Social Forecasting For Corporate Sector

SOCIAL FORECASTING AND ITS RELEVANCE TO CORPORATE SECTOR

Prepared by

Prof.K. Prabhakar, Director, , KSR College of Technology, Tiruchengode-637 209 [email protected]

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SOCIAL FORECASTING AND ITS RELEVANCE TO CORPORATE SECTOR Introduction The term Social Forecasting is not a recent addition to business vocabulary. The use of social forecasting stems from recognition that social pressures are becoming an increasing determinant for the success of any organization.

The various indicators

indicate that the society will be experiencing a total change in next few years. Some of these changes have to be anticipated and must be incorporated in any long-range plans of an organization. These changes that are happening in the environment are fundamental. They are not evolutionary. The greatest challenge is the discontinuities that are happening in the environment. We are witnessing an era of knowledge Revolution. If we examine history we find a series of significant shifts in the conditions of human society. The Renaissance, the Agricultural Revolution and the Industrial Revolution. We are entering a period of rapid change that is more dramatic in its consequences compared to earlier revolutions. This will be followed by rapid changes in the way in which we live, our institutions and business organizations.

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The age of communications and knowledge have already begun with the advent of internet and convergence of various technologies.

The inevitability of internet and

convergence of technologies is not only due to revolution in microelectronics, but also due to exhaustion of material resources essential for maintaining the brick and mortar industrial economy. Should we jump in an era of Dot com and leave brick and mortar? Or should we become brick and click organization? Everybody says that government has no role in future business. Can we ignore government’s has role and go ahead with strategic planning? If various interest groups are demanding share of economic growth what kind of equality should government offer?

Where the postindustrial society

heading. It is towards Super Industrial State where everything is managed by machines or Voluntary Simplicity living according to environment. What kind of explanation we can give for explosion in investment in Dot com organization?

Is it because of

individualism promoted by Information Technology? The purpose of social forecasting is to provide an analytical framework for helping the corporate decision-maker to make his own judgement based on analysis. The social forecasting may not guarantee that correct decisions will be taken. Nor will it ensure that forecasts will be obtained from the emerging trends. It provides a better understanding of the forces shaping the environment. It should provide confidence to manager that his decisions reflect assessment of these issues. In social forecasting we include all those environmental factors that are not currently embraced by economic or technological forecasting. Primarily it involves individual as customer, supplier, manager or employee. It concerns people in-groups both inside as well as outside organizations. It further unfolds to government, society in general and to transnational organizations such as European Union. Therefore, Social Forecasting is a term, which includes both political and legal factors in addition to social. 3

We refer to economic forecasting,

technological forecasting as social forecasting as separate activities. The separation is not only artificial but also dysfunctional. Economic forecasting is essentially concerned with modeling how people behave using financial criteria as a means for maximising welfare. It is dependent on certain assumption of people behaviour.

If the behaviour changes the forecast is likely to

change. Therefore, one role of social forecast is to find the underlying relationships used by economic forecasters and to modify them as necessary. In the case of technological forecasts, it has been assumed that we can extrapolate part trends into future. However, we find lot of these relationships is unable to predict future.

In the case of

pharmaceutical organizations the new molecule development is more dependent on the R & D expenditure allocated. The advances cannot be attributable to serendipity. In fact they result from managerial investment decisions. In case of pharmaceutical industry these resources have been raising due to society’s growing concern for health. The liberalization of health insurance in India combined with accepting patent regime has totally changed the role of Indian pharmaceutical organizations. The example of pharma industry in India illustrates the complexity consisting of technological, economic potential, economic support based on legislation, governmental action and globalization of business.

Similarly, technological development in microelectronics furthers the

development of molecules. As we go through the article we will examine the interrelationships and dimensionalities of social, political, economic and technological factors. certain important factors need to be considered.

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However,

1. The forecasting techniques are developed by economists and technologists. It is their dissatisfaction with the methods and tools have led to development of social forecasting. 2. Highly active involvement of sociologists and business organizations are needed to further the objectives of social forecasting. 3.

The greatest disadvantage of social forecasting is for many phenomenon of interest, these are no clearly defined measures. Though objectivity is stressed, subjectively is inevitable.

4. The forecasts cannot be ‘ends’, they are only ‘means’ through which we can obtain better view of future. It bridges the gap between those concerned for the future of their company. Elements of Social Forecasting We are faced with uncertainty in future. Any amount of forecasting is not likely to remove uncertainty. Forecasting aids understanding of the factors shaping future, their interaction and their consequences. For this purpose we will analyse the elements of social forecasting. 1.

Identification of important phenomenon – This answers the question what to forecast? It is not obvious for us to discern the possible future events that could be significant for organizations. In the case of social forecasting it is likely to be more difficult. Our views of the society in which we are living, the way it has developed and it is likely path in future is affected by personal experience and individual values. It is likely that forecaster may overlook changes in attitudes that are not familiar to 5

him. Though objectivity is attempted, it may not be achievable. Individual personal judgement is involved in the selection of the data to be used in the forecast and his interpretation of results. The importance of first stage in the forecasting process cannot be over stressed. It calls for sensitivity to evolving influences and judgement. 2.

Selection of phenomena for deeper study – A comprehensive scanning of the socio-political environment generally leads to large number of trends and possible future events which might be considered within the forecasting exercise.

The

researcher would like to introduce, as much variability’s as possible to make this forecast more accurate. However, in practice it is better to have few factors or appropriate factors that are likely to affect the final forecast as to be taken into account. 3.

A system of measurement – The phenomena in which the social forecaster is interested can be categorised as “events or trends”. The word “event” is used to describe something which either does or does not happen. Even in the case of happening of the events it occurs over a short interval of time. A demolition of Berlin wall and disintegration of socialistic countries is an event. We may foresee their occurrence with some probability rather than forecast the dates at which that would happen. Therefore, the probability of occurring at any point of time may be less but a cumulative probability is likely to increase. On the other hand, the trend evaluates with time. Majority of the social forecaster works falls into this category. For example, the size of high-income group varies in magnitude with time. In order to make a forecast we need a parameter to measure the phenomena? Such parameter is obtained from economic, technological and demographic data. Many a times the phenomena for interested of social forecaster are not directly measurable. Let us consider the example of ‘alienation of the work force’. These particular phenomena 6

can be understood but how it is measured? In this case social forecaster seeks some surrogate measures as an indicator of alienation of the work force. We may consider the number of days lost through strikes or number of days lost due to absenteeism. The indicator may not be true measurer of phenomenon in which he is interested. With regard to this factor, social forecasting is more complex than economic and technological forecast. In many cases the forecaster needs to combine trends and events. The social trend may have been changing in regular pattern for a number of years within a particular political and legal framework. For example, liberalization by government of India, which is an event, has changed faces of Indian economic growth. The forecaster technologies should be flexible enough to accommodate both trends and events. 4.

