This article was co-authored with Brandon Metzger, an Associate at Metis Strategy
The pace of change is faster today than ever before, yet it will never be this slow again.
Over half of the Fortune 500 companies from the year 2000 have either been acquired, merged, or declared bankruptcy. Meanwhile, the number of private companies valued at over $5 billion has doubled since 2015. A key driver of this disruption is exponential growth in computing (e.g., calculations per second per constant dollar), which has driven rapid advancement, miniaturization, and democratization of technology. This has enabled an explosion in entrepreneurship, increased disruption from non-traditional competitors, and a growing customer expectation for personalized digital experiences.
The increasing pace of disruption presents an opportunity for technology executives to move from functional to transformational leaders by applying their knowledge of this shift to their company’s technology, innovation, and business strategies. But in today’s volatile, uncertain, complex, and ambiguous (VUCA) world, made more so by the Covid-19 pandemic, how can executives keep up?
No one can predict the future, but executives can improve their tolerance for uncertainty by adopting “strategic foresight.” This article explains how strategic foresight can enhance the traditional strategic planning process by empowering organizations to identify, observe, and interpret drivers of change, determine possible implications, and trigger the appropriate response.
How foresight improves strategic planning
Strategic foresight is a structured and systematic way of thinking about the future in order to anticipate and better prepare for change. Part process and part mindset, foresight encourages an adaptive rather than deterministic approach to strategy. It starts with a view of the future and works back to the present rather than starting with the present and projecting forward. By doing so, organizations develop a more complete and holistic understanding of the external drivers of change. Firms can then envision a wider array of plausible future scenarios than they otherwise would and interpret potential consequences, thus enabling executives to make wiser strategic decisions and capitalize on opportunities that may not be readily apparent to competitors.
Traditional strategic planning process often start by asking “where are we now,” and then “what do we do next.” Strategic foresight starts by removing the constraint of “where are we now” as a sunk cost, and liberates strategies to explore the full extent of what would need to occur in order to the company to be successful in the probably future state.
It remains critical that organizations maintain a structured and cascading approach for translating strategy into execution, but it should be restructured to include strategic foresight at its starting point. By doing so, foresight is an input to the strategy-making process that informs the thinking that occurs before strategic decisions are made and ultimately enriches the context in which strategy is developed, planned, and executed. Incorporating foresight into the strategic planning process can drive new insights about emerging markets (where to play), new ways to execute (how to win), or even reframe the organization’s vision (winning aspirations), ultimately expanding possibilities for growth while preparing companies for possible disruptions.
How to get started with foresight
Foresight uses several tools and techniques to help practitioners identify, observe, and interpret factors that induce a particular change, determine possible implications of that change, and trigger an appropriate organizational response. We have found it helpful to think about foresight activities as part of a three-step process:
- Explore what might happen.
- Consider possible implications to the organization.
- Trigger meaningful organizational responses.
We’ll explore each of those steps in greater detail below.
1. Explore what might happen
The first phase of foresight focuses on identifying and studying the underlying drivers of change and the potential impact of that change. To do this, organizations may use techniques such as horizon scanning, which seeks to identify emerging or unrecognized trends, or trend analysis, which examines the uncertainty associated with known trends.
Consider Moore’s Law, the well-known observation that the number of transistors on an integrated circuit doubles every two years. Many have argued that the end of Moore’s Law is nigh, and, to be sure, we are fast approaching the physical limitations of transistor density.
However, deeper trend analysis reveals that exponential growth in computing power is not inextricably linked to transistor density. In fact, integrated circuits are the fifth — not the first — paradigm of exponential growth in computing, and the price-performance of computation per constant dollar has been improving exponentially for over 120 years. By developing a deep understanding of the exponential forces driving technological progress, organizations can re-frame their perception of possible and probable futures and better anticipate disruptive threats and opportunities.
While many organizations engage in cursory scanning and trend analysis, these capabilities can be strengthened by widening the scanning aperture, developing a continuous scanning process, and creating a robust technology scouting ecosystem.
