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The new boardroom agenda

How scenarios help navigate an uncertain world

Author: ICAEW Insights

Published: 07 Oct 2022

ICAEW Future of Boards business Jeremy Bentham philosopher

Running the Shell Scenarios team from 2006 to 2022, Jeremy Bentham played a key role in identifying the risks and opportunities facing the energy giant. He explains how organisations can make sense of an uncertain world.

The need to anticipate, and interpret, shifts in the global economy is what led to the establishment of Shell Scenarios in the late 1960s. The Dutch energy giant created the group to analyse the effect of various hypothetical events, such as the emergence of a powerful energy cartel – which is precisely what happened in the shape of the Organization of the Petroleum Exporting Countries.

From 2006 until his retirement earlier this year, Jeremy Bentham ran Shell Scenarios as Vice President Global Business Environment, developing methods for weighing up business’s most pressing risks and opportunities. Some of the major global issues of our time, such as climate change, were hypothesised and analysed in years past by the Shell Scenarios team.

Bentham took on the role with vast experience gained across Shell in research, engineering, trading and distribution and investment analysis, as well as becoming CEO of Shell Hydrogen in 2003. He left the renewables pioneer a couple of years later to join the leadership team of Shell Strategy and run Shell Scenarios “to think about the broader business environment and how that affects the strategy of the company”.

He says early exposure to different ways of thinking – for example, a year spent as a Sloan Fellow at Massachusetts Institute of Technology – helped him “recognise that there are very different perspectives about the world. These are important in the way that people make choices, and these choices ultimately shape the future.”

But Bentham says any assessment must be based on recognition that the future is neither random nor in any sense predictable, referencing an Arabic proverb: “He who predicts the future lies.” He also warns against default human tendencies and biases. “Thinking linearly or extrapolating only from our own experience can result in a misleading way of thinking about future possibilities,” he says.

To counter this, Bentham advises two related approaches. “There is a technocratic craft of being able to consider all different types of perspectives on macroeconomics or geopolitics or market issues or technology and weaving together an understanding of the different plausible pathways available,” he says. But making choices requires an additional social craft to “bring insights to life in the minds, hearts and actions of decision-makers.”

ICAEW Future of Boards business Jeremy Bentham philosopher

Turning scenarios into good decisions

Bentham says that his broad experience at Shell, ultimately serving 42 years across the company, gave him an understanding of how every executive and board member “thought about what was important to them”. The Shell Scenarios team would consult with the company’s senior executives, as well as many external specialists, to gather multiple perspectives on economic events and their company relevance, from which pathways were drawn to potential scenarios and outcomes.

There were occasionally limitations, however. Bentham found his ability to influence decision-making was dependent on the proximity of Shell Scenarios to the senior executive team at Shell, which would fluctuate. “There was always a danger of being ignored as a result of being ‘out there’. You've got to maintain this combination of being able to bring the benefit of multiple perspectives and a broader horizon into the organisation while still being part of the organisation,” he says.

Explaining the tensions, Bentham says a senior HR executive once told him: “You are tolerated as a senior executive in the company, but not embraced.” To this, he says: “I thought that was just the right positioning for what I was doing.”

But how did the thinking of Bentham and Shell Scenarios manifest itself in the company’s actions? As one example, referring to energy transformation, Bentham says: “At the beginning of 2021, there was an announcement to investors of new strategic goals and positioning, which had years of scenario thinking coursing all the way through it. 

“Shell published energy transformation scenarios the week before the strategy announcements, to help investors and analysts understand the reasoning and the worldview behind the decisions that had been made. These strategy and scenario conversations hadn't been done in isolation or sequentially but in an integrated way, with lessons from scenario thinking continually informing strategy.”

Another outcome of this process has been the reduction of Shell’s interests in oil refineries, from more than 50 in the early 1990s to just six integrated energy and chemicals parks today.

The power of scenarios in today’s world

When it comes to characterising the operating environment today for all businesses, Bentham says: “There's always been uncertainty and turbulence in the world, but it's got a particular character now: there have never been so many people on the planet as now; with this level of technological connectivity; and the related environmental issues that are building up. So there are particular characteristics to today’s turbulence and uncertainties that we haven't experienced before.” 

Despite the world grappling with a new kind of turbulence, some of the events that have had most impact today have roots going back decades. In particular, the Russian invasion of Ukraine can be traced to events going back 30 years or more, he says: “Given the entrenched nature and character of those ruling Russia, this was always going to be a possibility. Many people overlooked this because they were looking at the world through the prism of ‘what you see is all there is’.

“For example, everyone understood Putin couldn't immediately be president for a second term. However, he then became prime minister, before becoming president again, thereby cementing over an extended period perspectives that weren’t understood or expected by the wider world.”

Over time, those in scenario planning have sought to harness enhanced computational possibilities to analyse supply and demand turbulence and its impact on business. However, similar to the combining of technocratic and social skills more broadly at Shell Scenarios, Bentham advises that mathematical modelling must be viewed in a wider context. “It’s very important in a company with an engineering culture such as Shell that people can see graphs and analysis that show what happens, for example, after a change of policy. But ultimately, those models support a deeper and broader level of thinking,” he adds.

That holistic approach to scenario planning is a form of thinking that Bentham sought to embed at Shell Scenarios – and is keen to see others adopt. After all, the risks of making a strategic misstep, or simply not doing anything at all, only grow in severity with time. “If things go wrong, you can lose a sack load of money or miss a lucrative emerging opportunity,” he warns. “Worse still, you can lose your reputation and your licence to operate.”

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