Future-proofing your business by using Foresight
Do you consider your company future-proof? How about future-resilient? Will your company exist in 10 years’ time?
If yes, how have you prepared for a future that is defined to be ever-changing, turbulent and complex?
According to innovation analysts, about half of the companies on the S&P 500 list will be replaced by new companies in 10 years. Research shows that the average time that companies to stay on the list has decreased significantly in the past 50 years: from 33 to only 24 years. The tenure is forecasted to diminish to just 12 years by 2027.
In Finland the perception of the future among business leaders is quite radical as well. According to a study, 80% of Finnish business leaders think that their companies will not exist in 2022, or they have at least gone through a complete transformation. And 2022 is not even far away – only three years from now!
Indeed, many companies as well as academics have noticed that nowadays the world is characterized by so called TUNA conditions that create pressure for companies. The acronym stands for Turbulent, Uncertain, Novel and Ambiguous.
In short, this means that changes in a business’ external environment can rapidly and unpredictably create ambiguous challenges that have not been encountered before. TUNA conditions take leaders by surprise and leave them facing uncertainty if they are still trusting the traditional planning methods that used to work in the “good old times”.
This constant change prevails due to several developments. For instance, rapidly developing technology, increased competition, globalisation, climate change, and other megatrends that affect the entire globe – not only businesses, but societies, organisations and individuals too.
Companies face various kinds of pressures they need to adapt to, act on, or even fully transform. For example, we have already seen how digitalisation can either wipe out businesses (for example Kodak, Sony MinisDisc, or Makuuni – a Finnish equivalent to Blockbuster) or create completely new ones such as Instagram, Spotify and Netflix.
How can you plan for a future that is unpredictable and uncertain due to this fast-paced change?
To prepare or not to prepare?
How can we know about the future when it does not even exist yet? Futurologists state that it is true that we do not have facts of the future and that we cannot ever be certain about it. But, it is also true that the future always exists through our perception. What we can do is to educate our perception about the future and make ourselves prepared for different alternative futures. Or even better, we can shape the future!
We can expect that the future is very different from the past and the prevailing notion is that the change has never before been this fast in business environments or societies. And most likely, it will never be this slow again, either. The fact is that the future unfolds every second, whether we are prepared for it or not. To prepare or not to prepare – both are decisions that will affect your future equally.
Nowadays companies are implementing different practices in order to respond to changes and to be better prepared for the future. OP Financial Group’s President Timo Ritakallio describes in his recent book Elävä Strategia (“The Living Strategy”) elements of Foresight approach. This approach can make a company future-resilient by improving tolerance towards change and complexity. In short, Foresight helps companies to build visions, make better decisions, move towards long-term thinking and shape the future.
Foresight is about anticipating – rather than predicting – the future and about taking into account the change that might take place. This change can be discontinuous or continuous. Foresight is a well-documented practice in Futures Studies literature and it offers wide-ranging value for companies. For example, it helps to anticipate and understand change, spark innovations, reduce uncertainty, reframe strategy or, in the end, support decision-making and even improve competitiveness.
With Foresight, it is acknowledged that as we cannot predict the future, we have to consider different alternative futures and prepare for them. This is commonly done as a systemic and participative process with several methods that aim to create an understanding of the present with its drivers, future options and the vision the company strives for in the medium or long-term.
Foresight brings benefits – Just ask Nokia!
When a company carries out a Foresight-based analysis of the future, the process results in future insights that help the company define its strategic directions and create a basis for a competitive advantage as well as for longevity.
Indeed, an extensive study by Arhus University and EBS Business School confirms that Foresight creates value for companies when preparing for the future and change. Additionally, another longitudinal study by Aarhus University and Deloitte shows that Foresight does not only improve the resilience to change, but it also helps companies to outperform their competition in terms of company value and profits. Future-prepared companies are found to be 33% more profitable than firms on average, and they have a significantly higher growth rate.
