It all began one morning in the fall of 1958, when physicist Herman Kahn read an article in the New York Times about the escalating U.S.-Soviet arms race in which Soviet premier Nikita Khrushchev predicted a nuclear holocaust. Over the next few weeks, as Khrushchev continued to dominate the nightly news broadcasts with increasing threats of Communist world domination, Kahn began gathering together teams of experts and encouraging them to develop educated stories about the future, which he called scenarios. Sometimes sitting for hours at a time on the Santa Monica beach near his office at RAND, Kahn and his experts coolly calculated the reality and the costs of nuclear conflict. The result was a series of famous papers and strategy advice to the Pentagon, including the chilling On Thermonuclear War and Thinking About the Unthinkable.
Kahn's early experiments and treatises on scenario planning didn't stop there. His methods of peering into the future helped shape how a generation of Pentagon planners thought about the Cold Warand how a generation of business strategists at companies from Royal/Dutch Shell to Cigna Corp. looked at the future.
The Hudson Institute, founded by Kahn in the early 1960s, is widely recognized as the laboratory for modern-day scenario planning. Indeed, the technique has been used by hundreds of companies, from telecoms such as 3M Technologies and Nokia to retailers like Nordstrom's, to guide strategic decisions, select investments and position themselves to operate in an uncertain world.
But the technique is difficult: It demands intellectual rigor and a clear understanding of its powers and limitations. Yet as CIOs seek to manage the enormous economic and technological uncertainties facing their companies and the technologies they oversee, scenario planning can be invaluable for justifying strategic investments, determining which technologies live and die, and opening the minds of managers to a deeper sense of what the future may bring.