The Evolution of Forecasting

 

The objective of this discussion board is to compare and contrast the concepts of scenario planning and traditional forecasting.  The ability to assume some control over the future is the goal of scenario planning (Ali & Luther, 2020).  Scenario planning assists decision makers in understanding what could occur in the future and the potential options to address and mitigate the change.  This allows organizations to proactively define a playbook so that the organization is prepared to respond versus needing to react.  Scenario planning can also assist organizations in understanding and planning for future costs.  At the organization where I work, we do this wireless data capacity.  When we look five years out, we look at various data usage scenario that include everything from no change to an aggressive rate of the adoption of wireless home internet with the deployment of mmWave technology.  This allows us to run a number of budget scenarios but also to understand what would be required for tools to support and security to mitigate the potential risks.  One of the benefits of scenario planning is the amount of data that decision makers have at their disposal to assist them in making informed decisions.  A disadvantage is that conducting scenario planning is a massive effort and can take time away from running the business.  In addition, things can change very quickly that at times the payoff to the investment in scenario planning may not be there.

The utilization of forecasting using historical knowledge such as trends is known as traditional forecasting (Performance Canvas, 2018).  Compared to scenario planning where the organization may be looking several years out traditional forecasting tends to look out about one year.  So traditional forecasting does not account for large changes that could occur in the future due to technology, culture, or business needs.  Traditional forecasting also utilized historical trends to predict the future rather than running potential future scenarios.  This is a weakness of traditional forecasting as it has the potential to put an organization in a reactive mode.  Where I work, we do both we do strategic forecasting which focuses on future technology, security, and business scenarios that could impact us but then we also look at how things on trending utilizing past knowledge.  By focusing on both we are able to have a rich dialogue and define potential risks in our decision making.

Traditional forecasting and scenario planning both play keys roles in organizations.  Each of them has their advantages and disadvantages and it is important for organizations to recognize this when planning for the future.

Blog link:   An Engineer's Perspective (engineersperspective9.blogspot.com)

References

Ali, R. & Luther, D. (2020, May 14). Scenario planning:  Strategy, steps, and practical examples. https://www.netsuite.com/portal/business-benchmark-brainyard/industries/articles/cfo-central/scenario-planning.shtm./

Performance Canvas. (2018, August 1). Live forecasting vs traditional forecasting vs rolling forecasting. https://www.performancecanvas.com/live-vs-rolling-vs-traditional-forecasting/