THE INTERNATIONAL JOURNAL OF APPLIED FORECASTING

THE INTERNATIONAL JOURNAL OF APPLIED FORECASTING

Communicating the Forecast:

Providing Decision Makers with Insights
by Alec Finney

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 Communicating the Forecast:
Providing Decision Makers with Insights
ALEC FINNEY
PREVIEW Forecasts are necessary, but not in themselves sufficient for effective decision
making. Here, Alec Finney describes his takeaways from asking decision makers to reveal
what’s missing from the numerical outputs they receive from forecasters. Key themes
that emerge are the need to agree on assumptions, manage risk, and sell “a story—not a
spreadsheet.” His analysis led to the development of a new sharing platform to improve
communication and decision making.
ASKING DECISION MAKERS
WHAT THEY NEED
I remember a senior VP in the pharma-
ceutical industry telling me that “fore-
casting is more than just the numbers—
much more.” He is, of course, absolutely
correct. But how so? In what ways?
Over the last three years I’ve been lis-
tening to many development/portfolio
directors in pharma to find out just what
“much more” is. I did this by taking a deep
dive into interviews with creators, users,
and approvers of forecasts in the field.
My questions were designed to cut to the
core of the forecasting experience, such
as “What are the attributes of a quality
forecast?” and “If you had a magic wand,
what aspect of forecasting would you fix?”
Several themes emerged about communi-
cating the forecast. Decision makers need
outputs that
• Measure uncertainty and manage the
associated risk;
• Make the assumptions more visible;
• Differentiate between a forecast that
describes the most likely future and
one that serves the needs of functional
planners;
• Are delivered by an “alive and kicking”
support system that keeps the numbers
and the assumptions up to date; and
Figure 1. Composition of the Storyboard
44 FORESIGHT Summer 2019
•
Use a “storyboard” approach to the
structure and evolution of the forecast.
From these discussions we needed to
develop the storyboard structure, risk man-
agement, and functional plans requested.
STORYBOARD STRUCTURE
“Make the way the forecast is commu-
nicated more like a story rather than a
spreadsheet.”
“A spreadsheet model is lost on me—tell me
the story of the forecast as it evolves.”
Purpose and Scope
• First, what is the business process
the forecast supports? Is it a decision
emerging from the result of clinical tri-
als, a budgeting/target-setting exercise,
or a collection of information to support
long-term strategy?
• What are the contributing markets, the
time horizon, granularity, and units of
measure of the forecast?
• Are the Forecast Owner and Forecast
Creator for the specific forecast in-
cluded? The Owner is accountable for
the forecast—“the buck stops here.” The
Creator is responsible for the forecast—
creating and populating the model.
Assumptions
What are the challenges and opportuni-
ties presented by the competitive, regula-
tory, and market-access environments?
What resources will be invested to sup-
port the launch of a new product and its
subsequent growth? What is the assumed
size of the potential market, and what
market share will our asset achieve? What
future events will significantly impact
product performance?
A Forecast Evolution document should be
prepared to describe the ways in which
the drug classes and associated brands, Key Points
including generics, evolve during the
forecast timeline. ■ Decision makers need more than just numbers
Changes in assumptions since their last from forecasters—this contextual information is
submission—and their impact on forecast identified through a “deep dive” process.
values—must be documented. This pro-
vides a coherent audit trail of changes in ■ Stakeholders find it difficult to see what drives
the forecast over time, as well as context the forecasts and how it evolves over the life
provided by the change in assumptions. cycle. We have developed a storyboard structure
Model Logic to communicate the forecast in an intuitive and
“I need to see the forecast logic structure transparent way.
clearly defined—not hidden in a large, ■ Measuring uncertainty and managing risk are
complicated spreadsheet.” shown using a Monte Carlo approach, which also
Prevalence models are based on a cascade enables the development of individual functional
of patient populations, from the number plans based on the most likely future.
of possible patients through to those
who are seeking treatment, diagnosed,
and drug treated. Once this total patient
pool has been established, then the brand
market share can be modeled. Figure 2
details the steps involved. • Recommendations on how the forecast-
Insight ing organizations can present different
“Can we see the history of how good we are perspectives of asset value.
at forecasting, and if we’re getting better—
or not?” In the Insight phase, the decision mak-
The storyboard structure (scope, assump- ers are shown not only the numerical
tions, and model logic) provides the back- outputs, but also the supporting assump-
ground and context to the forecast. The tions. Information on forecast accuracy
“Insight” section provides the analytics to and other KPIs can be imported from
make comparisons. external applications.
Prevalence-based models contain Figure 2. Steps in the Forecasting Process
a vast amount of information.
Comparisons and “sense checks” Forecast Model Logic
against the supporting assump-
tions can be made at every level of
the cascade—across time, markets,
and forecasts created within each
business process. Forecasts can
be made at each level within the
organization (Global, Regional,
Country) and for specific busi-
ness processes (Budgeting, S&OP,
Portfolio Prioritization).
The results:
• Audit trails that show how the
forecasts change over time;
• Information on how the forecast
drivers differ across different
markets;

