Judgmental Forecasting: Delphi

Method; Scenario Analysis

Readings
Judgmental Forecasting: Delphi Method: Read
Pages 436-438, Business Forecasting, 5th ed by
Wilson & Keating, Tata McGraw-Hill
The Article on Inflation Could Be A Dampener,
Investors Guide, Economic Times, Kolkata Edition,
dated 7 Sep 2009;

Judgmental Forecasting: Scenario Analysis:

Case Zenith Marketing Research for High Definition
Television (9-591-025 (HBS)

Three Systems of Techniques for

Business Forecasting
First forecasting model is cause-and-effect.
This model assumes a cause determines an
outcome.
Cause may be an investment in information
technology, and the effect is sales.
This model requires historical data not only of
effect (say, sales), but also the cause (say,
information technology expenditure).

Three Systems of Techniques for

Business Forecasting
Second is the time-series model
Data are projected forward based on an
established method like -- moving average, simple
average, exponential smoothing, decomposition,
and Box-Jenkins.
This model assumes data patterns from the
recent past will remain stable in future.

Three Systems of Techniques for

Business Forecasting
Third is the judgmental model.
To produce a forecast without useful historical
data (while projecting sales for a brand new
product or when market conditions change
making past data obsolete).
In absence of historical data, alternative data
collected from experts in the field (Delphi
method), prospective customers (Conjoint
Analysis), trade groups, business partners, or
other relevant source of information.
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Delphi Method
(i) Pages 436-438, Business Forecasting, 5th
ed by Wilson & Keating, Tata McGraw-Hill
(ii) The Article on Inflation Could Be A
Dampener, Investors Guide, Economic
Times, Kolkata Edition, dated 7 Sep 2009;
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Delphi Method
When experts gather in a single meeting
location and asked about the future, group
dynamics may distort the process and
resulting consensus may not be carefully
thought out by all participants
Delphi method tries to remove the group
dynamic aspect from deliberations of
forecasters
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First Round
Experts reply in writing to questions posed
by investigating team
Investigating team summarizes comments
of participants and mails them back.
Participants read what others comments/
thoughts and either defends their original
views of modify them

Second Round, Third

The process of First Round continues through
two or three rounds.
Investigating Team may (or may not) invite the
participants to a meeting to share their views
and debate.
At the conclusion of the process the
investigating team will have good insight into the
future.

Key Features of Delphi Method

Anonymity
Iteration
Controlled Feedback
Aggregation of Group Response

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Anonymity & Iteration

When experts express their opinion privately,
they are free from group social pressures
With iteration of questionnaire over a few
rounds, participating experts have opportunity to
change their opinions without loss of face in the
eyes of remaining anonymous participating
experts

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Controlled Feedback &

Aggregation of Group Response
After each iteration of the questionnaire,
opinions of each expert are summarized and
each expert informed about the positions of
other anonymous experts
Feedback contains opinions/comments of all
group members and not just the most vocal.
After the final round, the group judgment is
summarized (using average, quartile etc) so that
each judgment receives equal weight.

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