The role of foresight should be as the basis for strategic planning and decision-making – it challenges the company to redefine its strategies to fit societal development better. It is important to remember that strategic foresight is not about predicting the future, which is inherently impossible. When we talk about strategic foresight we are talking about finding insight in long-term trends that are observable and actionable today.
Despite the fact that strategic foresight doesn’t aim to or can predict the future, it still has very concrete results when it comes to a company’s performance.
Research shows that future-prepared firms outperformed the average by a 33% higher profitability
and that future preparedness is “a powerful predictor for becoming an outperformer in the industry, for attaining superior profitability, and for gaining superior market capitalization growth”.
Thus, it is quite clear that there are benefits for strategic foresight and every company should do it. One of the reason why companies that do strategic foresight perform better is the fact that all strategic foresight increases the ability to understand the changing world and make better decisions. When we combine looking the long term to the short term understanding, we often make realisations not discovered without foresight. This results into accounting various stakeholders views in the strategy process and incorporating the values of what is sustainable and fair in our strategic decision-making. In more practical terms, through our work we can find at least seven clear results of how foresight can shape the outperforming firm of the future.
Seven concrete results how strategic foresight can help companies to become future-proof
1. Foresight displays knowledge gaps for market research
By showing where to look next and identifying the most important knowledge gaps, additional market research for a specific topic is often one result out of foresight. This means dedicating time and money for additional understanding of what really is going on with specific topic, to acquire more in depth overview at a moment in time of an entire industry and its possible future dynamics.
2. Foresight leads to recruiting new people and capabilities
Foresight often leads to identifying such a knowledge gap or needs for new business areas that result in investing resources in it, through one or several recruits to get the needed capabilities to be successful in the future.
3. Foresight reveals who to create strategic partnerships with now and in the future
Everybody talks about ecosystems these days, how to manage them, how to be part of them, how to create them, how to identify them. Foresight can reveal what type of ecosystems an organisation should be part of and who should be their main strategic partners because they are going to play a crucial role in the future.
4. Foresight shows where to create strategic experiments
One major result that can be achieved through foresight is creation of strategic experiments, in other words testing hypotheses on totally new business areas and models. This can be done for example by creating new teams or units within the company that test new ways of doing business or forming partnerships with unexpected actors. Quite often this requires reshuffling some internal capabilities to be able to capture new opportunities more effectively and can lead to creation of a new strategic area or an addition to the existing ones with the new unit.
5. Foresight results to a creation of a new company for strategic learning and future profits
Especially in larger organisations, foresight can show what part of the industry could be beneficial to have a totally new company or affiliate in, for strategic learning and future profits. For large global companies, this is often the most effective way of doing something else than the current business as the new company will be able to operate on its own, with its own business logic and strategy without having to adhere to the norms and dogmas of the old corporate structure.
6. Foresight identifies when and where to move for M&As
Foresight shows what type of positions different actors are betting on and what type of new actors are arising. Thus, it can also reveal a place for a possible merger or acquisition of a certain company that complements the capabilities of the current organisation to be fit for the future. Acquiring new business offers the possibility to gain rapidly new market knowledge, culture and know-how. Yet, it is complicated and hard to do successfully and specific attention should be given to the mixing of cultures of the companies so that the maximum gain can be achieved from it.
7. Foresight sparks a new strategic direction for the company
In the most extreme case, foresight can create the idea for a new strategic direction or radical reorientation of the role of the company, with the aim to disrupt the industry with a forerunner role. In finding a new strategic direction, foresight can be the lighting spark. This often leads to cannibalization of own business and shaping the market to be radically different than before. Certainly the most costly and challenging of the possible results of foresight, it also provides the largest possibilities for value creation and future profits.
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This is the first part of the blog series about strategic foresight. Read part 2 on why scenarios are the most important tool in strategic foresight and part 3 on the basic concepts of strategic foresight.
Do you want to discuss more about your organisation’s future and strategic foresight? Contact Risto Lätti and connect in Twitter @ristolatti.