Sales Forecasting: How Algorithms Are Putting An End To Guessing

Pierre Leroux

Alan Greenspan, former head of America’s Federal Reserve, once famously confessed: “We really can’t forecast all that well, and yet we pretend that we can.” If the world’s top economists can’t get it right, then it’s hardly surprising that forecasting is a problem in business too. Forecasting is at its most challenging in sales, where month after month, sales reps churn out their revenue forecasts for management teams that have little or no faith in their accuracy. CSO Insight’s 2016 Sales Performance Optimization Study shows that the average win rate of forecast sales deals is only 45.8%. Flipping a coin would provide better odds!

The problem with sales forecasting lies in a combination of human bias in pipeline reporting and spreadsheet models that are not sufficiently sophisticated to take in all the possible factors that might be driving sales deals. Inaccurate revenue forecasts can potentially jeopardize a company’s share price, endanger its cash flow, and inflate inventory costs, so businesses are increasingly turning to a new technology—predictive analytics—for help. Predictive analytics is revolutionizing sales forecasting by replacing the limitations of human inference and bias with models based on machine-learning algorithms.

How predictive analytics improves sales forecasting

Sales forecasting with predictive analytics starts with the combining of internal customer data such as win/loss ratios, delay factors, close rates, and completeness of the sales process, with external data that indicate a customer’s propensity to buy (these data points could be as diverse as company revenue, executive changes, and social media activity). Forecasting algorithms then use machine learning to look for patterns in these large volumes of data, in ways and speeds not humanly possible. The relationships spotted in the data are then used to score each deal in the pipeline and predict its likely revenue with levels of accuracy reported to be as high as 82%.

Fresh insights, live, and in the moment…Think, decide, and act in real-time. Learn more here!

This approach differs from using business intelligence tools and spreadsheets for forecasting— These traditional approaches rely on the human brain to infer correlations between the different factors (historical data) and the outcome (sales). However, the brain does not have sufficient power to spot links between thousands of variables and nonlinear relationships.

Sales forecasting with algorithms: in practice

While some have claimed that predictive analytics will replace sales reps altogether in the forecasting process, in practice this is not the case. At a global software company, sales managers compare forecasts by sales reps with those output from algorithms and discuss variances with their reps, who then take a closer look at their pipeline and fine-tune their estimates. When analyzing actual sales scored against those forecast, opportunities that didn’t close are also examined to find new factors driving closure that are then digitized and added to the forecasting algorithm for increased accuracy.

A Swiss chemical company uses predictive analytics to enhance the accuracy of its sales forecasting by complementing experience-based decisions with model-based forecasting. Through this process of forecast validation, the company has been able to reduce inventory levels and costs while increasing product availability, delivery capabilities, and customer satisfaction.

Predictive analytics is also becoming a key tool in sales enablement by letting salespeople know how and when to communicate with prospects based on algorithms that leverage every imaginable variable that impacts a customer’s decision to buy. A leading IT networking company is using predictive analytics in this way to help account mangers determine which customers to call on and which products to promote, based on deep insights into what their customers are likely to buy.

The bigger picture

In an earlier blog, Predictive Monthly: How A Little Bit Of Wizardry Can Transform Your Bottom Line, I explained that the key benefits of predictive analytics include not just objective and accurate predictions but also automated decision-making and the uncovering of new business opportunities. It’s for these reasons that predictive analytics is being adopted not just in sales but across many lines of business, including marketing, operations, HR, and finance. With the recent exponential increase in computer processing power and the rise of Big Data, predictive analytics is seen by many organizations as an ROI decision instead of a cost, because of the incredible value it can release from existing data and infrastructure.

Now that algorithms, machine learning, and Big Data can support sales forecasting, excuses are running out for getting it wrong!

For more on predictive analytics

This blog was originally published in the D!gitalist Magazine and has been republished with permission.

Comments

Pierre Leroux

About Pierre Leroux

Pierre Leroux is the Director of Predictive Analytics Product Marketing at SAP. His areas of specialty include Data Discovery, Business Intelligence, Cloud applications, Customer Relationship Management (CRM), and ERP.

Five Goals For Small Business Owners For 2018

Aaron Solomon

Once you’ve wrapped up 2017, you should be hitting the ground running in 2018 for continued success. Here are five goals every small business owner should set for themselves in 2018.

Analyze 2017

While 2017 is over, don’t let it be forgotten. Review how your business performed and what drove revenue. Also pay attention to what didn’t work as well as you’d have liked and allocate your budgets and efforts accordingly. Learn from your successes and failures and use this information to set yourself up for success in 2018!

Increase your customer loyalty

In 2018, all of your competitors will (or should be) trying to take your customers. You should ensure that you have a plan in place for keeping them. Retailers may want to consider a loyalty points program or special promotions targeted at your existing customer base. Even if your business is not retail oriented, take the time to make sure your customers know that they are valued and that there is a benefit to staying with you.