A time-scale – The association of an event or attainment of a quantified level for a trend, (which we generally) is called call it as ‘critical mass’ with a time scale, is an essential feature of forecast. A time scale is necessary for taking decisions based on informed view of future. Many of the studies of the future without application of forecaster methodology are likely to provide ineffective information. In recent years much of the data has been published with respect to impact of microelectronics on society. This has little value to businessmen who needs to know ‘WHEN’ and ‘AT WHAT RATE’ the changes will become significant. The establishment of need does not mean that it can be satisfied. Isolated events could happen at any time. Unless we relate events and trends to time scale the decision making is likely to be affected in business sense. In this respect social forecasting is different from science fiction.

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A probabilistic assessment – Decision making under uncertainty is one of the major limitations of social forecaster. The probability will vary with the forecaster confidence in selection of indicators. 7

Can we forecast social trends? The use of the word ‘trend’ implies social phenomena evolving over a period of time. If we call it as a trend than we can identify the pattern of this evolution and we can take a view that future is extrapolation have past. However, this pattern may take variety of forms. In the case of technological, techno-economic relationship “S” shaped growth curve is exhibited. The main feature is slow initial growth followed by period of rapid growth and reaches a plateau as physical limit is approached. This process is irreversible. The ability of the computer chip to shrink in its size is limited by its atomic structure. On the other hand economic forecasting is largely based upon cyclical pattern superimposed upon a trend line which may slope upwards or may be downwards a long-term cycle. We generally assume that the pattern established in the past is likely to repeat in future and therefore economic movement is reversible. In forecasting both technology and economic attributes we dismiss the possibility of discontinuities. They can occur but their probability of occurrence is low. In the case of social forecasting the occurrence and discontinuity is one of the most important factors to be taken into consideration.

Technical Parameter

Natural Limit

Fig. 1: shaped

Many technoeconomic relationships exhibit an S growth. The shrinking of the size of microchip is limited by the atomic size beyond which it cannot be shrunk. 8

t

There is a tendency to exaggerate the rate at which our lives will be changed by technology. Individual technologies reach plateaus beyond which further improvements are not worth while. For example the experience for travelling in commercial aircraft has not changed since the introduction of Boeing 707, more than 40 years ago. Computerization has not yet reached its plateau, but – it will when the miniaturization of solid state devises runs in to the limits imposed by finite size of individual atoms.

However, scientists of nanotechnology have a different opinion. Let us examine the concept of Nanocomputing. It is based on the premise that practically anything in the universe can be built up from one hundred and more basic elements. Everything that exists is an arrangement of atoms. So, given its atomic map, any system can be build from scratch. We assume that we have technology to manipulate singular atoms. This is the basis for nanotechnology. It is also known as molecular manufacturing; any object or structure can be created atom by atom. In a sense, we take the core from nature. DNA is biological software regulating the self-replicating mechanism that sustains all life. Ribosomes are large-scale molecular constructors; Enzymes are nature’s own molecular sized assemblers. In short, nanocomputers exist in nature. The Nanocomputing era is a new milestone in making all things smaller. The basic building structure is at the atomic level. The first scientist to outline the possibilities and the constraints is Richard. P. Feynman, Nobel Laureate, who talked about miniaturization in 1959. Three decades later Eric Drexler has described nano era in ‘Engines of Creation’. Nano products are already in existence at laboratories. The world’s smallest abacus is build by scientists at IBM Research Division’s Zurich laboratory using individual molecules with a diameter of one 9

nanometer as beads. In this process nenotechnology promises complete control over structure of matter. However, at quantum level the laws that are used by us to produce machines may not be applicable. The timeline to achieve this kind of development is long.

The social forecaster has to take these factors into consideration to find

Economic Parameter

discontinuation that is likely to affect the future technology.

Cyclical variation about the trend

Trend Line

The cyclical pattern of economic variables

A framework for conducting social forecast t

The framework has been compiled by D.J.Romano has been given in Table 1 for better understanding. Certain more variables are added by researcher keeping Indian environment in view. In order to make an ideal forecasting we will analyze the total environment of the organization as given in the table that is likely to affect corporate decision making. However, it is necessary for us to establish the mutual influence between these factors. The next step will be to establish the quantitative relationship for each of these influences is required. This is followed by forecasting of the future trend of each factor. Finally, each of these forecasting must be modified in the light of the trends in all the other factors.

This ideal forecast is in effect a comprehensive quantitative

model of the total operating environment. 10

Find factors that are relevant to organization

Establishment of mutual relationships

Quantitative relationships for each of the factors

Forecasting the future trend for each factor

Modification of each of the forecasting variables in light of trends in all factors

Fig.3 - Flow chart showing various steps involving construction and analysis for social forecast.

