How firms can avoid hazards and take full advantage of emerging opportunities
While most of us would not call ourselves futurists or trend watchers, we mimic them unconsciously every day. We stay informed of events in politics, business, popular culture and our areas of interest (perform an environmental scan); try to understand events and how they relate to us (analyze and interpret drivers of change); and imagine what type of future the past and present might create (develop scenarios).
Indeed, anyone who has played chess has taken part in simple strategic foresight and scenario planning.
Whether developing contingency preparations in response to global military threats or deciding on a long-term approach to public transportation investment, leaders of all types of organizations use foresight development and forecasting as essential components of strategic planning. In order to be effective in carving out a path through the future, leaders must understand what type of world they are planning for.
The old bromide of forewarned is forearmed is only part of the rationale for attempting to understand the future. Firms that engage in strategic foresight can not only avoid hazards, but also position themselves to take full advantage of emerging opportunities.
A recent Harvard Business Review article cited research by Germany’s EBS Business School that found four ways in which formal strategic foresight efforts add value:
- Enhanced capacity to perceive change
- Enhanced capacity to interpret and respond to change
- Influence on other actors
- Enhanced capacity for organizational learning
According to a recent report in The Economist, use of scenario planning is on the rise. The article cited an annual Bain & Company survey of management tools that found fewer than 40 percent of companies used scenario planning in 1999, but the number had grown to 70 percent by 2006.
Firms that anticipate disruption and track changes in operating environment can see crucial gaps in the satisfaction of future market needs — and be the first to fill them. An understanding of future market needs can fuel innovation in what a firm offers and the process by which it does its work.
Anticipating disruption allows firms to play not only early-to-market offense, but also proactive defense. Understanding twists in the road also allows leaders to anticipate threats and position their firms effectively to avoid them. What will we do if our primary market tanks? Or we see a new category of competitor? Or a new design technology renders our IT knowledge and investment obsolete?
A less tangible but still valuable benefit to strategic foresight is the effect on the firm’s culture. Three of the four benefits named in the EBS study enhanced capacities within an organization. The process of strategic thinking and digging into the complexities of the future can sharpen a firm’s view of the world, boost its ability to learn, and promote a culture of productivity.
Strategic foresight provides leaders a clearer idea of roads that may lie ahead, allowing them to confidently prepare options for positioning the firms (and themselves) for success.
Look Here, See There
If it makes sense to integrate trend analysis and foresight into strategic planning, where should leaders begin? The first step is understanding the basics of where to look for trends and how to spot potential implications.
The Splash Metaphor
A splash is a good illustration of what futurists look for. They try to see where the splash takes place, how big it is, and what the rock looked like that caused it. Perhaps most importantly they look for the ripples — those hard-to-foresee effects of a change that often happen in realms of life and work far from the one in which the catalytic event took place.
Take the arrival of the iPad. In 2010 the iPad debuted to predictions of a rapid demise. Naysayers included Wired, PC World, Bloomberg, Business Insider and influential tech bloggers. The iPad was lambasted as another Newton or something with limited entertainment use.
However, the iPad defied the expectations of all the pundits. In only nine months, the iPad sold 15 million units and generated $10 billion in revenue. This is the splash — the first indication that an event might be the catalyst for trends (in this case mobile computing). Fast‐forward four years: in July 2014 MacRumors reported that iPad sales totaled 225 million units.
The ripples continued a great distance from the original splash.
By January 2014, an estimated 500,000 apps were available. Relatively speaking, few of them were developed by Apple. A whole new type of software development platform grew to support a new way of computing, and it created new segments in the industries that provided not only programming but also content.
The proliferation of apps, including many directed at the AEC industry, have themselves created something new. Aec-apps.com is a virtual community for tablet users in our industry who wish to share insights and ratings on apps that help in the design and delivery of projects.
One disruptive device set so much in motion: fundamental changes in how we all relate to computing, the creation of new industries to develop apps and content for the new tool, and whole communities dedicated to understanding and taking advantage of the proliferation of options.
The “Downstream Effect”
What if you not see the splash? Look for changes that affect stakeholder groups in the design, delivery, operation and ownership of buildings.
All parties who create, own and use buildings generate and extract value from one another. Design, engineering and construction firms are hired by owners and in turn provide environments that allow the owners to create value for their customers. Consequently, all parties are tied together by the needs and expectations of the others.
