Giving innovation a boost
This article first appeared in D/sruption.
Smarter thinking about the future
In today’s fast paced and rapidly changing global business environment, all organisations face a common challenge – how to think about and plan effectively for the future. To achieve breakthrough innovation, companies need to have a good understanding of what their future business will look like and must anticipate new entrants, business models, and markets.
Many are bad at doing this. There is a tendency to focus on quarterly and annual financial / performance cycles and this encourages short term thinking, and often organisations simply have little time to devote to considering their long term future. The challenge is further compounded by human nature. It’s scientifically proven that people’s brains are naturally predisposed to favour continuity and to avoid upset and disruption. They like certainty and comfort; The Holmes & Rahe stress scale, for example, illustrates that stress and related illness can be generated by positive as well as negative change and life events. This means business leaders are likely to shy away from taking the steps needed to transform their organisations.
Overcome the limits of forecasting
At the same time, the effectiveness of conventional forecasting and other methods of prediction are being undermined by the sheer complexity and rapid pace of change in highly interconnected globalised markets. People’s intentions and sentiments can be even harder to predict as evidenced by the recent referendum on Britain leaving the EU and both the US and UK elections, where both outcomes contradicted some opinion poll forecasts.
Even predictive analytics that employ sophisticated machine learning models to draw out unanticipated trends and insights from large and varied data sets will struggle to give a long term view in a world that is characterised by volatility, uncertainty, complexity and ambiguity.
To better prepare for the future, and to think differently and innovatively, organisations need to make strategic foresight a business as usual activity.
It’s not about prediction
As a futurist I am often immediately asked for my top predictions, but this (somewhat counterintuitively) misses the point. Strategic foresight provides a set of tools, methods and techniques that help organisations to actively explore, influence, plan for, and manage the future. It is not about making accurate prediction. Instead it requires the exploration of multiple possible and plausible futures that are shaped by the actions that are continually being taken in the present. Through exploring uncertainty, exposing and challenging assumptions, and exploring the critical drivers of change and their future trajectories, businesses can prepare for a range of future outcomes and their implications. This allows for better decision making today for organisations of all types and sizes; Salesforce has, for example, used foresight to capitalise on acquisition opportunities.
A varied toolkit
There are many tools and techniques associated with strategic foresight. Specifically there are two activities that can make a real difference to organisations in both preparing for the future and strengthening innovation activities.
- Scenario planning – this is the process through which we create and bring to life possible and plausible alternative future narratives. By exploring the implications of these alternative future scenarios we ensure that planning is more flexible and adaptable, as well as highlighting risks and potential new opportunities for innovation. Scenario planning is also an excellent tool for shaping the future vision of the organisation. It has the benefit of opening up creative dialogue between different parts of the organisation, building consensus and challenging embedded assumptions through the exploration of a range of “what if…” narratives.
A well-known example that established the value of scenario planning was Royal Dutch Shell’s contingency plan which helped them to avoid the detrimental effects the “Oil Shock” had upon their competitors
- Horizon scanning – Horizon scanning (sometimes referred to as environmental scanning) describes the systematic identification of trends, drivers and weak signals of change that relate to a specific area of focus. Horizon scanning should not be done in isolation and should form part of a wider foresight process, where its outputs feed into scenario planning, visioning, and development of strategic implications and responses. The UK Government operates a horizon scanning programme responsible for ensuring that senior policy makers are kept abreast of emerging issues such as embryonic social trends and lab based research that may lead on to significantly transformative technologies.
Great leaders prioritise innovation to deliver revenue growth that outperforms their peers. Are you an innovation leader?
Foresight at the front end of innovation
By definition, innovation involves doing something new and different and it is this fresh thinking that creates value. Disruptive or breakthrough innovation in particular demands radical thinking, discontinuity and the creation of entirely new business models and product and service categories. Foresight can benefit this process, particularly during the early stages to:
- Create stimulus for ideas. Horizon scanning allows organisations to anticipate changes in social and consumer trends, and values. It helps to uncover new business models and alternative economic systems, environmental trends and issues, emerging technologies, and signals of change in the political and regulatory climate. It is often through looking far outside the organisation and native market sector that inspiration is found.
- Test the fitness of new ideas against future scenarios and current strategy. Would a strategy or a new product or service perform well under a “business-as-usual” scenario, but fail if an alternative future came to pass?
- Create a vision for new business initiatives, after all, what is a vision if not a scenario for a preferred future? Scenario planning – and specifically creating a scenario for a preferred future – can be used to create the kind of ambitious and forward looking vision that the business can unite behind.
- Challenge current assumptions about what the core business will be in the future. In my experience it is not uncommon for different parts of the same business to be working under completely different (and occasionally contradictory) assumptions about what the future might hold. Foresight creates the opportunities for assumptions to be brought to the surface, shared and challenged in a safe environment. This can be invaluable in building organisational consensus and shared belief.
Foresight as business as usual
To really benefit from strategic foresight it is important to move it beyond a discrete one off project to an integrated business-as-usual activity. For horizon scanning this could involve creating a dedicated team that undertake continuous scanning, feeding their insight back into different parts of the business to inform and act as a catalyst for innovation. Broad horizon scanning is a particularly effective way for businesses to pick up insights from adjacent or unrelated markets, or different geographies.
For organisations that do not wish to create a dedicated team, alternative approaches to scanning could be to engage professional futurists or to allow staff access to an automated scanning service – although it should be stressed that value from these is maximised when combined with expert curation and interpretation. Foresight is about much more than a data gathering exercise; the value lies in the rich dialogue and qualitative analysis and interaction that is part and parcel of good scenario planning and horizon scanning. In some of our own foresight work, clients repeatedly stress the value gained from participating in deep and open discussions about what the future might hold.
Foresight must result in change
For organisations using scenario planning there are few basic pitfalls to avoid. It is important that any scenario work leads to an action plan reflecting a considered analysis of implications for future scenarios for the organisation and other stakeholders. You can create the most beautiful, rich and immersive scenarios in the world, but unless they are used to drive through to a concrete set of actions – what you plan to do differently – efforts will have been worthless.
Boosting the bottom line
There are other good reasons for making foresight a part of business as usual, not least bottom line impacts. Recent research has shown that organisations with a long term perspective outperform their peers. PA’s own ‘Innovation Matters’ research supports this view with 41% of innovation leaders frequently taking part in formal horizon scanning and scenario planning compared with 25% of their less successful peers.
Foresight seeks to help organisations respond to a world of constant change. The current trends that could impact businesses, as well as potential trends and changes yet to come are considered in the context of the specific impacts they will have on a particular organisation, market sector, product, project, or team. Horizon scanning and trend research can also identify new growth markets and shifts in customer preferences, and in doing so support product innovation and development.
Scenario planning allows organisations to imagine futures that may be radically different from “business as usual” and through doing so create new visions, alternative strategies, new business models and products, and highlight risk.
In a world where traditional quantitative forecasting looks increasingly brittle and unreliable, foresight offers a highly engaging, creative, immersive and qualitative approach to exploring future change. And much like the lookout on the sailing ships of old, foresight acts as a forward looking, sense making system that helps navigate turbulence and hazards and ensure long term business growth and survival.
Rob Gear is a futurist at PA Consulting Group