Why new year prognoses disappoint – and how to do better  

For sure, some corporate readers of forecasts are very curious, not just about likely outcomes but also about what it takes to make consistently accurate forecasts. However, interest in forecasts that help make better corporate decisions is much larger. What executives really want to know is what actions they should start taking, stop taking, or keep taking in response to a new year prognosis, or how to devise plans to take if certain contingencies arise.

Unless a forecaster can show how their prognosis affects or confirms the calculus surrounding at least one key corporate decision, then expect little impact on senior management. Going further, the way to unlock serious corporate interest is to demonstrate how acting on a forecast provides a firm with a competitive edge over its rivals. Ultimately, influence on decision-making drives the corporate demand side of the corporate market for prognosis.

Put the demand and supply sides together and you can see why the market for turn-of-year prognoses is largely broken. Without enough information or insight into an organization’s circumstances, an external forecaster is at a severe disadvantage. Their forecasts may be accurate, even interesting, but chances are they will be ignored because there isn’t sufficient factual understanding to draw clear implications for corporate decision-makers. In short, accurate forecasts aren’t necessarily meaningful ones.

So why don’t forecasters invest in learning more about their readers’ corporate circumstances? Probably for three reasons: in some cases, due to lack of interest – and, where interest exists, such investments are costly and take time. Unless many firms are facing similar circumstances, the market for tailored forecasts is limited and aspiring celebrity forecasters don’t find this an attractive proposition.

This also explains why market- and sector-specific turn-of-year forecasts get – at best – low-profile columns in leading media outlets. The best real estate in publishing terms is held over to new year prognoses that are sweeping in range, but these tend to lack the specificity needed by corporate decision-makers. Apart from vague terms like “year of elections,” can you remember many (any?) predictions from the start of 2024?

There are two fixes for this problem and neither comes free. First, to the extent that external forecasters address factors relevant to a firm but can’t discern their implications for decision-making calculi, then internal expertise may be able to do so. Of course, not every high-profile external forecast may be directly commercially relevant so the job here is to filter the signal from the noise and to persuasively communicate the distinction.

The corporate strategy function may be well-placed to perform this filtering and translation function, but for certain corporate decisions (such as those to do with sourcing) then certain operational units may be able to contribute. Board members may know enough to draw the right corporate implications too. What matters is that the filtering and translating function is done systematically.

The second approach is to build internal expertise that can undertake the types of new year prognoses required or that can commission the needed forecasts from external providers which must be trusted enough to share relevant corporate context. Such external providers may be thin on the ground, not least because conflict of interest considerations should prevent them from working for more than one significant player in each sector.

Whether the approach taken is to filter and translate (option one) or to make or buy (the second option), valuable new year prognoses don’t come for free. The bottom line is that if seeing around corners offers the promise of a firm creating and capturing substantial value then it requires proper resourcing. A gift horse is rarely a thoroughbred.