It's that time of year when people take to making forecasts.  From (see how you can enter as a forecaster at Barron's here) to networking groups, organizations are asking for forecasts.  Many executives will turn to their favorite journalist, economist, internal strategy leader, or perhaps marketing leader and ask for a forecast for 2009.

But seriously, why bother?  Did you read any forecasts in December of 2007 that came close to predicting the events and outcomes of 2008?  From current events (such as the U.S. election), to the markets (such as the DJIA or S&P 500) to business conditions (such as GDP performance, manufacturing indeces, unemployment), to commodities (such as the price of oil, corn and gold) no one guessed hardly any of these correctly. 

Actually, it's surprising anyone tries to forecast.  All forecasts are based upon taking some historical time series and predicting it into the future.  The forecasting process itself is flawed because it tries to project some sort of similarity to the past – with variations explained by some predicted event.  Things really aren't much different than they were when Benjamin Franklin made his forecasts in Poor Richard's Almanac.  The odds of things going along the same are not very good, and the odds of predicting the unusual events is almost impossible.  So forecasting doesn't help managers much at all – unless we can expect things in the future to be mostly like the past.  And after 2008 – who would think that's very likely?

Instead of forecasting, we should spend some time now developing scenarios.  These vary considerably from forecasts because they don't project the past.  Instead, scenario planning starts by looking into the future, and describing a scenario.  Then, working backward to see how we should prepare in case that scenario happens.  Rather than planning from the past, the process begins with a view of the future.  Because we all can recognize major trends, like uncertain energy supplies, ongoing religious conflicts, increased globalization of trade, declining value of labor, etc. it's actually a lot easier to imagine what the future will look like.  Building an impression of how people are likely to live, based upon how we see major trends emerging, is more accurate than trying to forecast based upon history.  After all, we all knew the U.S. was in a recession months ago – but it took the experts almost a year to identify a recession had begun!  The closer people are to the "data", especially historical data, the harder it is to identify shifts

No one should plan their future based upon a single scenario.  Because none of us know which trends will dominate, or be offset by another trend.  So it's best to develop several scenarios.  By working through multiple views it is possible to best understand the strategy most likely to succeed given multiple possible outcomes.  Most importantly, this helps us understand how we're likely to perform, given our current Success Formula and the various scenarios.

Scenarios can help us understand likely market shifts.  Maybe not today, but likely.  And then to evaluate our Success Formula not on how we've done in the past, but how we're likely to do in the future.  When gaps emerge, we can then assess how to Disrupt outselves – and determine what White Space projects to pursue in order to evolve our Success Formula to remain competitive.

Forecasting can be fun sport.  But as a business exercise – it's not worth the bother.  No one trusts the forecast, so no one uses it.  And worse, it will most likely further Lock-in the old Success Formula by projecting a future not dissimilar to the recent past.  What will help us succeed in 2009, 2010, 2011 and onward is to have scenarios which help us plan for the future and pull us toward better competitive position as things change.