Covid turned the world on its side, and every company was left struggling to make sense of how it would impact their business. Prior to impact, we had enjoyed eight or nine years of relatively predictable growth, allowing companies to create strategies and operating plans based on historical data with reasonably high confidence that it would happen again.
That all changed – and dramatically so. Many of us have experienced a recession or two, and there is plenty of data out there to show how economies recover and how key economic indicators (inflation, employment, wages, consumer behaviour) typically trend.
But Covid brought along a whole new level of volatility, impacting industries aggressively and unequally. Consumer behaviour shifts rocked B2C supply changes, whether panic buying or shifting to ecommerce and delivery. B2B supply chains have also been impacted through worker shortages, rising material costs and distribution bottlenecks.
And who saw this coming? Maybe a couple of scientists a few years ago, but no business leaders. No predictions or plans were crafted to manage this degree of volatility, and planners are still struggling with the seemingly impossible challenge of somehow quantifying market volatility and incorporating it into the planning process.
A perfect storm
For years, as a predictive AI technology and solution provider, Prevedere has been helping enterprises predict and incorporate industry, economic and behavioural volatility into their planning processes. We help clients leverage global data, correlation analysis, predictive AI and econometric modelling to create three-month to five-year economic baseline forecasts, economic guard rails, future market insight and growth/share projections.
We help organisations such as Kraft Heinz, FedEx, Dollar General and Cooper Tire become more market savvy, enabling consensus forecasting, risk mitigation, growth optimisation and ‘crystal ball’ competitive foresight. Kraft Heinz recently commented that all businesses (especially CPGs in their case) should start the planning process with a top-down customised economic baseline forecast or scenario. Improved accuracy, little to no chance of big misses and more economically educated go-to-market teams are three of the benefits Kraft mentioned.
The pandemic has accelerated the need for businesses to reshape their planning and the type of information they include in their forecasting process. A survey recently conducted by Prevedere shows that 83 per cent of businesses indicated that Covid had changed the way they forecast and plan.
The survey identifies three ways that leading businesses are adapting to the new norm:
- Augmenting their internal data and perspective with external market signals (including consumer behaviour and sentiment, macroeconomic drivers and supply chain shifts) to understand how external factors will positively and negatively impact their business.
- Leveraging econometric modelling to quantify uncertainty and incorporate it into the planning process.
- Revisiting and iterating their plans and cycles at a much higher frequency or cadence than previously before.
Companies who are proactively seeking new planning solutions by leveraging big external data and predictive AI are best prepared to compete and succeed. Change is happening faster than we ever expected. Our customers are planning at a higher frequency, incorporating industry and economic signals into their ideas and developing confidence windows by using upside/downside scenarios. Consensus forecasting, which incorporates both traditional and economic data, now enables plans to be market validated by econometric predictions and projections. Covid has caused forecasting misses and resourcing pains to planners around the world. Why? Because it impacted things that organisations have little to no control over, namely economic trends, industry shifts and consumer behaviours. These external factors must now be incorporated into planning and strategy, or organisations will be operating with increasing go-to-market blind spots.