For A Finer Forecast, Pull Apart The Future

Ever notice how when the future becomes the present, it takes way longer to go through than you thought? Then get ahead with activity-based forecasting.

We had just entered a Manhattan restaurant, one of my former NYU students and I, when the topic of forecasting came up. He said that in his thousand-person IT firm, he and fellow decision makers couldn't look any further than two to three years ahead into the future. I've heard similar decision-restrictive assumptions from numerous leaders, and while I disagreed with his comment, my hunger kept me from speaking up. I could only focus on the meal ahead.

A bit later, he remarked that his development cycle takes about 12-18 months to complete. Not wanting him to limit himself, I couldn't let the comment go without saying something.

I began by asking five unassuming questions about components of his product's life cycle, and then I outlined for him on a napkin the breakdown of the entire cycle into its individual activities:

  1. "How long is your sales cycle?"Answer: 24 months
  2. "How long is your production/development cycle?" Answer: 12-24 months
  3. "How long is does it take to complete an installation?" Answer: 6-18 months
  4. "How long is tech support offered?" Answer: 24 months
  5. "How long are any extended warrantees/liabilities?"Answer: 12 months
He quickly realized that there was no way his management team's forecasting outlook would need to be limited to only two years into the future. He also understood that compartmentalizing the big-picture was easier than trying to forecast the big picture in one chunk.

By breaking down forecasting (in this case, the product life cycle) into its individual activities, this leader created two decision-making advantages:

  • The extended timeline of 6 ½ to 8 ½ years—more accurate than the two to three years he originally assumed when he considered the product life cycle in its totality—projected his ability to forecast farther into the future
  • Seeing each activity individually would ensure that he addressed each more thoroughly and precisely, affording him a more comprehensive view of the cycle to better inform his decision making.

I call this activity-based forecasting—performing it is quite simple. Instead of tackling the task of forecasting "The Future" of something all at once, you separate the whole into its parts or "activities," forecast each, and then reassemble them to formulate a more accurate view of what's to come.

Perhaps you've been in a meeting when someone has asked you to give a five- or ten-year projection. Attempting to give an accurate forecast all at once seems daunting, but separating the time span into more manageable increments increases manageability and accuracy.

Think back to my NYU student' product life cycle. We separated the process into its individual activities, but we wouldn't stop there.

Next, we would take an additional step of researching and predicting the likely futures of each activity. One of his activities required him to define the selling of software five years from now. He might investigate trending software-development changes, state-of-the-art programs, or budding technologies. Once he had gotten a good perspective on this activity, he would move on to the next individual activity, and so on. After performing his research, he would combine all the activities' forecasts into a larger-context picture of his IT firm's future.

Although this is something you can do on your own, involving the input and assistance of other people can have many benefits. Humans are prone to falling in love with their own ideas, blinding themselves to potentially better opportunities. Others' perspectives give a dose of reality.

Now take a look at what you are currently working on—plans, projects, processes, your career, operational improvements, strategies, etc.—that could be improved by activity-based forecasting? Selected your topic of interest, perform the following four steps, and watch your decisions yield positive outcomes over the ensuing months and years:

  • List the "activities." Break apart the whole project or initiative into its individual components. Be as thorough as possible so that you and your group are considering as many factors as possible within a future-focused perspective.
  • Predict the future of each activity. Do the research on your own or invite other people to gather information about each activity's potential future. Sometimes, a discussion among colleagues is sufficient, while other situations require more in-depth investigation where you may need to assign individual activities to different members of your group, disband to allow for research time, and reconvene at a later date to discuss findings and predictions.
  • Discuss predictions for each activity. If you're working alone, summarize these predictions yourself. If you're working with a group, keep any feedback on predictions positive; you never know what initially odd-sounding idea could become a valuable nugget of information.
  • Summarize predictions into a comprehensive forecast. Bring the activities' predicted futures together to formulate a big-picture view of your project or initiative's future. Use this competitively advantageous information to make future-focused decisions when developing strategic plans and while discussing next steps with key decision makers.

Forecasting is an essential component for great decision making regardless of your industry or sector. An astronaut friend of mine explained to me how he and his colleagues were prepped before being sent into space to make repairs to the US's Hubble Telescope. Leadership separated the repair process into individual activities to forecast any anticipated snags. One such activity involved astronauts having to practice tightening bolts while wearing the gloves they would don while in space, knowing that a factor as "minor" as a stripped bolt threatened the success of the entire mission, with their managers joking that "if you break it, don't come home."

You never know what minute factor might become the decision-making advantage that delivers big wins, but with a tool like ABF, you can lengthen and broaden your vision in ways that improve decisions and multiply successes. Just follow the four steps above, and watch how today's forecasts and decisions build better futures for you, your organization, and your career.

David Goldsmith is a consultant, speaker, coach, entrepreneur, and author. His newest book is Paid to Think: A Leader's Toolkit for Redefining Your Future.

[Image: Flickr user Natalia Osiatynska]

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