Scenario planning versus traditional forecasting

    Attempt to predict the future can be beneficial in many situations. This discussion will talk about two methods that can help gather ideas on where the future could go. Traditional forecasting and scenario planning are the two techniques that the debate will cover. The text will compare and contrast the two concepts then thoroughly explain the differences, advantages, and disadvantages of scenario planning versus traditional forecasting.

    Scenario planning is making presupposition on what the future will be and how your environment will evolve (Mariton 2020). Hernandez (2018) mentioned in his article that scenarios are not predictions; they only highlight different ways the future may unfold. He also added that a vital scenario planning requirement is to acknowledge that it is impossible to know the future, but people want to know where the future will unfold. The article talks about ten steps to help build scenario planning: Framing the challenge, gathering information, Identifying driving forces, Defining the future’s critical “either/or” uncertainties, generating the scenarios, Fleshing them out and creating storylines, validating the scenarios and identifying future research needs, Assessing their implications and defining possible responses, identifying signposts, monitoring and updating the scenarios as times goes on. It is also vital to consider brainstorming to understand the driving forces involved in this process, as well as determine and understand the critical uncertainties in the future. The group will then select the top two uncertainties to model the most extreme cases of each outcome “either…or…”. Some of the advantages of scenario planning are that it focuses on the top two most critical uncertainties to drive simplicity. Scenario planning helps you concentrate on the players in each situation, such as competitors, customers, suppliers, employees, key stakeholders, etc. A key disadvantage of scenario planning is that it is more time consuming than traditional forecasting (Hernandez 2018). 

    Traditional forecasting focuses on historical and current data to predict the future. Hernandez (2018) described traditional forecasting as “extrapolating where you were and where are you are now into the future, and at the end of this extrapolated line this is “the most likely scenario.” Traditional forecasting also focuses on mathematical formulations. Traditional forecasting is beneficial when working on steady states. According to Posadas (2017), traditional forecasting is useful when exploring systems like modeling the lunch rush throughout a cafeteria or predicting the number of tellers needed at a bank. It becomes limited when applied to complex systems such as segmentation. Regression, trend model, moving average. Another limitation of traditional forecasting is that it relies entirely on historical data when researchers found that the past does not equal the future. Another concern is that only one set of historical data exists because it is impossible to repeat the history to generate new data (Posadas 2017).

    This discussion covered scenario planning and traditional forecasting. The text defined the two concepts and talked about the pros and cons of using each concept. 

References

Mariton, J. (March 9, 2020). What is Scenario Planning and How to Use It? Retrieved from https://www.smestrategy.net/blog/what-is-scenario-planning-and-how-to-use-it

Hernandez, M. (January 27, 2018). Traditional Forecasting Vs. Scenario Planning. Retrieved from https://mkhernandez.wordpress.com/2018/01/27/traditional-forecasting-vs-scenario-planning/

Posadas, S. (August 22, 2017). When traditional forecasting doesn’t fit. Retrieved from https://clockwork-solutions.com/traditional-forecasting-doesnt-fit/