On Forecast Accuracy

I’ve been having a fascinating discussion on forecasting and forecast accuracy. While we will never be perfectly predictive, we can get better than the current forecast discussions as illustrated below:

Manager: “What’s your forecast for the quarter?”

Salesperson: “What number do you need?”

But we spend a lot of time talking about forecasting, without looking at the real underlying issue.

Let’s imagine the case that we can be 100% accurate in our forecasts (no I’m not smoking anything). Having an accurate forecast is relatively unimportant if we are only achieving 50% of the number we should be achieving.

Of course, when we look at the forecast and realize we are going to miss the goal, we pull out all the stops figuring out what we can make happen to close the gap with the goal. Can we pull something in, can we offer an “incentive (read discount),” can we perform a miracle. And the more miracles we have to create, the less accurate our forecasts are.

In reality, our problems are much deeper than forecast accuracy. They are really systemic issues about how we consistently win. Ironically, when we improve our ability to win, forecast accuracy becomes much less of a problem.

Anecdotally, whenever I study a consistently high performing organization, we very seldom get into discussions about forecast accuracy. There, somehow, seems to be a high correlation with those organizations that consistently perform better (read have higher win rates, strong customer focused deal strategy/execution) and forecast accuracy.

So maybe the forecast accuracy discussion is the wrong discussion. Maybe the right discussion is how we improve our ability to develop and execute high impact deal strategies that enable us to create real value with the customer. If we do that very well, our forecast accuracy will improve.