Scenario Planning VS Traditional Forecasting

Greetings to all,

The concepts of scenario planning, as well as traditional forecasting, are two different methods in which conclusions about future projections are drawn in different ways. The concept of traditional forecasting, for example, is a concept that relies on past as well as present data in order to develop a forecast of how the future will play out. This prediction of the future based off of relevant data from the present and past allows for a limited window into the prediction of future events. In other words, traditional forecasting is well suited for short term planning and predictions but does not take into account long-range planning (Marceau, 2016).

By contrast, the concept of scenario planning is exactly as it sounds: planning for different scenarios that can present themselves in the future based on the current direction an organization is traveling. One key difference from traditional forecasting is that scenario planning takes into account the fact that the current direction the organization is traveling can be diverted in the future into a completely different direction depending on the current situations surrounding the organization. These factors or driving forces are described in the acronym “PEST” by Woody Wade (2012), and “PEST” stands for political, economic, societal, and technological. These driving forces are areas that have the potential to have an unforeseen impact on the direction the organization is trying to move. The organization can then outline the different possible scenarios utilizing the different factors associated with the direction the organization is trying to move. Based on the different factors taken into account with each different scenario or contingency, the organization can take into account trends, essential elements, and critical uncertainties to narrow down the different scenarios into which one that has the potential to be more effective based on a cross comparison between the different scenarios. These scenarios range from likely to extremely unlikely; however, this allows the organization to preplan in the case of an uncertain future in order to be prepared for whatever scenario they are presented with.   This makes scenario planning a much more effective concept for long-term planning, as it prepares those utilizing the method for potential long-term solutions or issues that may arise (Wade, 2012).

The advantage presented by traditional forecasting is that is useful for short-range planning; however, in contrast, it has a great disadvantage when it comes to long-term planning as the uncertain future controlled by unforeseen variables makes it very difficult to forecast the future. The advantage with scenario planning is the preparedness it provides for long-range planning to the one utilizing the method; however, the disadvantage is this method takes a lot of time and thought, initially making it not as fast on the turnaround of data needed by modern-day businesses.      

References

Marceau, D. (2016, August 1 ). The fatal flaw in traditional forecasting methods. Retrieved from Prevedere : https://www.prevedere.com/traditional-forecasting-methods/

Wade, W. (2012). Scenario planning: A field guide to the future . Hoboken, NJ: John Wiley & Sons, Inc.