delta∆effect 23.3: The Benefits Of A Futures-Focused Business Plan.
Welcome to the unpredictable and exciting world of business planning! Contrary to popular belief, business planning is far from being a linear process. Instead, it's a winding journey filled with unexpected turns, and that's where the power of foresight comes into play. Foresight is about more than just looking at futures; it's about preparing for change and embracing the uncertain with open arms. And whilst we can't predict futures with absolute certainty, we can certainly prepare for them.
In this delta∆effect article, we'll explore the frames of reference and changes in thinking that are driving business planning away from the old past-data-driven linear forecasting models and towards a futures-focused, foresight-driven approach.
The world is changing exponentially.
The world is changing faster and faster. Businesses can no longer operate in the same way they have done for decades. As new technologies, markets and business models continue to emerge, businesses must be prepared to rapidly identify and react to change to stay competitive and to survive.
Our minds like to see change as linear, growing by the same amount in each time step. In reality, the changes we experience are more complex and often non-linear. Exponential change is a common phenomenon, occurring when the rate of change is linked to the present value. This implies that change accelerates at an ever-increasing pace. When exponential growth happens to things like the money in our savings account we like it. When it happens to things like COVID-19 or technological change like AI, it can cause us grief.
Watch this short video(1) below to see the impact of exponential change on Frog and his pond.
NB: Watch for the impact of exponential change in time periods 8 and 9 when the growth in lilies changes Frog's world dramatically.
By reminding ourselves of the impact exponential change can have, we can better prepare for the unpredictable. Too often, businesses create plans without considering the increasing speed with which change can occur. We are on the cusp of an era characterised by swift and unexpected global changes, as various advancements in society, technology, the economy, the environment, and politics converge. Things we could not have predicted a decade ago, or even last year, can hugely influence our business decisions today and the impact they may have tomorrow.
Therefore, businesses need to have a plan that takes into account the ever-evolving landscape. The ability to successfully anticipate and manage emerging change can make all the difference in shaping a company's futures and success. By planning for futures and anticipating change, businesses can be more proactive and less reactive in their approach, leading to greater resilience and sustainability over time.
The world is a system.
In 1997 in an address to the Council on Foreign Relations, on the future development of US foreign policy, US Secretary of State Madeleine K. lbright used the phrase;
“...what happens anywhere will matter everywhere."(2)
When we first start exploring the change around us this idea of connectedness and interdependence is an important starting place. Systems thinking is a useful tool for businesses striving to anticipate and manage change as it involves exploring the world as a whole rather than just its parts. Once we understand the whole we can drill down to the parts that matter most, but to start exploring we need to look as broadly as we can.
Systems thinking is a way of understanding how the world works. It helps us to see the hidden connections, patterns and loops that underlie the complex systems that encompass our business. Rather than looking at individual parts or elements within an organisation, systems thinking takes into account the broadest set of factors and interactions – both inside and outside the organisation – to understand how they impact one another over time.
By understanding and exploring the interconnections of a complex system, businesses can be better prepared for change. This is particularly useful in times of rapid and large-scale disruption, where businesses need to act swiftly to ensure they remain competitive.
When we start thinking about systems we start thinking about:
Interconnections: how things are connected.
Emergence: how things emerge out of interaction and change.
Synthesis: how the whole is created by the relationships of its parts.
Causality: how small changes can cause big impacts over time.
Systems thinking provides real benefits to today's business planning. It helps to frame complex problems that are often misdiagnosed when employing linear thinking. It also helps reveal options for managing change and enables organisations to be more resilient in the face of disruption.
Businesses should use systems thinking to prepare for their futures. By mapping and anticipating patterns of change, they can identify emerging trends and make more proactive decisions about how best to respond, allowing them to remain competitive in an ever-changing world.
Long-term thinking is the best short-term strategy.(3)
"From 2001-2014, the revenue of long-term firms cumulatively grew on average 47% more than the revenue of other firms, and with less volatility. Cumulatively, the earnings of long-term firms also grew 36% more on average over this period than those of other firms, and their economic profit grew by 81% more on average." - McKinsey Global Institute(4)
Intuitively we accept that long-term thinking beats short-term most days, however, it can be incredibly difficult to shift our mind into the long game. Long-term thinking requires businesses to move away from the immediate need for action and step back to take a longer view of what's going on in the world around them. With this view, they can then take stock of their reality and how it could change over time and be better equipped to respond.
In recent years the COVID pandemic, technology advancements, global conflict, environmental threats and economic instability, have forced many leaders to become reliant on what psychologists call "surge capacity"(5) - our ability to adapt, both mentally and physically, to short-term challenges when faced with chronic and ongoing stress. In a fast-changing world, leaders can find themselves constantly in crisis mode, prioritising urgent matters and being consumed by one immediate crisis after another. In a previous job we had a saying;
"nothing solves a problem like the appearance of an even bigger problem."
Short-term focused management at its finest! In this management mode, we may feel like we are handling the most important issues dealing with the most immediate problems and delivering the results required, however by failing to step back and look at the long-term implications of our actions, we expose our businesses to lost opportunities, soft growth, and declining impact.
