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Making Big Decisions Better - Insights, Applications and Real lIfe Examples

How to Predict the Future Demand of Your Business

  1. Cause for Alarm?

Leading a business requires foresight and insight. In my experience over 18 years  and across 4 continents I consistently see executives knowing  much more about the future than they give themselves and teams credit for. Afterall – their business is part of the global demand curve.

In recent conversations with CEOs these topics ( depending on the client) repeatedly surface and cause a level of uncertainty many have not seen before including:

  • Brexit
  • Tax Reforms
  • NAFTA renegotiations
  • Credit Bubble
  • Rapid Automation
  • Healthcare Reform

Pick your poison – any of these are weighty “What ifs”.

The underlying issue described by executives is trying to suss out the probability of them happening and the specific impact to their demand curve if they did ( to whatever level and time frame they unfold in.)  Depending on your business you may be in the same boat or be sitting on the golf course going  – so what?

In either case you should be looking at your strategic assumption in light of global or industry specific trends and be able to find one or two proxies that supplement your team’s thinking on how the future may unfold and impact your business.

Do you have any Predict the Demand of  Your Business tools in your arsenal today?

If not read on..  ( if you do, sign up for my blog – there may be other tools that could help your company or executive team)

  1. How to “Predict the Future” Demand for Your Business?

Two pragmatic tools many companies use to help them get out front of their demand expectationss are know as:

In a nutshell – the Baltic Dry Index is future looking indicator that looks at the level of bulk goods (used as raw inputs for MFG)being transported in ships. The level of bulk goods being shipped and the fact that they don’t get there overnight – provides an eye to the future of global economic demand.

Similarly, the HARPEX index is seen as a more current looking demand fortune teller – as it charts the finished goods travelling on the seas.Below is a 1 year snapshot of both indices.

Can these indices help you tell the future?

In both cases – you can review your historical demand against these indices and look for the patterns that emerge.  And they will appear even for your business – be it industrial or service, large or small becuase you are part of the global demand and supply equation.  Your company just needs to look.

For reference, this is not a 6 month build-the-business-model project ( although it could be) – but it can be used to supplement your STRATEGIC ASSUMPTIONS ( those factors that apply to all firms in your industry) along with the specific range of demand scenarios that could be unfolding because of these indices.

  1. Next Steps to Sharpen the Looking Glass on Future Demand

  • Develop Assumptions and Implications – If your strategy  does not include specific assumptions and implications that force you to link OUTSIDE TO INSIDE -a suggestion to develop some. In reality – your executive and managers are already operating off some set to make decisions anyways.
  • Find Economic Indices Right for Your Business :If the Baltic and HARPEX are not close enough to your business liking – find some proxies that are.  There are always leading economic indicatorss – be they country, industry or region specific  that can provide insight into you business.
  • Use them: Once you have assumptions in place, force your executives and people to look at a reasonable scenarios – in light of what the indices are suggested – and be prepared to make tough choices on demand options that you may face.

As a leader in your company if you are tossing and turning about global uncertainties following the steps laid out above will give you more certainty in your decisions and more confidence for the organization to execute behind you.

Connect with me if you have questions or comments

 

 

 

Tim Lewko
CEO, Thinking Dimensions Global
Managing Director, Global Strategy Practice

Making Big Decisions Better

Author of Soon to be Published Book – Making Big Decisions Better: How to Set and Simplify Strategy

 

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