This is completely speculation on my part but I was wondering if Larry Ellison has any intention of speaking at Dreamforce the same way that Marc Benioff spoke at Oracle Open World.  Might be fun but keep in mind that this speculation.  If you have any information I would love to hear it.

I just finished reading “The Black Swan”, a book that has been on my list since it came out in 2007 and I highly recommend it, though it is not easy reading.  There is a great deal of set up before you get to the whole point of the book in the last 50 pages.

“The Black Swan” is about uncertainty in the real world and the subtitle explains it all: “The Impact of the Highly Improbable” and it is something that I can see affecting CRM and its users on many levels.  Highly improbable things happen frequently and they have deep and unpredictable impacts on our world.

Uncertainty is related to risk and randomness, and while we lay people might lump all of them into the same definition, they are different.  My understanding of the three is that risk is something to which you can attach a probability like a coin toss landing heads (50/50 or .5).  Randomness is less constrained than risk if only because it is too complex to compute — if we flip one hundred coins we might reasonably expect half of them to land heads but we can’t say which ones.  Uncertainty is a condition or event that will surprise us, one that is not on the radar.  A blue bird, sometimes called an unknown unknown.

The blue bird interests me most and is an important factor for CRM.  I have been trying to get my head around some data that I collected earlier this year about sales and forecasting that seems to relate to this.  As you might recall, the data showed that the vast majority of sales forecasts (better than 90% of them) are worthless.  They are so inaccurate that they can make a coin toss look like the model of precision.

My question: Is this the best we can expect or are there things we might do to improve our forecasts by reducing uncertainty?

The data also show that most sales managers engage in a process of downloading forecasts to spreadsheets in which they massage the data with the intention of improving it.  If the dismal forecasting results are the product of an improvement process, it can only suggest that the starting point data is no better (remember GIGO).

All this evidence notwithstanding companies continue to make money more often than not and sales people manage to sell things.  And according to Jim Dickey and Barry Trailer nearly sixty percent of them make quota.  How can this be?  How can we be so profoundly bad at sales forecasting and still manage to sell things?

First, though there is a great deal of uncertainty in sales forecasting, uncertainty is a two-way street.  Deals come in that were not forecasted or perhaps not even known about — so-called blue birds — and some deals that appear to be a lock simply evaporate.  Anyone who has tried to sell — and forecast — knows this.

Customers do rational things for emotional reasons, the saying goes and the irony to me is that at precisely the moment when we need the customer to act emotionally — to buy a product — we expect that customer to act rationally.  If you doubt this then how can you explain attaching a probability to an otherwise emotional decision.  It’s not wise to do that so if you are going to forecast using a probability of close, then you have to assume a set of rational expectations.  In other words, if we have been through a sales process with the customer — understood the business problem demonstrated how our solution solves the problem and asked for the order — we expect the logical conclusion, a purchase order.

But while the situation might look certain or at least logical to us, we have little or no visibility into the similar process being conducted by our competitors and there lies a great source of uncertainty.

What can be done?

As mentioned above with GIGO, we need to acknowledge that the way we are forecasting is not working; in other words, stop digging the hole we have gotten into.  There’s too much uncertainty in a forecast to believe the numbers we generate.

But stopping the excavation will not solve the problem; it will simply prevent the hole from getting deeper.  As sales people we can try to eliminate some of the uncertainty in our deals but by definition, we can’t do that.  We don’t know what we don’t know.  Even if we know everything our competition says and does we have no visibility into whether the stock market will crater the day before we expect the P.O.  There is always something.

Nonetheless, a company’s sales usually fluctuate around a level that is near to the level of the goal — few sales teams in aggregate hit the ball out of the park and few get shut out.  Uncertainty makes sales a numbers game meaning the more irons you have in the fire the more opportunities you have and the better insulated you are against risk.  Notice I said risk and not uncertainty.  More opportunities reduce the importance of a single opportunity because there are many ways to make your number, that’s risk.  But there is nothing that will insulate your forecast from the remote (we hope) possibility of the stock market cratering or flu breaking out in your customer’s headquarters.

