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10/05/2007 STOREP 2007European Summer School, Italy
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Social Forecasting; Tool for Business Planning for Business Process Outsourcing Industry
Presentation byProf.K.Prabhakar,Director, KSR College of Technology,Tiruchengode-637209
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Premise for Social forecasting In business forecasting, we used technological and
economic forecasting to depict the future scenario or picture of future to design strategies to meet future opportunities and challenges. However, many organizations are experiencing residual error in forecasting which is too large to explain or caused by factors other than economic and technological.
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Argument Crime Forecasting 1995 James Allen Research on Crime rate in USA
indicated based on past trends that there will be at least fifteen percent increase in crime rate in optimistic scenario and thirty percent in pessimistic scenario.
Everyone started planning for the catastrophe. Journal Reference: The Fall and fall of Crime: Steven D.Levitt,
“Understanding Why Crime Rate in the 1990’s: Four Factors that Explain the Decline and
Six That Do Not”. Journal of Economic Perspectives 18, no.1 (2004). Pp.163-90
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What happened and the
research explanation; The teen age murder rate has decreased by fifty
percent. The research explanation was, 1)Growing economy providing better job opportunities
2)Gun control initiatives and innovative policing strategies.
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Reality
However, the reason for the fall of crime is attributed to an important event that has happened twenty years back. Norma Mc Corvey who was poor, uneducated and unskilled, drug using twenty one year old woman. She has given up two children for adoption and found herself to be pregnant again. In Texas in United States of America, abortion was illegal. She filed a class action lawsuit to seek legalization of abortion. United States Supreme Court on January, 22, 1973, ruled in her favor. Our question is how this is related to crime rate after two decades. It has been established by large number of research reports that children born in adverse family and economic environment is more likely to turn to crime. The reduction in crime rate is attributed to the unborn children to the millions of poor mothers who adopted abortion mode. More than the gun control, innovative policing techniques or growing economy has really produced the expected result of decline in the crime rate but the pool of unborn likely children who are likely to take up crime has come down.
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Prediction VS Forecasting Events are the “intersect” of social vectors (interests,
forces, pressures and the like), while one can to some extent assess the strength of these vectors individually one would need a social physics to predict exact cross points where decisions and forces combine not only to make up the “event” but more importantly its “outcome”. Prediction therefore is a function largely of the detailed inside knowledge and judgment that come from long involvement with the situation.
Forecasting is possible where there is “regularities” and “recurrences of phenomena" though rare or where there are persisting trends whose direction if not exact trajectory can be plotted with statistical data.
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Events and Trends “Event” is used to describe something which either
does or does not happen. The great depression in 1929 in United States of America is an event. We may foresee their occurrence with some probability rather than forecast the dates at which that would happen.
The use of the word ‘trend’ implies “social phenomena evolving over a period of time”. If we identify a trend than we can identify the pattern of its evolution and we can take a view regarding future. Therefore, the probability of occurring of any event at any point of time may be less but a cumulative probability is likely to increase. On the other hand, the trend evolves over a time.
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Social Trends The centrality of theoretical knowledge The creation of new intellectual technology The spread of a knowledge class The change from goods to services A change in occupational characteristics The changing role of women Science as imago Demographic changes Role of organization
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Technological Forecasting
Technological forecasting “deals with rates of change or permutation and combinations of factors within classes of “events”.
Just as one cannot predict events, one cannot predict specific inventions, however, one can forecast necessary next steps of succession of changes with in a closed system. Let us examine vacuum tubes-Transistors-
Integrated circuits micro processors evolution.
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The metaphor from Electronics Theoretically one can specify
the kinds of materials, New tensile strengths or lightness or the processes (miniaturization) necessary to achieve next level of speed, capacity, then one looks for these materials and processes. However, is matter of economics forecasting-the cost of search, the assessment of possible gains, the amounts invested in existing technologies, the scope of markets for new products.