To avoid this, leaders need to shift their focus from responding to short-term challenges to preparing for the long-term. By taking a longer view, they can identify opportunities as well as potential risks associated with changes in their industry, the marketplace and the global economic climate. This longer-term view also supports increased creativity, agility and innovation. (NB: more on this in another delta∆effect article.)
Beyond the shift from the immediacy of response and the time allocation required, the biggest challenge faced by long-term thinking is that the longer our thinking and planning extends, the more variables we have to identify and explore. This can lead to long-term thinking taking a long time and requiring significant resources - another barrier to implementation. It is important to know that there are tools and methods available, built from robust academic theory combined with practical business application, that support leaders to engage in structured long-term thinking. Under the banners of foresight, strategic foresight, futures intelligence etc. they provide a structure for leadership teams to think more holistically about their futures and develop strategies on how to prepare for them. Learning to use these tools and methods can help leaders plan and make decisions long-term, with more confidence and greater reliability.
Ultimately business success is rarely achieved in a straight line - it is about having a vision, creating long-term plans and being prepared for the unexpected. By taking a long-term view, leaders can make sure they are ready to take advantage of the opportunities and prepare for all the uncertainties, presented by a rapidly changing world.
From a straight line to...
Change is occurring exponentially, we need to think of the world as a system and long-term thinking is the best way forward. What does a business plan look like in this context?
Well, it's no longer a straight line...and maybe it never was. For so long business leaders have been taught to plan using past data and extrapolate previous results forward to forecast future results. This kind of linear thinking, while easy to understand and manage, is no longer enough in the hyper-dynamic business world. Previous results data may help us forecast the next 3-6 months but if we are going to adapt your business to the changing world and stay ahead of the curve, we need to utilise foresight.
Foresight isn’t predicting futures and it's beyond forecasting, it is about exploring and building an understanding of a range of potential futures and making decisions based on that knowledge. It’s a process of identifying, qualifying, and quantifying emerging change and trends in the world and assessing their implications for your business.
Foresight is proactive, it helps us to prepare for change rather than merely react to it. It allows us to anticipate the impacts of emerging changes in markets, customers, regulations and technology on your business and adjust quickly and effectively. This enables us to confidently explore new opportunities, build competitive advantage, and drive long-term success.
So how do you utilise foresight in business planning? It requires a mindset shift from linear thinking to non-linear, adaptive and agile thinking. Business leaders should embrace this new paradigm by learning more about emerging trends, allocating time to engage with their external world, staying informed of social, technological, environmental, economic and political developments, and honing their collaboration skills.
Ultimately using foresight in business decision-making is about preparing for a range of futures by understanding what might happen, rather than trying to predict it. It’s a proactive approach that empowers organisations to be agile and adaptive in the face of uncertainty while also building long-term sustainability. It's an important skill set for any business leader who wants to keep their organisation ahead of the curve.
The shift from linear to foresight-based business planning doesn't have to be daunting. With the right people, processes, and tools in place organisations can become more adaptive and agile while striving for long-term success. Leveraging foresight to drive strategic planning is a powerful way of preparing for change in an ever-evolving world.
Check out article 23.4 in our delta∆effect series to learn more about implementing foresight into your business.
References:
(1)Video concept adapted from: Lang,T. Ramirez,R. Tending the lily pond: Exponential growth and scenario planning. April 2020. Viewed at https://www.sbs.ox.ac.uk/oxford-answers/tending-lily-pond-exponential-growth-and-scenario-planning
(2) Secretary of State Madeleine K. Albright Address and Question & Answer Session before the Council on Foreign Relations. Madeleine K. Albright. Council on Foreign Relations. September 30, 1997. Transcript at https://ciaotest.cc.columbia.edu/conf/alm01/
Dominici, Gandolfo. (2012). Why Does Systems Thinking Matter?. Business Systems Review ISSN 2280-3866. 1. 1-2.
Westover, J.H (2020) The Role Of Systems Thinking In Organizational Change And Development, forbes.com viewed at https://www.forbes.com/sites/forbescoachescouncil/2020/06/15/the-role-of-systems-thinking-in-organizational-change-and-development
(3) Carey, D., Dumaine, B., Useem, M., & Zemmel, R. (2018). Go Long: Why Long-Term Thinking Is Your Best Short-Term Strategy. Wharton School Press.
(4) McKinsey Global Institute, Measuring the Economic Impact of Short Termism, Discussion paper, February 2017. Viewed at https://www.mckinsey.com/~/media/mckinsey/featured%20insights/long%20term%20capitalism/where%20companies%20with%20a%20long%20term%20view%20outperform%20their%20peers/measuring-the-economic-impact-of-short-termism.pdf
(5) Haelle, T. Your ‘Surge Capacity’ Is Depleted — It’s Why You Feel Awful. Elemental, August 2020. Viewed at https://elemental.medium.com/your-surge-capacity-is-depleted-it-s-why-you-feel-awful-de285d542f4c