If sales really is a numbers game then it makes sense to have systems that can help you manage big numbers of everything — opportunities, deals you know.  More important, it is also essential that we have ways to get as many good opportunities into a pipeline as possible.

For years, we’ve had a discussion about the efficacy of SFA — is it good, is it worth the effort, isn’t it just a management tool?  Ironically, there are still companies out there that believe they are too small for SFA or that it doesn’t work.  In a few years it will be the same stories with social CRM and by then the companies that failed to adopt SFA will be completely out of business.

Truth is, we need both these days.  We need SFA to manage our large data sets and we need social CRM to help us take uncertainty out of deals.  If we never use an outbound social CRM tool such as a blog or micro-blog or networking site we would be fine as long as we had some exposure to tools that help us know what customers think in aggregate.  For me that’s where the power of social CRM is, it’s in helping us reduce uncertainty by that radical idea of asking customers what they think.

There is a difference between a customer experience and a service product and it is worth noting the distinction.  We seem to obsess about the former and almost ignore the latter and that’s too bad because I think there is money to be made in the difference.

The distinction reminds me of the big discussion that went on a few decades ago over quality.  At the time imports from around the world, but principally Japan and Europe, were cleaning our clocks because they were perceived to be of higher quality than domestic brands.

In typical American fashion we mounted a comeback strategy to bring our quality up to world standards and for a while smart business discussions were all about quality.  It reminds me of the last few years and the relentless emphasis we have placed on the customer experience.  Let me say that emphasizing anything as fundamental as this can’t be bad, in moderation, but there’s more to consider.

My interest in the customer experience was provoked by a long series of calls between my wife and our mortgage company, a typical big bank.  The problem was that the bank had failed to pay our property taxes though it was clearly their responsibility because they collect the money each month and hold it in escrow.  The problem got worse as we waded into it.  Not only did the bank not pay our tax bill but also they had inadvertently paid someone else’s with our money.

My wife had a series of calls with bank representatives who work in the call center.  Each bank agent promised to fix the problem, each tried to reassure us and each was pleasant and professional told my wife to have a nice day at the end of the call.  My wife ended each call thinking that the agents were “nice” and that the problem had been solved.  Unfortunately, there was no follow up and here I will let you imagine the rest.  After four “nice” conversations the problem is still there.

Now if this was a manufacturing problem I would say that the product is broken and that the bank has a quality problem.  The typical response when quality became an important value in manufacturing was to improve final inspections and it worked.  Certainly a lot of inferior product was kept from the customer but the manufacturer also ended up with a lot of products that needed fixing.  Clearly something else had to be done and that led to the idea of designing quality in rather than inspecting for it.

I think our focus on customer experience is a lot like focusing on quality.  Just as you can’t separate quality from the whole manufacturing process you can’t separate the customer experience from offering a high quality service product.  My wife is more tolerant than I am and left each encounter (so far) encouraged that the situation would be rectified.

Intense focus on the customer experience has left us with a hollowed out service product, at least in this case but I will extrapolate here.  It appears to me that the bank might be incenting people to be nice but also to pass the ball and not care too much if the ball falls on the ground and dribbles away.

This experience vividly shows me and I hope others that there are two parts to customer service — the customer experience for sure, but also delivering a quality service that goes well beyond being nice or professional or any other qualifier that to attribute to the people involved except one.  You still have to get the job done, and CRM needs to ensure that aspect as much as it addresses the experience.

I was at a user meeting with NetSuite in Boston earlier this week.  The company has bought two companies since going public — OpenAir and QuickArrow — both of which support the professional services market.  Companies sell things as well as services and CRM has been applied most successfully to the former.  Companies that sell services have been left to their own devices to figure out how to automate and manage sales and delivery and their situation resembles that of the thing-sellers pre-SFA.

NetSuite’s idea is an integrated solution combining ERP and services oriented planning and sales modules going by the name of SRP — services resource planning — and the idea has legs.

