Predicting the Future: Scenario Planning vs. Traditional Forecasting

 

Whether we like it or not, change is inevitable. Change can be good; change can be bad. From a technological perspective, new emerging technologies have the potential to reshape our future. The Industrial Revolution, for example, brought about large-scale industrial technologies that had a substantial impact on the people of the time. Unfortunately, there were also negative impacts such as pollution and poor labor conditions. How can we approach change? We can approach change by being prepared. One of the best ways to prepare (for literally anything) is proper planning. As it is related to futuring and innovation, there are two predominant concepts that can assist with planning and predicting change: scenario planning and traditional forecasting.

Scenario planning is a good tool for researchers to have in their figurative toolbox. This type of planning can assist with identifying potential outcomes. These outcomes can then be weighed and prioritized to help predict future outcomes. Scenario planning is used in a wide variety of industries. One such use of scenario planning is in business. Businesses will use scenario planning to identify potential outcomes, estimated impacts, and evaluate responses to both positive and negative possibilities (Luther, 2022). Scenario planning helps take those “what if” questions to examine second and third order effects so that the organization can plan to accommodate for those changes.

Traditional forecasting is another tool that can be used to predict future changes. Simply put, traditional forecasting is concerned with predicting future outcomes. Unlike scenario planning, traditional forecasting methods are not as creative (Mortlock, n.d.). Mortlock (n.d.) also explains that traditional forecasting methods rely heavily on the assumption that the future looks like the current state (whatever that may be). The data used to provide traditional forecasting is typically in the form of historical quantitative inputs and methodology.

The advantages of scenario planning are that it is more creative and can provide several plausible predictions. It can also be used to explore risk and uncertainties when used for planning (Mortlock, n.d.). A few cons of scenario planning include the subjectivity of the process. Being subjective, it can be difficult to test for accuracy (Mortlock, n.d.).

The advantage of traditional forecasting methods includes the fact that it can be tested for accuracy. Forecasting predictions are based on objective truth. As discussed, data involved is typically in the form of historical data. As such, the results of forecasting can generally be replicated (Mortlock, n.d.). One of the biggest pitfalls is the lack of creativity. This lack of creativity provides a single, probable result without considering risk and uncertainty (Mortlock, n.d.).

References

Luther, D. (2022, August 25). Scenario planning: Strategy, steps and practical examples. https://www.netsuite.com/portal/resource/articles/financial-management/scenario-planning.shtml#:~:text=In%20the%20context%20of%20a,how%20your%20organization%20will%20respond.

Mortlock, L. (n.d.). Scenario planning vs. forecasting: 6 questions to ask to prepare for a post-pandemic future. https://www.leadershipnow.com/leadingblog/2021/05/scenario_planning_vs_forecasti.html

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