By Vicki White, Vice President of Operations, OC Reilly Inc.
(July 19, 2017)—People have been trying to predict the future since the moment they realized there was such a thing. From the ludicrous online fortune teller to the practiced radar-jockey meteorologist on TV, knowing what may be headed one’s way never fails to attract an audience.
In the world of business, this concept finds its home in the realm of strategic planning and economic forecasting. There may be more tried-and-true tools deployed in this process, from historical trends and data to detailed analytics and market research, yet the forecasts it produces still carry a tinge of uncertainty for any business.
In an article appearing in a recent edition of Supply Chain Management Review, the cautionary message about business forecasts is tied to the numerous polls taken during the 2016 presidential election.
“When an outcome is binary, such as when calling a coin toss, around half of a group would likely be wrong. So if the election was reasonably close, on average around half of the pollsters should have picked the winner,” reads the story. “However, President Trump was a long shot – meaning less than 50% should have picked him. The New York Times and FiveThirtyEight, both respected pollsters, gave Trump a 15% and 29% chance of winning, respectively.”
The author then cites an example from the world of business, writing, “I forecasted a substantial change in the annual revenue trend of my division. That was a good year for me in that I forecasted a revenue turning point – from low double-digit annual percentage growth to flat revenues. It was a bad year because the executives, managers, and co-workers refused to believe the forecast…”
In the political example, people believed the forecasts and saw reality yield a different result. In the business example, people did not believe the forecast, which turned out to be accurate.
As with any tool in business, forecasts are meant to be just that – a tool. As we work to serve our health care supply chain clients, we try to always balance expectations and assumptions about what’s ahead with our own first-hand knowledge and experience on the client’s side of the equation.
Most times, that careful balance – which only comes with proven expertise and history in the business – turns out to benefit everyone involved.
Copyright 2017 OC Reilly Inc.