Planning and Forecasting

 

Any organizations must be able to look at the past to improve the present to look at the future to understand upcoming trends that could affect a specific industry. Different techniques have been used throughout the years for organizations to imagine a possible future and prepare accordingly. For this discussion, we will look at scenario planning and traditional forecasting. The discussion will talk about the relationship between scenario-type planning and planning and innovation for change. IT will also cover the different forces involved and the impact that they make. The discussion will also cover how students can use scenario planning for future innovation efforts, and whether scenario plans account for the social impact of change.

Schoemaker (1995) described scenario planning as a disciplined method for imagining possible future that companies have applied to a great range of issues. Forbes (2015) added to this definition by stating that in scenario planning, scenarios are alternate futures in which today’s decision may playout (Forbes 2015).

On the other hand, we have traditional forecasting that is defined by Posadas (2017) as the use of historical observation to evaluate future business metrics such as inventory, asset performance management, budgets, and revenue (Posadas 2017). There is a lot of concerns about the use of traditional forecasting or the misuse of scenario planning.

An example of poor forecasting and improper use of scenario planning is apple’s 2014 iPhone sales. Singh (2014) explained in his article that traditional forecasting methods do not account for changes in customer requirements (Singh 2014). Scenario planning, on the other hand, explores the impact of various uncertainties (Schoemaker 1995). Those uncertainties include customer’s behavior. Customer behaviors are hard to predict, but with proper scenario type planning, organizations should be able to explore different future scenarios and prepare themselves accordingly. Scenario type planning support planning and innovation because it helps the organization plan its future by looking at various uncertainties. Looking at different future scenarios allows organizations to develop new ideas that could lead to innovations.

In this example, the force that was not considered by apple was the social force. The organization should have regarded as social behavior as it relates to its customers. Taking social trends, customer’s preferences, and requirements into consideration when forecasting would have prevented apple from missing their estimate.  The social force was critical in this case. It shows the importance of acknowledging the different strengths that may affect the future of an organization. Another external force to consider is competitors. Apple neglected other products that were in the same price range or cheaper that provided similar technology.

Scenario planning can be beneficial if used properly. Schoemaker (1995) described a process for developing scenarios that can be used as a basis for scenario planning. The process is as follow:

 

1-     Define the Scope: Set the time frame and scope of the analysis while accounting for the rate of technology change, product life cycle, political elections, competitor’s plan, etc.

 

2-     Identify the Major Stakeholders: Who are the people that will have an interest in these issues? Who could influence them?

 

 

3-     Identify Basic Trends: Identify the political, economic, societal, legal, technological trends can affect each scenario

 

4-     Identify Key Uncertainties: Those are uncertainties that could have a critical effect on the scenarios that are currently being investigated.

 

 

5-     Construct Initial Scenario Themes: Construct the scenario after trends and uncertainties are identified

 

6-     Check for Consistency and Plausibility: Sorting trends and removing the trends and uncertainties that do not fit.

 

 

7-     Develop Learning Scenarios: Identify themes that are strategically relevant and then organize the possible outcomes and trends around them.

 

8-     Identify Research Needs: After developing learning scenarios, it is crucial to look for blind spots, such as understanding how stakeholders will behave when facing any of the methods.

 

 

9-     Develop Quantitative Models: Revisit the scenarios and decided whether to include the use of qualitative research in the process.

 

10- Evolve toward Decision Scenarios: Review the entire process to ensure that the selected scenarios address issues faced by the organization (Schoemaker 1995).

 

As described above, it is essential that scenario planning accounts for the social impact of change. Scenario planning is a comprehensive process. An organization’s scenario planning should explore all forces that could affect the future of the organization. It is the organization’s responsibility to look at all forces in all scenarios before making decisions.

 

References

Forbes (2015). Scenario Planning and Strategic Forecasting. Retrieved from https://www.forbes.com/sites/stratfor/2015/01/08/scenario-planning-and-strategic-forecasting/#372ef6d3411a

Posadas, S. (2017). When traditional forecasting doesn’t fit. Retrieved from https://clockwork-solutions.com/traditional-forecasting-doesnt-fit/#:~:text=Traditional%20forecasting%2C%20using%20historical%20observations,asset%20performance%2C%20budgets%20and%20revenue.&text=Yet%20traditional%2C%20historical%20forecasting%20attempts,averages%2C%20and%20smooth%20out%20variability.

Schoemaker, J. (1995). Scenario Planning: A Tool for Strategic Thinking. Retrieved from https://sloanreview.mit.edu/article/scenario-planning-a-tool-for-strategic-thinking/

Singh, S. (2014). iPhone Sales: The Failure Of Traditional Forecasting Methods. Retrieved from http://www.tech-thoughts.net/2014/01/iphone-failure-traditional-forecasting.html#.X0erU8hKhEZ