How to forecast
A few years ago, I wrote a blog post about how the concept of VUCA could help us in Market Research. Now that we are in the midst of a pandemic, I thought I would update it and make it relevant to our new reality.
VUCA stands for volatile, uncertain, complex and ambiguous. While you may not have heard the term VUCA itself, I think most of us resonate with those descriptors of today’s world, especially now during a pandemic.
The term VUCA was originated in the military in the 1990’s and is now being used in management circles. One of the first steps an organization can take in ensuring that it responds appropriately to VUCA situations is understand what is going on. That is exactly what Market Research is so great at! Don’t get me wrong, I am not saying that Market Research should have identified the pandemic. But using this framework can be helpful as we help our business partners to evaluate the marketplace dynamics. Let’s look at the various components of a VUCA world and what Market Research can do to take into account each of these elements.
A lot of times in Market Research we work with averages. We describe the majority of responses and use terms like most and many. That is valuable work and we shouldn’t stop doing it. However, volatility comes from the non-majority. Volatility comes from the outliers that may have been there to read but we might be ignoring them if we only focus on the norm. A scan of the social media universe would be helpful in uncovering some potential volatility. After all, we know what one well-placed twitter can do to upend a long-term strategy.
One of the studies I did for a client illustrates the kind of work that might help in a VUCA world. In the year 2000, there were starting to be rumblings about vaccines causing autism (today’s equivalent might be some tweets). A large-scale segmentation study was able to identify how many people held these anti-vaccine attitudes and how those attitudes fit into their life view. This group was a potential VUCA type event waiting to happen and we can hypothesize that that group has grown in size today. (This study was published by the Merck and can be found in the journal Vaccine in March 2005.) Conducting these types of studies to understand the entire landscape and then following negative groups can be the key to understanding the potential sources of volatility.
Another area to consider the effects of volatility is how we forecast trends. We spend a lot of time uncovering potential events (competitive new product launches, potential legislation, etc.) In my world, we take trend curves from various other historical launches into account and then adjust them for those events we anticipate. That’s useful, and well and good. But those are for things are continuations of what is going on today. What are the things we can’t know about? Perhaps this is only a topic for war gaming but is there anything market research can do to uncover what some potential sources of volatility might be?
This is the definition of what the world is like today. How can market research help? By envisioning alternative scenarios and helping to evaluate their impact. As Ray Poytner of New MR has said, Market Research can help project the future by developing and evaluating alternative scenarios.
However, we need to do that in such a way that our respondents can be accurate. It’s tempting to ask respondents to predict their behavior in the future. But because of the uncertainty, they don’t know, we are probably asking something they really don’t know. So, if we do that, the data we get will be garbage.
But what can we do? What I will suggest is taking the time to build out real potential scenarios before we ask people to respond. And we need to be careful who we ask to respond. Some people have greater imaginations and are able to respond as if they were in an alternate reality. Others are so tied to their present or their past that they are less reliable. I found that while working to help launch new pharmaceuticals that some doctors were unable to envision a future that was different than their current reality. I worked to find a way to identify those who were more imaginative and were able to put themselves into the future. Based on that experience, I suggest using a screening question like:
- Which of the following best describes you?
- I can immerse myself in an alternate reality such as a book or a game
- I never forget the current reality
I also suggest asking follow-up questions after the task, asking how easy the task was for them and strongly they felt about their responses. Afterwards, you can compare the answers of those who found it easy and felt strongly to those who didn’t. I would consider how much weight to give those who were convinced versus those who weren’t. That’s the whole hedgehog/fox parable, where the hedgehog knows one thing, but the fox knows many. As Phillip Tetlock says in his book Superforcasting, we have a tendency to believe the people who sound the most certain about their answer (hedgehogs make great pundits) but the foxes are more likely to be right. Thus, we should weight their answers more heavily.
If you do this for several alternative scenarios (one per respondent please – it’s hard enough to predict the future that is so uncertain), you will be begin to build a picture of how people might respond to the various new potential realities. Then, through war gaming, you can assign probabilities to each of the scenarios occurring.
We all want things to be simple, we want to understand. But we need to walk a fine line between creating a comprehensible story line so people can make sense of what is going on and simplifying too much, so that they lose the texture of the events. Given the situation we find ourselves in these days, we need to overcome the problem of how we present the data about our complex world to our colleagues. Too simplified, and they won’t understand the world; too complex and we will lose them. Perhaps scenario fables could help with this as well.
Market Research can certainly help reduce ambiguity. I think the scenario planning exercise can certainly help.
I am also beginning to think about the factors that are going to influence what the world will look like post-pandemic. So far, I have come up with the following: the length of time the pandemic is front and center, pent-up demand, the new financial realities post-pandemic, and the degree of trauma and fear. These will vary by location and, importantly, by age. Each will affect your product category in a different way.
I'd love to hear your thoughts as you try to forecast the VUCA future for your brand or your clients.