What Is the Real Value of Forecasting?

Simon Butler shares his experience of getting the most from your forecasting capabilities.

A forecast’s accuracy is only important when you can articulate how that accuracy impacts the real goals. It can be easy to get sucked into valuing the contribution and impact of forecasting through accuracy alone, as opposed to the impact it has on real business issues.

The goal of support functions is to make better decisions, and those decisions need to be aligned to real objectives; there are no organisations with the sole objective of having low forecast error.

It is much more likely that your organisational goals are sustainable profitability, excellent customer service, and achieving the right return on investment. As such, we need to recognise the role of forecasting in supporting these goals, instead of being concerned with accuracy for accuracy’s sake.

Don’t become afflicted by analysis paralysis, taking action only to improve accuracy without benefit. Stop earlier, at a lower accuracy level, if it is enough to meet the business goals.

Re-invest the time saved to find out more about the root causes of demand and the drivers of productivity. My challenge to you would be to consider how you can change your metrics to reflect the real business impact of your forecasting, and how can you reposition forecast accuracy to articulate risk. Aim to be measured on how you enable better strategic decision making.

Another way in which we can think differently is by reconsidering the role of forecasting in the planning team and how to align it with emerging insight functions.

Insight and planning teams often work in isolation of each other, which is a missed opportunity. The insight team will normally be able to tell you why volume was what it was and what caused it.

Unfocused insight functions sometimes adopt a scattergun approach, producing great analysis that doesn’t make a difference, as it does not engage with specific business purpose.

Aligning the insight team’s activity to the planning function’s goals can generate outcomes greater than the sum of their individual parts.

I would encourage you to reflect on the stated purpose of both your insight team and your forecasting team. Is it to unearth interesting information and create accurate forecasts or is it to use new and insightful information to shape your business plans?

With thanks to Simon Butler at The Forum