Scenario War Room

# Scenario Planning Reference

## Shell's Scenario Planning Methodology

Shell invented modern scenario planning in the 1970s after the oil crisis. Core insight: **scenarios are not forecasts — they're tools for thinking.**

### Shell's Principles (adapted for startups)
1. **Scenarios are mutually exclusive, collectively exhaustive** — they cover the space of possibilities without overlapping
2. **2x2 matrix** — pick 2 critical uncertainties (not risks — uncertainties); cross them to get 4 scenarios
3. **Name the scenarios** — named scenarios are remembered; numbered ones aren't
4. **Identify predetermined elements** — things that will happen regardless of scenario (regulatory changes, tech trends)
5. **Early indicators** — each scenario has signals you can monitor today

### Shell's 2x2 for Startups
Critical uncertainties for early-stage SaaS:

| | Market grows fast | Market grows slow |
|---|---|---|
| **We raise successfully** | "Blue Ocean" — execute hard | "Ramp Carefully" — efficiency focus |
| **We bridge/delay raise** | "Scrappy Growth" — ramen profitability | "Survival Mode" — cut to core |

Build your war room sessions around whichever quadrant is most relevant right now.

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## Monte Carlo Thinking for Startups

Monte Carlo = running thousands of simulations with random variables to understand probability distributions.

You don't need software. Apply the mental model:

### The Mental Monte Carlo Process
1. **Identify the key variables** (3-5 max)
2. **Assign ranges** — not point estimates
   - CAC: $6K–$12K (uniform distribution)
   - Close rate: 20%–40% (normal, mean 30%)
   - Churn: 5%–20% (right-skewed — bad tail is worse)
3. **Run mental scenarios** — pick low/mid/high for each
4. **Identify the combinations that kill you** — which variable combinations make runway hit zero?
5. **Focus hedging on** the 20% of combinations that account for 80% of kill scenarios

### Practical Monte Carlo Heuristic
For revenue forecasting, always state:
- **P90** (90% confidence you'll exceed this)
- **P50** (median case)
- **P10** (only 10% chance you'll exceed this — your "stretch")

Boards respect ranges. Point estimates are usually wrong and make you look naive.

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## Pre-Mortem Technique

A pre-mortem asks: *"It's 12 months from now. We failed. Why?"*

It's the opposite of planning (which asks why you'll succeed). It surfaces hidden risks that optimism suppresses.

### Running a Pre-Mortem
**Setup:**
- Time: 90 minutes
- Participants: leadership team
- Facilitator: neutral (COO, or external)
- Assumption: "It's [date 12 months out]. The company failed / missed its major goal. This is real."

**Phase 1 — Silence (10 minutes):**
Each person writes their top 3 reasons the failure happened. No discussion.

**Phase 2 — Round Robin (30 minutes):**
Each person shares one reason per turn. Facilitator captures on whiteboard. No debate yet.

**Phase 3 — Cluster (20 minutes):**
Group similar causes. Identify the top 5 clusters.

**Phase 4 — Probability & Impact (20 minutes):**
For each cluster: P(likely) × impact = risk score. Rank.

**Phase 5 — Mitigation (10 minutes):**
Top 3 risks: what one action would most reduce each?

### Pre-Mortem Prompt Variants
- "It's March 2027. We ran out of money. Why?"
- "It's Q4. We lost 3 enterprise customers in 60 days. What happened?"
- "It's next year. Our top competitor took 40% of the market. How?"
- "It's 18 months from now. Half the engineering team left. What triggered it?"

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## Cascade Effect Mapping

Cascades are where most startups get surprised. The first hit is expected — the second and third aren't.

### Cascade Mapping Format
Draw as a chain:

```
INITIAL EVENT
    ↓ [immediate effect: domain, severity, timeline]
SECONDARY EFFECT
    ↓ [cascade mechanism: how A causes B]
TERTIARY EFFECT
    ↓ [cascade mechanism]
END STATE [runway impact, ARR impact, team impact]
```

### Common Cascade Patterns

**Revenue → Cash → People:**
```
Customer churns ($400K ARR)
    ↓ CFO: runway drop