Forecasting

Forecasting

Throughout time mythical gods, ancient cultures, and individual human beings have made claims of a supernatural ability to predict future events. The attraction of this power was always irresistible, and people flocked to these alleged soothsayers to help choose the appropriate wardrobe for their late afternoon croquet games. This uncontrollable human desire to know what is going to happen two years from now, or two minutes from now certainly explains the popularity of tarot card readers and the Weather Network App.

The beauty of future forecasting is that the accountability for your intrepid work is minimal, yet the occasional right prediction gets rewarded and chronicled for generations. In 300 A.D. One of the Mayans, let’s call him Fred, suggested the world would end on December 12, 2012. This simple little declaration caused very long lineups at the local bomb shelter stores to become surprisingly brisk on December 11, 2012. Now my proactive friends did all of their shelter and end of world supply shopping on December 11th to avoid that anticipated last minute rush. Though the results of this prediction proved to be less than reliable, Fred was not given a negative performance review rating by the Mayan HR department at the end of fiscal 300 A.D., and hence the popularity of forecasting began. In Japan they have a figure who smiles to indicate the ironic humour in those who offer future predictions.

The other wonderful fact about forecasting, particularly ancient future predictions is the varied interpretation of century old claims broadens exponentially as time passes. For example in 1555, when Nostradamus boldly claimed “the scourge and plague of the world will be predicated by one single action delivered by the matriarch of a village leading to a catastrophic event!” was later simply reinterpreted as “Your mother in law will be late for Sunday dinner and the potatoes will get cold.”

Whether it was ancient Greeks, Romans, Druids, Mayans or the Tea Party, the passion of the proclamation will always outweigh the disappointment of forgettable results. And let me repeat, if you get one out of your three hundred predictions kind of close, you can start your own consulting company that will get quoted in the next Harvard Business Revue.

Today thriving businesses insatiable desire to know the next trend, the next hot commodity or even the next boy band to follow, cost organizations millions of dollars a year. Market research, statistical analysis, colourful pie graphs and bar charts are subtly replacing insights and common sense. Nobody looks out the window anymore to determine weather. Unfortunately with over reliance on data, one can get blindly caught in a temporary trend, which explains why your neighbour across the street bought the P.T. Cruiser convertible.

Inevitably a company must weigh the volumes of information available quickly and make a relatively educated decision. Market research, historical sales data, competitive espionage, overheard conversations at Starbucks, and observing the last purchase a fourteen year old made online, will not be enough to rationalize the  magnificent forecasting model you are about to present to your CFO.

In the spirit of past history will predict future behaviour an organization will have to carefully assess the old risk / reward template in the annual short term and long term planning exercise. On the risk side, one must clearly measure the magnitude of the humiliation of being wrong. There is a large difference in the humiliation of that grade eight girl turning you down when you asked her dance at graduation, versus committing all company resources into repackaging your soap because your new, young wife likes the colour green. On the reward side of the ledger, being disciplined on not only the short term gains, but clearly appreciating the long term implications of a decision are paramount in your thinking exercise as you pour over your information.

The harsh reality in forecasting comes down to half a dozen basic but often ignored questions that are less taken from MBA courses, but rely more on common sense.  So before you respond, that is exactly the kind of foolish talk we expect from non-MBA people, here they are.

1. Do you truly understand the emotional fragility of your target demographic?
2. Does the science of our research match the conversations of social media and your own water cooler?
3. Are we too late?
4. Have we seen this before and what did we do to successfully address this?
5. What conditions have changed in our new working environment?
6. Can we afford not too act?

I will not pretend to suggest that by asking these six questions, you will have solved your forecasting problems, but what I am implying is to not just use data to make important decisions. Explore multiple sources, talk to people and tap into your intuition and experience as you blend what you know with what you feel. Great market research forces great minds to ask much more insightful questions than what I am proposing here. Your ability to ask the right questions to many diverse resources will be rewarded.

Of course, when tackling the topic of research and statistics, I tend to lean on authorities like retired PGA golf professionals, who now make a career out of predicting current trends on the Champions tour for the over fifty athletes who can still play the game they love, with admirable skill and grace. Lanny Wadkins often sights a reference of an old golf teacher he admired, when dealing with the science of statistical analysis. “Be wary of people who use a statistic improperly. Remember data is akin to a drunk man leaning on a lamp post at night. Don’t use the lamp post for support, use it for illumination!” Information should not be used to support what you think, but rather challenge what you think.

The art of striking the right balance of what you know, and what you feel, is the hallmark of high aptitude of forecasting.

Finally, and frankly the most comforting part of my forecasting suggestions here, is I have unashamedly embraced the spirit of the ancients. I have boldly suggested six questions to guide, without explanation or solid evidence that theses challenges will assist you at all, in your forecasting process. Like the ancients, I do this without taking any accountability of the success or failure of the implementation of any of these recommendations. If these ideas work I will become a forecasting guru. If they do not, you will forget this article and move on to the next business book that offers a unique approach to an old problem. Nostradamus would approve.