Most companies are missing the opportunities of strategic foresight in developing and growing their business. We have seen this time and again both in our research and in our work with companies. Instead, managements’ focus is mostly on immediate results or short-term profits and incremental development.
In doing so, they fail to take advantage of many emerging opportunities for future business.
Yet research has shown that strategic foresight can help to improve business competitiveness. When viewed in the long term, firms that systematically invest in foresight are more profitable and grow their value more than others.
Indeed, strategic foresight is a largely unexploited opportunity for companies. It allows firms struggling with transformation to recognize emergent technologies, identify social and political disruptions, foresee and forecast changes in consumer behavior and understand market changes.
As the pace of change in the world continues to accelerate and the operational environment becomes ever more complex, it is increasingly important for firms to understand future trajectories. This is especially critical in the VUCA world, where volatility, uncertainty, complexity and ambiguity complicate strategic management. Strategic foresight offers a useful set of methods and tools for upgrading strategic thinking and actions in an environment of continuous disruptions.
So why then businesses don’t harness strategic foresight in a systematic way to support their management processes? In our experience, there are several reasons. Most importantly, firms do not considered systematic foresight to be so critical for practical business management that it warrants significant investments.
Developing a foresight system to identify and analyze future opportunities is often considered expensive. It’s often thought of as a slow and laborious process with uncertain value. Concrete benefits from systematic foresight are not expected to materialize until well into the future.
This is why it’s difficult for middle management, say the strategy team or the R&D unit, to prove to the CEO and the executive team that investment in systematic foresight makes financial sense. And equally, it’s difficult for corporate management to prove to the board of directors or the company’s shareholders that investments in systematic foresight are essential for business. Therefore, management often focuses the money in areas that yield immediate and numerically demonstrable value.
The systematic development of foresight requires that its value to the business can be clearly and practically demonstrated. But how to do this? What exactly are the benefits of systematic foresight to firms? What are the needs and problems that systematic foresight can resolve? What are the specific processes on which foresight can contribute with significant knowledge and insights?
Investing in strategic foresight, we suggest here, increases the competitiveness of the company in three key areas:
- strategic management
- new business and growth
- organizational renewal
Next, we look at these benefits in more detail.
Firstly, foresight provides valuable and useful futures knowledge in support of strategic management. In practice, this means that systematic foresight allows firms to gain a deeper and wider understanding of the changes in their operating environment and their impacts on strategic decision-making.
Furthermore, identifying weak signals, for instance, can help corporate management question current strategic assumptions and principles and forge a common strategic vision of the company’s future direction. Companies need to grasp what the future world could look like and what impact their business would have in that environment. Foresight helps in develop an understanding of the company’s purpose and position in the future society – and its role in building that society.
Systematic foresight will also help firms prepare for alternative futures and associated risks. Most importantly, however, foresight is used not only to identify and control risks but also and specifically to facilitate controlled risk-taking. At the same time, it opens up new strategic paths to bolder decision-making and to more adventurous explorations.
Secondly, foresight supports the development of new business and growth. Systematic foresight helps corporate management understand market development, the emergence of new markets, and changes in industries and value networks.
Foresight can also help firms identify new growth opportunities and take advantage of them. It allows to develop well-founded growth strategies and to chart roadmaps for future growth. At its best, disruptive foresight can even provide insight and tools for creating whole new markets.
Foresight can help understand the needs and behavioral patterns of future customers. An enriched understanding of future consumers is also important in developing future concepts and products. To develop the firm’s product portfolio, it’s important that new ideas are co-created and tested with customers and stakeholders.
Thirdly, systematic foresight provides broad support for organizational renewal. Futures knowledge helps the organization to question its strategic assumptions and prevailing paradigms. This will allow the organization to constantly reassess the organizational beliefs and work practices to strengthen its resilience.
Foresight will help to create a better understanding of what kind of organizational capabilities and skill sets are crucial in the future. Firms need to have new and broad-ranging competencies to enhance their capacity for self-renewal and innovation in a constantly changing business landscape. Developing future skills and competencies is critical to improving business competitiveness.
Companies should also invest in building organizational structures and culture that support employees’ efforts to create and take advantage of futures knowledge in their everyday jobs. Furthermore, investing in various networks and ecosystems of co-creation will foster the application of futures knowledge.
As discussed, it is difficult to demonstrate the value of systematic foresight based on short-term economic indicators. Usually, the benefits of futures knowledge become apparent years later. This is why many firms fail to focus on strategic foresight. It is, therefore, crucial to develop methods that clearly demonstrate the value of futures knowledge to encourage managerial boards to invest in systematic foresight.
A holistic understanding of emerging consumer habits, new markets and social phenomena opens up new strategic opportunities for innovation. When firms have access to solid and evidence-based insight about the future, they will also have the readiness and courage to invest in new growth opportunities. Therefore it is critical for firms to invest in creating a systematic understanding of possible futures to identify and take advantage of the emerging changes and disruptions in the uncertain world.
About the Authors
Ph.D. Nando Malmelin works at VTT Technical Research Centre of Finland as a Professor of Practice focusing on strategic change. He is also an Adjunct Professor of media and communication studies at the University of Helsinki.
Dr.Sc. (Tech.) Kalle Kantola is a Vice President, Foresight and Data Economy at VTT Technical Research Centre of Finland. He has several positions of trust around innovation, digitalization and business strategy.