Forecasting is Tough

Quick Summary: Increase forecast accuracy by understanding why past forecasts were correct or not.

Abstract:

Forecasting virtually every future event is difficult.  We live in a probabilistic, not a deterministic, world in which no outcomes at any given time are certain.  Instead of accepting this fact as inevitable, we can significantly improve outcomes by responding to conditions as they occur.

Actually, forecasting is easy.  However, forecasting accurately is tough!  As Yogi Berra once said, “It's tough to make predictions, especially about the future.”  If you need any proof of this statement, tune into one of the Sunday morning pre-game football shows with the experts providing thorough analysis of which teams will win their games in the next few hours.  With their years of experience and the up to the minute facts available to them, by the end of the season most of them show results that are little better than flipping a coin.  Other examples are everywhere.  A good example involves the forecasts made by public companies and the Wall Street “experts” who closely follow them.  Quite often their revenue forecasts are equally wrong.  In these cases, and virtually all others, there are simply too many variables and unknowns that can impact most forecasts.  Creative CFOs often mask the earnings per share forecasts with “clever” adjustments.  Unfortunately, most sales situations do not allow similar adjustments to be made.  Some companies do make adjustments and some CEOs and CFOs are in jail as a result.

Individual sales outcomes follow the same pattern observed by Woody Hayes, the legendary Ohio State football coach of a past era.  Woody said, regarding the forward pass, only three things can happen and two of them are bad.  He was referring to a pass completion, an incompletion, or an interception.  Watching any given football play and the actions and interactions between the twenty two determined athletes on the field shows the incredible complexity of each play and the many possible  outcomes before the play is over.  A product or service sale is generally far more complicated, but there still remains only three possible outcomes.  The sale is successfully completed and the order is received, a competitor receives the order, or the prospect does not make a buying decision (which is a decision by itself).  Just like Woody said, two of the outcomes are bad while only one is good.

One significant difference between the football play description and the process of pursuing and receiving an order is that the sales process is longer than the four of five seconds associated with a football play, which provides far more time to react to the changing environment.

Just as a quarterback or the play-calling coach takes into account a multitude of factors before each play, a sales rep needs to carefully consider past events and the current circumstances that they face in pursuing an order.  Wishing for success needs to be replaced with the development of specific plans and purposed actions when the reality of the situation evolves as it most assuredly will happen.  This is never easy, and similar to the Monday morning quarterbacks who discuss what should have been done with the benefit of 20-20 hindsight, it is easy to second-guess virtually any unsuccessful sales situation.  Successful teams do not turn the page and look forward and plan the next encounter until they have reviewed their past game films to determine what they should have done differently.  Rationalization never helps.  Cold hard reviews and identifying the root cause of the failure is required.  It is never comfortable but helps to avoid the two bad future outcomes.

Forecasting accurately is never easy, but can be dramatically improved.  Start by replacing wishing with working and looking backwards before looking forwards.

 

Article Number : 5.010201   

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