Recently I heard a piece on National Public Radio about probability in weather forecasting. The central question was, what does a 20% chance of rain really mean? To some it meant take an umbrella, while to others it meant pack up the kids for a picnic. To statisticians, it meant that when you look at the 1,000 days with the closest variables to the day you are in, it will rain on 200 of them.
In the first case, you’re risk averse and probably a little pessimistic. In the second, you’re a risk-taker and willing to play the odds. As the statistician, your value lies in being able to provide the basis for the decisions of the other two.
What does this mean in sales? The first and most obvious conclusion is that people are different and their assessment of probabilities and their reaction to them will be different. Someone’s 20% will be someone else’s 50%. And one person’s reaction to 50% might equal someone else’s reaction to 80%.
The other side of probability is risk, and risk is usually defined as the probability that some event will occur and the impact that it will have if it does. A 20% chance of rain when you’re home watching the ball game is a whole different risk than that same 20% when you’re at the beach.
Generally, people react to risk and probability by avoiding risk and playing probabilities. In sales, risk must take into account all the possible impacts on any opportunity, including the financial value and the strategic value and the level of effort to succeed and the other opportunities in your pipeline that won’t get your attention and all the other considerations affecting your decision-making. And the decision that you’re making is critical to the success of the organization – which opportunity will I work on now?
All of this – assessing probability, reacting to the risk, assigning a priority – and the different approaches of each different person results in a forecasting and prioritizing nightmare. And it’s why automated CRM forecasts are generally simplistic and wrong until you get to some large statistical sampling where things can average out. Or until the sales manager uses his knowledge to massage them into some semblance of accuracy.
You need to elevate the role of the statistician to make this work automatically. He must not only impose an accurate and repeatable process for assigning probability, but he must then interpret this probability within the context of the risks involved in each opportunity in order to come to a conclusion – when do I work on this opportunity in favor of that other one?
Statisticians rely on computer modeling to do this. Why shouldn’t CRM systems do the same? They can, and SalesWays does it with a patented technology called the Automated Sales Process Engine for the Computer. Simple to use, accurate and consistent results.