Shoulda, Woulda, Coulda...The Power of Knowing Now What's Likely to Happen in the Future
What if you had tomorrow's winning lottery ticket number? I know if I had it I'd be ready to pick out that shiny new car or big vacation I've been dreaming about these past few years. Imagine the possibilities.
Would you quit your job? ...travel the world? ...addition to the house? ...pay off those nagging debts? Probably all of the above. Seems like every lottery winner these days we hear about is pulling in tens of millions of dollars. This kind of money can be a real game changer. No doubt. Of course, you're more likely to be attacked by a shark in Midtown Manhattan than win the lottery but we all can have dreams.
Let's look at this differently. What if you knew where the stock market would be in 6 months? Or, what if you had early insight into your future health condition specifically how long you're going to live? Not sure I want to know about that last one but that's just me.
There's obviously a Grand Canyon-sized difference between predicting tomorrow's winning lottery ticket number and the other examples I mentioned. Other than predicting tomorrow's winning lottery ticket number, there's the predictability factor that's possible which certainly isn't the case.
We can now pull from massive amounts of historical data (structured and unstructured data), run what-if scenario models, collaborate in near real-time with our peers including drawing from experiential input across the business to more accurately determine what is likely to happen. Once you have access to this information you can begin to do some planning for the expected out comes. We know how much information is being captured today by companies about their customers, products, consumer sentiment as well as their internal operations and external market & economic conditions that there's obviously not a problem with lack of data to do this predictive analysis.
Yet, in a lot of companies today this practice does not happen with regularity. Companies aren't using their most valuable resources available - their people and their data.
Look, I don't need to tell you the advantages of knowing what's likely to happen and how an organization can exploit this knowledge. If you're an investment bank in 2006 with a large amount of Collateralized Debt Obligations, or CDOs, and mortgage-backed securities on your books it might have been real helpful to hear from your front-line traders and other knowledgeable people in your operations that these speculative instruments were bound to go belly up driving your entire financial services enterprise into near bankruptcy. But, the culture and process wasn't in place to facilitate this feedback and resulting quick-response.
Staying with what's now being called the "2008 Global Financial Crisis" it's safe to say that in hindsight the data was all there to predict this banking collapse but there wasn't a culture in place to gather this feedback and act on it. Prescience. Only helpful to the enterprise if there's a platform in place to capture these insights and communicate them up the corporate tree so all are aware.
Without this kind of enterprise forecasting platform the enterprise won't collapse...not overnight that is. But, in the long run, it might suffer from multiple missed opportunities which could lead to a slow death by a 1,000 cuts.
Alternatively, if you know something's likely to happen in the future, say a hurricane, are you going to remain in your home if your home is in the hurricane's predicted path? Of course not. You're going to do everything you can to save all of your earthly possessions - maybe even your home, if possible - and get out of there. You're acting now. Not waiting for the day of the hurricane to do something about it. This is the basis for textbook business forecasting.
Only in obtaining honest, unbiased feedback from your workforce will you be able to trust this information to take action on it. If this workforce feedback is biased - meaning the figures that are produced from this effort were top-down dictated or driven by what the individual believes he or she has to achieve versus what they believe they can realistically achieve over a particular time horizon (think sales manager telling their sales rep what their next quarter's sales figures MUST be vs. what this sales rep believes the figures WILL MOST LIKELY be) the process ends up with little use for real decision making.
What do we do to implement such a forecasting culture?
1) Measure twice, cut. Don't over think this. Get started with forecast process in one department or functional area of the company. Get a quick win, promote your success and build out from there.
2) Forecast Accuracy. Check forecast accuracy to see if there's bias being put into the numbers. Reward people for their honest feedback.
3) Divorce. Yes, divorce...divorce the process from the budget.
4) Quality. Measure the quality of this new process by meeting with forecast participants to see how they're utilizing this feedback. Is the purpose of the forecast versus the budget understood?
5) It's on you. Beyond that this really requires you to take action to make this happen. I've been working with companies for 20+ years and I've seen what happens to the people who lead this change effort for their organizations - these people invariably rise in their organizations because they're viewed as change agents who don't need to be told to make game-changing things happen in the organizations. Implementing a real bottom-up driven forecast is low-hanging fruit if you're looking to rise in your organization. Is it easy to accomplish? Nothing worth doing ever is.
To use a skiing expression: no guts, no glory, go for it!
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