Scenario Planning Vs. Traditional Forecasting

Scenario planning and traditional forecasting are both terms I am familiar with through my current career and the military. Both are beneficial in their own way but the environment they are required to vary tremendously. The Economist (2008) describes Scenario planning as “Scenario planning (sometimes called “scenario and contingency planning”) is a structured way for organizations to think about the future.” Based on the author’s definition, this is essentially planning with many fail safes in place. Traditional Forecasting, defined by Posadas (2017), is simply using the trends from the past to define future outcomes. As stated earlier, both traditional forecasting and scenario planning have a specific time when they are suitable for use in addition to the advantages and disadvantages of using each.

(Hoffmann, 2017) has stated a few advantages and disadvantages of using the scenario planning approach by starting off with stating that with this approach there is an appreciation and welcoming for innovative thinking in regards to paths to take regarding behavior. On the flip side to that, the success of the plan is purely dependent on the behavior, which many times are unpredictable. Next, companies are faced with numerous paths to take and test, which is great as it pertains to having contingency plans. However, this may stir displacement and loss of focus on the goal. Finally, this plan accepts an unclear future which will make allows flexibility regarding the direction to take. However, this uncertainty will also not be appropriate for short term planning.

Hernandez (2018) gives an overview of the advantages and advantages of Traditional forecasting by stating firstly that, this concept is not that hard to grasp and only has three outcomes. Of the three outcomes, there can only be one result. The disadvantage that is selecting the wrong outcome could lead to a bad outcome. Finally, management usually grasps the concept and as the stakeholders, it is easy to make a decision based on trends. The disadvantage to that is this will lead to a false sense of security over time, especially with unusual trends.

References

The Economist. (2008).  Scenario Planning. Retrieved from https://www.economist.com/news/2008/09/01/scenario-planning

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

Hoffmann, C. H. (2017). Strengths and Weaknesses of Scenario Planning as a Risk Management Tool. In Assessing Risk Assessment: Towards Alternative Risk Measures for Complex Financial Systems (pp. 213-218). Wiesbaden: Springer Fachmedien Wiesbaden.