Product Forecasting and the Planning Fallacy
Experience shows that what happens is always the thing against
which one has not made provision in advance.
An old cliché in forecasting is that when it comes to the single-valued forecast, the only thing you can say with certainty is that it’s wrong. More than just plain wrong numbers, a reliance on single-valued forecasts suffers from these problems:
- Communicates over-confidence about the forecast and your knowledge of the future
- Discourages a team from seriously considering events that may increase or decrease project value
- Fosters complacency about the need to develop options and contingency plans
I have a nagging suspicion that none of what I’ve just written is a surprise to you, even if you’re one of those single-valued forecasters. It’s ironic that many people avoid the topic of uncertainty because they are…uncertain about what to do about it. The popular literature on decision-making has only raised awareness of how challenged we all are at estimating uncertainty and risk, and it’s easy to rebuff Monte Carlo simulation as a lot of statistical mumbo-jumbo. We in turn are not surprised when we speak with R&D teams about forecasting and hear a variant of “we don’t estimate uncertainty because we just don’t know enough.”