Why should I buy a market forecast?

The short answer is to save you time and to provoke questions you may not have considered. However, your agenda and that of the forecaster are quite different: the forecaster needs to sell as many copies of the forecast as possible before it goes stale; the user needs data that is in the public domain (where the forecaster has put it for sale) on which to build.

This is useful to the strategist in the following ways:

1. The forecaster has set a baseline for the information that is available to all (for a fee). Thus, by buying a copy of the forecast, the strategist knows what many of his/her competitors will be working from. Some will take the forecast as prediction; others may take it to inform scenario planning.

2. The forecaster has based the forecast on a number of assumptions, which may not be explicit. The wily strategist will uncover these assumptions and ask (a) to what extent are they proven beyond reasonable doubt? (b) what is the remaining uncertainty? (c) what is the effect on the forecast if they were a little different? (d) how dependent is the strategist’s strategy on these assumptions? (e) what is the risk to the strategy if the assumptions are inaccurate? (f) what questions do the assumptions provoke and what is the benefit/cost of improving them?

3. The forecast should illume the drivers in the market. The strategist can use these to test his/her own evaluation of the drivers, and exploit the resulting insights in the development of plausible scenarios. which are ultimately more useful than forecasts. (In brief, a forecast extrapolates various drivers to say what the market will look like at certain times in the future. Usually, a forecast is a single route. Some forecasts offer some variation around this according to ranges they set around the driving parameters. Scenarios look at events and postulate what could plausibly happen. These have to argue convincingly both forwards (if this happens then this must follow) and backwards (if this is the state, then this must have happened to arrive there) and be plausible rather than possible.)

In one of my strategy roles I relied on forecasts of helicopter production around the world so that I could build a ten year strategic plan for our supply into helicopter manufacturers. My boss was adamant that one European manufacturer could not possibly see a decline in their heavy helicopters as I was presenting in my strategy. However, on discusion with the helicopter manufacturer, it emerged that their business in that area would decline because they had been slow to realise the impact of a competitor’s strategy in this market. Sometimes someone else’s forecast can challenge the world view that easily takes root in large companies. In this, they can be invaluable.

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