Predicting the Unpredictable in Analytics

Like me, you’re probably wondering what 2009 will bring. At this time of year, I often wish I had the attributes of the Roman god Janus, who could look backward and forward simultaneously. It’s easy to look back and review a year, but it’s harder to look forward and see what might be.

This time last year I wrote in this space, “If I’m to make one more prediction for 2008, it would be that I don’t think it’s going to be a dull year!” Sometimes you can wish that you were less prescient! It’s been anything but dull. For a lot of us, this is the first time we’re experiencing anything other than relative economic stability and growth.

If you’re in the forecasting business, you mostly identify patterns and extrapolate trends. When you suffer shocks to the system that radically changes the way the system works, it’s hard to extrapolate any trends because the trends have been broken or disrupted.

We can only look back to the last time such events occurred (decades ago in this case) and try to get some signals from all the noise. The problem is that looking back to the last occasions when our economy went into recession isn’t likely to help much.

Circumstances were very different in the late ’80s and early ’90s. For a start, technology didn’t impact our lives in the same way and the Internet was in its infancy. Fax and telex were still the primary forms of immediate communication.

With such a difference in our technological capabilities, what can we marketers learn from previous recessionary environments? Probably not a lot.

The other difference is scale. Historically, one global economy might be in recession while others might be stable or in growth. Multinational companies could play a portfolio game, managing losses in some markets while seeing compensating growth in others. This time round, there are no safe harbors.

If there’s one prediction I’d make about 2009, it’s that 2009 will be unpredictable. The degree of turbulence and volatility will make it difficult to separate the signals from the noise.

One outcome is that planning horizons will get shorter, from years to months, and from months to weeks. As a result, measurement cycles will get faster. In turbulent times, people want more frequent information and better insight delivered more quickly.

Analytics and insight teams (if they still exist) will be under pressure to produce more goods in less time of a higher quality. This will inform how organizations use the human and technological resources they have at their disposal.

Whenever I write or talk about this subject, I always get the same mental image: a boat sailing in a storm.

On a calm day, you can see for miles ahead and you probably don’t need to check your maps and equipment that often. You have the time to plan and plot your course, and the navigator has time for a coffee break.

In a storm, you have to be much more reactive to the circumstances you find yourself in. You can’t see that far ahead, so you need to rely on your equipment to tell you where you are and what to do next. You need to quickly communicate your decisions to those around you, and the navigator is chained to the desk.

It’s the same for organizations as we head into 2009. We know the storm is coming, but we may not know exactly when or where it will hit or how bad it will be. As a result, we can’t predict how we may need to react.

We must get prepared. For analytics and insight teams, now is the time to make sure the technology is working properly, the data is sound, and the business processes are in place. If you’re in the right kind of organization, you’ll have a very busy, very challenging, but hopefully rewarding year.

I wish you all the best for 2009.

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