Scenario planning versus traditional forecasting

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The scenario planning takes into consideration past events, as well as developments that we are currently monitoring as probable disruptions and visualize what future conditions or circumstances are likely. The scenario planning only illuminates different ways the future may unfold and are not predictions. The strength of using scenario planning is mixed with qualitative and quantitative views. According to Ogilvy (2015), “The scenario planning has enough detail to assess the likelihood of success or failure of different strategic options and has a methodical eight-step process. The process has two major parts: first, choosing which scenario logics comprises the first five steps, and second, telling its implications and early indicators in the next three steps.

1: Focal Issue

2: Key Factors

 3: External Forces

4: Critical Uncertainties

5: Scenario Logics

6: Scenarios

7: Implications and Options

8: Early Indicators (Ogilvy,2015).

Traditional forecasting uses historical observations to estimate future business metrics like budgets, revenue, or asset performance. It heavily relies on historical data, which might create a gap between forecasts and actuals observations where the future does not equal the past. According to Posadas (2017), “Traditional forecasting fails to deliver the precision and agility as the past does not represent the future in dynamic operations that must respond to changing maintenance practices, aging equipment, engineering innovations, reliability improvements, and highly variable worldwide operations. The traditional forecasts are tightly coupled to past events and separate natural variability from meaningful relationships based on historical data. This technique Uses static time models and assumes maintenance is unchanging over time” (Posadas,2017).

Scenario planning is more beneficial than traditional forecasts. The scenario is planning to be far superior and more strategic than conventional forecasting methods as scenario planning a greater level of flexibility. The disadvantage of scenario planning is more time consuming than traditional forecasting.

References

Ogilvy, J.(2015), Scenario Planning and Strategic Forecasting. Retrieved from https://www.forbes.com/sites/stratfor/2015/01/08/scenario-planning-and-strategic-forecasting/#6b3a5121411a

Posadas, S.(2017). When traditional forecasting doesn’t fit. Retrieved from https://clockwork-solutions.com/traditional-forecasting-doesnt-fit/

 

 

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