Futurist Paul Saffo on Uncertainty - David Matheson

Technology Forecaster Paul Saffo recently wrote about forecasts in the Harvard Business Review. He articulates very well the fact that forecasts are all about uncertainty.

Here are a few sentences from his "Rule 1: Define a Cone of Uncertainty":

"As a decision maker, you ultimately have to rely on your intuition and judgment. There’s no getting around that in a world of uncertainty. But effective forecasting provides essential context that informs your intuition. It broadens your understanding by revealing overlooked possibilities and exposing unexamined assumptions regarding hoped-for outcomes. At the same time, it narrows the decision space within which you must exercise your intuition.

"I visualize this process as mapping a cone of uncertainty, a tool I use to delineate possibilities that extend out from a particular moment or event.

“The forecaster’s job is to define the cone in a manner that helps the decision maker exercise strategic judgment. Many factors go into delineating the cone of uncertainty, but the most important is defining its breadth, which is a measure of overall uncertainty.

"Drawing a cone too narrowly is worse than drawing it too broadly. A broad cone leaves you with a lot of uncertainty, but uncertainty is a friend, for its bedfellow is opportunity—as any good underwriter knows. The cone can be narrowed in subsequent refinements. Indeed, good forecasting is always an iterative process. Defining the cone broadly at the start maximizes your capacity to generate hypotheses about outcomes and eventual responses."

Value-Based Management software tools like SmartOrg’s Portfolio Navigator™ focus decision-makers’ attention on dealing with uncertainty and monitoring its impact throughout the decision-making process.

Check out the article at

http://harvardbusinessonline.hbsp.harvard.edu/hbsp/hbr/articles/article.jsp?articleID=R0707K&ml_action=get-article&print=true&ml_issueid=BR0707

Also, if you are in Silicon Valley, you can hear Paul speak at the Churchill Club on Tuesday, Aug. 28  http://www.churchillclub.org/eventDetail.jsp?EVT_ID=744.

Comments

[Don Creswell]

Great input from Sean. It continues to amaze me that many people are reluctant to work with numbers! For instance, just today I was talking with an executive of a major international company who was perplexed because his people virtually refused to put numbers on forecasts about future markets, market penetration, etc., citing that "we can't put numbers on things we don't know." And, people wonder why so many projects or new products fail! Uncertainty is there whether you like it or not - so at least try to deal with it in some sort of quantitative manner. Recognize what you don't know - identify the tiger pits - and do something about resolving the critical uncertainties. Wishing away uncertainty is a sure path to failure. Dealing effectively with uncertainty is a great path to improving the success rate of projects, products and new business ventures.

[Sean Murphy]

It was a good talk. I blogged about the article in advance of the event here:
http://skmurphy.com/blog/2007/08/14/paul-saffo-at-churchill-club-breakfast-tue-aug-28/
and blogged about the event itself here:
http://skmurphy.com/blog/2007/08/28/paul-saffo-on-forecasting-innovation-in-silicon-valley/

Uberpulse covered it here
http://www.uberpulse.com/us/2007/08/good_forecasting_step_back_look_at_the_big_picture_futurist_paul_saffo_says.php
and has some video attached that is also here: http://www.youtube.com/watch?v=qEHcCrX729s

You make a good point in that Saffo never gives the mathematics for the edge of the cone of uncertainty, where SmartOrg's Portfolio Navigator or Decision Advisor would take a more quantitative look at it and explicitly set the midpoint of the cone at the 50th percentile and the two outer edges at the 10th and 90th. It's not clear that the IFTF methodology attempts to put any numbers on a decision, in reading the article and hear him talk he cast the forecasting process as more of an intuitive and ethnographic (can we find evidence of emerging subculture like robotics that's getting ready to break into the mainstream) methodology than a quantitative one.