Focus on your employees

A healthy business needs a competent, well-performing workforce. Take steps to not only retain your top performers, but attract top new talent. If you have staff that are not meeting expectations, coach them to improve performance or, if necessary, considering managing them out of your organization. Don’t let staffing hold you back!

Improve your social media marketing

Each passing year, social media marketing is more and more important for driving sales and ensuring success. If you don’t have a social media presence and marketing strategy, make it part of your goals for 2018 to get one started. If you already have one, make sure you’re taking the proper steps to improve it based on your 2017 performance.

Plan for expansion

A good mindset to have is that if you’re not growing, you’re falling behind. Your most threatening competitors will be working hard to grow their businesses, so don’t let them outpace you. Big or small, prioritize developing and executing a growth plan for 2018 to improve your market position!

For more tips on running your small business, visit the SAP Anywhere Customer Success Blog.

Comments

Aaron Solomon

About Aaron Solomon

Aaron Solomon is the head of Training and Content Development for SAP Anywhere. With a dedicated history in knowledge management and consulting, he is driven to provide quality information to customers and help them understand how best to grow their businesses. His areas of expertise include e-commerce management, data analysis, and leveraging technology to improve efficiency.

Adapting To The Digital Sales Revolution

Arif Johari

Is social selling at a tipping point?

“That magic moment when an idea, trend, or social behaviour crosses a threshold, tips, spreads like wildfire.” – Malcolm Gladwell

Social selling is impacting how sales and marketing teams collaborate, accelerate business, and engage customers. With the technology that supports social selling constantly changing, do the behaviours that make a great social seller need to change too?

The modern buyer requires a modern seller

Charlene Li, principal analyst at Altimeter, wrote in the report, The Transformation of Selling: How Digital Enables Seamless Selling: “Selling must transform because the ways customers buy have changed.”

Forrester’s Mary Shea put it this way in B2B Buyers Make The Case For Better Marketing And Sales Alignment: “Your buyers want contextual interactions with both human and digital assets across a holistic but non-linear journey. They want their experiences with salespeople to be high value or frictionless.”

Sales and marketing reps will be obsolete in two years if they do not adapt

Changing times begets a need for a change in behavior. Look at what email did for communications, the computer took away from the typewriter, CRM did for the world of customer service and sales force automation (SFA) for sales.

Sales and marketing professionals must be aligned with a common understanding of the current buyer’s needs. We must meet the buyer in their digitally connected, socially engaged, mobile-attached, and video-hungry preferences. Today’s buyer wants to talk only with professionals who can add demonstrable value.

Myth: Digital selling is the same as social selling

Incorrect. Social is a component of digital.

Digital selling is understanding how to align the mindset, skillset, and toolset to engage, connect, and grow a relationship through any digital platform—social, video, email, messaging, etc.

“Social does not take the place of a handshake, but it turns a handshake into a hug.” – Brian Fanzo

How to adapt to the digital sales revolution through a social approach

1. Update your LinkedIn profile from a resume to a resource

The more value you can bring to your audience, the more likely that they will become fans, referral partners, and clients.

The litmus test: Does your profile get your buyers excited to take your call? If the answer is yes, then your profile is working for you and your customers!

2. Recognize that Twitter and LinkedIn are like peanut butter and jelly: perfect together

If LinkedIn is your primary social media platform, don’t ignore the power of Twitter.

Add your LinkedIn URL to your Twitter profile. When you have a new targeted follower, start a conversation and invite them to connect with you on LinkedIn.

If your profile is positioned correctly, they will learn much more about you as a thought leader and you can begin to move them forward in the buyer’s journey.

3. Schedule time every single day to work on LinkedIn prospecting.

Treat that time as if you were with a client.

Don’t let your prospecting time get interrupted – it’s the number-one thing you can do to get in front of new clients.

Social selling has become such a hot topic that Coffee-Break with Game Changers is dedicating an entire series to exploring its various facets and promoting best practices for salespeople. To listen to other shows in this series, visit the SAP Radio area of the SAP News Center.

Comments

Arif Johari

About Arif Johari

He is a Communications lead, Digital Marketing generalist, and Social Selling advocate. He trains marketing and sales employees to become experts in Social Selling so that they’d leverage social media as a leads-generation tool. He is responsible for executing innovative marketing strategies to increase engagement in social media, customer community, and landing pages through content, events, and A/B testing. He is passionate in making the work processes of the marketing and sales team more efficient, so that they can generate more revenue in a shorter time.

Human Skills for the Digital Future

Dan Wellers and Kai Goerlich

Technology Evolves.
So Must We.


