Kim Warren on Strategy
Strategy insights and living business models
When market forecasts are totally pointless
I have sometimes made the point that ‘market forecasts’ are of little value as a start-point for strategy development [ sorry to the folk who make a living feeding the apparently insatiable demand for ‘independent market forecasts’]. This is because market development is not an ‘independent variable’. The way customers respond is a function of what suppliers offer, as much as it reflects some innate desire to consume. An old example – the ‘market’ for 24-hour global TV news was zero before CNN offered it, but then grew at a rate that reflected CNN’s success in getting its service adopted – not because the number of people who wanted it grew by x,000 per month.
Just come across another couple of extreme cases.
- The ‘market’ for mortgages in middle-east countries is apparently near-zero – but the rate at which ‘demand’ will grow will reflect the rate at which banks develop and provide Shariah-compliant products. For such a bank, ‘forecasting’ growth of this market is pointless, as its growth will depend totally on what suppliers will do.
- Same applies to some alternative-energy markets – roof-top solar heating, domestic combined-heat-and-power, ground-source heat pumps etc. The current ‘market size’ for many of these is currently tiny, because the technology is immature and costly, and ‘growth in demand’ is a meaningless concept – demand will develop in response to the rate at which each technology’s performance and price improves … which in turn depends on the sales rate. [All explained in chapter 6 of the book]
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