https://foresight.forecasters.org FORESIGHT 45
 RISK MANAGEMENT
“In more direct terms, all forecasts have risk
associated with them—just tell me when
I’m leaning out of the window too far.”
“Are there any other possible futures of
which I should be aware?”
Presenting a forecast model, even with
a strong link to the assumptions and a
transparent description of the model log-
ic, will not satisfy all the contextual needs
of the decision makers. We also need to
measure uncertainty and manage the as-
sociated risk. Doing so requires answers
to these three questions:
• What is the Most Likely Future (MLF)?
• How confident am I in the forecast?
• Are there other futures of which I need
to be aware?
The Most Likely Future (MLF)
This MLF forecast is based upon the
agreed assumptions across the business
as well as on evidence-based models/
algorithms. It is the 50/50 forecast right
in the middle of the range of expectations
(Finney and Joseph, 2009).
How Confident Are We
in These Forecasts?
Describing clearly and openly how much
uncertainty surrounds the forecasts
will require honesty and, very possibly,
Figure 3. MLF with 80% Confidence Limits including Two Scenarios
46 FORESIGHT Summer 2019
courage, especially if the margin for error
is wide. But it has to be done.
A good way to illustrate the uncertainty
around a forecast is to draw a band de-
noting, say, 80% of all possible outcomes
around the MLF, as shown in Figure 3.
This prediction interval can be based on
Monte Carlo simulation (MCS). Here,
we specify the amount of uncertainty
around each assumption from “the worst
nightmare” on one extreme to “the best
dream” on the other. MCS then allows us
to create an uncertainty profile covering
all assumptions behind the forecasting
model.
Other approaches to depicting uncertain-
ty are nicely presented by Paul Goodwin
(2014), including fan charts and probabil-
ity density charts.
Are There Other Futures of Which I
Need to Be Aware?
Some of these assumptions may be bi-
nary—either “on” or “off.” These should
be represented as specific scenarios.
Scenario 1—An upside. The brand is
launched into market first-in-class rather
than second.
Scenario 2—A downside. A competitor’s
new indication is approved and will hurt
our market share. The total picture is
shown in Figure 3.

