Scenario planning vs Traditional forecasting
Though we live in the world, today we all think about the future. Most people believe that the future is unknown including the world renowned scientist Albert Einstein. There is a report that, when once asked what he thinks about the future, Albert Einstein answered that he never think of the future (Wade, 2014). Not only that but there is a bible verse which quoted Jesus Christ saying people should not worry about tomorrow, for tomorrow will worry about itself because the day has enough trouble of its own (Matthew 6:34, The New King James Version). Despite this assertion, everybody thinks about the future because life is future oriented.
Thinking of the future is more important to the business organization because business is a future-oriented venture, but the future is full of uncertainties. Due to business uncertainties, the business needs to plan for the future if it wants to survive. Planning and forecasting are a tool used by businesses to deal with the future uncertainties. Forecasting is trying to predict outcomes of an event or future state that has not been observed while planning is set of activities put in place in the present to ensure that we obtain the future result. Scenario Planning and traditional forecasting are two tools use to facilitate how to think about the future and innovation. The different between Scenario Planning and Traditional forecasting is discussed below.
Traditionally forecasting is techniques that use used various concepts such as qualitative and quantitative statistical tools such as moving averages, time series, regression or causal methods to predict the future. Quantitative methods used data from the past to predict the future while is qualitative methods explore the future using available data. However the traditional forecasting method is very rigid, and most of the time fail to predict significant changes in market trend, particularly in the real world.
According to (Peterson et al., 2003), scenario planning is a systemic method for thinking creatively about possible complex and uncertain futures. Scenario planning is a tool to address some of the shortcomings of the traditional forecasting techniques. Scenario planning technique is an analytical tool for managers to prepare strategically for the future (Wade, 2014). The process of scenario planning is based on the deification of driving forces that could affect the future business environment. The key strength of scenario planning is to discover the potential future environments and based on this fact understand the impact of today’s strategic decisions will have the impact on the organization (Amer, 2013).
Advantages and disadvantage of traditional forecasting
The main advantage of traditional forecasting method is that it is mathematical and scientific, so the output prediction is independent of the human involved in predicting the forecast. The disadvantage of traditional forecasting is it is very rigid and do not allow for changes in the environment.
Advantages and disadvantage of Scenario Planning
The main advantage of scenario planning is that it allows for flexibility. The disadvantages are that it is uncertainties are difficult to control and cause high stress to individuals who are concerned with the controllable factors and the method is not scientific as compared to traditional forecasting.
Amer, M., Daim, T.U., & Jetter, A. (2013). A review of scenario planning. Futures, 46, 23-40.
Peterson, G. D., Cumming, G. S., & Carpenter, S. R. (2003). Scenario planning: a tool for
conservation in an uncertain world. Conservation biology, 17(2), 358-366.
Wade, W. (2014).“Scenario Planning” - Thinking differently about future innovation.