If there is one thing governments, businesses, and society everywhere agree on then it is that we are living in unprecedented and uncertain times. We see trade wars, social unrest, global health crisis, and an actual war in the heart of Europe unfolding in front of our eyes impacting our lives and businesses. But how is a company supposed to consider these external disruptions in its strategy? How could you have predicted the events of 2022 when looking into your strategy in 2021?
The simple answer is you could not have predicted what has happened in 2022. Strategy today is no longer about setting a fixed target and a pre-defined path towards that goal but about establishing a framework and guardrails that will help your company navigate the uncharted territory that lies ahead.
One of the reasons we established Taival six years ago was the understanding that the way we do strategy has to fundamentally change. Inspired by the service design methodology that back then took the world by storm, we developed a new, dynamic strategy development framework that we have since then been shaping and developing further.
The Dynamic Strategy Model builds on several key principles that contrast the traditional strategy process:
The role of Foresight in Strategy
So, how do you make your strategy fit for the future? Traditionally, the strategy process is built mostly on past data. Meaning, to predict the future development of markets, customer behaviour, and the regulatory environment you would look into the rear-view mirror. What have our customers bought in the past years? How was our financial performance? What was our cost structure?
The information about past performance and market conditions is then used to predict the future and to plan how to optimise the organisation. The only problem with this approach is, that given the rapid development of the operating environment of businesses in all industries and geographies, historic data is a very bad predictor of the future. This is where foresight or futurology comes into play.
What is foresight? According to Wikipedia[1], foresight is defined as critical thinking concerning long-term developments and consists of three building blocks:
- futures (forecasting, forward-thinking, prospective),
- planning (strategic analysis, priority setting), and
- networking (participatory, dialogic) tools and orientations.
Different from historic approaches, a foresight-driven strategy is considering qualitative data to predict future trends and developments rather than quantitative data. Combining the two approaches enables businesses to forecast future events based on weak, qualitative signals and consider the mid-and long-term effect on their financials, operations, and market position.
Tools like the ThoughtWorks Technology Radar[2] or the Futures Platform[3] can help in understanding and predicting these blips on the radar that have the potential to turn into disrupters of industries.
The impact on your strategy
Foresight can be used to develop an array of plausible futures (or scenarios) that your business will most likely be facing in the longer term. To prepare for that, your strategy process needs to provide the possibility to prepare “parallel” strategies that consider different scenarios, reactions, and outcomes. Backward engineering the chains of events leading to the alternative futures gives you a radar through which you can monitor the shifts in the probabilities of the different scenarios. As such, foresight and more specifically the resulting scenarios can help companies identify the pivotal events it needs to succeed in and emerge as a winner in the future.
Conclusion
There is no denying that understanding the current and past performance of your business is critical for success. But to understand and predict future scenarios, threats, and opportunities the future, the dynamic strategy process needs to strongly consider qualitative information and early blips on the business radar. Additionally, the strategy development and execution process needs to be able to consider multiple scenarios of the future and enable the management team to adjust and react along the way once early blips on the radar become reality.
For business leaders, this means transforming the strategy process from an annual event that looks in the rear-view mirror to predict the future to a forward-looking, continuous process that reviews and adjusts the strategic direction of the company based on scenarios and the ongoing evaluation of the operating environment.
At Taival we believe that the future holds tremendous opportunities for those that can understand its trends and developments and are able to adjust their direction on the go. Let’s talk today about how we can enable your organisation to be a champion in the future.
Further reading:
- Dynamic Strategy in times of uncertainty – a deeper look at developing a dynamic strategy process
- Strategy 365
- Know Thyself – understanding the current environment and business situation is crucial, in this article we provide a framework to do that.
[1] https://en.wikipedia.org/wiki/Foresight_(futures_studies)