This perfect forecast is ideal if only its relationship is constant with time. The ideal forecast is based upon understanding in-depth of the fundamental forces, which shape in future. However, in reality most of the techniques are based on observations and based on the past behaviour rather on full understanding of the underlined factors determining the trends observed. However, the use of computers has helped us to prepare the modeling. Let us consider the example of social consequences of computerization. We will start by considering the development of technology capability. Its application depends upon economic factors in the form of availability of finance, political influence, 11

cultural attitudes (willingness of management to innovate) and so on. However, the application of technology will have an effect upon employment, education system, industry skill requirement, etc. These in turn will affect social attitudes which, will feed back upon the political, economic and technological factors modifying the initial analyses. This complexity makes the construction of a comprehensive model difficult to accomplish. Table 1. A suggested social variable checklist _______________________________________________________________________ _ Primary social Area categories Variables to be considered _______________________________________________________________________ _ 1. The individual

2. The political Process

(a) Attributes

Physical characteristics Attitudes Abilities Preferences Wealth Lifestyle Skills Social roles Competencies Work ethos

(b) Relationships

To: Family Kinship systems Formal groups Informal groups Organisations Roles in society

(a) National

Government Opposition Administration Political structure Quasi-political bodies Local government Legislation

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Likely political impact of company Action Competition law Promotion of corporate

governance

Availability of institutions to

support

Free market economy Patents and patent protection (b) International

Political structure Nationalism Ideology Administration Attitudes to foreign companies International and regional groupings Regime stability Trends in patenting Role of World trade organization Role of International Monetary

Fund

Role of World Bank Etc. 3. Education

(a) Formal

Objectives Literacy Numeracy Duration Specificity Primary education Higher education Advent of virtual universities Vocationalization of education Social purposes of educational system

(b) Informal 4. Socio-economics

-

Cultural environment Distribution of wealth Distribution of income Patterns of spending Economic philosophy The use of money, cheques, Attitude towards credit Taxation

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Etc. 5. Demography

-

Size of population Age structure Movement of population Changes in population Local demography Characteristics of population Etc.

6. Socio-technology

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Uses of technology Dangers/benefits of technology Spread of technology – who has it? Control of technology Development of technology –

levels Social perceptions of technology Effects of technology 7. Groups in society

(a) Political

Political parties Pressure groups Interest groups Trade unions

(b) Non-political

Interest groups Trades unions User’s groups Environmental groups

(c) Formation Issues Actions Effect 8. Quality of life

(a) Morality

Crime Religion Social norms Behavioural norms

(b) Arts and Sciences

Meuseams, libraries Availability of social goods

(c)Pollution and Ecology

Water pollution Air pollution Land pollution

(d) Health and

Legislation

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Welfare

Product liability Consumerism Protection of the individual Child mortality Reduction in child labour

(e) Work / leisure

Working days per year Hours worked per week Life-style

_______________________________________________________________________ _ Assumptions to be made Our knowledge relates to the past and there is uncertainty about our future. There are many events that are likely to occur but some events are likely to occur more than others.

Therefore, some of these assumptions are to be explained clearly. In order to

have understood future we may have to make realistic assumptions about future. Monitoring and Measurement in Social Forecasting Social aspirations can be monitored from statistical data. The attitude towards obsolescence can be obtained from the market research showing the repurchase cycle of the main durable goods. Freedom from drudgery is shown by the increasing density of ownership of certain household goods. The acquisition of social prestige can be found by the ownership density of high valued consumer durables such as cars and ownership of residences. Attitudes have to be detected by different methods. Attitude towards work is more difficult to find. It can only be inferred. Much of the attitude towards work depends upon management and its approach to leadership.

The higher the empowerment in

organizations the more positive will be the attitude towards work. Sociological inputs 15

can be quantified. The income structure can be obtained from the research done by National Council for Economic Research and various statistical data provided by government of India and Reserve Bank of India. In an income-structured society, which is related to ability, the demand for education rises? Once income is totally related to ability, the people will demand better educational facilities. The emancipation of women and empowerment of women can be traced through the employment of figures, reduction in atrocities towards women, reduction in physical violence towards women etc. A host of data can be generated and related in order to find the place of women in the society. The most difficult factor is to study family relationships. The breaking of joint family system the concept of nuclear families and large population immigrating to different parts of the world is one of the trends which are likely to provide us information on change in family relationships. The change in pattern of leisure pursuits can be obtained from retail sale of music systems, home video systems, audiocassettes, raise of visitors to theme parks. The change in the number and households is also available from statistical data. The average household members in India per family, according to Indian market demographics are 5.6. This provides information about their living styles. The change in position of women in society may not be detected statistically but can be forecasted. In 1950’s the population of boys was higher than the girls. However, from 1970’s onwards there are fewer girls than boys. Hence, women would be relatively scarce and therefore precious. Equal opportunity, equal pay and equal status for women is likely to emerge in this society. The political model in one sense is easier to develop but difficult to manipulate. We would like to know philosophy of the government and its various policies. The bigger problem is to work on political trends in the long-term. Is the national ethos created by politicians or merely followed by them? Is the national ethos or social values 16

determined by the interaction of the people in society or by aggregation personal value systems? Theoretically, in a democracy the political philosophy should follow social trend, which in turn will be influenced by individuals. However, politicians have the means of leading and altering the national ethos. We need not elaborate on the role of politicians in a country like ours as we are well informed about their antics. Measuring Change in Social Attitudes – Leading Indicators The measurement of social change is no easy task. Forecasting will, however, become impossible unless we are able to track changes in the social environment and in social attitudes as they occur. An individual enterprise will nee, further, to organise a databank of such information once it has been established which aspects of change are likely to be of most significance to it, taking care to examine every facet of its operations – its immediate customers, its markets, its relationships with employees and with local and central government. How do we go about organising such a databank? We might begin by posing a series of questions about the population of the area or country within which the organisation operates. 1. Growth or Decline - Is the total population growing or declining? How is the age structure of the population likely to develop? What factors (e.g. changes in fertility, the birth rate, mortality) do we need to examine in order to predict change? 2. Economic Activity - What is the size of the employed population? What is the unemployment rate, distinguishing between long and short – term unemployment? How is the employed population distributed by age and marital status? How is it distributed by manufacturing industry, services, the professions, agriculture etc.? 17

3. Housing - What are the level of home ownership and the various forms of home tenancy? What is the balance between demand and supply of property and of finance for buying and renting? 4. Ownership of ‘key’ Durables - Ownership of durables which may fundamentally change the pattern of life, such as a car and a telephone. 5. Patterns of Expenditure - What are the broad patterns of expenditure by the population as a whole and by the various ages and socio-economic group housing and associated expenditure, food, clothing, leisure activities and so on? This is obviously only a short, selective, list of the type of questions that we could ask. Yet when we have answers to all these questions we merely have the outline of a data system for the examination of social change. Social change is effected not only by alteration in the internal economic infrastructure but also by: •

The external economic environment;

•

The political system and the reaction of that system to popular demand for change;

•

The attitudes of the population, which may or may not be translated into a demand for governmental action or into direct action without legal or organisational change.

