Predicting the Future: Market Predictions
This week we’ve covered a lot of topics about predicting aspects of your business (both large and small). If only your business was entirely within your control, how easy life would be!
Alas, your business exists in a larger market and the changes in that market can have significant impacts into your business. Trying to predict the future without compensating for larger market trends would be like charting a course through the ocean and ignoring the weather.
Predicting the future of your market is harder than predicting aspects of your business because you will lack enough data to do it well. However, the goal of today’s topic is to encourage you to think about big-picture trends that can help you identify leading indicators of success for your company.
To lead or to lag
Many of the KPIs you follow are lagging indicators of success, like revenue. In other words, you can react to the KPI to help you think about what you can do better in the future. Leading indicators, on the other hand, help you be more proactive and change course before the final outcome. The discussion from yesterday around Churn Prediction is particularly relevant here; if you can figure out which customers are at risk of churning before they do, then you still have the potential to improve the relationship and retain the customer.
Customer churn is a fairly low-level leading indicator that will be common to pretty much any business. The challenge you face is finding higher-level macroeconomic leading indicators that can help you change course before it is too late. For example, if I worked at a sports team, I could analyze the number of HDTVs sold per capita to see if that is a leading indicator for in-person attendance to my events.
As with everything in predictions, there is no crystal ball that will perfectly tell you what will happen in the future. The goal is to find the most reliable leading indicators of your business that will give you enough time to adjust your strategic plan before it is too late.
Next Week: I’ll toss Data Driven Daily back over to Dr. Doug Mitarotonda who will spend a few weeks talking about simple ways to analyze and visualize data, and explore the tools that you can use to tackle these tasks. In the meantime, have a great holiday weekend!
Quote of the Day: “I now have had my foggy crystal ball for quite a long time. Its predictions are invariably gloomy and usually correct, but I am quite used to that and they won’t keep me from giving you a few suggestions, even if it is merely an exercise in futility whose only effect is to make you feel guilty.” Edsger Dijkstra