Strategic planning and forecasting tend to use projections of past events to develop future plans. Such approaches rely on historical data and assume a continuation of past business practices and environmental stability. Scenarios are used to develop plans for significant changes in products, personnel, or processes for which data are limited and uncertain. The premise is that the best way to prepare for radically different situations is to think through various events that could occur and consider alternatives for responding to those situations if they should happen.

One early application of this technique was a 1968 forecast for the Royal Dutch Shell Group that foresaw the 1973 OPEC oil price rise. By thinking through this possibility, Shell executives were able to respond more rapidly than their competitors. This allowed Shell to move from its position as the eighth-largest oil producer to the second-largest in two years time. Businesses...