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Flash1: Report from Analytics2011 in Orlando

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By Topics | Advanced Analytics

We'll interrupt the series on Why Forecasts are Wrong, with a report from the inaugural Analytics 2011 conference, held last week in Orlando.

A2011 drew over 1025 attendees (from 44 states and over 25 counties).  The Analytics conference series features a wide range of topics (including forecasting, optimization, data mining, text analytics, and high-performance analytics) and industries (such as manufacturing and consumer products, banking and financial services, insurance, utilities, and hospitality).  I wanted to report on a few of the 50 sessions.

Tom Montgomery of Ford, on Prediction Markets

You can think of a "prediction market" as a virtual stock market to predict future events. Tom took us through the background theory behind PMs -- using the "wisdom of crowds" to aggregate the information held by many people to produce forecasts that are often better than experts, surveys, or analytical approaches.  Many companies are now experimenting with this approach, and Tom shared some of the learnings from Ford Motor Company, where more than 1300 employee/traders have participated.

Prediction markets are not for large-scale forecasting problems, where you need forecasts for hundreds or thousands of items, and where good time-series forecasting software is available and appropriate.  It would be unnecessary and impracticle to run a PM for every product in your portfolio.  However, PMs can yield valuable results for new product sales, timing of projects or product releases, or feature/function/design questions.

In addition to the closing value of the questions that are posed for trading, Tom pointed out the value in the comments provided by traders. For example, an executive may push a favorite feature to be included in the next product release, but a prediction market can provide feedback on what a broader range of people really think about the feature. Preserving the anonymity of traders also allows them to voice their true opinion -- untainted by fear of reprisal.  (Wouldn't you like a true estimate of when that project will finish, or when that new product will release?)

 

 

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About Author

Mike Gilliland

Product Marketing Manager

Michael Gilliland is a longtime business forecasting practitioner and formerly a Product Marketing Manager for SAS Forecasting. He is on the Board of Directors of the International Institute of Forecasters, and is Associate Editor of their practitioner journal Foresight: The International Journal of Applied Forecasting. Mike is author of The Business Forecasting Deal (Wiley, 2010) and former editor of the free e-book Forecasting with SAS: Special Collection (SAS Press, 2020). He is principal editor of Business Forecasting: Practical Problems and Solutions (Wiley, 2015) and Business Forecasting: The Emerging Role of Artificial Intelligence and Machine Learning (Wiley, 2021). In 2017 Mike received the Institute of Business Forecasting's Lifetime Achievement Award. In 2021 his paper "FVA: A Reality Check on Forecasting Practices" was inducted into the Foresight Hall of Fame. Mike initiated The Business Forecasting Deal blog in 2009 to help expose the seamy underbelly of forecasting practice, and to provide practical solutions to its most vexing problems.

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