Looking back, with the superpower of hindsight, we now know that the majority of models used to predict and manage the spread and impact of Covid-19 have been proven to be wrong. It’s clear that these models missed the target, but does that matter?
If we see the purpose of modelling as providing accurate answers to predicting the future, we are on mission impossible. However, we must consider how these models allowed governing parties, organisations and individuals to participate in decision making processes that prepared them for an uncertain future. Modelling is critical in optimising decision making with a deeper understanding of factors driving success. Without these models, perhaps we wouldn’t have been able to make the right decisions and would have found ourselves facing a worse reality than the one we have now.
Quantitative modelling produces models that are designed to provide an idea of what could happen, not a representation of what will happen, and to allow participants in the process to assess what it would take to survive and thrive in these different projected scenarios. This type of modelling mixes hard, factual numbers with qualitative inputs to create a range of realistic outcomes, given sets of assumptions, and identify potential strategies to calculate these possible scenarios. It plays an important role in informing policymakers.
The foundation of a good model is a comprehensive set of assumptions, without which the model would fall flat. A well-designed model is based on a set of adjustable assumptions that are as based on empirical findings as possible. When developing the underlying assumptions, you need to understand the impacts of different assumptions and work with the client in order to make the assumption sheet as robust as possible. This provides the biggest learning and insight – helping the client to optimise decision making and strategy selection. Just as important as the assumptions, the raw data used in the model needs to be reliable and recent. Data regarding the spread of Covid-19 is questionable at best given how hard it is to trace the spread of the virus and thus models based on this data will also be questionable at best.
When developing models using a combination of quantitative inputs, market observations and qualitative research at Lighthouse Strategic Leadership to guide our clients, we always tell them that that these models are not accurate predictors of future outcomes, but we now have an idea of what could happen. Models are not “all-knowing” frameworks that can accurately predict the future and any model claiming to do so is either lying or is using some magical clairvoyance baloney. Models are critical tools for decision-making in a VUCA environment and to help leaders navigate through uncertainty. In our recent engagements with a soft drinks client and a premium spirits client, both looking to enter new markets, we involved extensive modelling to enable decision making. The quantitative models we developed enabled the clients to understand the point of market entry that would maximise growth, minimise competitive impacts and optimise their return on investment.
- Patrick Hughes
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