Assuming that “past performance will predict future behavior” is a textbook example of linear thinking.
Two recent economic and political situations illustrate deficiencies in linear thinking.[i] We thought the economy was going to continue to improve in 2008, mostly oblivious to the sub-prime mortgage lending crisis and the ensuing “Great Recession.”
You’ve seen the headlines:
Apple i-Phone X sales miss their mark.
Apple down 4.7%.
GE misses revenue forecast, becoming the worst performing stock in 2017.
Tesla underestimates demand, suffers 2 years wait on Model 3.
When analytics is done in a silo, the breadth and depth of the analysis will be constrained to the experience and expertise within that silo.
We find that organizations get more effective answers when working collaboratively as part of a team. Some improvisation is required to define business questions more broadly and integrate a wider range of data and insights from across multiple disciplines.
A surging competitor is dropping their prices by 20 percent. Distribution is dropping as a key retailer is closing stores across markets. A flood of new advertising tactics are becoming available. Which of these market changes should I respond to? How should I respond to them? How will they impact my business?
I remember back in 2015 when I first interviewed for Concentric, I found the company after being inspired by a book, Buyology, by Martin Lindstrom. In it, Martin Lindstrom describes the differences between what people think, what they say, and what they ultimately do.
At this time of year, there is tremendous optimism for what lies ahead in the year to come, but also a high-level of uncertainty. Most everyone in business is thinking “How will this turn out?” “Will we meet our goals?” “We have a plan but will it deliver the sales we need?” This ambiguity is most acute for the CFO, who often feels it’s a 50/50 shot to make their plan. Accordingly, they create contingencies and reserves to account for variability. Not only is this hedging a barrier to efficient resource allocation, it also creates stress throughout the organization that can hurt productivity and growth.
I’m Alex, a member of the support team at Concentric. I was a part of the latest effort by the development and support teams to improve the user experience of Concentric Market®, which is a simulator of human behavior that organizations use to evaluate their past performance and to forecast their future outcomes. If you know the words simulator, human, behavior, and forecasting, but are not quite sure how they all fit together, don’t worry. Four months ago, I didn’t either.
It’s Monday morning and it’s time to go to the monthly forecasting meeting to see if we met last month’s numbers and adjust the quarterly forecast. Have you ever been in this kind of meeting?