The value of this case study is demonstrative. It demonstrates how contingency planning can be used, but it says nothing of the results.
A quasi-experimental design was used by Chermack & Kim (2008) to explore the effect of scenario planning on decision-making styles. It was found hat participants in scenario planning have a tendency to make a mental shift towards intuitive-based decision-making styles after their participation in the scenario planning process. This study used a limited sample from a single company. However, the study demonstrates that this might be an area of interest for future studies. It examined the effect of the scenario planning process on individuals, rather than on the firm as a whole. This study was unique in its approach to scenario planning. A majority of the studies found in this literature review approached scenario planning from the standpoint of the entire organization and its affects on the business. This study demonstrated that scenario planning has an effect on the individual, as well as the organization.
The Chermack & Kim study suggests that future research attention needs to be placed on the effects of scenario planning on the individual. The effects of scenario planning demonstrated in this study indicate that the scenario planning process had an effect on changes in business culture and methods. As the individuals within the organization changed, so did their perspective on business strategy. The shifts in thinking that were discovered during this study suggest that scenario planning might have caused a fundamental shift in the organization and the way in which they manage strategy in the future.
Scenario planning is used in an number of applications and industries. Much of the literature focused on scenario planning from a financial standpoint. However, scenario planning can be applied to almost any field. For instance, scenario planning has been applied to the future electricity supply in Indonesia. This scenario planning episode attempted to forecast future demand by observing past trends and then developing scenarios based on those trends. However, it was found that this method of scenario planning fails to include future uncertainties. In order to consider future uncertainties, the scenario must rely less on past experiences. It must be willing to make long-term projections (Rachnatullah, Aye, & Fuller, 2007). This study supports the idea that all scenario planning methods are not the same and that some might be more successful in some scenarios than others.
Not every scenario planning method will work in all circumstances. Some methods might be more successful in certain business climates than in others. The Indonesian electricity example demonstrated the need to rely on past experiences to forecast the future, but it also demonstrates that past experiences are not adequate to make long-term predictions in the future. Although many scenario planning sessions follow the standard form discussed in the first section of this literature review, situations can be found in the literature that require a different type of scenario planning methodology.
Cares & Miskel, (2007) also found that nontraditional scenario planning methods have been developed for use in complicated strategic situations. The authors mention that strategic games are played on the highest level of the U.S. Department of Defense as a method of scenario planning. These war games require teams to move and countermove, with each move representing a time projection into the future. These games represent a form of coevolutionary scenario planning. This form of scenario planning brings in the element of how various factions might react in a competitive environment. The results of this process do not always produce a strategy, but they give the individuals an understanding of how the others might react in a competitive environment.
The studies by Cares & Miskel, as well as that by Rachnatullah, Aye, & Fullter bring up an important point in scenario planning. It is important to formulate contingency plans, but these are not actual predictors of the future. The situations that businesses will face are reactionary. Scenario planning can help to develop ideas that might be used when a certain situation arises, but seldom are the actual situations similar to those that were rehearsed. The general plan might remain the same, but the contingencies must be flexible and able to adapt as the situation changes.
The war game strategy in scenario planning brings in the element of competition. The Rachnatullah, Aye, & Fullter example stressed the importance of relying on the past. Another example from the area of accounting, finance and management focuses on the design of a knowledge-based system that can be used in strategic planning. This example stems from the European Airline industry. In this example several strategies were developed. These resulted in several sound recommendation and rational strategic reasoning. The result was considered to be successful in the development of team consensus. The system required members to draft strategies based on expert system rules that were presented along with the reasoning for these rules. The development of these rules was useful in clarifying thinking of the group and for achieving final group consensus (Davies, Moutinho, & Hurcheson, 2005).
Goal programming is another addition to scenario planning that can aid decision-making under conditions of uncertainty. One of the differences in this methodology that differentiates it from those discussed earlier is that it emphasizes conflict management as a key principle. This scenario planning strategy uses a computer program to structure the scenarios based on probability. The output is a goal-based probabilistic output that represents the most desirable outcome of the scenario-specific goal (Durbach & Stewart, 2003). One of the problems with computer-based scenario planning that was stressed in the work by Cares & Miskel (2007) is that when the scenario involves human decisions, models based on probability might not be the most accurate.
Multi-criteria analysis (MCDA) was found to be a powerful combination when integrated with traditional scenario planning methodologies. This combination allowed decision makers to receive the benefit of thinking about possible future scenarios and it also received the benefit of MCDA, with its ability to support in-depth performance evaluation of each of the strategies. This method not only allows the strategist to devise certain strategies using scenario planning, they can perform an analysis of the strengths and weaknesses of each strategy (Montibeller, Gummer, & Tamidei, 2006). This article also discussed several other scenario planning methods that combined methods such as multi-attribute theory. This method is mathematically simple, but effective method. The study by Montibeller, Gummer, & Tamidei examined two case studies where this method was used to support real-world strategic decisions with success. However, the application of the method encountered several challenges and limitations, which suggests that improvements to the methods need to be made in the future in order to maximize the results.
This literature review thus far, has revealed that there are many different approaches to scenario planning and strategic decision making. The study has examined several methods that could be applied to specific situations and types of businesses. Thus far, no one has been able to develop a method that can be applied to every situation with great success. All of the methods examined have both strengths and weaknesses. The most apparent conclusion that can be drawn from these results is that many different methods for scenario planning have been developed using different strategies and theories. Each of these methods is best suited for certain situations. One of the most important factors in scenario planning is to choose a method that suits the purpose and situation to which it will be applied. Choosing an appropriate scenario planning method is one of the most important factors to ensure its success.
Caughron & Mumford (2008) have divided research into the study of planning techniques into two different lines. The psychological approach to planning techniques focuses on the cognitive processes that are the basis for planning. However, project management researchers have taken a different approach. They have focused on the applications of planning in the organizational setting. The psychological approach focuses on the processes that are used to get to the end. Project management approaches focus on the end result and how it can be applied. Throughout this literature review, this division can be seen among the researchers that have been examined thus far. The literature examined thus far supports this observation.
The purpose of the study by Caughron & Mumford was to examine how formal planning techniques influence the planners' creative problem-solving skills. Three planning techniques were examined. This study addressed Gantt charts, case-based planning and critical path analysis. The results of the study found that participants achieved higher levels of creative problem solving when they were asked to consider events that could prevent them from achieving their goals. The consideration of events that could negatively impact goal achievement were more successful than those were they were using cases from memory or planning specific tasks to be done.
As one can see, there are many factors that can influence scenario…