Best Practices in Planning and Performance Management: Radically Rethinking Management for a Volatile World, Third Edition

Chapter 8. Forecasting: Pass the Crystal Ball

	He who can see three days ahead will be rich for three thousand years.
	--Japanese proverb

September 15, 2008, will long be remembered not just as this author's forty-seventh birthday but also as the day the financial markets changed forever. On that day Lehman Brothers filed for bankruptcy, triggering a financial crisis and global recession on a scale not seen since the dark days of the 1930s. Few, if any, forecasters saw it coming.

A few weeks after Lehman failed, the chief financial officer of Apple, Peter Oppenheimer, commented that visibility is low and forecasting is challenging." This seems to be a polite way of admitting that he had absolutely no idea what was going to happen tomorrow. He was not alone. Forecasting has become one of the most challenging management tasks. Get it right and the rewards can be enormous; get it wrong and the consequences can be fatal. The Oxford English Dictionary defines a forecast as a "conjectural estimate of something future." Conjecture is defined as the "formation of opinion on incomplete grounds; guessing." So forecasts are just guesses about the future.

In 1922, Thomas Edison predicted that "the radio craze...will die out in time." Of course he was wrong; most forecasts are. Getting over the fear of being wrong is the first step toward developing a best practice forecasting process. Accepting the fact that most forecasts will be wrong is perhaps the hardest concept for most people to come to ...