Why has nearly 80% of business and product forecasting been wrong?
In short, the most important reason is that forecasters, by nature unduly optimistic, fall in love with their own forecasts, especially if the forecast is based on an exciting new technology.
Odd as it may seem, important innovations rarely come from firms that would seem the most likely sources. Firms that currently dominant in a given industry often seem to be the least foresightful. It is instead often the industry outsider that seems to be the most perceptive.
Many firms have failed to capitalize on technological developments because they came from outside their specific industry. Surprisingly, firms holding a commanding share of their market are often among the last to foresee potential threats to their bread-and-butter products. As a result, market leaders often miss the opportunities that they themselves should have created.
The evidence supporting this proposition is overwhelming. Many of the biggest growth markets of the past few decades have been discovered by upstate or industry outsiders. Industry leaders have paid for their lack of insight, and in most cases, either ignored the threat or embraced forecasts of opportunities in innovations that flopped badly.
Typically, market leaders are complacent about innovations that affect their served markets. As a result, they fail to foresee the technological developments that will change their markets forever. They often turn a blind eye to new trends and focus intently on their current product. They do not perceive imminent threats to their markets as imminent or threatening. As a result, they leave themselves vulnerable to the attacks of new entrants, who seem far better able to foresee the direction of change in the industry than they are.
Remarkably, time and time again, in industry after industry, market opportunities have been more apparent to outsiders than to those with a dominant position in the industry.
The lesson by using a car analogy: Do your forecasting while looking out of the front window in an open-minded fashion, and not by looking out of the rear view mirror while driving backwards.