5. System factors - Understand which System factors drive variance in forecast, account for the “significant” ones

Why it matters

We are impacted by system factors that influence outcomes.

  • Example 1: August is a very slow month in Europe.
  • Example 2: In the US, there are annual sales cycles, there is code embargo for the 3-month period between September and December so as not to interrupt this high revenue period.

Impact: Use forecasting to figure out what will likely hit the embargo period compared to something that is more certain to be completed well before.

The question we want to ask is: What factors unrelated to the work itself could possibly influence the forecast outcome in a major way.

Example: There are other system factors that play a role often to a larger degree than the work itself. No matter how much historical data we have on the flight time between London and New York , it becomes irrelevant when you have a snow storm.

You would want to account for that.

How it works

  1. Brainstorm and decide the top 5 major system factors in any forecast exercise.
  2. Estimate the likelihood and the impact of these system factors, and then incorporate them into the forecast.

Example: If you are forecasting the travel time of flights between London and New York in the snow storm example above, estimate the impact caused by the storm and the likelihood of it occurring (during the timeframe of your forecast), then multiply the two and incorporate the result into the forecast.

In a few extreme cases, system factors can dominate the forecast.

Case: If a company only releases once a year in December, it doesn’t matter if you finish the product in August.