ABOUT BUSINESS FORECASTING

Business forecasting is a combination of processes and techniques used to estimate or predict future patterns using the available data. It has many different applications - estimating quarterly market sizes and sales, product demand, customer lifetime value and churn potential, inventory and supply-chain deliveries, workforce attrition, revenue generated from website traffic, and even predicting total business loses from adverse events and exposure to fraud and risk. APPROACHES TO BUSINESS FORECASTING

Business forecasting techniques can usually be split into two different types of approaches. The first are the so called statistical methods – time series analysis, regression analysis, more sophisticated techniques like ARMA and ARIMA models and neural networks. These types of analyses generally rely on the availability of historical data of the estimated parameter(s).

BUSINESS FORECASTING: NAVIGATING A SHIP THROUGH TREACHEROUS WATERS

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What this means in simple terms is that it is impossible to use statistical analysis to forecast the sales value for the quarter if you do not have historical sales data. The second type of approaches consists of the so called business intelligence or business logic models. Examples of such models are Adoption and Product Life Models, Top-down User Base models, Cluster Models, Technology Models as well as other more “casual” assumption based techniques or purely qualitative models. These models can vary greatly in terms of their structure and logic but are generally not so reliant on direct historical data for the estimated parameter, hence why they are often chosen by companies with less information about their business available. FORECASTING IN ORGANIZATIONAL CONTEXT What these two groups of techniques have in common are that they are only really tools at the company’s disposal. The process of Business forecasting is like navigating a ship through treacherous waters. On the one hand you have all your navigation tools – your statistical forecasting models, your Cluster Model, your Adoption and Lifecycle Model – these are your Radar, Sonar, Satellite Navigation, maps, etc.

BUSINESS FORECASTING: NAVIGATING A SHIP THROUGH TREACHEROUS WATERS

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But you also need the knowledge and business intelligence of how to use these tools correctly so that the correct management decisions are made. Same as navigating a ship – you need to know when to use the Radar, when to use the Sonar, when to use the maps, so that you can find the easiest and safest way to harbour. Forecasting techniques are quite often not as accurate as Satellite Navigation, hence why it is even more important to have the correct knowledge and processes set in place so that based on these tools, the maximum from the forecasting tools can be extracted and correct management decisions made.

GEMSEEK’S EXPERIENCE GemSeek is an experienced advisor providing our customers with forecasting tools as well as with the application and processes know-how. Can we help you? Contact us at: office@gemseek.com. We will offer a free consultation and an inventory of the data sources available for your industry and markets.

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