In MCS, one can select a particular shape
distribution of possible outcomes, such
as a Normal distribution, which we’ll now
use as an illustration.
Developing Functional Plans
We can now ask each functional stake-
holder what operational plan they will
need to manage expectations and risk.
The responses could be as follows:
Supply Chain: I want to manage the
uncertainty in the forecast to make sure
that we meet 90% of our customer-
service levels and minimize inventory
(Manufacturing Plan). This is depicted
in Figure 4 at the right end of the distri-
bution consistent with a high outcome
(circa. 1.2Bn) with a corresponding low-
level risk.
Finance: I want to be able to set a target
within the confidence limits (high or low)
to manage both risk and stakeholder/
investor expectations (Financial Plan).
This is indicated in Figure 4 toward the
left of the distribution consistent with a
medium risk and a low level of outcome.
Marketing: I want to set targets with
full understanding of the risk involved
(Marketing Plan). This is indicated to-
wards the right of the distribution consis-
tent with a medium risk and a midrange
level of outcome.
Does this communicate the forecast in an
effective way? I believe it does.
The alternative is to create a “Consensus
Forecast”—more appropriately,
“Compromise Forecast”—where none of
the functional planning requirements are
met. Better to afford each function the
choice of how to manage expectations
and risk; at the least, their plans will be
made transparent and can be monitored
and amended when necessary.
THE SHARING PLATFORM
One common question I hear from deci-
sion makers is “Why has the forecast
changed since the last update?” Figure
5 shows the updates made in the sales
forecast of a particular pharmaceutical
product.
Figure 4. Planning End Points Chosen by Each Function
Figure
4. Planning End Points Chosen by Each Function
X
Probability
Marketing Plan
(Setting targets)
Financial Plan Manufacturing Plan
(Managing expectations) (Managing risk)
X X
0.8Bn 1Bn 1.2Bn
Figure 5. Impact of Changes in Assumptions on Peak Year Sales
THE SHARING PLATFORM
One common question I hear from decision makers is “Why has the forecast changed
since the last update?” Figure 5 shows the updates made in the sales forecast of a
particular pharmaceutical product.
Figure 5. Impact of Changes in Assumptions on Peak Year Sales
The original assumptions were made early
The original assumptions were made early in 2014. The first updates of these, made
in 2014. The first updates of these, made
later in 2014, were as follows:
later in 2014, were as follows:
a 1. Price reduction from $10 to $8 per day
1. Price reduction from $10 to $8 per day
2. Price growth reduced from 5% per an-
2. Price growth reduced from 5% per annum to 3% per annum
num to 3% per annum
3. A reduced comparative advantage in efficacy and safety
3. A reduced comparative advantage in
Impact: Peak Year Sales down from $1.0Bn to $600M
efficacy and safety
Impact: Peak Year Sales down from
The blue line in Figure 6 shows the further revisions made in 2015 and represents a
$1.0Bn to $600M
slightly more positive view of sales prospects based on assumptions of improved
compliance from a recent study, and a small increase in patient numbers from a new
The blue line in Figure 6 shows the
epidemiology study. Peak year sales now forecast at $700M.
further revisions made in 2015 and rep-
resents a slightly more positive view of
sales prospects based on assumptions of
Figure 6. Early 2015 Added
improved compliance from a recent study,
and a small increase in patient numbers
from a new epidemiology study. Peak year
sales now forecast at $700M.
https://foresight.forecasters.org FORESIGHT 47
 Figure 6. Early 2015 Added

CONCLUSION

Alec Finney first caught the forecastingCONCLUSION

A key question is how to translate fore-
bug as Forecasting and Logistics Manager casts into actionable plans. A note I re-
for a major paint company. He developed ceived recently from a portfolio director
A key question is how to translate forecasts into actionable plans. A note I received recently
replenishment algorithms and ran the reads, “Nothing is certain; whatever the
from a portfolio director reads, “Nothing is certain; whatever the forecast tells me, I will be
S&OP process before moving to what is now forecast tells me, I will be taking a risk.
AstraZeneca. His initial role was Head of
taking a risk. Just tell me what I would be leaving on the table.”
Just tell me what I would be leaving on
Forecasting at the UK affiliate, and latterly as the table.”
Head of Forecasting in Strategic Marketing.
By combining the clarity of the storyboard
He is currently ManagingBy combining the clarity of the storyboard with the power of visual risk profiles and insights,
Director of Forecast Insight, providing
businesses with a shared decision-support system. Alec holds an with the power of visual risk profiles and
we can give decision makers more than just the numbers. Much more.
honours degree in Physics from King’s College, London. insights, we can give decision makers
more than just the numbers. Much more.
alec@forecastinsight.com
REFERENCES
Finney, A. & Joseph, M. (2009). The Forecasting
Alec Finney Mantra: A Holistic Approach to Forecasting and
Planning, Foresight, Issue 12 (Winter), 5-13.

Goodwin, P. (2014). Getting Real About Uncertainty,
Alec first caught the forecasting bug as Forecasting and Logistics Manager for a major
Foresight, Issue 33 (Spring), 4-7.
paint company. He developed replenishment algorithms and ran the S&OP process
before moving to what is now AstraZeneca. His initial role was Head of Forecasting at
the UK affiliate, and latterly as Head of Forecasting in Strategic Marketing. He is
currently Managing Director of Forecast Insight, providing businesses with a shared
decision-support system. Alec holds an honours degree in Physics from King’s
College, London.

48 FORESIGHT Summer 2019