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Forecasting Product PerformanceLike A MeteorologistProductCamp Boston 2012#pcampBostonA.Chakravarty 6/9/2012
Problems are just as frustrating…        Jim Kosek – Funny Weather Video        Three Key Forecasts related to Product Mgt...
Workshop Overview • Forecasting – why is it important • Forecasting Impacts Decisions • Limitations                       ...
New Product Forecasting• Error Rates are HIGH!• So Why Forecast?                                                     Error...
Forecasting – Why? New Product Development (NPD) On average ~20% of company sales are New Products1 Newer products typic...
Forecasting Impacts DecisionsWeather Forecasts               Product Forecastslet us decide:                  let us decid...
Forecasting NPD LimitationsWeather Forecasts                    Product ForecastsAre limited:                         Are ...
Metrics for Product Managers                                             Qualitative Metrics                       • Empir...
Metrics for Business                         Business Metrics                    Increase           Decrease              ...
Basic Meteorological Forecasting      Key Weather Forecasting Techniques: Persistence    Today = Tommorrow Trends – Now...
Methods & TechniquesThree broad sets capture dozensof methods  Mkt                 Subjective                       Quanti...
Some things to keep in mind to forecast• Timeframe• Assumptions• Units of Measure – atomic• Project Timeline and Milestone...
Workshop Preparation…• TASK 1: Break out into groups of 2-5 people each and introduce  yourselves.
THE FORECAST CASEWORKSHOPWeatherCommerce.com is a clicks-only online business that sellsThermometers, Barometers, Hygromet...
THE FORECAST WORKSHOP• TASK 3: Each team takes 5 minutes to list 3-5 Key Resources and  Key Deliverables that they would r...
THE FORECAST WORKSHOP• TASK 4: Each team takes 5 minutes to list one method they would  rely on to forecast – and a quick ...
THANK YOU!           Ananda S. Chakravarty               @achakravartyhttp://www.linkedin.com/in/anandachakravarty
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Forecasting Product Performance Like a Meteorologist (June 2012)

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Ananda Chakravarty's presentation at ProductCamp Boston, June 2012

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Forecasting Product Performance Like a Meteorologist (June 2012)

