Few businesses really understand what drives their markets, their industries, or their brands. Without this understanding, it’s almost impossible to predict the future, explain the past, or develop the best plan for the future. Typically, Optimize Data Analytics approaches demand forecasting at the industry level first and recommends including as much historical data as possible (up to 50 years or more, if available). What are the fundamental drivers of the growth of an industry? For example, the rise in the percentage of women formally employed in the workforce has been one of the main drivers of growth in the restaurant industry over the past 40 years, but that variable is approaching a limit—so future growth in the restaurant industry might slow. As another example, one of the major factors in the rapid growth of world population over the past 100 years has been the increasing supply and falling real cost of food. But food is an energy intensive industry, and the real costs of food are highly likely to rise over the next 50 years, which probably will constrain world population growth (along with other limits).

In developing a demand forecast for an industry, Optimize Data Analytics creates an analytical database consisting of some measures of industry growth over the past 20 years, 30 years, 40 years or longer (revenue in constant dollars, employment, or unit output, etc.). This is the dependent variable, the thing we are trying to predict. Then relevant economic data from the same time periods are assembled and integrated into the database. The economic data are usually expressed in constant dollars and represent all of the independent variables—the things that might explain or predict the dependent variable, industry growth (or decline). Generally, multiple regression and time-series analyses are the workhorses of demand forecasting and analysis, but other statistical methods are also used by Optimize Data Analytics, such as input-output analyses.

The great value of demand forecasting is an enhanced ability for a company to see into and understand the future, and to make optimal decisions to guide its own destiny.