The exact relationship between attitudinal and behavioural change is, of course, a vast and complex problem. We may observe connections without necessarily proving 18

causal relationships. We may be able to trace historical relationships between attitudinal and behavioural change. Yet we find it extremely difficult to predict the manifestations of changes in attitude. For instance, with hindsight, it is now fairly easy to trace the connection between attitudinal change and the changing nature of the family which has been brought about by (amongst of course several other factors): The growing demand for equal opportunities for the sexes, not only in terms of employment but also in the enjoyment of leisure and in education; The breakdown of traditional values at one time upheld as social norms (if not entirely enforced) by the churches, the police, the courts, schools and other institutions which achieved their present form and formal stance in the last half of the nineteenth and first half of the twentieth century; The changing perception of childhood brought about by the psychological and educational insights of the late nineteenth and early twentieth centuries, but which took some time to work their way through to popular thinking. Since we know that attitudes do affect behaviour our inexact understanding of the mechanism by which this is achieved should not cause us to decry the utility of finding methods by which we may measure changes in attitude. We cannot rely on our own, individual, observation or upon even highly professional journalistic reporting. We need systematically to question a representative sample of the population in which we are interested and to repeat the questioning at regular intervals in order to build up timeseries for forecasting.

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Summary of Areas of Ignorance in Social Forecasting After discussing we feel that the areas of ignorance in the field of social forecasting are all pervasive. However, there is a considerable amount of relevant data is available for us. The two big gaps in knowledge are 1. The lack of causal structure. We can recognize new situations when they have emerged and sometime extrapolate with a reasonable degree of success, but we cannot design a model, which enables us to understand the mechanics of change. 2.

The inability on our part to be able to provide a timing mechanism for psycho-social changes generally in social forecasting a generation has been used as a unit of time change (implying 20 to 25 years). But generations are overlapping and significant changes cannot be made with respect to timing. We use working hypothesis, which generally are generated in the form of scenario developments. The large area of ignorance is what factors mould attitudes and what factors build them and change them. The exact motivation of a person to act in a particular way is yet to be well developed. The motivation is developed on the basis of self-interest. But do all motivations depend on self-interest? It may not be so as we have seen from thesis and antithesis the self-interest is likely to evolve into extra self. In a true Christian society, motivation should be extra self. Though no doubt some people are motivated like that, we are yet to see a society motivated by extra self-only. Nevertheless such trend analysis is too broad and too long terms to be of help in social forecasting. We assume that motivation is currently based on self-interest and will continue to be in the foreseeable future. We are also not having clear understanding of determinants of value system of society. Society similar to an individual is also fighting for survival. If society is threatened with extinction because of burden of too much old and infirm, 20

euthanasia might well become socially acceptable.

After fall of communism in

Russia, many elder citizens in Russia could not be looked after by they’re off springs and they were reduced to destitution. This has been accepted by the state as well as by society. We have seen birth control becoming socially acceptable because of the fear of population explosion.

Still some more areas such as determinants of

personality of an individual and the effect of personalities of an individual on society and society’s effect of personality need to be studied. There exists a large gap in our knowledge regarding the relationship between personal attitudes, national ethos and political policy. The Techniques Available for Social Forecasting a. Brainstorming b. Delphi c. Checklists d. Forecasting of issues in isolation e. Simple extrapolation f. Fitting curves of a known characteristic g. Analogies h. Substitution curves i. Monitoring j. Value profiles k. Cross relationships between factors l. Trend impact analysis 21

m. Cross impact analysis n. Scenarios The various techniques are familiar to readers.

However, in appendix these

methodologies are discussed. Importance of Social Forecasting in Organizational Setting Need for social forecasting arose due to ignorance or gaps in economic and technological forecasting.

The residual error in both technological and economic

forecasting is bigger than it uses to be before 10 to 15 years. This is primarily because of rate of change in societal attitudes and other related factors. Therefore, the present models do not help us to predict future based on static assumptions.

Thus the

assumptions have to be made dynamic due to changes in the society. This gave rise to the need for further areas of forecasting which can be labelled under the head social forecasting. Business as we understand is a decision process under conditions of scarcity and uncertainty. Business is concerned with people. But people play different roles in different contexts. They play the role purchasers in the form of customers or consumers or both. They also play the role of resources as workers and managers in organizations. For the organization to be successful, it must understand the pattern of living (described in the form of psychographics), their choice models, motivation and value assumptions etc. Therefore, the business must know not only their present situations of people, but also plan to predict their future outlook and needs. The business has to deal with two groups of factors:-

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1. Exogenous factors – These factors affect the business. However, no control can be exercised by the business on these factors. They are labeled as the ‘environment’. 2.

Endogenous factors – These factors affect business and organization and are a foremost to a large extent controls these factors. They are defined as resources of the organization. In business we have to expect the likely changes in exogenous factors and respond with endogenous factors i.e., ‘resources’. The above discussion gave rise to three forecast outputs that business requires

from the environment:1. Changes that are likely to happen in the market potential 2. Changes that are likely to happen in the various relative price, cost parameters; 3.

Changes that is likely to happen in those factors that could influence or affect efficiency. In order to estimate these factors we need to have synoptic model in which all the

assumptions are dynamic. In the synoptic model discussed in this research paper consists of six separate models all interconnected with each other such that output of one becomes input of others and cause these models to react within themselves. The six models are as follows:1. Economic model 2. Demographic model 3. Technological model 23

4. Psychological model 5. Sociological model 6. Political model The psychological model consists of seven important factors:1. The desire of freedom of choice 2. Acquisitive motive 3. Change the attitude to obsolescence. 4. Freedom from drudgery 5. Acquiring social prestige 6. Attitude towards work 7. Paradox of leisure The political model covers the following factors:1. Basic philosophy 2. Equality (equality of results or equality of opportunity) 3. Policy regarding full employment 4. Stability of price 5. Social welfare and defence 6. Fiscal policy 7. Monetary policy

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The economic and demographic models are to a certain extent independent when compared to other models. All other models either increase rate of change or decrease rate of change in the economic model. They are also likely to affect the time lapse in economic model. They also provide barriers to economic forecast or determine the maximum above, which the economic model cannot operate. We should understand the five models other than economic model as our areas of interest. They should be analyzed in terms of their inter relationship to obtain a better view of the environment. This is an essential prerequisite for organizational effective planning. Organizations must first assess the likely changes in the environment and then decide its objectives and goals to and control the endogenous factors (resources) so as to achieve mission and vision of the organization efficiently. The organizations have three ways in which it can respond to the expected changes in the environment. 1. Identification of changes in the market potential ; 2. Adjusting resources allocation based on the available technology; 3. Maximize use of resources. All the six models described are used to identify and find changes in the market potential.