In Finland, especially Nokia and OP Financial Group are known for their Foresight practices. Nokia chairman Risto Siilasmaa and OP’s Ritakallio are firm advocates of scenarios when it comes to preparing for the future and evaluating different trajectories as well as courses of action. According to Siilasmaa, Foresight helped Nokia in finding a new strategic course in the network business and affected the decision to acquire its competitor Alcatel-Lucent after its mobile phone business had failed. Nokia is an example of a 150-year old company that has reinvented itself and its business when facing TUNA conditions.
All in all, Foresight enhances future-resilience.
Not only for the CXOs
The most common Foresight methods used by companies include scenario building, trend analysis, forecasts and scanning for change, such as detecting weak signals and wildcards among others.
The starting point of Foresight should be setting the time horizon further than the traditional strategy work that normally reaches somewhere between one to three years into the future. Looking into the future that is further ahead helps companies to detach from their present mindset as well as from their operating and business models, and even helps them to reframe their strategy. This provides the company a chance to renew itself – and as many experts have noted, companies cannot endure in the long term without reinventing themselves.
Ideally, Foresight is not only a process for the upper management team, but rather embedded to every level of an organisation. For example, every employee of a company can be on the lookout for the future by detecting signals of change and interpreting their consequences for the company.
Common methods used in Foresight
Here are some elements that can be considered when applying Foresight to shaping a company’s future:
Scenarios present a path and its drivers towards plausible futures. Scenarios are usually presented in the form of a story that is internally consistent and interesting enough to capture attention. A scenario should present causes and effects that link a future setting to the present, as well as describing events, focal decisions and consequences throughout the story narrative. Scenarios are said to be the most powerful tools for challenging prevailing mental models and they can remove obstacles that are limiting creativity and resourcefulness. They are often used for reframing strategy and enhancing decision-making.
Forecasting belongs to a statistical modeling approach in futurology studies. Forecasts are based on quantitative data measurement and analysis that then project forecasts about the future. These statistical methods can be useful, but their caveat is that they are in most cases based on historical data that might not take into account changes in future conditions.
Workshops are an efficient way for engaging people in participatory Foresight. Workshops serve as a method for bringing together different perspectives, creating new and surprising ideas, or revealing assumptions in an organisation.
Horizon Scanning is one common method of Foresight. This method focuses on understanding what is happening in the business environment – both internal and external – and gaining relevant information to support decision-making. This kind of anticipation of change takes place on four levels: wildcards, weak signals, trends, and megatrends.
Megatrends are slow, ongoing changes with a huge impact on the entire world and its societies. They change or get disrupted rarely, if ever, and it takes a long time for them to end.
Delphi is a widely used data collection method that brings together an expert panel and engages it into a discussion on a theme and its possible trajectories for the future. The aim is to form well-grounded opinions and outlooks based on expertise.
Foresight as a Service
Even though many companies are convinced of the benefits of Foresight, some are still wary about the approach. The reason might be that starting such practices can be perceived as time and resource-consuming, but this does not have to be the case.
Small steps, such as vision building or perceiving what kind of effects megatrends might have on your business and the business environment in the future, can act as a starting point. The cost of doing nothing amid changing times can be greater than the cost of implementing Foresight to your company. As noted, even academic research shows that future-prepared firms are outperforming the ones that are not prepared.
Sofigate has created a Foresight as a Service (FaaS) model that helps companies analyse different drivers of change and build future scenarios in a systematical and participatory way. Do you want to know more and turn your business future-resilient? Please, contact Practice Lead Sanna Suomela or fill the form below for more information.
About the authors
Sakari Nisula is a Foresight specialist at Sofigate’s Business Design and Innovation Management Team. He holds a master’s degree in Futures Studies with a business twist. Sakari’s motivation lies in resisting short-termism and promoting “the art of the long-view” for companies and organisations.
Minna-Maria Salonen is a passionate problem solver and business designer at Sofigate. She has been combining tools and best practices from service design and futures research to bring organisations closer to the resilient future.