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How to Boost Accuracy in Business Forecasting

business forecasting

Forecasting is no more accurate now than it was 15 years ago despite progress in research technology. Presently, forecasting agencies prefer projections that underestimate volatility for many reasons:

1/ Innate dislike for uncertainty
2/ Innate inclination to toe-the-line & conform to competitors
3/ Inadequate understanding of qualitative factors

Forecasters often miss period of rapid growth, abrupt change of directions, shocks & contractions etc. They even get the magnitude of changes way off the mark.

Progress in data collection & analytics & processing technologies were supposed to boost accuracy but this hasn’t happened.

Usually, forecasters can accurately predict directional changes but not amplitudes. Their accuracy is only slightly higher than projections that are based on the previous year’s trends.

To build a sharper picture of markets & events, forecasts require forecasters to:

– Pay attention to the underlying socio-cultural behaviors other than their own idiosyncrasies & cultural superiority

– Correlate Cause/Effect relationships objectively

– Understand how targets react to stimulants

– Hire critical minds

– Use the right tools and weights

– Humility to not project a false sense of misleading confidence