delta∆effect 23.1: A Great 5-year Plan Requires Thinking 10 years Ahead.
Many businesses may think a 5-year business plan is their finish line, their final destination. But, what if we told you that the magic truly happens when you think even further ahead? Imagine this - a 5-year business plan built with the foresight of 10 years. It may sound a bit much, but stay with us. This isn't about predicting the future, it's about preparing for it. It's about leveraging the power of foresight to navigate the often turbulent waters of business growth and sustainability. Let's delve deeper into why a 5-year business plan should be more than just a 5-year view and how thinking a decade ahead could be your secret weapon to long-term growth and success.
When you stretch your thinking 10 years forward, you identify and plan for future developments that could impact your business. Whether it's a market shift, new regulations, a change in customer behaviour, environmental impact or a potential new player in the field, understanding what’s coming down the track can help you stay ahead of the curve. When you look 10 years ahead for a 5-year business plan, it allows you to identify areas of uncertainty and opportunity and think strategically about how to address them. This can help you better identify the actions, resources and investments needed to reach your 5-year business plan’s objectives. Having a clearer understanding of what needs to be done over a longer timeline, allows for more effective preparation for change and more successful integration of adaptive strategies.
Thinking 10 years ahead has several benefits for your 5-year business plan.
Research conducted in 2020 by the Nuremberg Institute for Market Decisions and Institute for the Future(1) showed
"executives from top foresight performers perceive their markets as less complex and more predictable than their competitors."
This was attributed to their ability to get ahead of trends, mitigate risks and shape markets with a clearer long-term view.
A great 5-year business plan must also be forward-looking enough to anticipate potential risks and changes over the next decade. This means taking into account macroeconomic developments such as globalisation, technological advancements or new regulatory regimes that could impact your business. Being able to anticipate these changes and plan for them accordingly, can be crucial in allowing your business to remain competitive in the long-term
In their 2018 research paper titled "Corporate Foresight and Its Impact on Firm Performance: A Longitudinal Analysis," Rohrbeck and Kum(2) presented compelling evidence of the beneficial effects of cultivating foresight on organisational performance.
By employing a seven-year time lag and utilising five different assessment approaches, the researcher's findings revealed that firms that were prepared for their futures, classified as being "vigilant", had a significantly greater probability of achieving success and outperforming others in their respective industries.
The analysis uncovered that companies that employed foresight experienced a solid 33% increase in profitability and an impressive 200% growth in market capitalisation compared to the average. On the other hand, organisations that neglected to leverage foresight in preparing for future scenarios suffered a significant decline in profitability ranging from 37% to 44% when compared to firms that embraced foresight.
These data points demonstrate the power of thinking 10 years ahead when building a 5-year business plan. It can help you better understand the world around you, including how markets are changing over time, and it can make a demonstrable impact on your bottom line.
At the heart of foresight is the ability to identify, qualify, quantify and assess emerging change and trends that may present opportunities or threats to your business. By having a view on how the world could change, and how you and your business could respond to that change, you can become better equipped to hedge potential challenges and shape potential opportunities.
Thinking longer term can bring profound benefits that extend beyond mere profitability and market capitalisation. Here are some key points to consider when assessing a foresight approach.
Foresight thinking encompasses a wide range of factors, such as emerging societal challenges and trends, while also considering their interconnections. This holistic approach enables firms to generate rich insights into a range of potential futures.
Foresight thinking involves looking at a wide range of information sources, both conventional and unconventional. It also involves paying attention to the knowledge and experience of each individual involved in the process. This helps to get a robust collective point of view on what futures might appear and delivers more diverse and meaningful insights.
Foresight thrives on a wide range of stakeholder inputs. Foresight empowers staff members to actively participate in shaping their organisation's futures and provides them with the skills to respond quickly to an ever-changing world.
Foresight is a continuous, iterative process that can be used to create change rather than just respond to it. A well-executed foresight strategy helps organisations shift from reactive responses to proactive ones, allowing them to drive their futures instead of being driven by them.
Foresight work looks at the big picture of our choices. It is not about predicting what will happen, but more about gaining an improved understanding of how short-term decisions will influence long-term results.
Foresight work involves examining the assumptions people hold and understanding the underlying reasons for their beliefs. These assumptions often stem from deeply ingrained convictions that can be resistant to change, even in the face of evidence proving them wrong or outdated. Recognising these biases and blind spots can help inform more effective decision-making.
By cultivating and harnessing foresight, businesses can foster an ecosystem that nurtures emerging capabilities, cultivating knowledge and equipping the organisation and its people with the tools to shape brighter futures.
The great thing about cultivating foresight is that it can be done at any stage in a business lifecycle. It may take a bit of investment and effort initially, but the rewards are significant. A 5-year business plan created within a 10-year foresight horizon will help you stay informed, anticipate potential problems before they happen, identify untapped opportunities and develop flexible strategies to navigate change.
A great 5-year business plan should be a dynamic and evolving framework, open to feedback from stakeholders and adjusted as new information becomes available. By implementing foresight into your planning process, businesses can ensure that their 5-year business plans are more likely to succeed in the long run. With foresight, companies have the potential to maximise their opportunities, manage risks more effectively and remain competitive in a fast-changing world.
If you're looking to build an effective 5-year business plan, don't just think five years ahead –think 10! By embracing foresight, your organisation will be better prepared for whatever futures come your way.
So how do you think 10 years ahead? Visit insightandforesight.com.au and check out edition 23.2 of the delta∆effect.
References:
(1) Buder, F. (2021). The Value of Foresight in a VUCA World. Results from a Survey of Organizational Foresight Capacity. NIM Research Report.
(2) René Rohrbeck, Menes Etingue Kum, (2018) "Corporate foresight and its impact on firm performance: A longitudinal analysis." Technological Forecasting and Social Change, Volume 129, Pages 105-116.
