Scenario Planning vs. Traditional Forecasting


Scenario Planning

Focused heavily on the current trends, possible destructions, and past events, scenario planning allows an organization to visualize potential solutions or conditions, how they would evolve over time, how to respond to such changes, and what the potential advantages are. Using a mix of quantitative and qualitative approaches, this method of planning “allows for a top-down/bottom-up approach, as well as looking forward to the future and seeing how a portfolio might react to certain market citations” (Schultz, 2021). This diverse approach allows organizations and individuals to develop dynamic solutions that are meant to adapt to future changes that are not necessarily accounted for. In addition, based on the identified uncertainties that step for current citations, scenario planning allows for the development of multiple scenarios that may be followed. 


Traditional Forecasting

Following a more rigid analysis process, traditional forecasting focuses on the quantitative conclusions made by tracking past and present data within a specific area of interest. This method of planning follows a more probable approach as it relies heavily on the data collected, and the ability to test its accuracy. It is an objective and fact-based method that enables organizations to understand how current trends have developed and how to utilize these trends to propose new solutions (Morlock, 2021). This, of course, follows the theoretical assumption that the future is predictable and static. 

Advantages and Disadvantages of Scenario Planning

Aside from analyzing and understanding past and present trends, which is a similar approach to that of traditional forecasting, scenario planning also enables and prepares an organization to react to changes of direction as posed by the surrounding environment. In addition, scenario planning requires more collaboration across teams and subject matter experts due to its diverse nature, which provides a creative dimension that may otherwise lack in the traditional forecasting method. 

Advantages and Disadvantages of Traditional Forecasting

Traditional forecasting is a quicker method of analyzing past and current trends to develop a solution that closely aligns with current day expectations and needs. One of the main disadvantages in using the traditional forecasting method is the lack of predicting changes within a market or the environment directly impacting the solution or condition being analyzed. Hence, there is much less creativity in the assumption of future shifts within an environment, which is likely to disrupt and challenge the performance of new solutions. 

Conlusion

To summarize, scenario planning provides long-term solutions that are based on unknown risks that may develop over time. On the other hand, traditional forecasts do not take into consideration potential future changes, and instead rely on the short-term advantage of a similar future as the current day. While it depends heavily on the scenario, I think scenario planning is a much more effective method in this rapidly changing world we live in today, where any new solution in any industry requires the ability to adapt to unexpected future changes.  

Reference

Mortlock, L. (2021b, December 5). Scenario Planning vs. Forecasting: 6 Questions to Ask to Prepare for a Post-Pandemic Future. LeadershipNow. Retrieved September 8, 2022, from https://www.leadershipnow.com/leadingblog/2021/05/scenario_planning_vs_forecasti.html#:~:text=Scenarios%20provide%20longer%2Dterm%2C%20multiple,much%20like%20it%20does%20today.

Schultz Financial Group Inc. (2021, August 20). Scenario Planning vs. Forecasting. Retrieved September 8, 2022, from https://sfginc.com/scenario-planning-versus-forecasting/

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