Welcome. As our next venture into judgmental forecasting this week, we're looking at exploratory methods. Exploratory methods typically consider multiple potential outcomes and consider information from a wide variety of sources, the two most common exploratory methods in business forecasting, are scenario analysis and the Delphi method. Scenario analysis can be useful in identifying plausible ranges of forecast outcomes, while the Delphi method is more useful in identifying consensus about likely future outcomes. The first exploratory method that we'll look at is scenario analysis, in a planning context, scenarios can be described as stories of possible futures that the organization might encounter, scenarios are graphic and dynamic, revealing the flow of an evolving future. Scenarios are holistic, combining social, technological, environmental, economic and political trends, events and other data, scenarios focus on the branching points of the future, the potential contingencies and the potential discontinuities. Thus, scenarios allow us to better prepare for uncertainty. For decisions about the future of an organization we must first know the kind of future environment the organization will be operating in. Scenarios can help us develop flexible and adaptable strategies to deal with multiple possible future outcomes. There are seven recommended steps in building scenarios identify the main issue or decision facing the organization, list the key factors that influence this decision list. The driving forces that influence these key factors, rank the key factors and driving forces by importance and uncertainty, compose plots for alternative futures that could impact the decision, evaluate the decision for each of the hypothesized scenarios, select indicators for each scenario. The next exploratory method we will look at is the Delphi method, the Delphi approach is a commonly used qualitative forecasting method, the Delphi method was originally developed at the rand corporation in the USA it is essentially a method for obtaining a consensus from a group. The objective of the Delphi approach is to obtain a reliable senses of opinion from a group of experts, while at the same time minimizing the undesirable aspects of group interaction, the Delphi method also provides a more systematic approach than the jury of executive opinion or other group consensus techniques, the technique eliminates committee activity altogether. There is a design program of sequential individual interrogation, interspersed with information, opinion and feedback from consensus of earlier interrogations. Respondents may be required to provide reasons for previously expressed opinions. A collection of reasons is presented to each respondent in the group with an invitation to reconsider and possibly revise their earlier estimates. The Delphi method requires a group of experts who are willing to answer specific questions relating to the issue under investigation, experts do not meet but are kept apart from one another so that the judgment will not be influenced by social pressure or other aspects of small group behavior. First, the coordinator sends the initial questionnaire to all participants each participant writes the anonymous responses, the coordinator collates these responses, and performs an analysis of the responses. If a consensus is reached, the coordinator summarises the business forecast. If, however, a consensus is not reached, the coordinator sends the updated questionnaire to all participants again and invites them to reconsider or revise their responses based on the outcome of the completed round, this process repeats until a consensus is reached. Don't forget to check out this week's tool box for more resources and details about exploratory methods as always, make sure that you attempt the quiz to practice what you've learned and receive some feedback on your learning. You soon realize the benefits and drawbacks of exploratory methods in business forecasting and whether you can incorporate these into your decision making. Next week we will look at the issue of biases when it comes to judgmental forecasting one more week to go until you complete this course, everyone say, wow.