  1. 1. Forecasting Product PerformanceLike A MeteorologistProductCamp Boston 2012#pcampBostonA.Chakravarty 6/9/2012
  2. 2. Problems are just as frustrating… Jim Kosek – Funny Weather Video Three Key Forecasts related to Product Mgt: • Domino Effect – Power outages, Traffic backup, Black Ice • Redundancy Effect - Snow Drifts, Windy • Anticipated Failure – Heavy Snowfall http://www.youtube.com/watch?v=Awwg0SO4Nck PPT Notes provide addt’l information.
  3. 3. Workshop Overview • Forecasting – why is it important • Forecasting Impacts Decisions • Limitations Review – 20 min. • Metrics & Data • Methods & Techniques • Leveraging forecasts workshop – Key Product Metrics – Internal partnering for product success Case – 25 min. – Method and TechniqueDISCLAIMER: This session will not discuss how you should forecast, but you should walkaway having a better understanding of what to think about and the complexity of goodforecasting for new products.
  4. 4. New Product Forecasting• Error Rates are HIGH!• So Why Forecast? Error rate in Guessing a Coin Toss (50%)1. New Product Development and Forecasting Problems. R. Simon, Journal of Business Forecasting 2009- 2010.
  5. 5. Forecasting – Why? New Product Development (NPD) On average ~20% of company sales are New Products1 Newer products typically command higher profit margins1 In the US, 50% of revenues and 40% of profits are from New Products1 ~26% of revenue from Engineering companies are from products < 3 years old1 ~70% of today’s manufactured goods will be obsolete in 6 years1  In Fashion and High Tech that’s closer to 2 years1 35%-45% of New Products fail immediately2 According to Herb Baum, Former CEO of Campbell Soup Company, in consumer business, “80% of all new products fail, only 4% reach the 20 MM level and 0.5% break the 100MM mark.”3 Drive Sales & Profit Reduce Market Costs of Failed Products 1. New Product Forecasting 2006. M. Singh. MIT 2. Doing it Right: Winning with New Products. R. G. Cooper. Product Management Institute 2006. 3. Journal of Business Forecasting C. L. Jain, Editor. Winter 2009-2010.
  6. 6. Forecasting Impacts DecisionsWeather Forecasts Product Forecastslet us decide: let us decide: Cover/Clothing  Product Launch Time/Resources  Sales Support Emergency  See Notes Planning Event Planning
  7. 7. Forecasting NPD LimitationsWeather Forecasts Product ForecastsAre limited: Are limited: Short term Accuracy  High failure rate Significant data collection  Almost no accuracy Many data points  Data collection is sparse, erratic, and not necessarily sales drivers Change Impact  Incomplete/Unknown data points New patterns emerge  Product Change Impact Long term Impacts  Environment Change Impact, game theory, competitive pressuresForecasting is difficult!  Long term Impacts are strategic only
  8. 8. Metrics for Product Managers Qualitative Metrics • Empirical Data • Subjective DataQuantitative Metrics • e.g. Sales • Delphi • Unique Visitors • Sales Force • Subjective Data Composite • Market • Focus Groups Research • Pattern Data • Surveys • Pattern Recognition • Look-Alikes • Scenario Analysis
  9. 9. Metrics for Business Business Metrics Increase Decrease Revenues Expenses Product Metrics Product metrics must impact a business metric Product metrics need to be translated into a P&L statement Example: Unique Visitors X Est. Avg Revenue per Visitor = Revenue
  10. 10. Basic Meteorological Forecasting Key Weather Forecasting Techniques: Persistence  Today = Tommorrow Trends – Nowcasting  Extrapolation of current variables Climatology  Historical Extrapolation Analog Patterns  Looks like June 6th, 1874 so…, Scenarios, Looks-Like Numerical Weather Predictions  Computationally heavy, multi-variable predictive algorithms – many variations
  11. 11. Methods & TechniquesThree broad sets capture dozensof methods Mkt Subjective QuantitativeResearch 57% 44% 39% 30% 19% 14% 15% Top methods used are shown by percentage Mkt Executive Sales Force Scenario Looks-Like Trend Line MovingResearch Jury Composite Analysis Analysis Analysis Average1. Managing the Mysterious: How to Forecast New Products. Logistics Summit & Expo, Mexico 2010. Kenneth Kahn2. New Product Forecasting 2006. M. Singh. MIT
  12. 12. Some things to keep in mind to forecast• Timeframe• Assumptions• Units of Measure – atomic• Project Timeline and Milestones – including failure to meet impacts• Ongoing, Cost Structure Estimations (for P&L Pro-Forma development)• Risks & Mitigation• Estimation technique for revenue or cost savings• Revenue Derivation algorithm• Validation & Assumptions Check
  13. 13. Workshop Preparation…• TASK 1: Break out into groups of 2-5 people each and introduce yourselves.
  14. 14. THE FORECAST CASEWORKSHOPWeatherCommerce.com is a clicks-only online business that sellsThermometers, Barometers, Hygrometers, and Weather stations. The sitehas recently launched a new ecommerce sales engine to sell a new line ofproduct – the Baltimore Weather Gauge. We need to forecast productperformance post launch for 12 months.• TASK 2: Each team take 5 minutes and create a list of 3-5 Key Product Metrics to measure new launch success for the Baltimore Weather GaugeEXAMPLES:• Monthly Sales (Units Sold) for 12 Months• Monthly Sales ($) for 12 months
  15. 15. THE FORECAST WORKSHOP• TASK 3: Each team takes 5 minutes to list 3-5 Key Resources and Key Deliverables that they would reach out to develop their forecast.EXAMPLES:• Marketing - Customer Market Survey, Realistic Price Points, Existing Customer Interest• Ecommerce Sales Operations – Site Traffic and Conversion Rates for similar products.
  16. 16. THE FORECAST WORKSHOP• TASK 4: Each team takes 5 minutes to list one method they would rely on to forecast – and a quick justification of why they would choose it.• Note: There are no right or wrong answers. Many companies use up to 3 methods at the same time for validation and cross-check.EXAMPLE:• Online Market Surveys –With many existing customers through an ecommerce platform, we can quickly gauge product sentiment.YOUR ORGANIZATION• TASK 5: What techniques would you use for your company’s products?
  17. 17. THANK YOU! Ananda S. Chakravarty @achakravartyhttp://www.linkedin.com/in/anandachakravarty

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