Mistakes to Avoid When Making Forecasts

by | Mar 8, 2023 | economics

Business plans require a sales forecast. Scott Fishman, the CEO of Envisage, sees three common mistakes in business plans (Fishman 2015):
• They forecast “hockey stick” revenue growth.
• They forecast smoothly rising trend lines.
• They lack convincing evidence of market size.
A “hockey stick” forecast—a revenue graph shaped like a hockey stick—involves limited revenues initially followed by explosive growth.
It is a potentially effective sales technique to use in discussions with executives and investors because it suggests that the business opportunity might be extremely valuable.
In contrast, smoothly rising trend lines do not seem plausible from an economic standpoint. The number of customers and their consumption of any product is typically finite. Furthermore, any true blockbuster product will attract competition.
Every new product faces a complex environment: features and benefits, competitive environment, regulatory conditions, payment models, distribution, pricing, market positioning, and so forth. A genuinely new product will have multiple unknowns in its market. If there are no unknowns, it is not really a new product. A convincing forecast demands market research, an honest recognition of what is not known, and a strategy for resolving some of the unknowns.
Discussion Questions
• What is problematic about a “hockey stick” forecast?
• Can you find an example of a product that displayed “hockey stick” revenue growth?
• What is problematic about a forecast with a smoothly rising trend line?
• Can you find an example of a product that displayed smoothly rising revenue growth?
• From an economic point of view, what is implausible about smoothly rising trend lines?
• Can you find an example of a product that wildly underperformed early forecasts?
• Can you find an example of a product that wildly overperformed early forecasts?
• What external factors might cause below-forecast sales? Above-forecast sales?
• What internal factors might cause below-forecast revenues? Above-forecast revenues?
• What are examples of new products with uncertain prospects in healthcare?

Sample solution

Dante Alighieri played a critical role in the literature world through his poem Divine Comedy that was written in the 14th century. The poem contains Inferno, Purgatorio, and Paradiso. The Inferno is a description of the nine circles of torment that are found on the earth. It depicts the realms of the people that have gone against the spiritual values and who, instead, have chosen bestial appetite, violence, or fraud and malice. The nine circles of hell are limbo, lust, gluttony, greed and wrath. Others are heresy, violence, fraud, and treachery. The purpose of this paper is to examine the Dante’s Inferno in the perspective of its portrayal of God’s image and the justification of hell. 

In this epic poem, God is portrayed as a super being guilty of multiple weaknesses including being egotistic, unjust, and hypocritical. Dante, in this poem, depicts God as being more human than divine by challenging God’s omnipotence. Additionally, the manner in which Dante describes Hell is in full contradiction to the morals of God as written in the Bible. When god arranges Hell to flatter Himself, He commits egotism, a sin that is common among human beings (Cheney, 2016). The weakness is depicted in Limbo and on the Gate of Hell where, for instance, God sends those who do not worship Him to Hell. This implies that failure to worship Him is a sin.


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God is also depicted as lacking justice in His actions thus removing the godly image. The injustice is portrayed by the manner in which the sodomites and opportunists are treated. The opportunists are subjected to banner chasing in their lives after death followed by being stung by insects and maggots. They are known to having done neither good nor bad during their lifetimes and, therefore, justice could have demanded that they be granted a neutral punishment having lived a neutral life. The sodomites are also punished unfairly by God when Brunetto Lattini is condemned to hell despite being a good leader (Babor, T. F., McGovern, T., & Robaina, K. (2017). While he commited sodomy, God chooses to ignore all the other good deeds that Brunetto did.

Finally, God is also portrayed as being hypocritical in His actions, a sin that further diminishes His godliness and makes Him more human. A case in point is when God condemns the sin of egotism and goes ahead to commit it repeatedly. Proverbs 29:23 states that “arrogance will bring your downfall, but if you are humble, you will be respected.” When Slattery condemns Dante’s human state as being weak, doubtful, and limited, he is proving God’s hypocrisy because He is also human (Verdicchio, 2015). The actions of God in Hell as portrayed by Dante are inconsistent with the Biblical literature. Both Dante and God are prone to making mistakes, something common among human beings thus making God more human.

