In this assignment, we examine a case study related to the application of planning and forecasting. The involving forces and impacts from the application will be analyzed and explored as well as the graphics model of the process. The two techniques for planning and forecasting discussed in this project are the traditional forecasting and scenario planning. The organization of the project will be divided into three section: 1) Definition of traditional forecasting and scenario planning, 2) Case study and discussion, and 3) The force and impact.
1. Definition
Traditional forecasting is the approach to estimate the occurrence of an event in the future. According to Seeman (2002), the technique is used in many areas such as weather, economics, healthcare…etc. Many people get confused when comes to distinguish between prediction and forecasting as in certain cases, these terms can be interchangeable. However, to be more specific, prediction refers to a general estimate of future events of how many times it occurs, whereas forecasting is the estimation of certain values (Ogilvy, 2015).
Another important technique in planning and forecasting is the scenario planning, which usually focuses on the strategic side of the business at the top level. Based on Wade (2014), businesses use scenario planning as a compliment to the traditional forecasting with the flexibility to different situations such as increased competition, or a recession.
2. Case study and discussion
The case study we bring to the discussion is Microsoft. Microsoft is a software company that in 1990, it used the standard forecasting process that based on three steps: business strategy, systems strategy, and IT strategy (McNurlin, Sprague, & Bui, 2009). The company also used the outside-in approach as the traditional forecasting method. Figure 1 shows the outside-in approach that has the core and frontline as the middle portion. Under this approach, the company has several assumptions which are quite conservative and old-fashioned. These assumptions include that the future event is predictable, and the executive levels are the smartest person to make an overall decision and they are also the commanders with orders that the subordinators need to adhere.
Figure 1: Outside-in Technique for Traditional Forecasting
Since the assumption and the forecasting did not work because Microsoft did not gain any market shares and did not earn revenue enough for the company to be successful. Then, Microsoft began to use the scenario planning with pragmatic assumptions. These assumptions are the opposite of the traditional forecasting especially the fact that the future is far from being predictable and the company should not ignore the lower level management because they are the first one to notice any small changes in the business environment. With this new planning technique, Microsoft started many varieties of products (.NET platform, Xbox 360), pushed higher revenues, and won a lot of different market throughout the year.
In this section, we will take a deeper examination of the scenario planning process and how Microsoft turned its business around with this technique. According to Figure 2, the scenario planning process has eight steps: 1) focal issue, 2) key factors, 3) external forces, 4) critical uncertainties, 5) scenario logic, 6) scenarios, 7) implications and options, and 8) early indicators (Ogilvy, 2015). With this process in mind, the company will have to test its strategy based on each of the scenarios with any possible outcome in the future (Ogilvy, 2015).
Figure 2: 8 Steps for Scenario Planning Process
Since the scenario planning creates a 3D future outcome rather than just only 2D future outcome like the traditional forecasting, the company can project and use the strategy accordingly which can offer unique opportunities like taking advantage of a new market. The scenario planning also adapts sophisticated techniques in quantitative data like time series, exponential smoothing regression to estimate the future values (GBN, 2008).
3. The force and impact
There are certainly many forces that influence the application of planning and forecasting. Firstly, the competition force can either threatening and rewarding if the company approaches it correctly. The scenario planning can help the company win over its competition by producing differently in terms of product design or quality. Secondly, economic force is also important because once the country economy is improving, the purchasing power is also increasing, thereby driving more revenues for the company. Lastly, technological force allows firms to find new products with better technologies and quality (McNurlin et al., 2009).
The way the scenario planning can impact the social changes is through the leadership the company uses. If the company adopt a more flexible approach to the business future, then the company likely has a forward-thinking, therefore cultivating new lines of knowledge for innovation that ordinary customers can enjoy.
Reference:
Global Business Network (GBN, 2008). Introduction to scenario planning. Retrieved May 2, 2016, from https://www.mwcog.org/uploads/committee-documents/aV5eWFtX20080731094534.pdf
McNurlin, B. C., Sprague, R. H., & Bui, T. X. (2009). Information systems management in practice. Prentice-Hall International.
Ogilvy, J. (2015). Scenario planning and strategic forecasting. Retrieved May 2, 2016, from http://www.forbes.com/sites/stratfor/2015/01/08/scenario-planning-and-strategic-forecasting/#661a1e006b7b
Seeman, S. (2002). Traditional forecast techniques. Retrieved May 2, 2016, from http://speedy.meteor.wisc.edu/~swetzel/winter/methods.html
Futuring of AI 