As you can imagine there are some significant differences between selling things and selling projects.  Most importantly, services companies have bigger issues with fixed overhead because you have to have smart people on staff if you expect to sell their time.  Economists might say that supply is inelastic or certainly less elastic for the services guys than for the companies that can throttle up or down the manufacturing process.

All this got me thinking not about the two different types of selling but about the two different styles of building a company exhibited by Salesforce.com and NetSuite.  Both companies have purchased other companies when it made sense as a way to build out their offerings.  But each company also has a multi-tenant architecture and a cloud platform, which makes it easy for third parties to build or modify applications.  Nonetheless, if I had to describe each company’s strategy I would say that NetSuite is more likely to buy than make compared to Salesforce — if you include the partners.

Salesforce appears to have decided on an approach that encourages a partner community to build native applications while NetSuite seems to encourage partners to deploy and modify its core solutions though not necessarily build wholly new ones.

Now, this is a rough approximation and it looks more black and white than it is — there is a lot of grey area in all this.  But it drives an interesting question that I believe can’t be answered, at least not now.  Which approach is better?  Should the primary vendor be the only one involved in new product development or should the platform vendor simply let a thousand flowers bloom?  Certainly the existence of the platform makes the second option possible.

Part of the answer can be found in how each vendor views itself.  Salesforce is obviously looking for a big new market to penetrate that’s bigger than CRM and it has selected application development tools for the enterprise and smaller organizations.  NetSuite might have a serviceable platform but for the time being it appears to be more interested in the market for integrated front and back office applications, which is more crowded.

I don’t have any good answers here or prognostications, just these observations.  Salesforce has always been in the business of inventing the future and while they’ve been successful they have had their stumbles along the way too.  Other companies have been content to stick to their knitting, but the future rarely keeps to a script.  There are many markets just opening up, at least in part because there is reliable and low cost software available to support them and that says good things for both companies’ chances.

The big question to ponder is whether there is enough demand for in-house development to support Salesforce’s vision.  It groups are notoriously backlogged and it is unclear to me if the backlog is a result of too much demand or inefficient tools.  For decades we have argued that it is the tools and we’ve seen generation after generation of tools that promised to fix the problem.

Tools are important but if you read “The Black Swan,” which I recommend, you might get the notion that backlogs are inherent in what we do, in part because we do such a poor job of understanding and planning for future requirements.  If so, one of the next logical acquisitions for either Salesforce or NetSuite should be a company that focuses on improving forecasting and planning methods.  Does such an animal even exist?

We are all junkies for leading economic indicators.  Whether it’s the first spring swallow or an uptick in orders for semi-conductor fabrication gear, we love to call the start of a new movement, if only because it signals the end of something more prosaic.

So it is now at what appears to be the end of a bad recession and the beginning of a new economic cycle.  The aforementioned semi-conductor sector has done its thing along with house prices and general real estate activity is picking up.

But what about the trailing indicators — those things that take their time going down when the economy hits the skids?  A notorious lagging indicator is always employment.  Companies cut jobs as a last resort in the early stages of a downturn and cautiously re-hire after the first indicators of recovery are in full bloom.

Newspapers and TV talking heads meanwhile wring their hands about a “jobless recovery” as if the economy is spring loaded and able to bounce back with the seeming alacrity and speed of a toy.  They are always surprised at employment latency and the headlines hardly vary from recovery to recovery.

I have my own economic indicator that I watch with guarded optimism at this time of a recovery and fright when the economy seems to be going south.  It is marketing spending and a corollary is the number of people I know in marketing who are out of work and having difficulty finding it.

In late 2007 I began hearing whispers of a housing bubble getting ready to burst and through early 2008 the whispers turned to shouts but marketing spending seemed to be on pace.  Later analysis showed that the recession actually began around the same time as the whispers but marketing spending was resilient.  I recall having lunch with an already out of work CMO in May 2008 and we were musing about the arc of the economy that year.

“Do you think things will pick up in the second half (of 2008)?” he asked.

