Forecasting icebergs
Perhaps nowhere is the phrase just the tip of the iceberg more profound and appropriately applied than in forecasting. What you think you see at first glance is seldom the full extent of the reality of any situation.
In fact, at our recent Pharma Forecasting Excellence USA Summit 2009 in Boston, Alec Finney, principal at Rivershill Consulting ( www.rivershill.com ) and chair of the events second day, reminded us of an insightful observation about icebergs and forecasting by Spyros Makridakis in Forecasting Methods and Applications. Makridakis said: Concentrating totally on accuracy is like trying to melt an iceberg by heating the tip.
Bob Draper, head of global forecasting at Eli Lilly, picked up that sentiment and ran with it to give conference attendees a fresh look at the difference between the accuracy and effectiveness of forecasts and how greater insight can help the organization make better decisions (see our summary of his presentation here). And I think Draper did a great job at trying to open our eyes to the pitfalls of focusing too much on accuracy.
As he pointed out, sometimes were so absorbed in accuracy that we get bogged down in it. We often get so sidetracked by getting our forecasts right, that we never get around to forming the insights that were the real reason we set out to craft a forecast in the first place. In a nutshell, Draper says that if forecasters cant spend time thinking about and communicating insight through flexible approaches that deliver answers in some timely fashion, they can count themselves out of being part of the decision making process in most organizations.
How many times have you and your colleagues toiled until the last possible minute getting the numbers for a forecast and rushed into a meeting to present your results without any real context or insight that you can offer to your organization? Whats a forecast without the context?
The data is just the tip of the iceberg. The context the insight is what lies below the surface. And it can either be the solid platform that holds everything else up if youve taken the time to uncover and understand it, or it can be the dangerous obstacle that threatens to sink you if left undetected.
Drapers right. Accuracy is great, but its not everything. We simply cant be so absorbed with numbers that we forget to assess the rest of the iceberg and share that analysis with the rest of the organization. Otherwise, were just rearranging the deck chairs.