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Brain circuits

Do you know the secret to effective forecasting?

Published 22 June 2022 in Brain circuits • 2 min read

Let’s try a forecasting exercise. Sit down and envision your industry and your company’s position in it right now. Now picture what changes you foresee in your industry in the next five years. You may even want to type out an outline on your computer. How will you position your company to adapt to the changes?

Step two

Okay, now tell me what the alternative vision of the future you envisioned is. Did you only picture one scenario? If so, you’ve fallen into a trap that is extremely common among corporate leaders. It’s important to hold more than one point of view in your mind to remain flexible enough to adapt as new information comes along. This lessens our tendency to dismiss counterevidence and seek confirmation, which is what causes most people and businesses to get stuck.

The secret to strong predictions

Effective forecasters don’t have more information than other people, nor are they intellectually superior. The people who are best at predicting the future are flexible enough to absorb new data and update their models. This may seem extremely simple, but most companies don’t do this. The problem is that managers get stuck in their initial point of view. After careful examination of analytics, they take a view, form a plan, and allocate resources, all of which is the correct thing to do. After that, however, they remain committed to that one plan, failing to change as new data becomes available. So, while you need to align your organization behind a plan, you also need to be willing to change direction easily. The changing part is often difficult for managers, but those willing to be as bold about switching direction as they are about formulating a strategy in the first place are the ones who are successful.

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