Forecasting is a tool used to predict future events based on historical research and data and is linked to the strategic skill of analyzing relationships, trends, and patterns. Traditional business theory focuses on making changes only when changes are needed in order to retain or regain equilibrium. In contrast, forecasting allows for a bit more foresight in strategic planning by helping strategic planners to assess historical event data in order to predict the future.

The foresight of forecasting can help organizations to orient themselves in existing markets in a manner that they are not taken by surprise when new innovations and disruptions create widespread market change. Forecasting also can result in the competitive advantage of being one step ahead of the game, with already considered solutions ready for implementation when changes occur.

Forecasting does not always result in correct predictions, but it will always provide a framework for managers to see the context in which an organization exists. The practice of forecasting also helps to make the process of change more inherent to organizational strategy, allowing greater flexibility when change is needed. You can group forecasts into three groups––what will probably happen, what might happen, and what probably will not happen but is possible. Being intellectually prepared for something makes it much easier to respond as required. Even if the completely unexpected happens, the strategy of forecasting all sorts of possibilities should make it less of a surprise and remove the need to react in a panicked fashion.