BlueSky Business Aviation News

Dagmar Grossmann, Chief Executive of Grossmann Jet Service, Prague, and Founder of CEPA.

When the solution is the problem

he old, but nevertheless good question is how do we understand and calculate how any market will develop during the course of this year?

We can assume how it will be, we can ask a psychic to tell us or we can simply get confused by all the different opinions. Using the BASS Formula to gauge market performance is another option, however, what we really want to know is something for which no one really has the answer.

The question is especially difficult to answer in all of the new emerging markets with their incredible micro and macroeconomic factors which are volatile and each and every one of those factors a problem in themselves. So the solution is to wait and see, and in the meantime to adjust to the given conditions.

Eastern Europe has everything; promising markets and some terrible political turmoil. The countries and their political and sociological history are young so there are no comparable events and available data to really predict the future - not even the near future. The gap between rich and poor, geographically north and south and east and west within the various countries varies incredibly and while the internal speed of growth is swift, the pressure from outside increases.

So what can we do?

I still believe that CEE and all CEPA countries are the future markets in Europe. It is important to look more closely at the situation and translate it as much as possible to the economic language of the west.

For example, data has shown that Ukraine has an incredible number of potential UHNWI in the country, with 500 people falling into this category. For sure this number is real, but now, after the political trouble has escalated, it has become an area with as many problems as it has opportunities. Accounts are being frozen outside the Ukraine, financing banks are speechless and some OEMs are learning that it is crucial to understand the cultural language here more than anywhere else in the world.

Even though we are used to a 7-year cycle in business aviation, we try each and every year to answer the question of how to predict the future.

Light travels in waves, as does sound, and of course water. Any vibration across a solid surface is also considered a wave. And waves creates cycles. Herein lies the interesting question; how in a moving environment we can predict a fixed target?

How can we at least get closer to the real numbers that the market will show us at the end of the year? One solution is the BASS Formula (for those who are precise).

And it actually says this:

Over time everything goes flat, but hopefully, our industry does not really have this problem and the forecast coming from a famous formula is just academic assumption.

But here is the key: It's not the "why" for the directional movement that's critical, rather, it's knowing which direction and the size of each developing wave that really tells you ALL you need to know to start earning big profits and protecting them against reversals.

There are other ways of looking at the market

There is such a thing as the Art and Science of Forecasting in Economics. Despite recession and political turmoil, forecasting is half of the success. Regardless of how turbulent or volatile your company or industry might be, there is always a way to conduct proper forecasting to ensure that at the end of the year there are no surprises or guess work for the following year.

Proper forecasting depends on various tools that a good manager should be aware of as well as one fundamental point: Our market is where it is today based upon decisions that were made in the past. So, starting from now, it means that every decision made in the past has an impact on the future.

To be successful in any industry we have to live mentally in the future whilst giving some weight to historical data. We need to understand and correctly interpret the events and movements all over the world that will have an impact on the industry in the near future. In the aviation business it is important to be a good chess player and know your moves and the moves of all players at the right time.

Shown below are some tools that many managers will use for forecasting. The Forecasting Orientation diagram represents the three types of leadership thinking - Retro, Current and Forward.

Forecasting is the most important thing in leading a company and predicting a market. Many different factors are involved, thousands of books have been written and it is still not really deciphered. But the three main factors are Cycles - Trends - Patterns. Analysing those three gives you for sure a clearer picture of where you stand at any time.

In addition, one of the other tools is:

Forecasting Triggers

When you are forecasting, you must avoid being so myopically or linearly focused on products or aspects of your industry so you do not notice other factors they could impact the industry’s future.

People have use the ‘Hype Cycle’ in the past to become educated about the promise of an emerging technology within the context of their industry and individual appetite for risk.

Should you make an early move or follow the crowd, seeing what your competitive operator does or going alone when entering new markets? If you’re willing to combine risk taking with an understanding that risky investments don’t always pay off, you could reap the rewards of early adoption.

Is a moderate approach appropriate? Executives who are more moderate understand the argument for an early move but will also insist on a sound cost/benefit analysis when new ways of doing things are not yet fully proven. Should you wait for further maturation?

If there are too many unanswered questions around the commercial viability of an emerging market, it may be better to wait until others have been able to deliver tangible value.

©BlueSky Business Aviation News | 6th March 2014 | Issue #262
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