However, economic model, demographic model and technological model

define economy capability or its output potential. Thus, they are connected with resource allocation. The lower group defines the effectiveness in the use of that output potential. We can also segregate economic, demographic and technological models as theoretical output potential and the rest as realizable output potential. Our focus will be on psychosocial-political models as they are least explored compared to other models.

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Time horizon for forecasting What should be the time horizon for forecasting? Should it be for 5 years, 10 years, 15 years or 25 years? We find that short-term period of 2 to 3 years generally remain stable unless there is occurrence of discontinuity (a change of government policy from controlled economy to total free market). On the other hand in a long term i.e., forecasting beyond 25 to 30 years, the social change may be incorporated into the model. The real useful time horizon business is between 3 to 10 years to cover investment appraisals. This is primarily based on author’s working hypothesis and not based on empirical research. We can identify 1 to 2 years’ position and beyond 10 years position. But we are not certain of the likely route between A and B. It could be any of the 4

Forecast outcomes

shapes or an amalgam of them.

(i)

B

(ii) Fig.3 Time horizon for forecasting(iv) (iii) A

1. Here the change is equally followed by a period of consolidation 2. A straight-line projection where amount of increase is the same each year but the Years proportionate rate of increase is decreasing. 3. It is a type of Gompertez curve covering three different profiles of change a gestation period followed by dynamic change and in turn consolidation. 4. In this changes take places slowly and come to fruition after a long period.

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It depends upon the various factors for the forecast to take a particular route. We can categorize forecasts into two different categories:1.

Information forecasts; are those whose purpose is to forewarn and to help us to mould attitudes about future. They have wider margins and errors compared to other forecasts and they are not specified. For example, the discussion on nanotechnology is information on forecast.

2. Decision forecasts; are designed for a particular purpose and for a particular decision and the error of assumption has to be clearly stated. Social forecasting as we have used tends to be concerned more with information rather than decision forecasting. There are four general rules evolved to help to curtail the residual error in social forecasting:1. The forecasting should not be technique oriented. 2. Good social forecasting should have a fine understanding of particular situation for which forecasting has been done. 3. Forecast should work from simplicity to sophistication. Sophistication by way of mathematics is introduced only as and when it is necessary to reduce the margin of error. 4. The forecast should have a funnel approach from general to specific and from macro to micro

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5. Forecast if they are worked from long term to short term, they are likely to be more effective. Psychosocial relationships and income structure After considering some general facets of social forecasting let us consider practical aspects of social forecasting. In this chapter we answer the question where do we start our social forecasting? Social forecast tries to understand people in terms of changes in social relationships. For this we should know whether personal attitudes affect social attitudes or vice-versa. In fact they influence each other. All forecasting is to start with people. Therefore demographic model is a basis for our forecast. People form the basis for demand since consumption model relates changes in expenditure on different groups. Hence for consumption / demand we need to know the size of population in age group and sex ratio.

Similarly, estimate on theoretical working

population and activity rate for different age and sex ratio is necessary to find actual working population. The quality of working population is necessary to provide right assumptions. This is obtained from the education factor of the sociological model. Similarly, the skill inventory of the workers and productivity factors are also necessary to be built into the models.

We would also like to know the components towards

psychological model. There are four particular factors that are inter related. 1. attitude of workers; 2. skill of management particularly in terms of leadership; 3. attitudes of institutions; 4. national ethos as regards work. 28

For example, managers working in highly competitive world markets are in desperate search for business solutions.

Therefore, the managers and workers are

motivated by an overriding desire to survive to do everything they can do to increase profit margins. The old management ethos of hard work invariably leads to success are no more valid. However, this work ethic has now become a prerequisite to business survival. We also need to know the degree of technological and energy support available to the work force. This is obtained from the technological model. Role of security and efficiency for evolution of human being and working hypotheses Men and women are evolved as individuals, each with a distinct personality and a distinctive collection of talents. Hence, social relationships were essential to provide security and efficiency. Primitive life group was more important than the individual. As wealth increased, the position moved from group to the individual. The feeling of better security moves the trend towards individualism.

Due to advent of internet and

availability of information made individual more powerful than the group. Therefore, we find less and less number of pre-war and dictator types of governments. In the case of dictator type of governments the individual and his conscience were completely subordinate to the state.

The problem to forecast such trends is that we can recognize

only when they are established. It is not possible to foresee them in advance. We do not understand the causal logic of the mechanics of change in this area. Therefore, we cannot build a viable forecast model to describe it. Instead we use working hypotheses; these are ‘theoretical causal systems’ which are likely to work. However, there can be some errors. We can always explain the time development of society in term’s thesis and antithesis. The positive trend creates its own negative and vice-versa. Social development is thus a helix constantly becoming more sophisticated as more technology and technical support 29

comes into play. In the process, it moves from one pole to the other i.e., from society to individual and to back again. Such a model suggests that after a generation of two, when individual was dominant we would swing more towards the social group. Though at the beginning the researcher said that knowledge inputs make individual more individualistic, there is a tendency to move from individual to the groups. For example, in Internet we can find an individual subscribing to various groups and indulging in chats and discussions. This process definitely supports our view of helix model of social development. It is possible to postulate that if society were to face total shortage of energy e.g. fossil fuels, for 25 years or more, this would accelerate the movements back towards making the group or society more dominant. However, we may not be able to precisely say when this is likely to take place. If we would like to consider the past how far you would go backwards? Russian economist Nikolai Kondratieff has observed long waves of economic activity. He studied commodity prices, interest rates, wages, industry production, and consumption figures covering the period from the late 1700s to the early 1900s for Britain, France, and the United States. While Kondratieff notes that these series exhibit cyclical ups and down over periods of a few years, he claims they are dominated by long-term expansions and contractions lasting several decades.

