Lydia was a region in Asia Minor famed for its great wealth. Lydia prospered in the 7th and 6th centuries BC and grew most powerful during the reign of King Croesus. Wanting to expand his empire Croesus looked for a forecaster who could help him make a decision. He asked seven oracles to predict what he would be doing that day and Pythia, the oracle of Delphi correctly answered that he’d be cooking lamb and tortoise stew. Convinced that he had a reliable oracle the king asked Pythia if he should attack Persia. She answered that if he did he’d destroy a mighty empire. Given her previous successful prediction, these comments confirmed his own instincts and desires. Croesus attacked and, as foretold, he destroyed a mighty empire – his own!
Forecasting is about finding out what you ‘need’ to know as opposed to finding out what you ‘want’ to know. Examples abound, from New Coke to the Apple Newton to the Blackberry Playbook, of catastrophic market mistakes launched by companies who trusted their instincts buoyed by their past ability to launch winners.
Bill Gates once stated that “Success is a lousy teacher”. Its tonic hypnotizes us into thinking we know the market, lulling us into believing we can trust our instincts. Success gives us confidence to believe “we know what’s right” and grants us permission to take shortcuts when developing our strategy. For the naÃ¯ve entrepreneur past success is the greatest predictor of future failure.
True business leaders are good forecasters who don’t rely on oracles or instinct. They take the time to assess the market and see its present structure. They do the conjoint analysis and conduct business simulations to better understand complex situations which helps them and their management teams to overcome their market biases. Based on the information uncovered, they develop their strategy (portfolio, segmentation and positioning strategy) deciding where best to apply limited resources and where best to compete.
Market biases are difficult to overcome and gut feel/instincts are easy to follow. What can we learn from Bill Gates and the King of Lydia?
- Forecasting is hard work – it’s not guess work
- Trust insights not instincts
- Use marketing research tools to overcome biases
There are no shortcuts. Exceptional leaders exercise the required discipline to develop market insights. Instincts, gut feel, winging it – whatever you want to call it – can lead you to ruin. Even the Oracle of Omaha, Warren Buffet, will tell you “it’s hard work to predict the future”!
1. Story from Synthesis Question Certainty; How forecasters look at the world Walter Frick HBR Oct 2015