Scenario Planning vs Traditional Forecasting

Scenario Planning involves creating response plans for possible future scenarios.  In disaster recovery planning, scenario planning can be an invaluable tool where leaders imagine worst-case situations and develop mitigation plans to address them ("Scenario Planning: Full-Dress Rehearsal," 2003).  Scenario planning does not try to plan, rather, it tries to speculate possible scenarios or stories that can have any possibility of happening.  

 

Scenario planning for an organization has six steps (Tucker, 1999)

1.     Learn the future world perceptions of top decision makers

2.     Gather trends intelligence, and prioritize external forces

3.     Sketch scenarios

4.     Weigh scenario implications

5.     Consider warning indicator signs

6.     Check the organization’s relevance and vision

 

Traditional Forecasting uses historical data and observations to determine future plans.  It relies heavily on the availability of historical data and is often done either yearly or quarterly.  It assumes that the future will not be much different than the past.  Traditional forecasting can often be seen in financial sectors of businesses.  Companies often try to create budgets a year in advance based heavily on the previous year’s data.  

 

Scenario planning can be extremely valuable for determining what-if and worst-case scenarios, and help companies know what they would do in a specific event.  However, it cannot help with long term projections that a company may need to present to stakeholders.  Traditional forecasting can fill that gap, but these forecasts can be rendered worthless in the face of a major unforeseen event.  

 

In my career, I am seeing the trend moving to more scenario planning, especially in the cybersecurity realm.  We lean heavily on scenario planning when creating disaster recovery plans.  But to fund those cybersecurity initiatives, I have to use traditional forecasting to present my yearly budget and request additional capital.  

 

References

 

Scenario Planning: Full-Dress Rehearsal. (2003). Info - Tech Advisor Newsletter. 

 

Tucker, K. (1999). Scenario planning. Association Management, 51(4), 70-75.