“I don’t know,” I said not wanting to deflate him.  “I think we’ll see when we know about marketing spending after July first.”

My idea, which I explained to him, was that the marketing money being spent at that point was loaded into budgets that had a more or less calendar year cycle.  The real test, coming after July first, would be whether companies with June 30 year ends would be as bullish or with six months more perspective, they might pull in their horns.  The distinction is important for our industry because so many companies in the technology sector have June 30 year-ends, thus their marketing spending renews on July first.

At the time, my reading of the tea leaves advised caution because I had not seen the typical run up to a new spending year in the second quarter of 2008.  In other words, fewer companies were asking for quotations, planning programs and the like.  I was right.  The second half of 2008 was slower than the first half and a lack-luster summer gave way to a wild autumn ride on Wall Street that erased doubts about the economy’s direction as well as untold fortunes and more than a few marketing jobs in the technology sector.

The first indicators of renewal have, indeed, been spotted both economy-wide and in the tech sector.  I know of at least one out of work mid-level marketing person who got a job offer last week and several senior people now consulting so there’s that (highly unscientific, I know).  But I still have not seen a general if cautious uptick in marketing spending plans.  This would be the quarter for that to happen if companies are intent on starting the new year with any momentum.

Marketing costs money even in today’s highly automated and socialized marketing world.  There is still time to make plans for early next year even if they get delayed and the first harbingers of revival lead me to think that we are about to see the first tentative steps.  Those chip makers and house builders can’t all be wrong.

Colorado Springs is an interesting place.  Despite the name there are no “springs” it’s an arid place in a valley surrounded by the southern Rocky Mountains and Pikes Peak National Park (for sticklers Pikes really should be Pike’s but the official U.S. naming convention eliminates the apostrophe).  The springs were an invention of the railroads seeking to establish a destination for vacationers.  Good idea, it’s a nice place.

You can ride horseback through the mountains and see abandoned mines and homesteads as well as some rugged natural beauty.  Last time I was there we rode on some trails that were barely wide enough to accommodate our horses.  On one side there was forest and on the other a steep drop off.  RightNow convenes its annual user group meeting at the Broadmoor Hotel in Colorado Springs next week.  By most accounts it’s been a good year for software, especially SaaS vendors so the meeting should be upbeat.

Other commitments will keep me from attending the RightNow Summit but I look forward to hearing about their announcements.  In general there is an unmistakable move in most areas of CRM, contact centers included, to move more operations to an on-demand footing.  Whether it’s called SaaS, managed or hosted, the call center is moving to simpler surroundings — at least for the client organization, and for good reasons.

Owning and operating a call center is a big and expensive undertaking for a company.  With all phases of the operation in-house, a company has to be able to support multiple subject matter experts from hardware to applications.  The company also has the task of managing an impressive (some would say bewildering) array of gear both telephonic and computer.  The same company also has all of the headaches of recruiting, training and managing a sophisticated workforce.

So, when a vendor comes along offering to take even a portion of that big job over for a fixed price per seat, it draws a lot of attention.  In the not too distant past, the number of vendors willing to make such an offer was limited and RightNow was at the top of the heap.  The market is changing making it easier for vendors to get into the business and the fact that we are even talking about the difference between on-demand, managed and SaaS solutions is evidence of that change.

But it’s not just changing technology that is driving the market.  The core customers, you and me, are smarter and more experienced and we are beginning to draw less from our vendors’ call centers.  Since we’ve all experienced earlier generations of products we are more likely to solve simpler problems with new products ourselves.  Moreover, our recently acquired sophistication with social media makes us more adventurous when it comes to seeking out service and advice from our peers.

It was no surprise to me that RightNow acquired social networking company HiveLive to bolster its efforts in social service offerings.  I look forward to hearing what RightNow CEO Greg Gianforte has to say about his company’s direction in socialized service and support.  Should be an interesting conference.

Also on the docket, the following week Sage Software hosts its user meeting in Atlanta followed by Microsoft holding an analyst briefing in Redmond.  I wish I could make all of these events but they are simply too close together.

