Traditional Forecasting vs Scenario Planning

Traditional forecasting:

Forecasting is one of the steps that is taken when planning for the future. It is a process of using current and past information to attempt to predict what may happen in the future. A family planning for a trip may use the amount of money spent of food for previous trips to forecast how much they may spend during the future trips. Meteorologists forecast future weather events in part by using data of past events. Traditional forecasting encompasses commonly used forecasting methods like the naïve forecasting method, casual forecasting, and the Delphi method of forecasting. While these approaches vary, each one uses past data in some way to attempt to predict future events (Porter, 2011). For example, casual forecasting attempts to use related data to predict a future event. If a movie has high ticket sales, we can assume that the action figure toys for that movie will sell well. The Delphi method uses the opinions of experts of past events to predict future events. A drawback to this type of forecasting is that it only prepares the participants for events that have already been observed, since the data is based primarily off past data. Using the meteorologist example, if data is coming in that the meteorologist doesn’t have a model to base their forecasting from, they can’t predict the weather. This is usually parodied in movies during a cataclysmic event when the resident expert is asked what is going to happen and turns to the camera and says “I don’t know!” The next time that happens, we now know to scream out in the theater “Traditional forecasting does not take previously unobserved phenomena into account during analysis!!” I strongly recommend not doing this.

Scenario Planning:

Scenario planning is a unique approach to predicting future events and trends. Instead of using past data to attempt to predict future events, scenarios are developed that represent what may happen in the future. Those scenarios are played out to their logical conclusions, and decisions are made based on the results. A good example would be when planning a fire escape plan for a building. The planners can develop scenarios based on where the fire may be. For example, if the fire is near the main escape path from the building, the planners can work through that scenario and determine an alternate path out (Wade, 2012). The strength of this approach is that a scenario can be determined from what could possibly happen, instead of what has happened. Using another Hollywood example, in the movie World War Z a plague sweeps across the world and only Israel is prepared. In the movie, the Israeli government identified this possible scenario early and planned through the logical conclusion. Using traditional forecasting, this would probably not be the results since this outbreak was the first of its kind. A weakness for scenario planning is the opposite of traditional forecasting to where it is not based on past data and can be wildly subjective and miss the mark of what really happens when the scenario plays out. Scenario planning also breaks down in planning for short term or specific planning (Coates, 2016). In the book Foundation by Issac Asimov (1951), humanity builds a massive super computer that can use traditional forecasting to predict the future for several thousand years. Throughout the book, we find that the scenarios built by the supercomputer during a massive war were way off when planning short term actions, and the techs monitoring the system added changes whenever they thought the system was wrong. Although fictional, this is a good example of this flaw with scenario planning.

References

Wade, W. (2012). Scenario Planning: A Field Guide to the Future. John Wiley & Sons. 

Porter, A. (2011). Forecasting and Management of Technology, Second Edition. John Wiley & Sons.

Asimov, I. (1951). Foundation. Gnome Press.

Coates, J. F. (2016). Scenario planning. Technological Forecasting and Social Change, 113, 99-102.