Building users are a frequent source of shifting requirements because they are often the place where money enters the equation. An obvious example could be changes in consumer habits that drive new uses for retail and hospitality spaces. Identifying trends and projecting scenarios for the future becomes more complex when the economic relationship includes additional parties, as in workplace design. Simply put, greater numbers of people in the economic equation bring more potential forces and factors that influence needs and requirements.
Generally speaking, the further downstream you look for changes, the longer lead time you have to explore the ramifications of what you see and to prepare a response. The caveat: more parties and steps in any search increases opportunities for error to enter into the equation.
Using Models to Frame the Search
The first and most essential step in scenario planning — and most types of foresight development — is to define the issue or problem to be explored. In order to be successful, a strategic foresight approach must balance focus and breadth. If not sufficiently narrowed, the effort will bog down as researchers follow endless rabbit trails. If too constrained, they can miss important contextual ideas that leave holes in their findings.
Using models can ensure that researchers and planners maintain a healthy tension between deep investigation and broad exploration. Models can also help establish research priorities and keep the effort focused on what is important.
A good first option is to build a model for investigation based on stakeholders — parties that play important roles in the market and profession. Who influences the customers of our clients? What motivates each group? How will the views and actions of one party in the value chain change in response to shifts in the demands of others? A good response explores issues and develops interpretations through the lens of stakeholder concerns.
Another helpful approach is to focus on what rather than who — to direct research based on relevant domains of knowledge and practice. One helpful framework is Greenway Group’s Design+Enterprise model, which captures the key dimensions of a design-based business: marketing, professional practice, operations, finance and leadership. What will be different in each of these domains? What are the drivers of change? Developing a robust picture of future conditions in all areas of the Design+Enterprise model will ensure you can develop more comprehensive and useful scenarios.
Regardless of approach, two key questions can guide your search:
1. In what ways will the market’s demands of you change? (What new or different things will people want?)
2. What will change that enhances or transforms what you are able to do, and how you can do it (more effectively or efficiently)?
Behavior Problems: Understanding the Dynamics of Trends
The difficult task of understanding and predicting trends is complicated by the complexity of how they behave. While the most fundamental tenet of strategic foresight seems to be a complete lack of hard-and-fast rules, certain patterns and dynamics in how trends behave can be helpful in forecasting future events.
Megatrends drive other trends
Like a massive clump of rocks thrown into the pond, megatrends are massive forces that create a cluster of other trends. Tracked by global consultancies like PwC and McKinsey, megatrends include broad and pervasive themes such as technology, demographic shifts, and the eastward migration of global capital and political influence.
Trends rarely happen in isolation
Whether caused by megatrends or some other driver, smaller trends and their ramifications overlap and have an unpredictable effect on one another. In order to capture a picture of how clusters of trends affect one another, firms can employ multiple search models and cross reference the results of each.
Trends can be small to large in scale, and local to global in scope. Smaller trends, when they are focused within your industry, can frequently have a greater impact on your firm than much larger events.
Same trend, different outcomes
Trends affect groups differently. For instance, mobile technology affects the affluent developed countries in different ways than it touches the rural poor in the developing world — but it exerts a strong influence on both. This phenomenon highlights the importance of cross-referencing the “what” and “who” models described earlier.
Foresight development gives some truth to the cliché about driving forward by looking in the rearview mirror. Creating effective future scenarios involves seeing patterns and trajectory in historical trends, then predicting their direction and likely outcomes. Like the periodic re-emergence of bell bottom pants, many trends are cyclical; a good understanding of history will help you spot those things that are destined to return.
Equal and opposite reactions
Trends are neither monolithic nor unidirectional. Frequently, movement in one direction will result in a counter-trend that heads the other way. Examples include swings in the political pendulum, or the emergence of new clothing lines that seem to contradict last year’s fashions. Scenarios should consider the effect that reactions to trends will create in the market.
Universal ideas don’t change
Maslow’s Hierarchy of Needs, the psychological theory of human motivation, highlights basic characteristics shared by all people. The needs that straddle divides among cultures are consistent across time. Basically, people are always after the same things; how those needs are satisfied sometimes changes. Alert trend spotters use these universal motivators to better understand why certain trends take place and how people may seek to satisfy their needs in the future.
Unfortunately, there are no hot stock tips on the future. The practice of strategic foresight is inherently foggy around the edges. But leaders who embrace uncertainty and remain creatively open in scenario development and foresight planning can glean invaluable insight into the best strategic course for their firms.
Bob Fisher is the publisher of DesignIntelligence.