Planning and Forecasting - Scenario Planning versus Traditional Forecasting

 

Concepts of Scenario Planning Versus Traditional Forecasting

This post entry will compare and contrast scenario planning with traditional forecasting concepts, explaining their differences, advantages, and disadvantages. 

Scenario Planning

An alternative forecasting technique to the traditional one considered by many organizations today is Scenario planning. With scenario planning, trending the future would require that the practitioners understand the driving forces of the phenomenon. It emphasizes unexpected and plausible extreme outcomes representing a clear delineation from the past (Derbyshire & Giovannetti, 2017). Scenario planning does require admittance of the unknowns but examines the possibility of addressing deficiencies found in traditional forecasting methods. Strategic decisions made in an organization today and their impacts may well be understood by a picture of future potential events painted by scenario planning. The scenario planning process involves a combination of logical, creative, and innovative thinking in formulating ideas that build up to create scenarios upon which the experts can expand on.

Traditional Forecasting Methods

In contrast to forecasting’s emphasis on continuing trends, representing change along the same trajectory, as in the recent past. 

According to Kuosa (2014), traditional forecasting favors quantitative methods, surveys, and expert advising over foresight and ethnographic field studies within an area of interest. Using statistical trend analysis and modeling, in other words, forecasting utilizes, to some extent, linear systematic estimations, projections, extrapolations, predictions of highly probable future events or statements (Kuosa 2014).

Advantages 

Scenario Planning	Traditional Forecasting
Allows a wide range of possible forecasts	Mathematical and scientific void of human error in predictions
Allows for flexibility
Enhanced discoveries via scenario-building

 

Disadvantages

Scenario Planning	Traditional Forecasting
Building scenarios is more of an art than science	Rigid in structure
The human element attached to it can result in more uncertainty in trending	Reliance on historical data tends to create gaps in the predicted output

 

Summary

Scenario Planning involves generating scenarios that consider all possible factors or drivers, together with their relative impacts as well as the interactions between them in relation to their forecasted targets. Traditional forecasting, on the other hand, makes use of historical observations to trend the future.

 

References

 

Derbyshire, J., & Giovannetti, E. (2017, 2017/12/01/). Understanding the failure to understand New Product Development failures: Mitigating the uncertainty associated with innovating new products by combining scenario planning and forecasting. Technological Forecasting and Social Change, 125, 334-344. https://doi.org/https://doi.org/10.1016/j.techfore.2017.02.007

 

Kuosa, T. (2014). Towards strategic intelligence: foresight, intelligence, and policy-making. Dynamic Futures.