MIT Sloan Management Review Article on How Scenario Planning Influences Strategic Decisions

A recent study sheds light on how the use of scenario planning affects executives’ strategic choices.

The use of scenario planning once saved a credit union that had had Enron Corp. as its sole corporate sponsor. In their 2009 MIT Sloan Management Review article, “How to Make Sense of Weak Signals,” Paul J.H. Schoemaker and George S. Day described how, after Enron’s sudden collapse into Chapter 11 bankruptcy and scandal in 2001, the credit union survived, rather unexpectedly, because its management had taken previous actions to reduce its dependence on Enron. Management took these actions after considering scenarios in which the credit union could not depend on Enron for its growth.

Another example of a strategic decision influenced by the use of scenario planning is UPS’ acquisition of Mail Boxes Etc. in 2001. This acquisition gave UPS more than 3,500 retail store locations in the U.S. to complement its network of large hubs used as mail-sorting facilities. A scenario called “Brave New World” — one of four scenarios UPS senior managers considered in formulating the company’s strategy — was a huge influence on the acquisition decision. The “Brave New World” scenario described a deregulated, globalized marketplace — markedly different from the world UPS was operating in in 2001. It was this scenario that convinced management to invest in retail locations.