To wrap it up, Dante portrays God is more human since He commits the same sins that humans commit: egotism, hypocrisy, and injustice. Hell is justified as being a destination for victims of the mistakes committed by God. The Hell is presented as being a totally different place as compared to what is written about it in the Bible. As a result, reading through the text gives an image of God who is prone to the very mistakes common to humans thus ripping Him off His lofty status of divine and, instead, making Him a mere human. Whether or not Dante did it intentionally is subject to debate but one thing is clear in the poem: the misconstrued notion of God is revealed to future generations.

 

References

Babor, T. F., McGovern, T., & Robaina, K. (2017). Dante’s inferno: Seven deadly sins in scientific publishing and how to avoid them. Addiction Science: A Guide for the Perplexed, 267.

Cheney, L. D. G. (2016). Illustrations for Dante’s Inferno: A Comparative Study of Sandro Botticelli, Giovanni Stradano, and Federico Zuccaro. Cultural and Religious Studies, 4(8), 487.

Verdicchio, M. (2015). Irony and Desire in Dante’s” Inferno” 27. Italica, 285-297.

Sample Solution

• What research is required to make a convincing forecast?
• How can you resolve some of the unknowns present in an uncertain market?

What is problematic about a “hockey stick” forecast? Hockey stick forecasts depend heavily on unrealistic assumptions and tend to be overly optimistic, making them potentially unreliable for decision-making purposes. Furthermore, they don’t reflect the realities of how markets typically evolve over time; i.e., with gradual growth followed by slower periods as competition increases.

Sample Solution

• What research is required to make a convincing forecast?
• How can you resolve some of the unknowns present in an uncertain market?

What is problematic about a “hockey stick” forecast? Hockey stick forecasts depend heavily on unrealistic assumptions and tend to be overly optimistic, making them potentially unreliable for decision-making purposes. Furthermore, they don’t reflect the realities of how markets typically evolve over time; i.e., with gradual growth followed by slower periods as competition increases.

An example of a product that displayed “hockey stick” revenue growth is Apple Inc.’s iPod music player which experienced explosive growth after its launch in 2001 due to its innovative features such as portability and huge storage capacity coupled with great marketing campaigns .

What is problematic about a forecast with a smoothly rising trend line? Smoothly rising trend lines are implausible from an economic standpoint since any true blockbuster product will attract competition over time ,therefore production should plateau at some point rather than growing exponentially indefinitely.

An example of a product that has experienced steadily increasing revenues would be Microsoft’s Office Suite which has been around since 1990s but continues remain highly popular amongst consumers & businesses alike due its user friendly design & cross platform compatibility.

From an economic point of view, what is implausible about smoothly rising trend lines? From an economic point of view it’s implausible because number customers their consumption any product typically finite – meaning eventually amount sales will reach certain level stabilizing thereon . Additionally, any true blockbuster product attract competition thus creating downward pressure prices diminishing demand over time .

Can you find an example of a product that wildly underperformed early forecasts ? One example would Google Glass – wearable computer system released 2013 had immensely hyped prior launch however failed meet expectations due high price tag , privacy concerns along lack compelling use cases resulting rapid decline popularity even being pulled from market less year after launch .< br>< br > Can you find an example wild over performed early forecasts ? One such case would Sony PlayStation 2 video game console had massive success despite predictions failure mostly attributed superb library exclusive games well wide range multimedia capabilities offered device like DVD playback something no competitor could match during period 2002-2006 when was most active part life cycle . < br >< br > What external factors might cause below-forecast sales ? Above-forecast sales ? External factors causing below forecast sales include things like introduction new substitute products offering better performance lower costs or regulatory changes restricting access certain markets above production could result unanticipated demand either tied technology advancements improved marketing/branding strategies etc ..

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