Business strategies require the ability to plan for the future. Organizations have numerous tools to leverage in an attempt to predict the future. Two of these such techniques include Scenario planning and traditional forecasting.
Scenario planning focuses on re-imagining potential future states by outlining a resultant scenario and the actions that would lead to the scenario. Scenario planning does not have a formalized methodology or guidelines associated to it. Instead, focus is placed on using intuition to creatively explore potential futures.
When trying to imagine future scenarios, it is important the scenario building be orchestrated by knowledgeable experts from across the organization and subject matter experts from outside the organization to provide varying perspectives. The resulting scenarios will prove valuable due to the data and perspectives used to achieve them. The activity is supposed to be focused on simplicity. The resulting scenarios should not over complicate the current conditions or rely on complex situations to occur.
Traditional forecasting relies on utilizing existing knowledge and data to build models to predict future trends. This forecasting can be based on numeric or non-numeric characteristics. Numeric based traditional forecasting leverages statistical tools and prediction models to predict future variables based on current conditions. The accuracy of these models and their ability to represent the target problem can be represented numerically through the statistical tool, root mean square error.
References:
Bowman, G. (2016). The Practice of Scenario Planning: An Analysis of Inter- and Intra-organizational Strategizing. British Journal of Management, 27(1), 77–96. https://doi-org.coloradotech.idm.oclc.org/10.1111/1467-8551.12098
Fernandez, V. (2008). Traditional versus novel forecasting techniques: how much do we gain? Journal of Forecasting, 27(7), 637–648. https://doi-org.coloradotech.idm.oclc.org/10.1002/for.1066
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