Enhancing strategy evaluation in scenario planning : A role for decision analysis

Abstract

Scenario planning can be a useful and attractive tool in strategic management. In a rapidly changing environment it can avoid the pitfalls of more traditional methods. Moreover, it provides a means of addressing uncertainty without recourse to the use of subjective probabilities, which can suffer from serious cognitive biases. However, one underdeveloped element of scenario planning is the evaluation of alternative strategies across the range of scenarios. If this is carried out informally then inferior strategies may be selected, while those formal evaluation procedures that have been suggested in relation to scenario planning are unlikely to be practical in most contexts. This paper demonstrates how decision analysis can be used to structure the strategy evaluation process in a way which avoids the problems associated with earlier proposals. The method is flexible, versatile and transparent and leads to a clear and documented rationale for the selection of a particular strategy.