Margaret Heffernan: Five year plans are now a fantasy

The era of forecasting is over. The era of experimentation and just-in-time thinking has begun.

by Margaret Heffernan

Last year was tumultuous for manufacturers of plastic straws. Now it’s the turn of managers of cruise companies, tour operators in China and the director of La Scala (to name but a few). Without warning, all these businesses have been upended. The unexpected has become normal. 

Over time, we became so good at forecasting that it made sense to imagine progress was infinitely sustainable. But it isn’t. Along the way, fundamental change occurred. We moved from a complicated world to a complex one. Complicated environments are linear, follow rules and are predictable. But globalisation, coupled with pervasive communications, has made much of life complex: non-linear and fluid, where very small effects may have disproportionate impacts.

The consequence of this shift is that experts in forecasting now believe accurate prediction is feasible only up to about 400 days into the future. For those with less expertise, the horizon is around 150 days. This turns five-year plans into fantasy. It’s a startling shift, breaking the three-legged stool – forecast, plan, execute – on which management depended. If you can’t see further than about a year (and that still contains uncertainty) how do you plan? Seeing so little of the future demands a different kind of management and a different kind of leader, both characterised more by scepticism than confidence.

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