Sage is always surprising in part because the company’s business model — selling exclusively through the indirect channel — puts different demands on its products and services.  That has frequently meant that the company has held back on major innovations until its partners were ready to get on board.  But last year, the company announced a 2010 strategy to bring its multiple CRM products under an umbrella that will enable it to achieve greater economies of scale and better integration capabilities with its back office solutions.

Also, Sage recently announced a foray into another on-demand style solution to be delivered early next year.  Their original SageCRM.com notwithstanding, this will be something new for SalesLogix, their high end product.  This is CEO Sue Swenson’s second year at the helm and it was clear at the partner meeting in May that she’s putting her imprint on the company.  She’s tasked senior executives with ambitious plans to update key products and improve partner-facing programs.  It will be interesting to see what end user facing changes are in the offing.

Finally, Microsoft is a very important player in the front and back office applications markets today.  Their analyst meeting in the same week as the Sage user meeting should generate a few headlines and I am eager to hear more about their direction though I will not be able to be there.

All this activity makes me optimistic about next year, and if all this isn’t enough, Intel, AMD and IBM have all reported better than expected financial results for the recently finished quarter.  The semiconductor market has always been a reliable indicator of an upturn in the tech sector and I am hopeful that these results are the first signs of a general economic rebound.  But recovery means more than simply reporting better financial results especially if the increase is from a depressed level caused by recession.  It’s clearly a half full glass but that’s fine with me.

For the second day in a row Adobe made an important partnering announcement.  Yesterday the company said it had teamed with Salesforce.com to produce Adobe Flash Builder for Force.com, which will speed development of Flash-based user interfaces for Salesforce customers.  Today Adobe announced that it has concluded acquisition of Omniture, a web analytics vendor based in Orem, Utah for a whopping $1.8 billion.

It seems an obvious strategy to leverage some of Abobe’s ingredient technologies, like Flash, to make a bigger presence for itself in Cloud Computing.  The addition of web analytics is very interesting.

At this point in the evolution of CRM, if you are not already a big player the chances of starting from scratch and getting big are nugatory so the strategy has to be to buy.  But Adobe’s choice of partnering with a leading CRM company for user interface design and following up with buying analytics is intriguing.  With these two ingredient technologies, Adobe appears to be 1) betting on the future importance of understanding customer moves and motivations and 2) clearly understanding that robust simplicity must rule all software interfaces regardless of platform.

If you ask me, these are two good bets.  While there are clearly many good analytics products on the market either freestanding or embedded in business applications, my research tells me that regular users are still too confused about analytics to fully leverage them.  Ask ten people in our industry the difference between reporting and analytics and you will see what I mean.

My quibble with analytics and analytics vendors generally is that few acknowledge the effort required to capture good data.  Too often the MO is to capture large samples and get some averages, a good but not great approach that, in another setting, once left a bemused Benjamin Disraeli to list three categories of lies, “Lies, damn lies and statistics”.  There’s no substitute for understanding demographics, biases, attitudes and the like to better predict behavior.  Here’s hoping that Adobe gets it and uses Omniture to go the more rigorous route.

With Oracle’s announcement of Fusion applications, you can make a reasonable case that Salesforce.com has won an important ten-year old argument about the future of the software industry.  Notwithstanding SAP, the only significant outlier left, Oracle is the last major software company to adopt on-demand computing as a centerpiece thus awarding legitimacy and critical mass once and for all to the idea.

Amen.

But the Oracle announcement says more about business models than technology paradigms and at the model level it is not clear that Salesforce has won.  Salesforce CEO Marc Benioff’s vision of business applications delivered over the internet has won an important victory but the business model — subscription services — that makes this technology the center of the movement and exclusive delivery mechanism has not eliminated all competition.  Not yet, at any rate.

The reasons are simple enough, market reticence generated by concerns — both real and imaginary — about security or the viability of the technology model still hamper full adoption of the business model.  As a result, companies as diverse as Oracle, Microsoft and Sage have hedged their bets by offering technology that can be implemented in numerous ways including on-demand as well as by conventional deployments.  As a result vendors have effectively thrown the business model decision over the wall to the customer.

