Forecast – Event – Response – Reforecast

To quote PracticalForecasting.com, “Forecasts are a critical part of business planning, management, and strategy -- but they're always wrong.” I think it depends (where have I heard those words before) on your assumptions and desired or expected level of accuracy.  I was deeply saddened this week when Southern California Edison (SCE) announced that they would be permanently closing their San Onofre Units.  For those who don’t know about it, here is a link to some information about the shutdown and problem.

 

 http://ansnuclearcafe.org/2013/06/07/songsretiredecommission/

 

I had interviewed for an Engineering Fix It Now (EFIN) Supervisor position at San Onofre about a week before they initially shutdown because of the leaks in their almost new steam generators that were manufactured by Mitsubishi.  Although there will be some jobs remaining at their site for decommissioning, I was kind of surprised at the number of employees that they had there when I interviewed, about 2700.  I guess I’ve gotten used to our small Vermont Yankee staff of 600.  Of course, when they were operating at full uprated power, they were producing approximately 2150 Megawatts compared to 620 for Vermont Yankee.  Now, that carbon-free capacity is gone forever because of unnecessary regulatory uncertainty.  How many windmills or solar panels does it take to replace 2150 Megawatts of carbon free power or even the 70% of one unit’s capacity, which they planned to produce without much regulatory interference and is still greater than the output of our little VY plant?  Either we’ll find out or it will be replaced by more natural gas, which still emits carbon, or coal plants, which kill more people per megawatt hour than any other power source available. I’m guessing the later, since wind and solar require “farms” to produce any appreciable capacity.  Unfortunately, the NRC decided they needed to rethink their own previous decision to allow them to operate and it would take them more than a year to decide.  I’m not blaming SCE for their decision.  They face that certain uncertainty (our regulatory inadequacy) that requires them to make the difficult decision to abandon a product. 

 

This week’s prompts included “what is the most important thing you learned during the simulation?”  I think it’s that you have to balance how much effort you put into data gathering, the situation analysis and the marketing plan.  Outside situations, which may or may not already be happening, can change your plans for you.  I originally didn’t really consider the allergy medication to be a viable product because I thought the market to be too small. I didn’t realize that it would be the first non-drowsy allergy relief medication on the market.  Even though the first to market doesn’t always lead the market, I saw this as an opportunity to capitalize on our already good brand name to expand our mission into the allergy relief market.  It is still an expensive product to produce and I don’t really know why, but it is currently profitable enough to continue and shows promise since most customers feel we are priced too low.  Our team is focused on market leadership rather than profitability or sales revenue.  Those will follow once we have established market leadership, but we are more concerned about providing the most relief for our customers.

 

Although we didn’t specify it in our marketing plan, we did consider the competitive advantage versus market attractiveness matrix.  We gained competitive advantage with the combination of Allround and Allround+ in the cold market, which also extended into the cough and allergy markets.  The cold relief market continued to expand and we saw the opportunity to reach children and others concerned with the alcohol and cough suppressants present in our original formula, which we did not want to abandon because of brand loyalty and market leadership.  We knew that the new formula would cannibalize some of the existing product, but felt it would increase our overall market share in the cold relief market.  As the allergy market consistently increased, we recognized the market attractiveness potential for a non-drowsy formula, even though it was not specifically stated (but forecast) in our original marketing plan.  The market attractiveness of both the cold and allergy relief markets increased as those were the two markets that were showing consistent growth above population growth.

 

The incidents have been interesting, since we didn’t have any in the practice runs.  For the Social Media incident in the first period we chose “Website with interactive blog and use up to 5% of the advertising budget toward Google Adwords to generate additional awareness and direct people to the website.”  We felt it wasn’t enough just to create a website, which, because Allround.com was not available, we used Allstar.com.  We also didn’t feel Facebook or Twitter could really promote our product(s) like a website would.  The second special decision was the Quality Assurance incident and we disposed of the soon to expire product rather than messing with our distributors.  The next special decision was the cannibalization incident.  We felt the children’s formula would cannibalize our original formula more than it actually did but also felt it wouldn’t be as bad as the cannibalization from a 12-hour capsule.  We didn’t think the cough formula market attractiveness was there compared to the children’s formula which, at the time, had only one other specific competitor.  The Social Media Problem was next and we chose to check the page often and respond to comments rather than ignore or delete them, shut the page down or get legal involved.  For the Detailing Changes Incident, we chose to add e-detailing to our website in hopes of improving recommendations from doctors and pharmacists.  For the Creative Marketing incident we chose to run an ad contest to have customers come up with a clever ad to run on the web in order to get customers involved and gain some insight from them.  For the Price Discrimination Incident, we chose not to extend the additional discount to the large chain store, thinking that would upset our other distribution outlets if we gave special treatment to one.  We probably lost some sales for a short period but, being the market leader using a pull strategy, customers will likely get them to sell our product again.  We’re still working on the Product Tampering Incident.