Understanding Forecasting

Simon Tucker

Chief Planning Officer

This post was inspired by a tweet I received after posting a recent Anaplan article last week, (SFDC vs Anaplan) outlining the differences between how Anaplan and salesforce.com perform sales forecasting. I’d like to genuinely thank that consultant, (who shall remain nameless), for inspiring me to outline how mis-understood forecasting sales and financial information is, especially in the CRM community and around how people think salesforce.com does it.

His tweet was:

Wow nice misinformation ever heard of analytical snapshots? #sfdc

Well Mr. X, sit back and let me help you understand what forecasting is really all about and why Analytical snapshots aren’t the answer.

First, let’s level-set. Analytical snap-shots from salesforce.com are great. Complex to set up, (here’s just a few of the discussions I found about them on forums, (Setting up Analytical snapshots), for the average sales manager, but great. They are also ‘static’ and fall firmly in the Business Intelligence category. So this is not to diminish their importance, (although I haven’t met anyone who uses them yet), but let’s not compare them to planning and forecasting in a multi-dimensional, in-memory environment. They are chalk and cheese.

Business intelligence is not and has never been a form of forecasting. It can be used in conjunction with planning and forecasting, but does not replace them. No, it’s an analysis, snap-shot in time or query of a body of data to give an answer to a question. It is past or current history. This should not be confused with forecasting or planning which is a data set, usually multidimensional in nature, that one interacts with in order to project a desired result, or at least to predict some future result or outcome. It’s the perfect blend of past, present and future. Something you can read/write to, not just read. It is forward looking in nature.

Last time I checked, sales leaders constantly want to know how the quarter and year will turn out in the future. That means they need to look at what the situation is now and predict what will happen in the future. This means they have to interact [write] with the data, i.e. write in their own predictions, to be able to see what the quarter/year will turn out like.

For example, if my Q2 is looking rather sick, I need to be able to look at deals that are currently forecasted in Q3 and see if any could come in early. Then, I need to change the close date, or sales stage, or discount rate or a combination of those to see what the quarter will now look like. And I need to do that real time. And I may have many iterations before I get it right.

I wonder if you can do that with ‘Analytical Snap Shots’? I don’t believe so. You’d have to go back to salesforce.com and change the opportunities you think will come in, one by one, run the report again and run the snap shot again. (See snap-shots run constraints in the aforementioned forums reference link). Then Analytical Snap Shots will tell you how the business is doing and how reps are performing, right? No, don’t believe it will do that either.

So, in summary, I am sure Analytical Snap-shots suit a purpose. What Anaplan does however is very different. Anaplan takes the critical information you have on opportunities and transforms it into an indispensable sales management tool that sales leaders can use to control every aspect of the sales forecast. Add to that a sophisticated cloud modeling engine that allows you to extend far beyond just pipeline and opportunity management and you have solution that far out-paces simple analytics.

So, Mr. X, it’s not misinformation you should be worried about, it’s misunderstanding. One of which I hope I helped clarify.