Charles McElroy - Forecasting the Future – A Key Element of the Strategy Process

Charles McElroy - Forecasting the Future – A Key Element of the Strategy Process

A crucial, but under-analyzed, element of the strategy development process is the ability to make accurate forecasts of future events which senior leadership can then use as the foundations for their strategic planning and implementation processes.  As Kaplan and Beinholder suggest in “The Real Value of Strategic Planning”, if human bias corrupts the process of forecasting future events, the resulting strategic plan will be of very little use.  So, since no one has a crystal ball, how can a business unit integrate effective forecasting strategies into the strategic development process?  I would suggest two ways for consideration: 1) by incorporating expert wisdom of the crowd estimates which are assessed and tracked for accuracy, and 2) in the case of a very uncertain future by utilizing a technique called “deep analysis” developed by the Rand Corporation.

In the first approach, proponents such as Phil Tetlock at the University of Pennsylvania, have shown how by marshalling the expert wisdom of the crowd, organizations can be much more effective in predicting the outcomes of future events (Tetlock, Meller, Scoblic, 2017).  One of the critical components of this process is asking very specific questions – which can be answered by yes or no – and then recording and assessing the accuracy of the individual forecasters.  By doing so over a period of time, the organization should be able to identify the most gifted forecasters and then utilize their expert judgements to craft much better strategies.

In the second method a much different methodology is utilized.  In this approach, proponents such as lampley et al from the Rand Corporation only make very broad assessments of future events.  In essence, they develop a matrix of many future states which are deemed to be plausible and then they develop a strategy which satisfices – but does not optimize – the outcomes for the future.  In this way, they do not have to be accurate forecasters of very uncertain futures, rather they come up with a strategy which will be resilient in any likely future world.

These two approaches provide a quantitative based, results orientation to the strategy development process which was not thoroughly emphasized in the articles and case studies.Thus by utilizing one of these approaches, a business unit will be more likely to develop a robust approach to preparing for the future.

Tetlock, P., Mellers, B., Scoblic, J. (2017) Bringing probability judgments into policy debates via forecasting tournaments, Science 355, 481–483.

Brooks, J., Lampley, P., Smith, T. (2017) Deep Analysis – Planning for the Future. Scientific American, 15, 32 – 41.