Strategy Survival Guide

Linear Projection
Used to estimate values in future periods. By taking historical data, an actual growth rate can be determined.
This rate is then applied to the last known year and run forward. The validity of the growth rate found in
historical data depends largely on the number of reference points and the period over which they are found.
Obviously, the more reference points and the longer the period, the better. Linear projection will only serve
as a predictor of future values if future trend determinants are the same as historical determinants.
Therefore, factors such as technological innovation, changes in behaviour and radical economic shifts can all
mean that historical determinants are no guide to future trends.
Often it is difficult to find sufficient data to allow detailed quantitative analysis. Techniques to address this
problem include estimation and triangulation:
Estimation
One of the key difficulties in conducting forecasting is a lack of available data. If this is the case, estimation
may be suitable. The most common forms of estimation are:
• Ask an expert or group of experts to use their experience to formulate an opinion.
• Develop a case study. For example, how many gardens are there in the UK? You might discover
from the Office of National Statistics site that there are x places of abode in the UK, of which b are
units, c are detached and d are terraces. You might assume that all the detached and terrace
properties have gardens and one third of the flats have gardens. The most important thing is to
ensure that your assumptions are clearly noted, so that the model users are able to adjust the
assumptions if more accurate data comes to light.
• Mirroring. This method can be used when you identify a corresponding event. For a particular
prescription drug may always be bought in conjunction with another drug. You may be able to
ascertain the sales of the second drug by adding up quantities from annual reports, and then 'mirror’
that number to find an estimation of the number of sales of the first drug.
Triangulation
When developing a model, data is often incomplete or approximate. In other instances you may have several
sources of data that conflict. One way of developing a base to work from is to triangulate the available
information to develop a defensible average.
Three sources of comparable data are needed. These may be obtained by various methods – extrapolation,
expert estimation, case studies, literature reviews, etc. Once the information from all sources is standardised
(that is using the same base, units, denomination, etc), an average is taken. Usually it is a straight average,
though sometimes you may weight some of the information sources – to reflect a higher quality data source.
Qualitative Analysis
Qualitative trend analysis is more subjective and is concerned mainly with social, institutional, commercial
and political themes (i.e. things which may not be linearly related to the past). For example, qualitative trend
analyses deal with issues such as:
• What is the future of trade unions?
• What is the future of political parties or NGOs?
• What is the future of the entertainment business?
One of the most common forms of qualitative trend analysis is the identification of 'megatrends’ – driving
forces which can change society in all spheres e.g. politics, economics, technology, values and social
relations. Other tools include scenarios and analogies.
Qualitative analyses can be applied to most areas, but work best when focusing on real change. Megatrends
apply to all areas, within the defined time and setting. It is important, though, to be aware that mega-trends
may themselves produce powerful counter-trends - and that they may interact with each other.
Scenario Design
Quantitative and qualitative trend analyses together form the basis for scenario design. Different
combinations of key trends are used to describe possible pictures of the future, which can then be used to
design or test policy.
Strategy Survival Guide – Strategy Skills
Page 155