Scenario planning vs Forecasting

 

Scenario planning refers to understanding and visualizing future situations or events and the probability of an event's occurrence based on past occurrences. Scenario planning takes into consideration the current events to understand its implication in the future. Scenario planning focuses on developing "multiple views of the future. It explores the interaction of external conditions that may create vastly different futures. It separates predictable trends from unknowable uncertainties and then plays out their possible interactions using a limited number of scenarios" (Steil & Gibbons-Carr, 2005). Scenario planning applies a method to project future events developments relying on the past and current research (Forman, Nicol, & Nicol, 2015).

Forecasting involves the use of present and historical data and applies a forecasting method. Forecasting is relying on probabilities of occurrences of an event. Forecasting is an estimation of a variable of interest. Forecasting has the element of time/data that accompanies the variable of interest to be predicted. Forecasting does not offer solutions for "every kind of uncertainty" (Egrioglu et al., 2015).

Unlike forecasting, which depends on quantitative data, an integral aspect of scenario planning involves both quantitive and qualitative data. An approach is followed when assessing the impacts of observations made from these data sources. Forecasting uses statistical approaches to predict the probabilities of events from happening.

Since forecasting excludes events that are not recognized in predicting future occurrences that are not quantified in numbers, it is inflexible to consider future events or situations. Therefore, forecasting is limited to include new occurrences or events from being considered in building a forecasting model.

To narrow this limitation, which is associated with forecasting methods such as Auto-Regressive Integrated Moving Average (ARIMA), Facebook came up with a Facebook the Prophet forecasting model. A key argument the Prophet forecasting model takes is "events" in the model. Hence, one can include events that the model that can be considered in forecasting.

References

Egrioglu, E., Khashei, M., Cagdas, H. A., Burhan Turksen, I., & Yolcu, U. (2015). Advanced time series forecasting methods. Mathematical Problems in Engineering, 2015 doi:http://dx.doi.org.proxy.cecybrary.com/10.1155/2015/918045

Forman, D., Nicol, P., & Nicol, P. (2015). Looking to the future: Framing the implementation of interprofessional education and practice with scenario planning. Education for Health, 28(3), 162-168. doi:http://dx.doi.org.proxy.cecybrary.com/10.4103/1357-6283.178608

Steil, G.,Jr, & Gibbons-Carr, M. (2005). Large group scenario planning: Scenario planning with the whole system in the room. The Journal of Applied Behavioral Science, 41(1), 15-29. doi:http://dx.doi.org.proxy.cecybrary.com/10.1177/0021886304272888

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