Business

Trade forecasts are reliably wrong – but still valuable

Trade forecasts are reliably wrong – but still valuable

Trade forecasts are often wrong – and yet they can still be a powerful tool for savvy leaders if they look at them as a whole and ask the right questions. The authors offer six ways business leaders can gain competitive advantage from forecasting and offer their analysis of the themes revealed in 20 forecasts for 2022 and beyond by leading commentators and thought leaders on business and society. .

At the start of each year, when many people make New Year’s resolutions, organizations make plans for the year ahead. Both have high fallibility. Forecasts are predictions about what will happen in the future based on currently available information. As such, they are exercises in the imagination, which studies have shown to rarely correct in their particularities.

Though reliably incorrect, savvy leaders can derive strategic value from forecasts. When examined as a whole, they capture the zeitgeist. We just need to ask the right questions: what do the experts think is important and likely enough to predict? Where do they agree, and more interestingly, where do they disagree? Even if the forecasts are particularly wrong, what do they indicate about underlying trends and critical issues?

After two tumultuous years of the Covid-19 pandemic, as the world looks to what could become the new normal, this is a particularly salient time to assess our views and hopes for the future. the study of previous global pandemics and other crises teach us that the post-pandemic world is likely to be markedly different – ​​but how?

We have undertaken a meta-analysis of 20 predictions for 2022 and beyond by leading commentators and thought leaders on business and society. Here, we detail some of the most important themes and offer our perspective on how companies can leverage these forecasts to gain perspective and advantage.

What forecasts predict for 2022

More than half of the forecasts we reviewed offered predictions triggered or accelerated by the pandemic. But are these changes here to stay? Some, such as macroeconomic uncertainties and labor/commodity shortages, are expected to return as the pandemic recedes. Others, like the accelerated adoption of digital business models, reflect how the pandemic has changed the status quo.

Unsurprisingly, the most divergent forecasts are those that deal with complex emerging phenomena in social, economic and political systems, such as whether we are heading towards a period of more or less globalization, inequality or polarization.

We have synthesized some of the themes that emerged from our review into five categories. Within each category, predictions are ranked from highest to lowest degree of convergence.

Business/Finance

  • Raw material and labor shortages caused by the pandemic will initially keep supply chains vulnerable but will return to normal as businesses and consumers adapt.
  • The labor market will remain tight due to pandemic-induced resignations, workforce reductions and turnover due to greater employee mobility.
  • Businesses will increasingly leverage technologies such as AI, machine learning and automation to 1) meet demand in the face of labor shortages, 2) apply adaptive manufacturing technologies, and 3) develop new solutions to customer challenges.
  • Consumers expect personalization and businesses will leverage technology to create personalized experiences at scale (e.g. music, diets).
  • Flexible working models will persist, especially for knowledge workers, as more than 90% of employers plan a hybrid working model for knowledge workers.
  • Inflation will remain high in 2022, even as central banks raise interest rates while waiting for the economy, workforce and supply chains to adjust. Their objective will be to avoid a wage-price spiral.
  • After two volatile years, meme stocks will fade, and market valuations (particularly in technology and biotechnology) will recalibrate with company fundamentals.
  • Digital and crypto currencies will proliferate as central banks introduce their own digital currencies.

Society/Culture

  • Covid will become endemic, with sporadic outbreaks and periodic new variants, even as vaccine coverage expands to emerging markets and additional age groups in markets.
  • Decarbonization will be a growing concern for consumers and the public and private sectors. As climate disasters worsen, customers will make more sustainable choices (eg plant-based meat, circular/local shopping, ethical manufacturing) and sustainability will be seen as an integral part of the business.
  • Flexible working will support continued migration from mega-urban centers (like New York or San Francisco) to suburbs and Tier 2 cities.
  • Capital transfers from commercial real estate to residential real estate will continue, driven by the fall in office rents (down 15% in San Francisco) and the increase in vacancies (down 20% in San Francisco).
  • Reintegrate women and people from underrepresented groups into the labor market will be a key priority for businesses and nations to meet demand and drive diversity, equity and inclusion.
  • Economic inequalities which has increased during the pandemic will be exacerbated by the disproportionate impact of inflation.

