Scenario Planning versus Traditional Forecasting

Scenario planning in its simplest terms is art of assuming the future and then making assumptions on the possible outcome of the assumed future. In other words, scenario planning entails the precise identification of a set of undetermined actualities or things that would have been actually experience with the expectation of their possible occurrence in the future of a business. Thus, businesses implement scenario planning for the enablement of decision-makers with the capabilities and platform of identifying a variation or scope of probable effect and the estimated magnitude, response evaluation and management of the different possibilities (Amer, 2013; Ali & Luther, 2020). It is expedient to mention that the application of this integrated approach to uncertainty management cuts across different industries in the estimation of  cashflow, business performance, and risk mitigation strategy development. An example is making presumptions on the future events that might impactfully change the business landscape in the future. Scenario planning thus involves the analyzing and strategically planning of the different types of scenarios. Scenario planning generally takes into consideration different features of systems thinking in which a combination of multifactor culminate in the creation of a future innovation, with a series of non-linear feedback loops (Ali & Luther, 2020).

Traditional forecasting remains a pertinent approach in demand planning strategy which remains an integral part of business success. Traditional forecasting requires and understanding of patterns through different approaches including survey method for trend gauging and often conducted with customers; collective opinion approach is another traditional forecasting technique which though is easy to implement, there remains the possibility of a high degree of result variation especially as point of sale experts provides an estimation of their possible future demands; market experiment is another approach to traditional forecasting entailing the running of surveys and experiments within the market for similar samples including customer satisfaction, product features, and demography (Mehdiyev et al, 2016; Bluepiit, 2019). It is important to mention that, statistical forecasting methods could be leveraged for the making of informed decisions concerning the future by exploring the potentials within historical data. 

These two techniques are similar in that they are both applied for the purpose of future prediction with the primary difference between the two approaches being that traditional forecasting entails the deployment historical quantitative methods with reliance on historical and present data whereas scenario planning offers a greater level of flexibility and preparedness than purely quantitative forecasting models (Saulsgiver, 2018). Table 1 below summarizes the differences between scenario planning and traditional forecasting. 

Table 1. Traditional Forecasting vs Scenario Planning

Traditional Forecasting	Scenario Planning
Opinion driven by statistical outcomes	Opinion has reliance based on mental concept
Outcomes could be immediately leveraged into decision making process flow	Outcomes might not be leveraged immediately, based on requirement of additional judgment and rationale
Presents the possibility for accuracy test.	Difficult in testing because of its nature as more of a thinking tool.
Assumes the possibility for future connection and prediction	Acknowledges and assumes the difficulties and impossibilities associated with attempting to predict the future and the dangers involved.

 

References

Ali, R. & Luther, D. (2020). Scenario Planning: Strategy, Steps and Practical Examples. Retrieved from: https://www.netsuite.com/portal/business-benchmark-brainyard/industries/articles/cfo-central/scenario-planning.shtml

Amer, M., Daim, T. U., & Jetter, A. (2013). A review of scenario planning. Futures, 46, 23-40.

Bluepiit. (2019). Traditional Forecasting Methods. Retrieved from 

https://www.bluepiit.com/blog/traditional-forecasting-methods/

Mehdiyev, N., Enke, D., Fettke, P., & Loos, P. (2016). Evaluating forecasting methods by considering different accuracy measures. Procedia Computer Science, 95, 264-271.

Saulsgiver, W. (2018). Scenario Planning versus Forecasting. Retrieved from: 

https://sfginc.com/scenario-planning-versus-forecasting/