(p.179) Appendix B Shell 2001 Global Scenarios Case Study
(p.179) Appendix B Shell 2001 Global Scenarios Case Study
Shell is a global firm in the energy and petrochemicals business with many subsidiary companies. At the time of this writing (January 2015) it employs around 92,000 people in more than seventy countries. The formal name of the parent company of the Shell group is Royal Dutch Shell PLC, which is incorporated in England and Wales, and the company is listed in Amsterdam, London, and New York.1
Shell has been building and using scenarios for nearly fifty years. Its “global” scenarios,” which it produces regularly every few years, are designed to look further into the future than many other outlooks, and to highlight surprising possible developments. These global scenarios guide most of the more focused scenarios its scenarios team produces (relating to specific countries or issues), although every few years the company also produces even longer-term views, considering possibilities for periods that extend to almost a century, called “Long Term Energy scenarios.”
This appendix describes the global scenarios and the (in Shell language) “round” of activity that produced them, which took place in 1998–2002. This round resulted in the publication of a public report, Shell 2001 Global Scenarios: People and Connections, as well as a guide book describing the Shell scenario building methodology, Scenarios: An Explorer’s Guide (see Figure B1).
Scenario project work
Members of the company’s Global Business Environment team (the “Shell scenario team”) in Shell International develop long-term scenarios that examine how the world of energy and the overarching interests of the company—the “global scenarios”—might unfold. These scenarios inform corporate strategic planning and provide strategic analysis and advice to Shell executives. The scenario team also helps senior decision makers across the company to develop and use their own scenarios, which are translated and transplanted (see Chapter 4) to become refocused on business units and regional and country-specific operations, as required.
At the time of this case study (2000–1), the scenario team consisted of some seventeen professionals, who worked up to 50 percent of their time on the development of the global scenarios over this two-year period, following the inductive method described in Scenarios: An Explorer’s Guide. As is common in a Shell scenario exercise, everyone on the team was encouraged to take a leap of faith at the beginning of the project and believe in the combined talent of the team. Arguably, this norm is more important in a scenario exercise than many other endeavors because of the ambiguity and creativity involved.
The project had three planned phases: orientation, building, and engagement and communication. The scenario building process began work in early 2000 with a series of open-ended interviews conducted in active listening mode by members of the scenario team, on a one-to-one basis with several dozen individual executives. Using these interviews, a “chorus of voices” analysis was prepared in the form of a 2 × 2 matrix which mapped Shell executives’ ideas about changes and challenges within and beyond the organization, to identify areas of agreement and disagreement. This initial analysis provided a starting point for researching five cross-cutting themes that would underpin the definition of the scenarios and in a way that addressed the challenges facing senior managers and challenged existing views.
In parallel, starting in mid-2000, scenario team members began researching for relevant and interesting contextual developments which the team considered it needed to cover; these were in the general themes of society, technology, economy, environment, the changing nature of firms in society, and international relations. During this research phase, team members employed desk-based literature reviews and sponsored small-scale exploratory workshops involving wider experts. Throughout this phase, they also reflected on developments since the last round of global scenarios in 1998.
In these initial preparations there was intense inquiry and fierce competition among members of the Shell scenario team over which ideas would become central to the (p.181) scenarios. The interview synthesis and the insights derived from the thematic inquiry were also shared with a cross-section of about forty Shell senior staff through a highly interactive, two-day “orientation” workshop. The workshop resulted in the creation of three possible scenarios, but the participants could not reach agreement as to which of these together involved the “best” set to fit the concerns identified in the chorus of voices analysis. The decision on which set to use was taken after this workshop by the head of the scenarios team. He decided to limit the scenarios to two contrasting ones; eventually one scenario was named Business Class and the other Prism. Once the team leader decided on the main ideas, the team rallied to complete the stories and share them.
Several drafts of the two scenarios were shared with staff across the organization; their feedback contributed to the further development, deepening, and clarification of each storyline, debugging contradictions and refining the core messages. When the storyline logics were sufficiently clear, the team customized existing macroeconomic models to test the internal logics and to illustrate quantitatively projections and impacts within each scenario, consistent with the system logic of each scenario story.
The final draft set of scenarios was tested for relevance, plausibility, and communicability at an interactive workshop with senior decision makers before being presented to the executive team for discussion.
The Shell 2001 global scenarios
Two scenarios were developed in 2000–1 with a time horizon of 2020. Each assumed that global economic growth would continue but with different patterns of globalization, each carrying different implications for the company.
The scenario framework reflected a set of critical but uncertain assumptions that were implicit in the strategic conversation across the organization but until that point had not been clearly articulated. These assumptions revolved around the basic question: will the resolution of dilemmas arising from globalization be dominated by global elites or by the people of the heartlands? Two contrasting answers to this question generated the two scenarios (see Figure B2).
