How to Predict the Next "Big Thing"

Peter Drucker

Want to predict future trends that will impact your business? It’s not as difficult as it seems if you know a few essentials. Columnist William Cohen looks at how shifts in demographics have predictable outcomes and represent a major opportunity for those who have the desire and know-how to do the analysis and take advantage of it.

Most Americans were appalled in the 1960’s when youth suddenly and without warning rebelled against the beliefs and morals of the "Greatest Generation" and not only embraced drugs, free sex, communal living, and stripping naked to partake in the ritual which came to be known as "streaking," but rejected other of their parents’ most sacred values. Many thought that the apparent insanity of the post-World War II generation was due to having missed the character-building challenges of the Depression and the sacrifices of World War II and that they were therefore spoiled by having life too easy and missing lessons wrought by pain and struggle.

Not so, according to Drucker. He explained this period as a predictable phenomenon. It was a shift in demographics in which the average age of the population which had previously been centered in the twenties and thirties in age dropped significantly. The previous older age groups were older and they were ultra-conservative. However the "baby boom," which began in 1946, had caused a sudden shift such that the dominant age average dropped into the teens. According to Drucker, the "youth rebellion" of the sixties which spawned the Hippies wasn’t a permanent shift in American values. Rather it was rebellious adolescent behavior which became representative of the times only because there were so many more of this age group relative to the general population to promulgate and make popular this behavior. Drucker noted that the largest single age group at this time consisted of seventeen year olds!

Sure enough, as Drucker had predicted, as the large numbers of rebellious youths grew older and the age center of gravity drifted upward toward more conservative waters, the previous rebellious college student groups became more focused on grades and careers and Haight Ashbury in San Francisco faded into history.

Drucker had a point. He looked at changes in population, and realized that population change and its characteristics alone is perhaps the most important factor which a researcher or planner can analyze to accurately predict behaviors of the future. He found that major trends in markets, buying power, behavior, people’s needs, and more can all be predicted with near certainty by analyzing what has already happened in population dynamics and structure.

Orthodoxy Analysis and Where It Goes Wrong

Although one tends to think of the size of the population first, there is much more to demographics than mere size and these other aspects of demographics can be of far greater importance. They include age structure, ethnic composition, employment, education, and income. Drucker thought these were the clearest and most unambiguous of the various characteristics of population to examine for prediction. More importantly, that they have the most predictable consequences for the future.

Researchers usually investigate demographics to incorporate them directly into their planning, so use of demographics in and of themselves is nothing new. However, they are rarely used to predict the future. The norm is to look at demographics to determine what segments or subgroups exist in the overall population making up the group they are analyzing. After establishing these segments, analysts attempt to develop a detailed profile of the characteristics of a typical segment member. These profiles combine a number of different variables including ethnicity, gender, or something else.

Once these profiles for various segments are constructed, they are incorporated into the strategy for whatever is being considered, human resources, product design, etc and then this information is used to develop a plan. But there is a catch. For one thing these demographics are not static. They constantly change. Both segmentation and profile development done in this fashion are but a snapshot of an instant in time. The implicit assumption is that the demographics and resulting profiles will hold constant for the indefinite future. They won’t. Remember, it was only in a few short years that the U.S. went from conservatism to hippiedom and back again. If used for planning, these figures are dated even as they begin to be used. To predict the future, demographics need to be used in a different way.

The Problem Defined and Its Solution

Drucker thought that the primary reason that planners ignored demographic change was that demographic change appeared to be too slow to be relevant for any practical concern. This erroneous belief is still alive. It is as if there was a common agreement to assume that any change in population occurs too slowly to worry about. The resulting methodology is to simply assume constancy or continuing increase at a constant rate. So plans incorporate data which is certain to be in gross error. And those who develop and implement these plans continue to repeat this error over and over.

Drucker thought this the most rewarding opportunity for those taking the time to do what is really a relatively simple analysis. This very strange secret --- that decision makers of all stripes: marketers, HR experts, businessmen, public servants and government policymakers all continue to assume that demographics or the rate of demographic change occur too slowly to be of importance represents major opportunities for those who have the desire and know-how to do the analysis and take advantage of it. It is enabled by two simple facts:

  1. The events causing these demographic changes have already occurred and are usually well known
  2. The lead times between these events and the demographic changes that will accrue are also known

Where and How to Start

With the Drucker method one "looks out the window" and observes what has already has occurred and what this will mean demographically. The Baby Boom beginning in 1946 meant more toys and baby products required in the infant and childhood years. It also meant more mothers searching for information about problems with child rearing. Is it any surprise that pediatrician Dr. Benjamin Spock’s book Baby and Child Care, published the same year that the Baby Boom began became one of the best-selling books of all time?

Fifteen years later, this mass of live new "Terrible Teens" led to the temporary social upheaval the U.S. saw in the 1960s. As this group enters the 21st century and becomes senior citizens, it means among other obvious results increased demand for health care and health care products, the growth of which has skyrocketed and paralleled the aging of the Baby Boom generation.

Drucker’s process was to observe events that have already occurred, reason to logical conclusions as to resulting happenings, and then to seek opportunities in the competitive advantage of this knowledge. It does not absolve the need for segmentation and developing appropriate profiles of the segments members along with other important marketing analyses and decisions, but it imparts a major advantage to companies which know what is in the coming environment.

Using Drucker’s method of looking at demographics, not only could many of our current problems be solved, but we would take advantage of many opportunities in the future as well. Will you exploit demographic change in your job, or will you do things the old way and assume the conditions of today will hold for tomorrow.