With software capable of, shall we say, polymorphous deployment, the ultimate decision about how to deploy now becomes the exclusive province of the customer as the vendors have now turned into Solomon or, in a modern interpretation, Burger King.  Customers are completely free to have it their way or ways.  They can deploy business applications in a fully SaaS configuration or in hybrid ways that are to a lesser extent owned and operated by the IT department.  As I have noted before, this is typical transition state behavior of vendors straddling two diverse paradigms.

It is no surprise that adoption of the business model lags adoption of the technology.  It has always been true that conversion from traditional software licensing to SaaS is a big step and one that for many software companies could lead to financial ruin if not handled expertly.  More to the point, there are customers who, for reasons of security, custom and preference believe that SaaS computing is not for them, at least not now.

So it is no surprise therefore that the most successful SaaS companies are those that, like Salesforce, grew organically from on-demand roots.  Other successful SaaS companies like Oracle bought their way into SaaS computing, a time honored tradition when adopting new models.

Even before Oracle’s Fusion announcement at Open World this month, the company had been a player in SaaS based CRM with Oracle CRM On-Demand due to its earlier acquisition of Siebel Systems.  But it remains to be seen if any software vendor can fully realize the benefits of SaaS — and now Cloud Computing without full emersion into the technology model.

One of the most powerful aspects of SaaS computing is not the idea of subscriptions or even Internet delivery but of a single version of the applications supporting all users.  With a single version of the code, all users have the same foundation on which to configure, modify and build new applications.  The single code set — also called multi-tenant architecture — makes it hugely unlikely that any two independent software makers would develop incompatible applications and therein lays the power of the business model.

This single idea makes it highly likely that applications built to the standards of the foundation — or platform as we like to call it — will be able to inter-operate.  Take this standard away and you have the same Babel of competing standards and proprietary designs that have been the bain of the software industry.  There is a cost associated with this lack of standardization and software customers have been paying it for decades — with rising resentment.

That cost is not measured strictly monetarily; there is opportunity cost involved too.  When everyone played by the same conventional software rules the opportunity cost problem was equivalent to a farmer experiencing bad weather.  But SaaS computing eliminates the weather variable giving a big advantage to companies under its umbrella.  So it is ironic that the decision about adoption is still left to taste.

With most of the hybrid products, the same code can be deployed in a conventional multi-tenant way or as a standalone system behind a traditional firewall.  The segregated system becomes a unique instance the moment a developer modifies the platform.  Doing that makes the idea of standards a waste of time.

But for the time being — and I am still calling it a transition state — we can expect to see a lot of deployments in which the software is SaaS ready but the deployment is decidedly twentieth century.  In the next five to ten years we will see examples of companies trying to back out of their proprietary SaaS-like systems to finally get on board with SaaS or Cloud Computing.  It will all have been avoidable and it will be good business for software consultants.

As Kurt would say, “So it goes.”

Salesforce.com and Adobe jointly announced that they have developed a product called Adobe Flash Builder for Force.com.  The product enables developers to build powerful UIs for the Force.com platform.

Flash is a good thing.  It provides an attractive and powerful UI environment that makes applications more intelligent, robust and fun to use.  Salesforce partners have used Adobe Flash for several years and many have already deployed next generation applications using Flash interfaces.  Today’s announcement confirms the partners’ decisions to use flash and gives Salesforce further evidence of the openness of its platform strategy.

The press release says in part, “This tight integration (of Adobe and Force.com) enables client-side data management and synchronization between cloud and client, simplifying the development of applications that seamlessly run online or offline across operating systems and devices, while taking full advantage of the proven scalability, security and reliability of the Force.com platform.

This may be reading too much into the announcement but one wonders about the importance of “seamlessly running online or offline across operating systems and devices.”  I am assuming this refers to the ability to operate on mobile devices but I need clarification.

I have been studying sales forecasting and forecasting tools a lot recently and I have come to the conclusion that we need better tools as well as better ways of using them.

