Most financial models carry three columns: base, optimistic, pessimistic scenarios.
Look closely and the optimistic case is usually the base case with larger numbers and the pessimistic one with smaller numbers, while the hiring plan, the pricing, the timing and the structure stay identical across all three. That is not scenario planning. It is one plan typed out at three volumes, and it changes nothing about what you would actually do on a Monday morning.
A scenario earns its place only when a decision turns on it. If your downside case would make you delay a hire, hold a price or push a funding round back a quarter, it is doing real work. If every case leads you to the same actions, the exercise is decoration — three numbers where one would have told you as much.
Shell learned this the expensive way. When Pierre Wack built the company’s scenarios in the early 1970s, his first attempts failed: managers studied them, agreed they were interesting, and carried on exactly as before. The breakthrough came when he designed scenarios stark enough to change what executives were willing to do — one of which described an oil shock driven by OPEC’s growing leverage. When the 1973 embargo sent crude from roughly $2.50 to $11 a barrel and rival majors scrambled, Shell had already rehearsed the decision, moved quickly, and climbed from seventh to second among the world’s oil companies within the decade. The scenarios were valuable not because they predicted the date, but because they had already changed what Shell was prepared to do.
So before you build the three columns, ask the only question that makes them worth building: which of my decisions changes if the bad case turns out to be the real one? If the answer is none, the extra columns are decoration, and the work has not started yet.
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Sources
- Pierre Wack and Shell’s scenario planning (the aim of shifting decision-makers’ mental models rather than predicting; preparation for the 1973 oil shock and the rise from seventh to second among the majors): Wack’s Harvard Business Review articles “Scenarios: Uncharted Waters Ahead” and “Scenarios: Shooting the Rapids” (1985); coverage in strategy+business and Polytechnique Insights.