Transistors
Integrated Circuits
Vacuum Tubes
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Three kinds of Economic forecasting Simple Market survey based on income data, age
distribution, household information and anticipated needs, which firms use for anticipating consumer demand, the amount of inventory to carry and the acceptance of new products.
Creation of time series of macro variables such as indexes such as agricultural productivity, rate of unemployment and different parameters and serve us as indicators of business activity and are combined to make forecast about the state of the economy.
Econometric models define the actual interaction of crucial variables in the system, seeks to simulate the reality of economic system as a whole.
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Technological and Economic Forecasting limitations
In business forecasting, we used technological and economic forecasting to depict the future scenario or picture of future to design strategies to meet future opportunities and challenges. However, many organizations are experiencing residual error in forecasting which is too large to explain or caused by factors other than economic and technological.
The social forecasting may not guarantee that correct decisions will be taken. Nor will it ensure that forecasts will be obtained from the emerging trends. It provides a better understanding of the forces shaping the environment. It should provide confidence to manager that his decisions reflect assessment of issues. In social forecasting we include all those environmental factors that are not currently embraced by economic or technological forecasting. Primarily it involves individual as customer, supplier, manager or employee. It concerns people in-groups both inside as well as outside organizations. It further unfolds to government, society in general and to transnational organizations such as European Union.
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Shifts in the conditions of Human Society If we examine history we find a series of significant
shifts in the conditions of human society. The Renaissance, the Agricultural Revolution, Industrial Revolution culminating to present knowledge revolution. The age of communications and knowledge has already begun with the advent of internet and convergence of various technologies. However, web 2.0 tools and semantic web brought reverse convergence which can be called as “unconvergence”, in the sense anyone who is interested in giving expression to his or her thoughts with minimum training could be a part of knowledge revolution. The phenomenon of www.youtube.com and models such as Wikipedia are most successful where non-profit motive and volitional trait of humans enabled by technology to produce “content", that is shared by all.
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Where we are moving and relevance of discussion to managers and strategic
planning? We are moving from “age of reason” to “age of
possibility”. The five hundred years of age of reason has disappeared and we are moving into age of possibility. The age of possibility or post industrial society require different kind of approach to forecasting.
The forecasting techniques are developed by economists more specifically econometricians and technologists. However, the output has to be used by managers who are working in the real time environment who has information on different trends that cannot be incorporated in to the economic and technological forecasting.
Active involvement of sociologists and business organizations are needed to further the objectives of forecasting supplementing the economic and technological forecasts with social forecasts.
Disadvantage of social forecasting is for many phenomenon of interest, these are no clearly defined measures. Though objectivity is stressed, subjectively is inevitable.
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Elements of Social Forecasting
What to forecast? . Our views of the society in which we are living, the way it has developed and it is likely path in future is affected by personal experience and individual values.
Which phenomenon has to be selected for study or what factors to be considered? scanning of the Psycho-socio-political environment generally leads to large number of trends and possible future events which might be considered within the forecasting exercise.
Measurement . Let us consider the example of ‘attitude towards leisure for work force’. These particular phenomena can be understood but how it is measured? We may consider some surrogate measures such as number of days spent by families for vacation or increased number of people at different pilgrimage centres. The precision may not be available in social forecasting, however, the impact of event or trend can be incorporated into the forecasting process.
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Elements of Social Forecasting
A time-scale The association of an event or attainment of a quantified level for a trend, (which we generally) is called call it as tipping point or point of inflexion with a time scale, is an essential feature of forecast. A time scale is necessary for taking decisions based on informed view of future
A probabilistic Assessment Decision making under uncertainty is one of the major limitations of social forecaster. The probability will vary with the forecaster confidence in selection of indicators.
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Types of Forecasts
Information forecasts; are those whose purpose is to forewarn and to help us to mould attitudes about future. They have wider margins and errors compared to other forecasts and they are not specified. For example, the discussion on nanotechnology is information on forecast.
