Often, the power structure within companies inhibits the free flow of debate. People in meetings typically agree with whatever the most senior person in the room says. In particularly hierarchical companies, employees will wait for the most senior executive to state an opinion before venturing their own—which then magically mirrors that of the senior person. Scenarios allow companies to break out of this trap by providing a political “safe haven” for contrarian thinking.

Scenarios provide a less threatening way to lay out alternative futures in which the these assumptions underpinning today’s strategy may no longer be true.

Avoiding the common traps in using scenarios

For all these benefits, there is a downside to scenarios. Inexperienced people and companies are prone to fall into a number of traps.

• Don’t become paralyzed
• Don’t let scenarios muddy communications
• Don’t rely on an excessively narrow set of outcomes
• Don’t chop the tails off the distribution
• Don’t discard scenarios too quickly
• Remember when to avoid scenarios altogether
• Don’t use a single variable

Some rules of thumb

• Always develop at least four scenarios
• “Crunch” the quadrants
• There should always be a base or central case
• Scenarios must have catchy names
• Learn from being totally wrong
• Listen to contrary voices
• Even modest environmental changes can have enormous impact

Scenarios will not provide all of the answers, but they help executives ask better questions and prepare for the unexpected. And that makes them a very valuable tool indeed.

Charles Roxburgh is a director in McKinsey’s London office.