What to make of those annual forecasts
Tuesday, November 26, 2013
With 2014 only a month away, last year's business plans are heading for the shredder. 'Tis the season once again for sharpening pencils, creating fresh spreadsheets and bringing the team together for a visioning and planning session.
And just in time, here comes the annual parade of predictions, forecasts and trends for the coming year to give you a bit of help. Should you factor them into your plans or dismiss them as just so much seasonal industry buzz?
Like friendly advice, forecasts can be helpful if you approach them in the right spirit. No forecast is infallible, but some forecasts are more insightful than others. Here are a few rules-of-thumb to help you get the most from this year's forthcoming crop.
Consider the source
Many business columnists and industry experts offer up an annual list of predictions or trends for the coming year. While these may be well-informed, they are more susceptible to the author's bias or point of view.
Other forecasts compile information from a variety of data sources and expert opinions and thus tend to cast a wider net and provide a more balanced assessment of emerging trends and hot spots.
Beware linear thinking
As much as we like to talk about "thinking outside the box," our tendency is to imagine the future as being more or less a lot like today, including how we today think the future might be the same or different. Forecasters and futurists are not immune to this particular form of myopia.
"Most futures are thus contemporary futures, which tell us more about what's happening now than what's likely to happen next," observes Richard Watson, himself a noted trend watcher and forecaster.
Not surprisingly, therefore, many of next year's forecasts will look a lot like this year, only more so. Since trends may develop and crest over a number of years, there is some validity to these forecasts. But for purposes of business planning, you want to be looking for the unexpected, not just the expected.
Keep an eye out for what is on the fringe that might suddenly take center stage. A few experts foresaw the burst of the housing bubble and the potential for the Arab Spring, but because they were in the minority to those who predicted the status quo they received little attention until after the fact.
No prediction stands alone
Forecasters often consider trends and developments in isolation. But of course they are affected by any number of relationships and influences both within and outside an industry.
Watson again offers a valuable perspective: "We live in a highly complex world, but our instinct is to simplify things. All of the systems that we interact with, or inhabit, are highly complex and contain feedback loops. Unless we recognize this interdependence and these counterforces any linear forecast is doomed to fail."
When Apple first introduced the iPad, many tech pundits pronounced it DOA because of its name and dissimilarity to personal computers without taking into consideration that Apple had just shifted the paradigm to interactive computing, thus changing how people would relate to their machines and opening up whole new areas of digital experience.
Trending and forecasting are at best well-informed guesses about the future based on known behavior in the past. They rely heavily on identifying patterns and watching for where patterns may be changing. In tumultuous times — such as the present — it can be difficult to discern what is changing and what is a casualty of change.
As the speed of change accelerates, prediction is nearly impossible or too cautious to offer much insight. But forecasts can be useful tools for contingency planning and provoking innovative thinking. Use them as such and they can be good counsel. Rely on them too literally and you may end up disappointed or unpleasantly surprised.
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