Scenario analysis is used for strategic planning and decision-making in the world of policy, business and science. Scenarios support the analysis of potential Futures as other than in natural science subject to the law of physics the socio-techno-economic systems are subject to a large number of unknowns and to many uncertainties such that exact prognosis are not possible. Scenarios may be merely qualitatively described or also eleaborated in a quantitative manner.
M-Five is applying scenario analysis usually by combining qualitative and quantitative descriptions. First framework conditions and drivers of the scenarios have to be described. Within such a framework the various possible future developments will be elaborated. Typical framework conditions are demographic developments, oil price, economic trajectories of output or gross domestic product. Drivers may be changing preferences, technological improvements or (related) cost developments.
To quantify scenarios we are applying our inhouse System Dynamics models ASTRA-D for German scenarios or ASTRA-EC for the analysis of European scenarios. Together with our clients we are also using System Dynamics to develop taylormade scenario tools for their specific needs.
By analysing various scenarios important influencing factors, the impact of uncertainties, the effects of policy instruments or of different strategic choices can be identified. Our scenario analyses cover time horizons of between two and fifty years. As an example we have developed qualitative and quantitative scenarios achieving sustainable mobility in Germany by 2035 and assessed their macro economic impact. We also assessed scenarios of the short and medium-term impact of the Covid 19 crisis on the German economy.
We also apply a variant of scenario analysis called backcasting which is starting from a target scenario and is then tracing backwards from the future towards today the development path that would end at the target scenario.