No

explanation is postulated as to why these long waves occurred. He classifies the period from the late 1700s to early 1900s into three long waves:

1st wave:

rise from late 1780s to 1810-1817 falls from 1810-1817 to 1844-1851

2nd wave:

rises from 1844-1851 to 1870-1875 falls from 1870-1875 to 1890-1896

3rd wave:

rises from 1890-1896 to 1914-1920 falls from 1914-1920 to ?

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He is unable to precisely date turning points, but claims that they fall within a range of around seven years. He also states that the long waves (peak to peak or trough to trough) average between forty-eight and sixty years. Kondratieff notes that his findings are based on only a few observed long cycles. While he does not provide an explanation for their existence, he does assert that certain events seem to occur over cycles; events during upturns include wars, revolutions, increased gold production, increased application of new technology, and the assimilation of new countries into the world economy. He argues that such events are not causes, but are the effects of waves of prosperity and recession. Joseph Schumpeter (1939) provides an explanation for Kondratieff’s observed long waves. He postulates that long cycles are caused by waves of new technological innovations. He attributes the first long wave from the late 1700s to the mid-1800s to the Industrial Revolution, which was characterized by great advancements in textile and iron production. He calls the second wave, from the middle to late 1800s the ‘age of steam and steel’, and the third wave starting in the late 1900s is described as the age of automobiles, electric power, and chemicals’. Schumpeter theorizes on the source of these waves of technological innovations. He claims that people with the ability necessary to develop and market new technologies and products are rare. When conditions are right, a relatively small number of highly talented, innovative people bring forth great advancements that spawn entire new sets of products and production methods. Furthermore, these new products and technologies set off a whole new set of ancillary industries that provide inputs for the new products, or apply the new products to other uses.

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According to Schumpeter, these waves of prosperity end because new products eventually displace products based on older technologies. Industries unable to adapt to this change ultimately fail. This process takes several years as the new products infiltrate the market. In time, the failing industries are unable to obtain additional financing and go out of business. This is a period of depression as displaced industries no longer need workers and stop producing, and fewer new products are introduced because market conditions are not conducive to their appearance. When the adjustment to the previous wave of innovations is completed, the long depression ends. Once some degree of stability has been achieved, a new group of individuals comes forth with a new set of technologies and products.

As these technologies and products appear in the

marketplace, yet another long expansion is set off which will eventually end when the next period of readjustment occurs. Kondratieff and Schumpeter’s long wave theory has received considerable attention in recent years. Modern long wave adherents identify 1937 as the trough of the last long wave and argue that the upturn continued until 1973. This would put us in the early stages of a long wave decline that will turn into a major depression around 1990, ending around 2000-2010. We can see the remarkable prediction of Kondratieff and Schumpeter’s coming true. Kondratieff predicted the likely agricultural failure in Russia during 1980’s. He also postulated that classical communist model is unsustainable in long run.

He also

postulated that though capitalistic system is imperfect, it has a self-correcting mechanism.

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Structural relationships in the society Society is not an amorphous group. It has a hierarchical structure based on power (the power can be wealth, class or caste as in Indian society). The definition of power has changed over a period of time. In primitive days the power is defined by physical strength. Christian civilization attempted to get social structure based on love. It had a visionary concept of total evolution of society towards love and ultimately towards god. The history of civilization has displayed some such type of evolution. However, in practical terms it has not achieved its goals. The evolution of society can be traced in terms of changing definition of power. What is the purpose of society? The purpose of society is to provide security, perpetuation and efficiency (increasing welfare). Hence, in primitive society the person who had more physical power raised to the top. As the time progressed, this physical power is evolved into ownership of land. This enabled people to work together and land became major means of production. Therefore, positioning in society was determined by wealth, which is a surrogate measure of power. With industrial revolution the position of land was changed to factories. Power was still expressed in terms of wealth, but wealth was expressed in terms of ownership of stock and shares. In fact market capitalization is taken as a proxy measure to express wealth of nations or individuals. The next stage in the evolutionary development is that, the wealth is defined more in terms of income rather than by wealth of stocks and shares. Therefore, we have income-structured society. hierarchical in nature:

Income structured society is still

People occupy different positions but these positions are

determined by level of income. The behaviour the consumption patterns mostly depends upon their relative positions based on income. In our country this is also further skewed with respect to caste. However, people do not know each other’s income – hence the emergency of status symbols. The increase in consumption of cars and high value 33

products is an indication of emergence of these status symbols. These are items of expenditure which people want but which reflect different ways of living in various stratas of society. The main status symbols used are ownership of telephone, colour TV, refrigerator and house. The social structure is likely to contiune to evolve. The income structured society is moving into income-wealth-structured society that is stock options is being used as a measure of stock or wealth for future needs. Therefore, this in turn has given rise to different type of working styles for people. Based on this evidence we can explain the behaviour of employees working in software organization. They work longer hours harder and upwardly mobile.

The income-structured approach came into existence

because inheritance of property or estates is politically attacked. For example the pension scheme give to former rules was abolished in 1969 in order to pave way for more egalitarian society.

The existence of inheritance means the position in society is

determined by the accident of birth. Thus ‘wealth‘has to be earned. Thus we have income-structured society. Therefore, in such a society we can explain the advent of consumer credit among the population. The credit card population is increasing not purely on basis increased disposable income alone.

