Scenario Planning vs Traditional Forecasting

Scenario Planning vs Traditional Forecasting

Traditional forecasting:

            Traditional forecasting is basically extrapolating where we are and where we are now into the future, and at the end of the extrapolated line comes the most likely scenario. The extrapolations and mathematical formulations form the mechanical basis needed for traditional forecasting. At one point, all these forecasts would make out +/- 5 to 10% in all of the projections and could call it the worst and best-case scenario. This +/- difference comes with the range of possibilities that come out of the actual 360-degree solution spherical space (Mukhopadhyay et al., 2011). 

            There are other extrapolations and mathematical forms and the mental forms of the extrapolation, which are both dangerous as they would be, assuming that the world might not change much. But the disruptions like the new competitor, new regulations, new societal attitudes, new economic situations, new political situations, new customer behavior, new geopolitical tensions, new management ideas, and new technological developments could be moving this forecast in all the directions which are no longer accurate. One should not forecast the future through extrapolation and should start anticipating it with the scenario analysis.

Advantages of traditional forecasting

  • Easy to understand personally, it comes with three outcomes: the most likely scenario.
  • Easy for the management to move and understand forward on

Disadvantages

  • Considering the persistence forecasting, which is the exact one in the long term.
  • This leads to a false sense of security which could be quite fatal in some situations (Ruddle, & Grandstaff, 1978).
  • This fails to take into consideration the disruptions which might have an impact upon the scenario that is to be analyzed.
  • This is a rigid method that might not allow for flexibility.

Scenario planning:

            This could be done with at least 9 to 30 participants. But the essential need here is scenario planning which is to be understood by everyone by knowing the future that is quite impossible. Yet, the people need to know where exactly the future would turn. But, here, it is essential to note down that the scenarios are not just the predictions; the scenarios would indicate various ways the future might unfold (Godet et al., 2000).

            There this tool should be coming up with the way that is quite creative, methodological, and this would help in spelling out the future scenarios which could take place ten steps ahead which are as follows:

  • Framing the challenge
  • Identifying the driving forces
  • Generating the scenarios
  • Validating the scenarios and recognizing the future research requirements
  • Collecting the information
  • Defining the future critical uncertainties
  • Fleshing them out and creating the storylines
  • Recognizing the signposts
  • Updating and monitoring the scenarios as the times goes on

 

References

Godet, M., Roubelat, F., & Editors, G. (2000). Scenario Planning. Technological Forecasting And Social Change, 65(1), 1-2. 

Mukhopadhyay, S., Solis, A., & Gutierrez, R. (2011). The Accuracy of Non-traditional versus Traditional Methods of Forecasting Lumpy Demand. Journal Of Forecasting, 31(8), 721-735. 

Ruddle, K., & Grandstaff, T. (1978). The international potential of traditional resource systems in marginal areas. Technological Forecasting And Social Change, 11(2), 119-131. 

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