MRS recently launched their latest Delphi report: Prediction and planning in an uncertain world. We spoke to Jane Frost, CEO, about the findings.
In his talk at EffWeek 2016 Professor Patrick Barwise drew a wry laugh of recognition from the audience with this statement:
“When you as a marketer stand next to someone from finance or operations, much of what you say will sound less reliable… because it is”
“Marketing is about the future – future sales, future campaigns, future products,” he continues. “And when someone says to you ‘I can tell you about the future’, what do you think? Well, you’re sceptical aren’t you?”
This scepticism when it comes to prediction has become part of the popular consciousness recently. Predicting the future has become a risky business for all involved. Illustrated most publicly by Michael Gove’s ‘people have had enough of experts’ observation during the run-up to Brexit, and its apparent validation by the failure of the polls at both the referendum and the general election.
MRS commissioned their new report to move the conversation on. “We wanted to broaden the debate from the “polling doesn’t work,” rhetoric,” says CEO Jane Frost. “We also wanted to provide some practical advice and context for mid-senior managers who are involved in forecasting decisions.”
The power of uncertainty
Most people try to predict the future to try to reduce uncertainty. But one thing that stood out in the report was the value of simply not being sure. “As companies become more successful, the trigger for change is reduced, “says Jane. “Dominance leads to inertia and in this scenario companies often do bad research. They talk to their customers and forget the people who don’t buy their products. They base their predictions on past success, and they don’t bring in outsiders to the research process. The result is that they often miss something crucial that is happening in the world. Their predictions simply don’t include any big surprises. Unfortunately the world does.”
Uncertainty plays a huge part in the predictions of some of the most powerful economic players. The Bank of England use what they call ‘Fan charts‘ to predict metrics such as inflation. The charts allow them to show a range of possibilities and a confidence interval for each possibility. It forces the reader to consider that for example, although 2% inflation looks likely, 5% is also within the range of possibilities. This is what bad research lacks.
Jane thinks we can see examples of this out in the world now. “I would argue that Uber for example, may not have been thinking forward enough,” she says. “You can see that they are getting themselves into unnecessary problems now. It looks as though they may not have considered the point at which technology would not be the answer to their problems.”
Meeting the unreported need
Disruptive technology has a knack for meeting a previously unreported need. Airbnb understood that customers needs had fundamentally changed, while the hotel industry was busy with business as usual – refining and refining the model they already had. “Companies with a strong mono-culture often fail to see the unreported need,” says Jane. They tend to forecast based on previous successes and failure and historical data. So when someone comes along with a new and better idea, suddenly all that data is obsolete, because it is looking at the problem through the wrong lens.”
The radical influence of ethnography
When organisations rely on historical big data for their reporting they can get the wrong picture. A good example is American Airlines. “They looked at their data and saw that no-one was using their loyalty points,” says Jane. “So it seemed a no-brainer to get rid of the scheme and its associated costs. It was a commercial disaster. What all the data and numbers weren’t telling them was that their customers loyalty relationship with the brand was not the same thing as their price relationship. Customers have several approaches to a brand and they aren’t all based on it being the cheapest.”
Jane thinks that ethnography and behavioural science offer solutions, but are often absent as approaches from predictive research.
“If American Airlines had considered the possible impact of loss aversion for example, they might have spotted the problem,” she says. “If they had carried out some ‘ethnographic’ research on the ground with their customers, it might have revealed this hidden relationship that they had with the brand.”
“Ethnography is radical in the sense that it issues a challenge,” says Jane. “It says: ‘okay, this reports as X. But if you actually go and look at what is happening amongst real people you see that it is something different.’ It illuminates. If you rely on a pure numbers approach to prediction you exclude outsider voices – because your data is all about your customers. You run the risk of walking blindly into a future that is significantly different from the one your data projected and with no real insight into how your customers are going to behave in this new world.”
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Bridget Angear, Joint Chief Strategy Officer at AMV BBDO
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David Wheldon, Chief Marketing Officer, RBS
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