Selling is like playing chess on five chessboards while standing on your head. Why do we get so shocked when a situation is misread or a big deal doesn't work out as predicted by our forecasting models?
Business leaders try to understand and predict when revenue will land daily.
However, the reality is that human-based forecasting is subjective and error-prone. When a sales forecast is wrong, it makes people in your market feel bad and could change how your company uses its resources.
Business success depends on forecast accuracy, but what happens if the inputs are flawed?
These flaws can be attributed to many causes, and it's hard to place blame on anyone when they happen.
The good news is that there are improvements you can make and processes you can put in place to both identify and move past the two most common flaws that result in a failed sales forecast. Let's take a look at a case study.
John was a good VP of Sales. He was in charge of a focused team of sellers worldwide who were riding a wave of successful growth. Their company was getting a lot of buzz, and planning for the IPO was already underway. In fact, the phrase “like shooting fish in a barrel” came to John's mind as he looked at his increasing growth month over month and quarter over quarter. But last month was different.
Every sales leader forecasted a drop in projections. It wasn't significant, but it was a drop.
The sales managers were confident this was a glitch. Salespeople were not updating their CRM system because they were so busy with their increasing customer demand. At least, that was the story that sounded good. It was a good way to explain away the miss, and other managers who didn't want more inspections used it.
John was now poring over the forecast data, which showed double-digit decreases in every period going forward. He hid his hands in his face and sighed.
In Las Vegas, there are only two ways to lose money: by chasing your winnings and by chasing your losses. While John and his company's story is fictional, it's based on real-life cases of companies.
Clayton Christensen, the former Harvard Business School professor and author of The Innovator's Dilemma, saw this and the rise and fall of Digital Equipment Company (DEC). He came up with his well-known theory of disruptive innovation because of what went wrong with DEC.
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