Fresh studies into forecasting looked at over 80,000 predictions across the social sciences and discovered that, regardless of age, sex or experience, people just aren’t very good at forecasting. Failure to predict the recent worldwide recessions show just how accurate this research to be.
Learning that forecasting, in general, doesn’t work makes it easier to dismiss financial forecasts and better placed to take advantage of changes to your situation instead of sticking to a plan based on what is ultimately guesswork.
How Does Poor Forecasting Affect Your Business?
Business strategies that rely on forecasts tend not to be very robust as they are based solely on an arbitrary prediction. Choosing to believe this and thinking that your planning is all in hand is extremely dangerous, and you are much better served to prepare for the unknown and several possible outcomes.
Goals are fine, but forecasts are critical as they often become fact in the minds of employees and leave them unprepared for the real world conditions they end up facing.
Can We Produce More Accurate Forecasts?
The holy grail! If you can provide accurate forecasts, you’ll make billions, but we are getting closer to this being a reality. Recent scientific research encourages forecasts to take into account all possible unpleasant scenarios, a premortem if you like.
This change in thinking means forecasts will be more detailed, cover all possible adverse outcomes as well as positive or desirable ones. If you are prepared and have a strategy for all outcomes, only then are you truly prepared. We may not be able to forecast but we can prepare to fail, and this may be a far more valuable tool as it allows an exit from any situation.
Why Do We Place Such Importance On Forecasting?
Quite simply forecasts are clearer and easier to understand than choosing to analyse all possible outcomes and prepare strategies for each. If looked at objectively we wouldn’t use forecasts at all but human nature is a powerful force, and so we remain hooked on creating forecasts to simplify and explain the complexities of the modern world.
Prioritising forecasting is perfectly understandable but that doesn’t mean it’s a good thing, and we encourage all businesses to plan for every eventuality, that way you’ll be best placed to deal with whatever the world throws at you.