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The Value of Strategic Foresight

February 23, 2016

Introduction

In discussing the value of strategic foresight, it is important to distinguish it from forecasting. Forecasting seeks to predict discrete events in the future. By contrast, strategic foresight seeks to help decision makers think through uncertainty. It employs scenarios to consider how trends and developments in a number of areas may come together in different ways to affect the operating environment of an organization both positively and negatively.

The value of forecasting is clear and is directly related to its ability to accurately predict events of concern to decision makers. The value of strategic foresight is less obvious because its benefits, such as enhanced capacity to perceive change, are indirect and less readily measured. Even at Royal Dutch Shell, famed for its pioneering work in scenario-based planning, advocates have struggled at times to communicate its value to corporate leadership. Lessons from the Shell experience and the renewed corporate interest in scenario-based planning are discussed in a recent feature article in the Harvard Business Review, “Living in the Futures.”

Discussion

Scenario-based planning as it is broadly understood today was pioneered by practitioners involved in planning at Shell, who have articulated the concepts, methods and benefits of scenario-based planning that shape current discussions. Some of the most widely cited contributions include Peter Schwartz’ The Art of the Long View and Kees van der Heijden’s Scenarios: TheArt of the Strategic Conversation. Practitioners and academics have identified a number of related benefits of scenario-based methods. These include:

  • Challenging assumptions. Through the development of plausible alternative futures, foresight exercises can lead decision makers to acknowledge uncertainty and consider risks (as well as possible opportunities). Put another way, foresight can help identify blind spots.
  • Testing the robustness of organizations and policies. Foresight provides a means of assessing how an organization or policy might fare against different contingencies. It can be used to identify critical weaknesses and inform changes that will enable better performance under a range of conditions. Robustness testing is presented as a typical outcome of the scenario process by George Wright and George Cairns in their discussion of scenario methods, Scenario Thinking: Practical Approaches to the Future.
  • “Rehearsing for the future.” Peter Schwartz coined this phrase in Art of the Long View, by which he refers to how scenarios enable decision makers to consider and mentally prepare for different situations in the future. While decision makers cannot anticipate the particular future they will confront, they can prepare themselves to some degree by thinking through the implications of different situations and possible responses. This understanding of scenarios is influenced by the practice of war gaming, commonly used in the national security community, which allows decision makers to make and learn from mistakes in a non-threatening game-like environment.
  • Recognizing “weak signals.” Schoemaker defines weak signals as “seemingly random or disconnected pieces of information that at first appear to be background noise but which can be recognized as part of a larger pattern when viewed through a different frame or by connecting it with other pieces of information.” These signals can alert us to incipient developments that have the potential to significantly shape the future (e.g., technological discontinuities, major changes in social attitudes). Scenario-based planning is well suited to capturing such information and integrating it into the planning process. Leading practice is to develop indicators that can be used to monitor developments over time and provide early warning of significant changes expected to trigger the onset of a scenario.
  • Improving communication. A benefit of foresight that extends beyond planning is improved communication. Participation in the development and discussion of scenarios can lead to a shared recognition of trends and developments shaping the future. This shared understanding can facilitate conversations about strategic issues, such as the distinctive competencies of an organization and how it is positioned to carry out its mission. This is a particular focus of van der Heijden in The Art of the Strategic Conversation.
  • Improving coordination. A shared recognition of trends and developments shaping the future can also facilitate the coordination needed to prepare for possible futures and to respond effectively to events when they occur. Mietzner and Reger make this connection their review of the strengths and weaknesses of scenarios. Improved coordination was a key objective emerging from Project Horizon, an ambitious cross-agency foresight effort sponsored by the State Department. The final report recommends building a range of interagency capabilities to prepare for the anticipated changes in the global operating environment.

As this brief discussion makes clear, the benefits of foresight derive as much from the social process as from the analysis itself. This points to the importance of how foresight is organized, a topic addressed in the earlier blog post, “What is Strategic Foresight.”