Forecasting and prediction

This post will look at the current forecasting and prediction methodologies and highlight a prediction that came true. Forecasting and predictions have a long history, from the remote antiquity of ancient Greece, man demonstrated the desire to predict the future and understand the past. Thus far many studies have been devoted to prediction and forecasting. However there is considerable difficulty in predicting the future, this difficulty depends on the degree of freedom and complexity of the system (Matsuo, 2003). According to Beattie (n.d) there are a number of different methods by which predictions and forecasts can be made in business and they fall into two approaches.

Qualitative models

Qualitative models depend on the market to weigh in with an informed consensus, this can be useful in predicting the short term success of companies, products and service, but meets limitations due to its reliance on opinion over data. This methods include

Market Research: Polling a large group on a specific product or service in order to predict how many people will buy it

Delphi Method: Asking field experts for general opinions and then compiling them into a forecast.

Quantitative methods

Quantitative methodologies are concerned primarily with data. These models discount the expert factor and try to take the human element out of the analysis. Quantitative models include:

The indicator approach: This approach depends on the relationship between certain indicators. For instance GDP and unemployment rates remaining unchanged over time.

Econometric Modeling: Contrary to the indicator method that assumes relationships remain the same, econometric modelling tests the internal consistency of datasets over time and the strength of the relationship between data.

Time series method: This is a collection of different methodologies that use past data to predict future events. By tracking what happened in the past the forecaster hopes to be able to give a better prediction about the future.

In 1926 Nikola Tesla accurately predicted what we now refer to as the smart phones by stating "When wireless is perfectly applied the whole earth will be converted into a huge brain, which in fact it is, all things being particles of a real and rhythmic whole. We shall be able to communicate with one another instantly, irrespective of distance. Not only this, but through television and telephony we shall see and hear one another as perfectly as though we were face to face, despite intervening distances of thousands of miles; and the instruments through which we shall be able to do his will be amazingly simple compared with our present telephone. A man will be able to carry one in his vest pocket". Indeed the cellphone has had the most impact in our world. Aker (2010) discussed some of the forces that led to the success of the cellphone, these include:

• The cellphone has multiple uses and purposes which translates into diverse economic and social benefits
• Mobile phones can be easily adapted to local contexts. They do not ask individuals to change the existing social or cultural practices. Rather they provide an alternative form of communication.

References

Aker, J. (2010). Why Have Mobile Phones Succeeded Where Other Technologies Have Not? Retrieved from http://www.cgdev.org/blog/why-have-mobile-phones-succeeded-where-other-technologies-have-not

Beattie, A. (n.d.). The Basics Of Business Forecasting. Retrieved from http://www.investopedia.com/articles/financial-theory/11/basics-business-forcasting.asp?layout=orig

Matsuo, Y. (2003). Prediction, forecasting, and chance discovery.