Healthcare/Education

  • Further digitization in healthcare (e.g. digital therapies, wearable devices, IoT, remote care, interoperable digital health records, etc.) will make patient care more personalized, connected and accurate.
  • Induced by the pandemic decentralization of health care (e.g. telehealth, home testing, etc.) will accelerate.
  • The shift to value-based care will accelerate as payers and health systems develop new models of care to deliver better outcomes at lower cost by acting earlier to prevent, diagnose and treat patients.
  • Hybrid classrooms and online learning will persist like 24% of American schools are rolling out hybrid models for 2021-22.
  • Education and employment will become more aligned as employers try to retain and develop workers. “Education” or education tailored to a business/job/trade will become more common.

Scientific technology

  • Space technologies will proliferate through both privately and publicly funded initiatives. For example, five lunar missions are planned in 2022 by Japan, India, South Korea, the United States and Russia.
  • Decentralized IoT applications will grow in popularity, powered by connectivity and edge computing.
  • Accelerated investment in climate technologies will continueparticularly in areas such as electric aviation, battery technology and negative emissions technology.
  • Nuclear (fission and fusion) will grow as a clean energy source.
  • Investment in biotechnology for next-generation therapies (e.g. gene therapies, mRNA therapies, cell therapies, etc.) will be boosted by Covid vaccine successes.
  • Metaverse and AR/VR will become more mainstreambut widespread adoption will be limited.
  • Web3 will see continued private investment to build platforms, improve scalability and ease of use, but will have little immediate impact.
  • There will be significant advances in quantum computing, driven by continued investments.

Geopolitics

  • Rivalry between the United States and China will continue to shape the economic and geopolitical landscape.
  • Geopolitical conflicts will be amplified by the volatility of the fossil fuel economyinfluenced by decarbonization.
  • A pre-existing social polarization, exacerbated by the pandemic, will make political environments more turbulent.
  • Growing multipolar globalization will create more regions with competing interests, increasing the risk of global conflict, as we are currently seeing in Ukraine and may well see in the Middle East and the South China Sea.

Using forecasts to your advantage

We suggest the following six ways business leaders can use fallible forecasts to gain actionable insights.

1. Look at multiple forecasts, not just one.

Studies show that an expert’s individual judgment is often no better than a random guess, whereas the combination of several independent judgments is more likely to yield an accurate answer. Looking at the forecast as a whole can reveal the wisdom of the crowd.

2. Look at the underlying variables.

Even when there is forecast dispersion, forecast collection can signal a common set of critical variables or underlying trends.

3. Examine areas of convergence and divergence.

Forecasts with strong convergence could be considered as more likely potential futures for place safe bets. Alternatively, divergent forecasts could be considered alternative potential futures. for place maverick bets, given the outsized size value of anticipating or precipitating futures that others do not foresee.

4. Search for white space.

What topics are particularly absent from public discourse? Their identification can allow you to find white spaces where precursor benefits are possible and where you are more likely to have the power to shaping future opportunities to your advantage.

5. Consider how predicted trends can shape the nature of competitive advantage.

Often, forecasts are limited to predicting what will happen. Go a step further to consider the implied impact on how businesses will compete. Consider how your business could gain an advantage and how to adapt your strategy accordingly.

6. Assess your organization’s future readiness.

Consider your organization’s readiness and resilience for different future scenarios based on predictions – taking into account those with a high impact, even if their probabilities are low. Areas of divergence can help identify scenarios you should build.

Forecasts are often misunderstood and underused, but they can be a powerful tool when approached critically and thoughtfully. Leaders who identify the truths hidden in false forecasts can gain a better understanding of the present and see early indicators of the future, giving them a head start in gaining and maintaining a competitive advantage.