The consumption of goods is

determined by ones aspirations rather than by ones income. The psychosocial pressures of living in particular strata cause them to demonstrate that they are living in a higher position than their actual income. Therefore, we can generate a working hypothesis that the social factors have a strong influence on economic decision making. Similarly, obtaining cars in finance schemes has no taboo in Indian society and 40% of increase in sales is attributed to availability of easy finance. In a democracy the shape of national incomes structure becomes important. After independence the income was in few hands. The masses have very less income. However, this has rapidly changed to a diamond 34

shape based on the NCAER research (1994-1995). The ideal structure should be of a diamond structure in which equality opportunity and income is related to ability. The ability structure of a society generally corresponds to a normal curve and we are likely to have a diamond structure. The following figures explain these factors: -

Income scale

High income 20%

Middle income 20%

Low income 20%

Subsistence income

20%

20% 10% 20%

Percentage of households Fig.4 Distribution of income during post independence era

Present structure

1 Million households (6 million people

→ The very Rich → The Consuming class

30 million households (150 million people)

→ The climbers 50 million households (275 million people) → The Aspirants

50 million households (275 million people)

→ The Destitute

35 million households (210 million people) 35

Income Level Expected Future Structure Based on Ability 20%

20%

20%

20%

20% 10% 20%

Percentage of Households Fig.5 Diamond shape indicating income-ability correspondence

Mechanics of change In social forecasting it is difficult to use model-building approach because of lack of knowledge about causal structure. The problem is not with the data but with the casual relationship of the data. Business or life is a decision system based on scarcity and uncertainty. Choices are to be made with the knowledge that the choice is likely to be wrong.

Hence, the choice also involves assessment of risk.

Human beings basic

motivation is to survive, to procreate and to develop. The need ‘to develop’ involves the ‘acquisitive motive’. Man is willing to acquire more goods and services. This is the consumption-related work ethic. As we have discussed above, the consumption related work ethic would simultaneously develop consumption related leisure ethic, where leisure is sometimes equal to or higher on people’s preference scale. This is exhibited in terms of extensive investments made in ICE browses (information, communication and entertainment).

In primitive societies where the acquisitive motive has not been

developed, once the basic needs of the people were met, leisure became the next 36

preference. Due to advent of microelectronic technology and Internet the society is slowly moving into the direction of leisure ethic. Veblen has stated before 100 years before emergence of income structured society, the position in the society was demonstrated by conspicuous waste and conspicuous leisure. But it hardly lasted for one or two generations. With income structured society, the motivation comes from keeping in pace the features in the social structure. As the people’s real income rises they would like to demonstrate to themselves as well as to others that their standard of living has raised. They do not just buy more of the same goods but of different goods, particularly those goods and services which provide social prestige. Thus, the role of services is definitely going to rise as the income structure society takes stronger roots. Dissatisfaction with the present living conditions is the main powerpack of acquisitive motive. This acquisitive motive powers economic growth. If society becomes satisfied with material well being, the economy would become inert. It is likely to lose its dynamic force. However, we have no evidence of this particular trend even in richest countries. As people rise in the middle class and upper middle class in the income structure, there is need for more number of customized products, because the whole middle class becomes an amalgam. Due to this personal differences become important thus giving rise to more fragmentation of market and ‘niche’ players in the market. This explains the reason for larger number of line extensions and brand extensions. The acquisitive motive gives rise to a desire to get rid of drudgery and the chores of living. In the past the servants – the lower classes, carry out the chores. It was the only opportunity of employment available for lower classes. When there is a rise in demand for goods and services the people employed in domestic services are likely to transfer to the factories. For example, starting of garment units in Chennai has taken away much of the labour who were otherwise employed in domestic service. With simple training predominantly women employed in domestic service have switched to garment factories. Thus, the 37

chores of living descended on the housewife who was confined to kitchen. Due to higher education levels among women, women retaliated by going out to work. Thus the chores descended on the family and in turn demand has increased for those consumer goods which reduce drudgery. We can clearly see the social change in women being more employed in industries and in turn affecting the sale of consumer durables. LG has achieved a sale of 1000 crores. Within 4 years the sale cannot be purely attributed to raising income levels alone. We find there is a sudden increase in the demand for these consumer durables, which are available under various financial options. We can postulate that living on double incomes and demonstration effect has also affected the demand for consumer durables. Obsolescence also plays a role in the mechanics of change. Durability is no longer a necessity for acceptable quality. In a dynamic society obsolescence tends to be psychological and aesthetic rather than purely functional. A recent survey for HM motors (ambassador cars) has indicated that many of the ambassador owners are changing to new models of cars fully knowing well that the newer cars are not likely to last longer than ambassador car. Therefore, use and throw products (such as gel pens) are accepted in the market. This is particularly true between the age group of 20 to 45 who are experiencing a rapidly increasing standard of living. The social aspirations can be summarized as follows:•

the acquiring of social prestige;

•

preferring to be with the leaders rather than with the laggards;

•

the desire to get rid of chores and drudgery;

•

The use of obsolescence to reduce tension and to demonstrate a rising standard of living. 38

The surge in change is inhabited by social constraints.

Let us analyze five

important constraints 1.

Indian society can be broadly divided as urban, semi-urban and rural. In addition, it is still a caste-dominated society. Therefore, the urban rural divide combined with caste and class divisions makes the consumption pattern complex. The same income group in urban and rural has different consumption patterns. This has been clearly brought out by NCAER.

2. The emergence of a group of people refusing to go with the societies standard of living the rise of standard of living and tending to opt out of society. For example many of the members of Peoples War Group are educated. They would have used their education for climbing the ladders of society. However, they opt out of the society due to dissatisfaction with the societal norms.

This tendency may be

considered to be temporary than permanent. 3.

There is a general feeling that people should be equal. But in equality what we are expecting? Are we expecting equality of opportunity or equality of results? The equality concept was in the social psyche for a long time, which led to various revolutions. The French revolution was based on equality but it realized later that inequality is inevitable. The ideal of equality gave way to carriere, ouverte aux talents. The mangers, artists and the workers in factory cannot be equal. Therefore, rewards should be different based on ability.

Though theoretically this can be

achieved in practice. This is constrained by various distinctions in the society. 4. The desire for social justice is much more genuine and much more different. It is part of the changing value systems of the younger generation. However, social justice 39

itself is not a constraint. It is the institutional arrangements introduced to ensure social justice often create a situation where growth is inhabited. 5. Individual wishes to be individual. Individual is more important than group. Let us analyze this factor further. In the post industrial scenario there exits two extreme viewpoints and possibilities – the Super Industrial State or Voluntary Simplicity. In super industrial state almost everything is provided by machines. In the case of voluntary simplicity people generate their own energy and totally dedicated to environmental norms. Eminent authors such as Hermen Kahn and Daniel Bell have long stressed the emergence of value changes which will temper materialism that is prevailing today. Many surveys in various European countries suggest a shift of values away from the traditional, there is considerable uncertainty as to their meaning. The nature and direction of the perceived shifts are indicated in simplified fashion in figure 6. They imply that a growing number of people are guided by their own wishes than by rules imposed by authority; are resentful of bureaucracy and prefer personal autonomy; seek a wider range of experiences; and are sceptical of traditional norms and conventional behaviour.

