The start of every New Year is filled with a flurry of forecasts about the year to come. Almost always, these predictions are wrong, which we chalk up to the state of uncertainty in our knowledge of what lies ahead. But ignorance notwithstanding we could do a better job of anticipating what is likely to change and how.
We mis-judge change by overestimating the change our companies can adapt to easily and underestimating the change that is hardest to adapt to. Practically speaking, this means that we overestimate changes in demand and underestimate changes affecting operating systems.
Demand shifts are much easier to think about because they are the very essence of marketing. Marketing organizations are built to track what’s new with consumers and respond quickly. So, marketers are hyper-sensitive to even the smallest perturbations in demand and thus prone to over-anticipating big changes from slight fluctuations. This is the most common way in which forecasts go wrong. They are based on an expectation of too much change among consumers.
After big disruptions like Covid or inflation, there is always talk of a new normal, with forecasts galore of how consumers will change dramatically. But consumers don’t aspire to a new normal. Consumers want to get back to normal. Consumers resist change. Change requires an investment of time, headspace and, often, money that consumers are always reluctant to make. Certainly, demand changes over time, but rarely overnight. The changes that consumers adopt most quickly tend to be those that deliver greater convenience.
Marketers are like consumers. They, too, resist and ignore changes that require big investments in doing things differently. But putting it off means that when slow-moving macro forces finally catch up, change is quick and dramatic. We have seen this post-Covid.
The period from the mid-1980s to 2007 is known by economists as the Great Moderation. It was a period of relative stability during which nearly all of today’s operating models were developed, perfected and adopted. We’ve known for some time that our logistics and customer service and planning systems were not keeping up, but it has taken supply chain failures and a Southwest Airlines meltdown to overwhelm resistance to change. Operating models developed during a time of stability are ill-suited for a future of volatility. Systems built to stiff-arm change will now have to be rebuilt in a hurry as resilient to change. This is where to look for the shape of the future ahead.
Contributed to Branding Strategy Insider By: Walker Smith, Chief Knowledge Officer, Brand & Marketing at Kantar
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