Manager’s Guide to Forecasting
Manager’s Guide to Forecasting
by David M. Georgoff and Robert G. Murdick
Harvard Business Review
Reprint 86104
J A N U A RY– F E B R U A RY 1 9 8 6
HBR
Manager’s Guide to Forecasting
David M. Georgoff and Robert G. Murdick
E
arly in 1984, the Houston-based COMPAQ Computer Corporation, manufacturer of IBMcompatible microcomputers, faced a decision that would profoundly affect its future. Recognizing that IBM would soon introduce its version of the portable computer and threaten COMPAQ’s dominance in this profitable market, the company had two options. It could elect to specialize in this product line and continue to market its highly regarded portables aggressively, or it could expand market offerings to include desktop microcomputers. The latter move would force the year-old company to confront IBM on its home ground. Moreover, COMPAQ would have to make a substantial investment in product development and working capital and expand its organization and manufacturing capacity. COMPAQ’s management faced several important unknowns, including the potential market’s size, structure, and competitive intensity. Management recognized that the company’s vitality might seriously erode if it did not expand its product line. If the expansion were successful, COMPAQ might enjoy economies of scale that could help ensure its survival in a dynamic and very competitive industry. If COMPAQ’s market assumptions were incorrect, however, its future might be bleak. Many of today’s managers face similar new market realities and uncertainties. Continually confronted with issues critical to their companies’ competitive future, they must deal with novel and rapidly changing environments. In short, they must judge a broad range of dissimilar influences.
For more than a decade, new forecasting techniques have theoretically helped managers evaluate these varied factors. Much of the promise of these techniques has been unrealized, however, even as a quickening
by David M. Georgoff and Robert G. Murdick
Harvard Business Review
Reprint 86104
J A N U A RY– F E B R U A RY 1 9 8 6
HBR
Manager’s Guide to Forecasting
David M. Georgoff and Robert G. Murdick
E
arly in 1984, the Houston-based COMPAQ Computer Corporation, manufacturer of IBMcompatible microcomputers, faced a decision that would profoundly affect its future. Recognizing that IBM would soon introduce its version of the portable computer and threaten COMPAQ’s dominance in this profitable market, the company had two options. It could elect to specialize in this product line and continue to market its highly regarded portables aggressively, or it could expand market offerings to include desktop microcomputers. The latter move would force the year-old company to confront IBM on its home ground. Moreover, COMPAQ would have to make a substantial investment in product development and working capital and expand its organization and manufacturing capacity. COMPAQ’s management faced several important unknowns, including the potential market’s size, structure, and competitive intensity. Management recognized that the company’s vitality might seriously erode if it did not expand its product line. If the expansion were successful, COMPAQ might enjoy economies of scale that could help ensure its survival in a dynamic and very competitive industry. If COMPAQ’s market assumptions were incorrect, however, its future might be bleak. Many of today’s managers face similar new market realities and uncertainties. Continually confronted with issues critical to their companies’ competitive future, they must deal with novel and rapidly changing environments. In short, they must judge a broad range of dissimilar influences.
For more than a decade, new forecasting techniques have theoretically helped managers evaluate these varied factors. Much of the promise of these techniques has been unrealized, however, even as a quickening