Scenario Planning versus Traditional Forecasting

 Scenario planning and traditional forecasting are different ways to manage potential future events. These approaches use different approaches to try to essentially predict the future, which is difficult given the uncertainties we face.

Traditional Forecasting

 Traditional forecasting is a quantitative approach that uses historical models to extrapolate into the future (Schultz Financial Group Inc., 2021). While traditional forecasting may work in certain ideal conditions, sometimes events occur that have no similarities with past events (Schultz Financial Group Inc., 2021). Traditional forecasting is typically better for short-time horizon predictions since it is less likely that something will change dramatically from the past in the short term.

Scenario Planning

 Scenario planning develops qualitative and quantitative scenarios of possible future events. It is usually best to think about future scenarios in terms of political, economic, social, and technological forces that may drive certain outcomes (Wade, 2012). This approach plays "what if?" with future events, encouraging creative thinking about what may happen and not primarily relying on quantitative models of the past and present.

Conclusion

In summary, scenario planning creates potential future scenarios from a judgment of what the future may look like based on the political, economic, social, and technological environment. Traditional forecasting is limited to historical quantitative models, while traditional forecasting uses qualitative and quantitative approaches. Scenario planning is a more complete option for quantifying potential future outcomes since it does not require the future to happen in agreement with the past models. The future has a lot of uncertainty, and the further out we try to predict, the more likely traditional forecasting will fail to account for some of the possible outcomes.

References

Goodreads. (n.d.). A quote by Yogi Berra. Goodreads. Retrieved May 5, 2023, from https://www.goodreads.com/quotes/261863-it-s-tough-to-make-predictions-especially-about-the-future

Schultz Financial Group Inc. (2021, August 20). Scenario planning vs. forecasting. Schultz Financial Group Inc. Retrieved May 5, 2023, from https://sfginc.com/scenario-planning-versus-forecasting/

Wade, W. (2012). Scenario Planning. Wiley Professional, Reference & Trade (Wiley K&L). https://coloradotech.vitalsource.com/books/9781118237410