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Amy Webb: Forecasting the Future

Aug 11, 2020

By Jim Kaitz, President and CEO of AFP

Corporate treasury and finance professionals require quick access to accurate data and the ability to draw insightful analysis to propel their organizations forward. As we navigate this current crisis, forecasting the future has only become more complex and uncertain. So how can we take what seems to be disparate information and reveal the deeper underlying connections?

On a recent episode of the AFP Conversations podcast, I discussed ways to spot those underlying connections and broader patterns with Amy Webb, CEO and founder of The Future Today Institute. Webb is one of America's leading quantitative futurists, a professor of strategic foresight at the NYU Stern School of Business, and a bestselling, award-winning author. As the AFP 2020 Mindshift Keynote, she will discuss how treasury and finance professionals can harness futurist strategic tools to benefit their organizations.  

Jim Kaitz: So Amy, let's start with the obvious first question: what is a futurist? What do you do and how do you do it?

Amy Webb: Sure. I'm a quantitative futurist, and a quantitative futurist is somebody who models next order outcomes using a broad spectrum of data—so, weak signals, strong signals, trends, and other factors, which could range from economic indicators to volume of certain types of patent filings at the USPTO. We do not make predictions; instead we make projections, in order to create a state of readiness or to help leaders within organizations determine strategic actions to take. So a lot of what we do is about thinking near and long range, and imagine alternate future states for the purpose of making better decisions in the present.

And I think a lot of our work is very complimentary to the work that AFP members do, which is to say we're all building models. The models that I think your members are building are primarily focused on finance and risk, and narrowly defined so that leaders can make very specific decisions. We do similar work, but we use a broader scope so that we can look at uncertainties that are external to an organization versus internal, again, to help with that longer-range planning process.

Kaitz: Our members, certainly those that are looking to the future in terms of forecasting and modeling, now have to take in a lot more information, not just finance information. It really is understanding a lot of the future trends you talk about. So the immediate question I want to ask is, how in your view has COVID-19, if at all, changed your thinking about technology? Have the current events of the last three months given you any new insight in terms of what you see for the future?

Webb: Yeah. And let me maybe point out, because I think there's a fairly sizable difference between what is a longitudinal trend, which is what we care about and pay attention to, and what are the shiny objects that everybody gets distracted by. So the types of trends that we're tracking have to meet certain parameters and they tend to evolve over very long periods of time. It's the type of information, that a CFO and their team should be tracking anyway. We work with a ton of CFOs and also those who work in, again, managing risk and compliance. I think the challenge is that unlike maybe 10 years ago or five years ago, where we might've had some economic turmoil that was certainly untenable, there were fewer volatile, external uncertainties. This moment in time that we're living through right now is marked by a significant number of external uncertainties. And by external uncertainties, I mean those factors over which no one entity has control.

And so the challenge going forward for somebody who's trying to manage the finances of an organization is creating those models and building out projections that still make sense. And some of that has to do with what you're measuring and how. My observation with a lot of very large companies is that they continue to build out their projections using all of the numbers that worked in the past, and they're just not making adjustments. And so I'm seeing KPIs not being met and nobody knows why financial projections aren't quite working out. And again, it requires a forensic analysis to figure out what went wrong.

And what went wrong even before the virus happened is that nobody accounted for uncertainty. My academic background is game theory and economics, so I totally understand that you want a model that has reliable data that you can use and count on, but we're living in a situation where those models have to be a little bit more flexible.

Kaitz: So if you were advising a group of finance people, what are the things should they be looking at? There's always going to be some degree of uncertainty.  

Webb: What should they be paying attention to right now? I think that the factors that are most heavily accelerated by the emergence of the COVID-19 pandemic are those which I would be paying attention to a lot right now, and those are longitudinal trends that have to do with automation, supply chain, logistics, information trends, transmission and in the areas of privacy and security. So just very briefly, we're seeing a lot of acceleration right now in things like AI and the cloud, digital transformation, robotics and the like. And that for obvious reasons, we have a reduction in the workforce due to people not being able to go to work. And what that's done is accelerate progress that was already in action. So there was already some forward momentum and things like collaborative robots that are operated in the cloud.

Kaitz: Many parts of our large organizations have certainly moved to the cloud, but finance has been a little reluctant on the automation side and to really adopt digital transformation. But at what cost?  

Webb: I think the cost to a lot of these organizations right now is pretty obvious, those companies that are really scrambling because they didn't invest in digital transformation are now feeling the repercussions. And I get that there is a compliance issue, there are a lot of security issues. We do work with The Federal Reserve, so I understand the limitations that had existed, but I also recognized, especially among the C-suite, a sort of nasty habit—under duress, the leaders of large organizations will sometimes hold on to their cherished beliefs and there is no room for flexibility. I see that happening more in finance than anywhere else.

And I understand that there are rigid regulatory, legal, compliance issues to be contended with. That being said, we are living in a very different world today than we were six months ago, and the longer that you wait to adapt, the worse this is going to be.

Listen to the full interview with Amy Webb here. Learn more about her upcoming AFP MindShift session here.