Traditional Business Forecasting vs Scenario Planning
Attempting to forecast a business’s future is the
right thing to do in order to maintain relevance or at the least stay in
business. More times than not, long-term
planning is actually an extrapolation of the future based upon the present (Wade,
2012). Even while implementing genuine predictive
analytics whereby a correlation is quantified based upon a dependent variable and
multiple independent variables, said business or enterprise is still just
forecasting the future based upon the present (Wade, 2012).
This type of forecasting creates an illusion that the business or enterprise controls their own future (Wade, 2012). In fairness to this hypothetical organization, it is unwise to allow the future to become the present without any attempt to predict that future. The illusion, however, is based upon adjusting independent variables that this business or enterprise can already foresee (Wade, 2012). This type of planning or forecasting presumes a future that is very similar to the present with quantified correlations that represent the best-case future, worst case future, and most likely future but not including variables that could drastically change that future and/or force a paradigm shift obviously because such variables are unknown.
Woody Wade (2012) offers what he terms scenario planning as an alternative to traditional forecasting. He concedes that planning for a future such that a business or enterprise is to remain relevant if not competitive is no small task but is vitally important. His methodology recommends planning for a range of plausible alternative futures he refers to as scenarios (Wade, 2012). Scenario planning challenges the idea that any one future is the most likely to emerge but instead plans for an array of possibilities.
The result of scenario planning is a portfolio of future scenarios. Each scenario is a predicted future based upon the trends of today (Wade, 2012). Each scenario comprehensively illustrates the landscape of the given business domain. Competitors, customers, suppliers, employees, and stakeholders would all be represented in each scenario (Wade, 2012). The scenarios are intended to differ one from the others but nonetheless be realistic and plausible given the realities of same business domain in the present day. Given this portfolio of possible scenarios, the organization’s planning team should be able to formulate strategies that address each possible scenario (Wade, 2012). As tomorrow becomes today, at the very least, any enterprise or business that went through the rigor of scenario planning is not starting over or behind a power curve relative to its competitors.
Wade, W. (2012). Scenario Planning: A Field Guide to the Future. Hoboken, NJ: Wiley & Sons.
This type of forecasting creates an illusion that the business or enterprise controls their own future (Wade, 2012). In fairness to this hypothetical organization, it is unwise to allow the future to become the present without any attempt to predict that future. The illusion, however, is based upon adjusting independent variables that this business or enterprise can already foresee (Wade, 2012). This type of planning or forecasting presumes a future that is very similar to the present with quantified correlations that represent the best-case future, worst case future, and most likely future but not including variables that could drastically change that future and/or force a paradigm shift obviously because such variables are unknown.
Woody Wade (2012) offers what he terms scenario planning as an alternative to traditional forecasting. He concedes that planning for a future such that a business or enterprise is to remain relevant if not competitive is no small task but is vitally important. His methodology recommends planning for a range of plausible alternative futures he refers to as scenarios (Wade, 2012). Scenario planning challenges the idea that any one future is the most likely to emerge but instead plans for an array of possibilities.
The result of scenario planning is a portfolio of future scenarios. Each scenario is a predicted future based upon the trends of today (Wade, 2012). Each scenario comprehensively illustrates the landscape of the given business domain. Competitors, customers, suppliers, employees, and stakeholders would all be represented in each scenario (Wade, 2012). The scenarios are intended to differ one from the others but nonetheless be realistic and plausible given the realities of same business domain in the present day. Given this portfolio of possible scenarios, the organization’s planning team should be able to formulate strategies that address each possible scenario (Wade, 2012). As tomorrow becomes today, at the very least, any enterprise or business that went through the rigor of scenario planning is not starting over or behind a power curve relative to its competitors.
References
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