A move toward scenario analysis

Since the 1960s, tremendous emphasis has been placed on developing more sophisticated forecasting techniques which can process large quantities of historical data and produce extrapolations for predicting the future. These techniques, however, have failed in a number of respects including their ability to consider systematically qualitative variables, predict turning points, provide an internal communications tool, and serve as a link between forecasting planning and decision making. This paper discusses a relatively new approach to forecasting, called scenario analysis, and recommends further research to develop this technique. A scenario is a narrative description of a consistent set of factors which define in a probabilistic sense alternative sets of future business conditions. Scenario analysis addresses many of the weaknesses of traditional extrapolative forecasts mentioned above. Several techniques are discussed including intuitive logics (SRI International and Royal Dutch Shell), trend-impact analysis (the Futures Group), and cross-impact analysis (INTERAX and BASICS).