Decision forecasts; are designed for a particular purpose and for a particular decision and the error of assumption has to be clearly stated. Social forecasting as we have used tends to be concerned more with information rather than decision forecasting. There are four general rules evolved to help to curtail the residual error in social forecasting and we will discuss them.
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How to organize Social Indicators Database-Glimpse Growth or Decline - Is the total population growing or
declining? How is the age structure of the population likely to develop? What factors (e.g. changes in fertility, the birth rate, mortality) do we need to examine in order to predict change?
Economic Activity - What is the size of the employed population? What is the unemployment rate, distinguishing between long and short – term unemployment? How is the employed population distributed by age and marital status? How is it distributed by manufacturing industry, services, the professions, agriculture etc.?
Housing - What are the level of home ownership and the various forms of home tenancy? What is the balance between demand and supply of property and of finance for buying and renting?
Ownership of ‘key’ Durables - Ownership of durables which may fundamentally change the pattern of life, such as a car and a telephone.
Patterns of Expenditure - What are the broad patterns of expenditure by the population as a whole and by the various ages and socio-economic group housing and associated expenditure, food, clothing, leisure activities and so on?
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Models
Economic Model Demographic Model Technological Model Psychological Model Sociological Model
Political Model
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Syntropic Model
Technological Model
Demographic Model
EconomicModel
Psychological Model
Sociological Model
Political Model
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Criteria for an effective forecast The forecasting should not be technique oriented. Good social forecasting should have a fine
understanding of particular situation for which forecasting has been done.
Forecast should work from simplicity to sophistication. Sophistication by way of mathematics is introduced only as and when it is necessary to reduce the margin of error.
The forecast should have a funnel approach from general to specific and from macro to micro
Forecast if they are worked from long term to short term, they are likely to be more effective.
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Conclusion we can conclude that social forecasting provides a
framework of analysis for business planners especially relating to strategic planning.
It has different methodology of approach compared to that of economic and technological forecasting.
It captures dynamic nature of business. Thus social forecasting reflects present and future
likely events and can be used for supplementing economic and technological forecasting.
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Conclusion… Though, we observe that blind spots are pervasive in
social forecasting they can be bridged with the help of information revolution. Social forecasting combines various disciplines and provides explanation for different types of phenomenon that is happening around us. We could clearly see the move from individual to societal dependence and in turn from societal dependence to individualism. Therefore, we can conclude the social forecasting is a must for business planners to plan their resource allocation and achieve mission and vision of their organizations
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References 1. The Fall and fall of Crime: Steven D.Levitt, “Understanding Why Crime Rate in the
1990’s: Four Factors that Explain the Decline and Six That Do Not”. Journal of Economic Perspectives 18, no.1 (2004). Pp.163-90
2. Twiss Brian.C (ed.) ‘Social Forecasting for Company Planning’ by MacMillan Press Ltd. (1982).
3. There is a very little ‘hard data’ on how many do, in fact, do so. A useful survey of current practice is contained in D.J.Romano and J.C.Higgins, The Role of Social Forecasting in Business Planning (Management Centre, University of Bradford, 1978).
4.Social Trends, No.6 (1975), ‘Subjective social indicators’, by Mark Abrams; and No.7 (1976), Subjective measures of the quality of life in Britain, by John Hall. Survey Unit, Social Science Research Council.
5. Meadows, D, H.and Meadows, D.L., The limits to growth (Potomac Associates, 1972). 6. Coyle, R.G.Management Systems Dynamics (Wiley, 1977) 7. Kahn, H.World Economic Development: Projections from 1978 to the year 2000
(Boulder, Colorado: Westview Press, 1978). 8. Hayek, F.A. Individualism and Economic Order (London: Routledge & Kegan Paul,
1949). 9. Mitchell, A Life ways and Life Styles (1973) and Elgin, D., Voluntary Simplicity (1976) Social Change: Implications of Trends in Values and Lifestyles 91979) Rao.S.L. and Natarajan.I, ‘Indian Market Demographics’, Global Business Press, 1996.
