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What is Reference Class Forecasting?

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Reference class forecasting is a high level estimation technique that compares a strategy to past projects and their outcomes. It is designed to eliminate factors such as optimism bias that commonly result in poor quality estimates at the strategic planning stage.
The process of reference class forecasting begins by identifying a class of projects that are similar to your strategy. These are then modeled as a probability distribution according to a factor such as cost or risk. This distribution is then used as an approximation of the probable cost, risk or benefits of your strategy.
Overview: Reference Class Forecasting
Developing a rough estimate for a strategy by looking at the probability distribution of historical projects that are similar to the strategy.
A business case for a new service estimates a time to market of 2 months. However, the probability distribution of time to market for similar projects ranges from 4 to 8 months. As a result, 6 months might be a more accurate estimate.
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