“The ability to learn faster than your competition is perhaps the only sustainable competitive advantage” – Arie de Geus 

In 1951, Arie de Geus began working in the planning department of the then Royal Dutch Shell Corporation. From his early days at the firm, the young Dutch economist wondered how companies—particularly those as large and traditional as his own—managed to survive and grow by facing changing economic contexts and the highs and lows that these entail. 

Along with a group of collaborators, they were pioneers in “scenario planning.” It was a simple but very powerful idea, aimed at generating interest, reflection, and learning among key people in the organization, those with the power to make decisions. This methodology identified key elements to anticipate risk or uncertainty situations that would require a coherent company response. At the same time, it guided the participation of executive teams in these exercises. 

1. Frustrated Beginnings 

Initially, Arie’s team focused on traditional tasks for large companies, which had access to adequate resources such as professionals with a good intellectual level, calculation resources, and time to conduct analysis. These tasks involved research and development of possible scenarios for the future, with important questions about the actions and decisions that the company should take to continue progressing successfully and create sustained value for its shareholders. 

However, despite the effort and commitment of his entire team, de Geus harbored great frustration because his work did not have a significant impact on the organization’s final decisions. 

One of his main reflections during this period was the inefficiency of the teacher-student teaching process, which attempted to achieve the transmission of results and knowledge from those who posed scenarios—his area—to those who made the decisions. 

In this sense, and as demonstrated by the research of the British educator John Holt, this process at best generated a 40% learning of the topics presented and also required the total concession of authority from the student to the teacher. In the case of de Geus and his team, this “honor” was not entrusted to them by the decision-makers, who ignored their proposals.

2. Creation of the Method: Scenario Planning  

In the search for ideas to improve the capacity for preparation and learning within the organization, de Geus and his team came up with two interesting positions: 

• The learning process in an organization was facilitated when rules were reduced or inhibited. 
• The learning process was more effective when people “played and shared” to achieve a goal. 

Based on this, and in a risky maneuver, in 1984 they decided to change the strategy they had previously developed for the planning process. 

Following these ideas, they proposed a different exercise, in which through a case—a hypothetical scenario—to occur in one more year, the value of a barrel of oil was projected at $15. In 1984, the barrel was around $27, and a $12 drop meant the end of the oil industry. 

Provocatively and accurately, the case to be developed began with the following phrase: 

“We don’t know the future… but neither do you. And although we don’t know if the price of oil will go down, we can agree that if it does happen, it will be quite bad. That is why we have designed this case that illustrates one of the many different ways in which the price of oil could fall.” 

The case began by setting the price of the barrel at $16 in April 1986 and asked participants to answer three questions: 

• What do you think the government will do? 
• What do you think the competition will do? 
• What (if you think it is necessary) would you do? 

he exercise generated intense and entertaining work within the organization in which, probably, one of the keys was to shift the focus of the exercise. 

Previously, scenarios were based on “what is going to happen,” a “future-fiction” that generated general aversion among executives, but on this occasion, the focus was on “what will we do if it happens,” which directly involved the actors. 

Arie de Geus and his team made history as they predicted it. Although in January 1986, the price of the barrel was still at $27, in February, it dropped to $17, and by April, it had reached $10. Who knows what would have happened if the exercise had not been carried out? 

3. Lessons Learned 

Scenario planning is a good exercise to develop the company’s capacity to learn and adapt. Finally, change is inherent in competitive environments, and as Arie de Geus proposes, “the ability to learn faster than your competition is perhaps the only sustainable competitive advantage.” 

Publication prepared by Cristián Yánquez, Partner 

Note: The following sources, among others, were used in the preparation of this publication:
• “Planning As Learning”. 1988. Harvard Business Review. Accedido el 1 de septiembre de 2019. https://hbr.org/1988/03/planning-as-learning
• “Arie De Geus”. 2019. En.Wikipedia.Org. Accedido el 1 de septiembre de 2019. https://en.wikipedia.org/wiki/Arie_de_Geus.
• “Arie De Geus”. 2019. Arie De Geus. Accedido el 1 de septiembre de 2019. https://www.ariedegeus.com/thinking/biography/.
• “TOP 6 QUOTES BY ARIE DE GEUS | A-Z Quotes”. 2019. A-Z Quotes. Accedido el 1 de septiembre de 2019. https://www.azquotes.com/author/26340-Arie_de_Geus.
• Crainer, Stuart. 1998. “”The Living Company” By Arie De Geus”. Strategy+Business. Accedido el 1 de septiembre de 2019. https://www.strategy-business.com/article/18728?gko=f3b32.