There is a lot that can be said about forecasting, its current state and how to improve it and I don’t want to leave anything out but I will try to be brief.  First off, how we forecast says a lot about our views on economics.  Given that most of us are not economists, our views of economy are most likely derived from what we see and hear on a daily basis, much like our view of the weather.

For over thirty years our view of economics has been increasingly colored by the ascendant views of the New- or Neo-Classical school of economics.  To over simplify, it is a view that goes back to Adam Smith, of supply and demand and a belief that economics is a hard science governed by equations as rigorous as Newtonian physics — wishful thinking I’m afraid.

The most germane idea for our purposes is Say’s Law.  Say was a French economist, very much in the Classical school who said that “production creates its own demand” and from that we derive the famous supply side economics of the last thirty years.  Supply side economics corresponded nicely with another phenomenon in our world, the introduction of the CPU chip in 1968 and the cascade of new products that ensued over the coming forty years, roughly the high-tech era.

Increasing CPU power followed Gordon Moore’s famous dictum, now Moore’s Law, of increasing CPU power and decreasing cost, and it created a special circumstance that governed supply and demand for technology goods.  Moore’s Law made Say’s Law work like a charm.  A corollary to Say is that all markets clear, i.e. all supply is eventually absorbed at some price — but maybe not a premium price.

Moore’s Law ensured that a fresh supply of technology goods that superseded the earlier generation would arrive and drive demand thus ensuring Say’s Law would operate as advertised.  But if Say’s Law requires something like Moore’s Law to operate smoothly, then it must be said that Say’s Law is a special case, not an iron clad law of economics.

What’s that got to do with sales forecasting?  Quite a bit.  In the special case of selling into a market with undiminished demand, sales forecasting need not be a lot more complicated than determining where we are in the sales cycle.  If we’re ninety percent through the cycle we ask for the order and there is a reasonable chance that we will get the business — no guarantee, but a reasonable chance.

It hardly matters that our ninety percent is not really a probability derived statistically but really just a milestone in a process.  In an expanding market there are enough deals percolating that reasonably diligent effort will result in on-quota performance.  But on-quota performance is not what it once was and forecasting is in disrepute in many places.

According to Jim Dickey and Barry Trailer at CSO Insights, only about fifty-eight percent of sales people manage to make or exceed quota.  Also, according to my research less than ten percent of sales forecasts have an accuracy of ninety percent; the rest aren’t worth the time and effort it takes to compile them.

What’s happening to sales forecasting is not surprising.  With Moore’s Law slowing down and with so many formerly new market niches filled with products, we are transitioning from an era of expanding markets to one of zero-sum conditions.  In a zero-sum situation, if you are going to win business you need to do it by displacing another product.  If you are a customer in a displacement game it is always easy to do nothing and wait for a better offer and continue using an existing product that might not have all the bells and whistles you want but fills the need nevertheless.

A zero-sum economic environment has a lot of uncertainty in it.  You might use the words uncertainty and risk interchangeably but they are not the same.  Risk is something that is unknown but knowable.  If a deal forecast is at risk a sales representative — frequently at the urging of the sales manager — can ask more questions, get more data, and piece together an answer.  There are many issues in sales that are simply unknowable or mostly unknowable, for example, the details of the bid your competition makes.

When uncertainty — not just risk — enters the picture, our forecasting paradigm that relies on milestones in the sales process becomes useless.  We need better tools if we are to forecast in the face of uncertainty and those tools exist but few of us have taken them up yet.  For example, prudent managers might start with the territory planning process.  How much white space is in the territory?  What percentage of that white space is likely to churn this year?  What is the overall economic forecast?  Given our market share what is the probable share of that white space that we can capture?  Is that enough to sustain quota for one or more people?  How should we incentivize them?

Sales forecasting will always be an inexact science but we can do better than we are currently.  We could persist in basing our forecasting ideas on Say’s Law but inevitably it is a race to the bottom, to pure competition on price.  The airlines do that but none of them makes any money.