Forecasting

Forecasting holds a central role in business planning for innovation (Bessant & Tidd, 2018).  Forecasting methods depend on the following:  

• What is trying to be forecasted
• Rate of market change and technological change
• Availability and accuracy of info
• The company’s planning
• Resources available for forecasting (Bessant & Tidd, 2018)

Scenario planning is the process of using possible future outcomes or scenarios, to improve the quality of decision making or planning (Ringland, 2011).  Michael Porter describes a scenario as “an internally consistent view of what the future may be, not a forecast but a possible future outcome.” (Ringland, 2011).  Scenario planning are processes used for creating a variety of scenarios or mental models and using them to assist in making decisions (Ringland, 2011).  Scenarios are used to explore various possible answers to questions about the organization (Ringland, 2011).  Examples of these plans include evaluation of key business factors and how changes impact finances, employment, operational needs, organizational structures and workforce mix (Revenaugh, 2020).  

Forecasting development and adoption of innovation is hard, but participative methods like scenario planning and Delphi are relevant to innovation and sustainability (Bessant & Tidd, 2018).  Forecasting methods assist in identifying and assessing market opportunities and competition, market research and scenario planning (Bessant & Tidd, 2018).

The different methods of forecasting, their uses, and limitations are (Bessant & Tidd, 2018):  

Method	Uses	Limitations
Trend extrapolation	Short-term; stable environment	Relies on historical data, assumes patters from past
Product & Tech Road Mapping	Medium-term; stable, clear path	Incremental, fails to identify uncertainties for future
Regression testing, models, simulation	Medium-term, relationship between dependent & independent variables understood	Identification and behavior of independent variables
Customer and marketing	Medium-term; product attributes, market segments are clear	Sophistication of users, limitation of tools to differentiate noise and info
Benchmarking	Medium-term; process & product improvement	Identify relevant benchmarking candidates
Delphi & Experts	Long-term, consensus	Expensive, disagree, consensus wrong
Scenarios	Long-term; uncertain	Time-consuming, unpleasant outcomes

Traditional forecasting generalizes current state and future state based on more quantitative and common methods, as described above.  Scenario planning represents a sound future scenario that explores and conjects advantageous opportunities and unfavorable threats to a business’ mission and objectives (Wade, 2014).   

Scenario planning can involve mapping out possible scenarios with vignettes describing future environments that show outcomes with significant forces of a various trends like social and technological trends that can impact outcomes (Wade, 2014).  Sometimes forces are disruptive or traditional and can cause different outcomes, much like the example of WAN. Scenario planning involves 6 steps (Wade, 20120):

1. Frame the challenge
2. Gather info
3. Identify driving forces
4. Define future’s critical “either/or” uncertainties
5. Generate scenarios
6. Flesh out and create story lines (or end state) 

Using the 6 steps will create various scenarios and in order to have results of practical value, there are additional steps to follow:

1. Validate scenarios and identify further research
2. Assess implications and define responses
3. Identify signposts
4. Monitor and update as time passes

This info helps develop a better strategic plan to assist in decision making (Wade, 2012)

References

Bessant, J.Tidd. J. (2018). Managing Innovation: Integrating Technological, Market and Organizational Change, Enhanced eText. [Colorado Technical University (CTU)]. Retrieved from https://coloradotech.vitalsource.com/#/books/9781119379416/

Revenaugh, D., (Presenter).  (2020, Nov 4).  Live Chat 5-Futuring and Innovation.  Colorado Technical University, Online.  

Ringland, G. (2011). Scenario planning. In J. Law, Business: the ultimate resource (3rd ed.). A&C Black. Credo Reference: https://search-credoreference-com.proxy.cecybrary.com/content/entry/ultimatebusiness/scenario_planning/0?institutionId=556 

Wade, W. (2012) Scenario Planning: A Field Guide to the Future. John Wiley & Sons P&T. VitalSource Bookshelf Online.

Wade, W., (2014, Sep 3). “Scenario Planning” – Thinking Differently about Future Innovation  [Video file]. Retrieved from:  https://globisinsights.com/video/woody-wade-scenario-planning-thinking-differently-about-future-innovation/