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Some Methods for Scenario Analysis in Defence Strategic Planning.

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Abstract

Scenarios are an important tool in the strategic planning process, and are increasingly used in both the Defence and business world. This paper describes some potentially useful scenario analysis methods for systematically selecting and developing future scenarios. The processes of each method are illustrated with small examples. We also demonstrate a single, flexible approach to combining these methods using a typical Defence strategic planning problem. Some general guidelines to consider when choosing and using an appropriate scenario analysis method are also discussed.

Executive Summary

Scenarios are an important tool in the strategic planning process, and are increasingly used in both the Defence and business world. Scenario analysis has emerged as a tool for strategic planning when the future is perceived as surrounded by a high degree of uncertainty and complexity. Scenario analysis techniques characteristically synthesise quantitative and qualitative information, constructing multiple scenarios or alternative portraits of the future. Scenario analysis consists of the three basic stages: (1) Problem analysis to come up with an exact definition for the problem of the investigation; (2) System analysis to identify relevant external influences on the problem to be investigated, and (3) Synthesis process to examine the existing interdependencies between the influencing factors and to establish alternative scenarios. Problem analysis helps all experts and stakeholders gain a common understanding of the problem at hand. Based on this consensus the problem can be further bounded and structured. System analysis expresses the problem as a system of inter-related dynamic components (subsystems),with the system itself linked to its external environment. From every subsystem, a number of representative influencing factors relevant to the problem are then identified. Synthesis process establishes a logical and systematicway for scanning the range of possible scenarios and for selecting main scenarios or choosing a set of scenarios that includes all plausible futures. A variety of creative methods such as brainstorming, brainwriting, round table discussion, and the Delphi technique can be employed in the first two analysis stages. There are two basic methodologies for implementing the second and especially the third stage of the scenario analysis: (1) Non-Bayesian method (e.g. Morphological Analysis, Battelle approach, Field Anomaly Relaxation) and (2) Bayesian method (e.g. Cross-Impact Analysis). Some extensions based on both classes are also developed (e.g. Battelle approach with Cluster Analysis, Cross-Impact Analysis with Integer Programming). This report describes these scenario analysis methods and provides a possible way for combining them into a single more flexible approach. The processes and mathematical formulation of each method is presented in this paper, as well as with a discussion of the pros and cons of employing these methods. The combined approach is illustrated with a typical example and numerical experiment. This approach enables the scenario development process to startwith relatively simple information, gained from experts and problem-owners, and through a rigorous and transparent process identifies amanageable set of representative or balanced scenarios. To carry out the combined approach, information about the mathematical formulation of each method has been used to generate algorithms for developing computer decision support tools. These decision support tools automate complex calculations and enable users to use and combine the techniques without in depth knowledge of the mathematical aspects. The paper concludes by emphasising some general points to consider when choosing and using an appropriate scenario analysis method in Defence strategic planning.

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