Where I work, I am responsible for analyzing how the documents we create are doing. We post them on our website and I conduct quarterly analyses, sometimes I am happy with the results, but sometimes I am not. I take the analysis and predict how to target market will react to the potential introduction of a new document. If the numbers are looking hopeful, I then provide a “green card” to that type of document to go forward on spending our resources on such documents. With that said, these analyses are not always stable. They can be seasonal; can depend on the economy, and/or what our clients are concerned about that quarter. Being able to forecast the public reaction toward a given document is crucial to our business, so we do not waste time on a project that might not do great when published.
When I was reading an article in Businessweek titled, Hewlett-Packard’s Shares Plunge After Forecast Misses Estimates, I thought of our class and what I do. HP experienced a major plummet in their stock prices because of a shortfall on demand for their services. This happens to every company eventually, but it was a little out of nowhere because analysts’ predicted otherwise. If only they knew how good their tracking signal was, maybe this would have been avoidable.
When should a company know better than trusting numbers? I believe a company should hope for the best, but always be prepared for the worst.
The article has been provided for your reference.
I don’t think a company should ever base their future solely on numbers because there are so many other things to consider. One of the big problems with forecasts is that they don’t take into account the environmental changes that may occur. Maybe HP could have foreseen that their decision was going to have a negative impact if they would have considered the environment surrounding their numbers.
I think that numbers are extremely important factors in making important business decisions, but they cannot be the only factor. Numbers can be like paint, but paint alone cannot create a picture, that takes a brush, and an artist. I believe it is vital that someone with experience of the industry and just plain common sense is constantly looking at the numbers and deciphering what they MEAN. Numbers alone mean nothing, but once we see their causes and what they will cause, they can mean everything. This is why there are both quantitative and qualitative ways of forecasting. They should not be mutually exclusive, but should be initiated together. A regression or trend line is a great tool, but an executive board or subject matter expert should be interpreting it to make sure that the logic behind the numbers makes sense. Never blindly follow anything, always second guess yourself and be positive that information is intuitive and useful.
I think a company should always be looking at other factors besides numbers. Some of these factors may include senior management opinion, competition, and the overall economy. That is not to say that any of the suggested factors are not influence by numbers. I think by looking at other factors may raise the important question, why?