Technology replacing human effort is as old as the first stone axe, and so is the disruption it creates.
Thanks to deep learning and other advances in AI, machine learning is catching up to the human mind faster than expected.
How do we maintain our value in a world in which AI can perform many high-value tasks?


Uniquely Human Abilities

AI is excellent at automating routine knowledge work and generating new insights from existing data — but humans know what they don’t know.

We’re driven to explore, try new and risky things, and make a difference.
 
 
 
We deduce the existence of information we don’t yet know about.
 
 
 
We imagine radical new business models, products, and opportunities.
 
 
 
We have creativity, imagination, humor, ethics, persistence, and critical thinking.


There’s Nothing Soft About “Soft Skills”

To stay ahead of AI in an increasingly automated world, we need to start cultivating our most human abilities on a societal level. There’s nothing soft about these skills, and we can’t afford to leave them to chance.

We must revamp how and what we teach to nurture the critical skills of passion, curiosity, imagination, creativity, critical thinking, and persistence. In the era of AI, no one will be able to thrive without these abilities, and most people will need help acquiring and improving them.

Anything artificial intelligence does has to fit into a human-centered value system that takes our unique abilities into account. While we help AI get more powerful, we need to get better at being human.


Download the executive brief Human Skills for the Digital Future.


Read the full article The Human Factor in an AI Future.


Comments

Dan Wellers

About Dan Wellers

Dan Wellers is founder and leader of Digital Futures at SAP, a strategic insights and thought leadership discipline that explores how digital technologies drive exponential change in business and society.

Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Chief Futurist at SAP Innovation Center network His specialties include Competitive Intelligence, Market Intelligence, Corporate Foresight, Trends, Futuring and ideation.

Share your thoughts with Kai on Twitter @KaiGoe.heif Futu

Tags:

How Manufacturers Can Kick-Start The Internet Of Things In 2018

Tanja Rueckert

Part 1 of the “Manufacturing Value from IoT” series

IoT is one of the most dynamic and exciting markets I am involved with at SAP. The possibilities are endless, and that is perhaps where the challenges start. I’ll be sharing a series of blogs based on research into knowledge and use of IoT in manufacturing.

Most manufacturing leaders think that the IoT is the next big thing, alongside analytics, machine learning, and artificial intelligence. They see these technologies dramatically impacting their businesses and business in general over the next five years. Researchers see big things ahead as well; they forecast that IoT products and investments will total hundreds of billions – or even trillions – of dollars in coming decades.

They’re all wrong.

The IoT is THE Big Thing right now – if you know where to look.

Nearly a third (31%) of production processes and equipment and non-production processes and equipment (30%) already incorporate smart device/embedded intelligence. Similar percentages of manufacturers have a company strategy implemented or in place to apply IoT technologies to their processes (34%) or to embed IoT technologies into products (32%).

opportunities to leverage IoTSource:Catch Up with IoT Leaders,” SAP, 2017.

The best process opportunities to leverage the IoT include document management (e.g. real-time updates of process information); shipping and warehousing (e.g. tracking incoming and outgoing goods); and assembly and packaging (e.g. production monitoring). More could be done, but figuring out where and how to implement the IoT is an obstacle for many leaders. Some 44 percent of companies have trouble identifying IoT opportunities and benefits for either internal processes or IoT-enabled products.

Why so much difficulty in figuring out where to use the IoT in processes?

  • No two industries use the IoT in the same way. An energy company might leverage asset-management data to reduce costs; an e-commerce manufacturer might focus on metrics for customer fulfillment; a fabricator’s use of IoT technologies may be driven by a need to meet exacting product variances.
  • Even in the same industry, individual firms will apply and profit from the IoT in unique ways. In some plants and processes, management is intent on getting the most out of fully depreciated equipment. Unfortunately, older equipment usually lacks state-of-the-art controls and sensors. The IoT may be in place somewhere within those facilities, but it’s unlikely to touch legacy processes until new machinery arrive. 

Where could your company leverage the IoT today? Think strategically, operationally, and financially to prioritize opportunities:

  • Can senior leadership and plant management use real-time process data to improve daily decision-making and operations planning? Do they have the skills and tools (e.g., business analytics) to leverage IoT data?
  • Which troublesome processes in the plant or front office erode profits? With real-time data pushed out by the IoT, which could be improved?
  • Of the processes that could be improved, which include equipment that can – in the near-term – accommodate embedded intelligence, and then communicate with plant and enterprise networks?

Answer those questions, and you’ve got an instant list of how and where to profit from the IoT – today.

Stay tuned for more information on how IoT is developing and to learn what it takes to be a manufacturing IoT innovator. In the meantime, download the report “Catch Up with IoT Leaders.”

Comments

Tanja Rueckert

About Tanja Rueckert

Tanja Rueckert is President of the Internet of Things and Digital Supply Chain Business Unit at SAP.