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AUTHORITY CHAUVINISM PURITANISM DISGUISED SEXUALITY TRADITION AUTONOMY EMOTIONAL / IDEOLOGY VACUUM NOVELTY & CHANGE

Materialism Authority

BODY AWARENESS

Introspection

SCEPTICISM

?

Hedonism

Fig. 6 Changes in attitude profile Though these trends perceived, we must ask the question how they lead to fundamentally changed behaviour.

Those who seem to reject authority and avow

contempt for materialism frequently manage to be both introspective and hedonistic – a mixture which may herald some change in consumption patterns but not disavowal of consumption itself. Opposition to bigger institutions and bureaucracies crosses ideological, income and consumption boundaries.

Scepticism is not confined to what businessmen or

politicians or journalists say – opinion polls point to scepticism of most ideologies and even to a deep ideological and emotional vacuum in some quarters. Many of the perceived trends are therefore not amenable to rational analysis as to their cause or their impact.

Many are in fact ambivalent and sometimes strictly

incompatible with others. There is a lot of research findings suggest a kind of progress of values given in Figure No.7. We should not think that the society is fragmented as one set of people working for a Super-Industrial State and other for Voluntary Simplicity. 41

There is a bit of both in most of us – whether we like the former or not. We have to recognize that what most people want is a life in which economic and organizations realities can be satisfactorily integrated with non-material and environmental concerns. It is incorrect to suggest that the most traditional paths of advancement, focusing on emulation have never been oriented with various objectives and concerns. For most people, the hierarchy of values has been more integrative than disintegrative and we should think more in terms in this integrative model given in Fig.7 ECONOMIC & ORGANISATIONAL REALITIES

NON-ECONOMIC PRESSURES INTEGRATION OR SHARP CONFLICT? ORDER

HEDONISM 1980

AUTONOMY ENVY

MATERIALISM RESENTMENT

INTROSPECTION 1970

ACHIEVEMENT

1960 Emulation 1950 Survival 1940 Security 1920 Survival 1900 Security

Acceptability of Change and Social Forecasting 1880 Survival

An important factor in social forecasting is to evaluate the acceptability of Fig 7. Progress of Values change. People’s ability to accept change reduces with age. New ideas come from new 42

generation. The teenager established himself as an individual. For support and security he operates with his own group. He has to question and re-access everything. This process continues until achieving equilibrium with an environment.

Due to this

questioning the acceptability to change is likely to be higher with younger generation compared to older generation. The degree of acceptability depends more on proportion of the younger population among the demography of the society. We have to answer two questions 1. What information we have about social change and changing attitudes? 2. How can we use it for forecasting? One important information for understanding the decision process in a society is the change in value system. We can recognize the change when it has occurred but it is difficult to forecast the change exactly. Many of the researchers in organizations in India and abroad have indicated an emerging new value system, which can be given in six parts.

•

Personal integrity before loyalty or conformity;

•

Honesty (i.e., integrity of intention) before obedience, security or comfort;

•

Justice before selfishness;

•

The dignity of a person is regarded as sacrosanct;

•

The need to respect a person’s distinctive personality;

•

The realization that society depends on people rather than people on society.

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If we consider that above factors providing a basic change in the value system, we can foresee certain social factors that are likely to develop. We can discern this particular trend in senior executives leaving jobs and starting Dot com organizations. Possibly, this particular field offers self-expression for highly qualified personal. Similarly, the trend in business school graduates and IIT graduates preferring more of entrepreneurial persuits rather than working for organizations. Conclusion: Based on the discussion, we can conclude that social forecasting provides a framework of analysis for business planners. It has different methodology of approach compare to that of economic and technological forecasting. It is not based on static assumptions, but on dynamic nature of business. Thus social forecasting reflects present and can be extrapolated in to future. Though, we observe that blind spots are pervasive in social forecasting they can be bridged with the help of information revolution. The analysis given by Russian economist Nikolai Kondratieff proves to be correct in many respects. This indicates that past data can be used to find events and trends. Social forecasting combines various disciplines and provides explanation for different types of phenomenon that is happening around us. We could clearly see the move from individual to societal dependence and inturn from societal dependence to individualism. Therefore, we can conclude the social forecasting is a must for business planners to plan their resource allocation and achieve mission and vision of their organizations.

References:

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1. Twiss Brian.C (ed.) ‘Social Forecasting for Company Planning’ by MacMillan Press Ltd. (1982). 2. There is a very little ‘hard data’ on how many do, in fact, do so. A useful survey of current practice is contained in D.J.Romano and J.C.Higgins, The Role of Social Forecasting in Business Planning (Management Centre, University of Bradford, 1978). 3. Social Trends, No.6 (1975), ‘Subjective social indicators’, by Mark Abrams; and No.7 (1976), Subjective measures of the quality of life in Britain, by John Hall. Survey Unit, Social Science Research Council. 4. Meadows, D>H.and Meadows, D.L., The limits to growth (Potomac Associates, 1972). 5. Coyle, R.G.Management Systems Dynamics (Wiley, 1977) 6. Kahn, H.World Economic Development: Projections from 1978 to the year 2000 (Boulder, Colorado: Westview Press, 1978). 7. Hayek, F.A. Individualism and Economic Order (London: Routledge & Kegan Paul, 1949). 8. Mitchell, A Life ways and Life Styles (1973) and Elgin, D., Voluntary Simplicity (1976) Social Change: Implications of Trends in Values and Lifestyles 1979) 9. Rao.S.L. and Natarajan.I, ‘Indian Market Demographics’, Global Business Press, 1996. 45

10. Hall E.Thomas, ‘Business Cycles’, the nature and causes of Economic fluctuations Praeger (1990) 11. Kondratieff, Nikolai D. ‘The long waves in economic life.’ Review of Economics and Statistics 27 ( November 1935)

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