The Business Class scenario offered a vision of “connected freedom” and greater economic integration. This was a world of efficiency, opportunities, and high rewards for those who could compete and innovate successfully. Established authorities would be continually challenged, and the power of nation states greatly reduced. In this world, globalization had brought tangible benefits to both rich and poor societies, and growing inequality was tolerated because people saw opportunities to improve their lives and had the freedom to pursue their own dreams. The world of Business Class was not run by big business, but it was run like a business with a focus on efficiency and achieving goals. Almost all organizations—companies, of course, but also national governments and international NGO’s—would need to face the question of how to maintain their identity and purpose in a world of more open and fluid global networks.
The Prism scenario highlighted that human affairs were not inevitably going to be handled in a monochromatic globalized manner. This scenario articulated how an (p.182)
In effect, this round of Shell global scenarios attempted to reframe globalization away from the “accept or reject” reaction manifested in previous rounds of Shell scenarios. It focused instead on two contrasting perspectives: on the one hand, increasing competition and homogeneity (Business Class), and on the other the rise of emerging economies leading to a diverse pattern of multiple modernities (Prism).
A semi-public version of the scenarios was released to ambassadors and other dignitaries in the summer of 2001 in an event organized by Chatham House in London. A more public version of the scenarios was released in 2002. It included a reflection on how this set of global scenarios might help to interpret the terrorist attacks on the World Trade Center and the Pentagon, on September 11, 2001, as a defining moment, marking a new phase in the impact of globalization around world events. The global scenarios and 9/11 update had been shared in private with key governments in the months before the public booklet was launched. This followed the normal pattern of first using scenarios in-house to inform strategy, then sharing with key stakeholders, prior to publishing a public version and using the scenarios to reach out to wider stakeholders.
(p.183) Project results: uses, outcomes, consequences
The Shell 2001 Global Scenarios were presented in Houston on May 30 as part of the 2001 Shell Business Week, bringing up to 300 Shell leaders together to work on issues relating to the group as a whole. The event marked the handover from then chairman, Sir Mark Moody-Stewart, to the chairman-elect, Sir Phil Watts. The meeting focused on considering a fresh approach to strategy and planning, along with the new set of global scenarios outlining challenges to the group.
Increased collaborative efforts between the Group Strategy and Global Business Environment teams led to further attempts to link scenarios to group strategy and portfolio analysis. The global scenarios were also communicated widely across the organization under a six-month embargo of external communication.
The new chief executive, Phil Watts, required individual businesses to test their business strategies against the scenarios. Even though Watts had mandated the use of the global scenarios as a context for the strategic plans of the businesses, the decentralized nature of the company meant that responses from some of the business units were often a matter of mere compliance rather than the result of deeper reflection. These business units adopted a “tick box” approach to using the global scenarios, preferring to harness specific elements of the supporting analysis involved in developing the global scenarios for their own scenario building and strategy processes.
In contrast, some businesses (including the major earners) translated, transplanted, and leveraged the global scenarios to develop more customized scenarios for their own strategic planning purposes. For example, Bill Colquhoun, head of Shell’s chemical business, used the global scenarios as a starting point to catalyze an in-depth strategic review and restructuring of a business unit.
Many support functions also engaged the global scenarios to explore and inform elements of strategy. The group’s HR director, John Hofmeister, was particularly interested in the global scenarios as a way to cultivate an “external mindset” as one of the core skills required by a Shell executive.
Scenarios are part of the corporate DNA of Shell. The scenario process is ongoing rather than one-off, and provides the opportunity for highly motivated and diverse leaders in the company to understand their differences and ultimately work together to achieve the goals of the company.
At Shell, the future provides a safe context in which to talk about challenges and their possible implications. The business people involved are also given license to focus on the bigger picture and the connections between aspects of their operating environment, as well as likely and possible future developments. The scenario planning process shifts the corporate conversation.
Some in the scenario team were long-term Shell people, and others had been hand-picked to join the team for the duration of the round, based on the personalities, perspectives, specialist knowledge, and connections deemed likely to be important by the team leader. A balance between people who want to continue exploring and those who want to get to the destination is a very important aspect of getting the team (p.184) chemistry right. Designers were also involved at an early stage. The events of 9/11 happened after the 2001 global scenarios had been developed and were being used within the firm. The scenarios were not rewritten, but an addendum to the scenarios was quickly produced using the two global scenario frames, Business Class and Prism, as the starting point for developing much shorter-term crisis scenarios that provided alternative frames for making sense of this fast moving and unprecedented event, and for better interpreting different stakeholders’ subsequent reactions. The speed with which the 9/11 addendum was produced demonstrated the value-added of the Shell scenarios culture which had been cultivated over decades.
Across the Shell Group, scenarios are developed focused on projects, countries, major investment decisions, and other strategic factors. By enabling the global scenarios developed on a centralized, top-down basis to “talk to” scenarios developed on a bottom-up, decentralized basis across the company, Shell is able to adapt quickly or build new scenarios when facing emerging risks and crisis situations, such as on the invasion of Kuwait, on Iraq, and on the prospect of a global influenza pandemic triggered by a new flu virus.
(1.) <http://www.shell.com/global/aboutshell/at-a-glance.html> (accessed September 2015).