At Cisco, for example, former CEO John Chambers attributed the company’s historical success largely to its ability to identify technology trends and make strategic acquisitions before competitors. To do that, the company created the Cisco Technology Radar to identify and monitor key tech trends and leading companies. The end-to-end platform enables hundreds of global technology scouts to submit trends and insights for review and prioritization while helping drive alignment across corporate R&D, venturing, and strategic planning teams. As a result of using the Technology Radar, Cisco has been able to spin up internal innovation challenges around emerging trends like fog computing and acquire companies focused on nascent technologies just one to two years after the trend appeared on the radar.
By continuously scanning a broad environment for signs of change and deeply analyzing the drivers of change, executives can effectively position their organizations to prepare for threats and capitalize on opportunities before the competition.
2. Consider possible implications for the organization
The second step of the foresight process focuses on translating the signals identified in the first phase into insight, using that insight to inform alternative visions of plausible futures, and interpreting how those futures might impact the organization.
A popular method for this is scenario planning. This helps organizations define, test, and refine strategy by developing and exploring alternative narratives of what the future may look like. While many organizations use scenario planning today, foresight-focused scenarios aim to stretch thinking and challenge conventional wisdom. Leveraging the drivers of change identified in the first phase as an input, foresight-focused scenarios look at longer time horizons, foregoing immediacy and broadening what is possible. By focusing on scenarios at the limits of plausibility, each of which have different implications for the organization, executives can challenge their thinking about what the future might look like.
To tangibly experience the scenarios and their implications on the business, another foresight technique, business wargaming, is needed. Wargaming simulates real-world scenarios to test an organization’s readiness and response to a possible future event. Typically, wargaming takes the form of a real-time role-playing workshop that simulates a particular scenario. It involves creating a set of teams that each represent an uncontrollable factor such as a market, customer, or competitor. During wargaming workshops, all team acts concurrently without information about what the other teams are currently planning or doing. This enables executives to explore the implications of their strategy, anticipate future developments, and recognize emerging risks and opportunities.
In our work with a fast-growing cloud computing company, for example, we developed three distinct scenarios for the future of their IT department:
- A world where IT is 100% automated,
- Where IT is 100% outsourced, and
- Where the entire company is run using 100% in-house technology.
We then facilitated a wargaming exercise to mobilize a completely different IT operating model, which led the teams to revaluate previously discarded approaches and embrace new ways of working. In particular, assumptions on budget growth were transformed as “digital workers” became a significant part of workforce planning discussions.
By anticipating and preparing for alternative futures, organizations can reduce the effects of market uncertainty and response uncertainty.
3. Trigger meaningful organizational responses
Once an organization has explored plausible futures and considered implications to the business, the final step is to transform that insight into actions that maximize the probability of the organization realizing its preferred future.
One way to do this is with backcasting, a technique that organizations can use to reverse engineer the decisions, resources (people, processes, technology), and capabilities needed to reach a specified end-state. Organizations may then use innovation labs, accelerators, or empowered business units to further test a new course of action, create prototypes, launch R&D projects,, or invest in startups. These practices position the organization to bring new solutions to market if necessary but without needing to fully commit before the plausible future comes to pass. This preparation thereby heightens the organization’s sense and response mechanism and allows it to respond quicker than the competition.
At Autodesk, for example, recently retired CTO Scott Borduin created a Strategic Foresight group to “better navigate uncertainty, to more proactively capitalize on change, and to explore possible futures with the goals of realizing preferable futures.” Within the group, three teams are aligned to the three phases described earlier in the article: the thought leadership team focuses on identifying trends while the foresight team develops scenarios and envisions plausible futures. The storytelling team, meanwhile, applies common vocabulary and storytelling methodologies to articulate the vision in an actionable way. This team partners directly with Autodesk’s corporate strategy team to reveal and challenge potentially fatal assumptions in the company’s strategy and shape expectations about how trends will influence the future competitive landscape.
A clear view of the trajectory of change and how it could reshape the business landscape is increasingly required for organizations to make the bold investments in technologies and capabilities that will allow them to remain competitive. Strategic foresight enables organizations to explore plausible alternative futures that go beyond what is commonly anticipated. When done well, this should prompt executives to consider how well their current strategies position them to win in various future scenarios and to broaden their perspective on threats and opportunities the company may face. By gaining an understanding of foresight concepts and developing proficiency across the three phases described above, technology executives can help their companies embrace change and maintain a competitive advantage over the long term.