How does Futures Thinking help for a better Business Strategy?
In this article, I will be sharing my knowledge about Futures Thinking and Business Strategy in a simplified way for Students, Researchers and Strategists who want to implement Futures Thinking in their work process.
What is Business Strategy?
A business strategy is the combination of all the decisions taken and actions performed by the company to accomplish its business goals and secure a competitive position in the market.
It is the backbone of the business as it is the roadmap that leads to the desired goals. Any fault in business strategy can result in the business getting lost in the crowd of overwhelming competitors
The 4 Stages of Business Strategy Development
An effective strategy involves four stages of strategy development.
1. Strategic thinking
Strategic thinking involves intuition and creativity. It generally results in an imprecisely articulated vision of direction.
Note also that this is an iterative process, as these questions need to be asked regularly, and suitable responses developed to fine-tune business plans and activities.
With a longer-term frame of reference, the intent is to reflect on possible future eventualities and possible responses. This doesn’t lend itself to scheduled timetables or precise definitions.
Insights are likely to come from within the organisation, at any level, and it is useful to encourage free-thinking by people at various levels who are deeply involved with specific issues at hand.
Strategic Thinking is more focused on answering these questions
Who are we? Why are we here?
What is the big picture? What are trends and technologies impacting your business?
What is happening around us that we can’t really control?
What does the future hold?
What might happen?
What are our choices?
2. Strategic decision-making
The decision may be to do nothing, but it is important that a decision is made. This involves a process of discussion and debate.
Strategic Decision making is more focused on answering these questions
What are we good at? Bad at?
Where are we going? Where do we want to be?
What will we do to achieve this?
What won’t we do?
3. Strategic Planning
This is the bit that everyone is familiar with — the annual allocation of resources and responsibilities by which management pulls the strategy into reality.
Strategic Planning making is more focused on answering these questions
How we will act to achieve our goals?
What resources do we need to achieve them? What do we need to get/have/do to get to where we want to be?
4. Strategic management
The critical element of the strategy is execution.
Processes that ensure alignment with strategic intent will lead to more effective strategy execution, and higher profits.
Strategic Management is more focused on answering these questions
How will you manage your resources? How will they be directed?
Is this consistent with our purpose, does this promote a longer-term strategic vision?
How will you measure and track progress towards goals?
Problems with Traditional Strategic Thinking
When you see these different stages of strategy development, it is quite evident that “How much is Strategic Thinking is important to overall business strategy?”. It lays the foundations for overall business strategy.
To be a strategic thinker, you can’t just consider the present, the day-to-day in front of you. You have to take stock of the future through evaluating trends and identifying possible scenarios, and interpret the past so you can learn from it.
One important element is recognizing both macro trends that will impact society, maybe the rise of driverless cars, or 3D printing, and micro trends that will impact your industry specifically. Most people don’t bother to seek out this kind of big picture information. They’re content to just do their job, and are surprised when disruption happens.
It is very clear that strategic thinking requires deep analysis and understanding of market drivers and shifting technology. And there is a need to consider the past & future seriously to create an Informed strategy.
However many organizations failed to embrace strategic thinking completely.
Traditional Strategic thinking doesn't embrace foresight research as much as they embrace Market Research & UX Research lately.
Most of the time, visualization of the future is very subjective guesswork and has a tunnel view. The big picture is ignored.
If the strategic Thinking process follows a rational methodology to visualize the future & consider the macro trends. Then it will produce insights into opportunities that others have not realised. I call the process Futures Thinking.
What is Futures Thinking?
Future thinking is a future-centred approach to Long-term strategy — anchored in understanding the driving factors and context of different possible scenarios that could happen in future, creating future artefacts and generating creative ideas — that will enhance the way you do strategy for products, services, processes, and organizations. By using Futures thinking, you will have a forward view to avoid future shocks and to create disruptive innovations.
Steps Involved in Future Thinking
Choose a specific Future: Inspire your team to choose a specific future that is directly related to your product, service, process and organization.
Gather Future Signals: Identify the events (Inventions, Discovery, Policies, Startup etc) in the recent past that has a greater probability to affect your chosen future.
LookBack History: Identify the events in history that directly affected the field of your chosen future and signal.
Find Drivers: Identify the drivers of your signals that belong to you. Eg: If the “2021 Western North America heatwave” is a signal, then climate change is a driver. If “Neurograins” is a signal, then Brain-Computer Interface and “Cyborgs” are drivers.
Create Future Scenarios: Based on the drivers & signals, Simulate multiple possible scenarios that could happen in the future which explores Insights like advancements, changes, supports & constraints in your chosen field.
Generate Ideas: Use the scenarios which you simulated to help to come up with a fresh long-term strategy, vision, and future artefacts.
Share the Story: Once you’ve arrived at the right strategy, vision, future artefact then share the story to introduce it to your colleagues, clients, and customers.
Benefits of Employing Futures Thinking
Futures Thinking helps you to stay on top of trends, you won’t be surprised by disruptions. In fact, you can also be far ahead of others because you’ll have had years to strategize and adapt, so that when disruption hits, you not only have a plan, but you are already implementing it.
Futures thinking will help individuals/products/companies help them plan to build/align with disruptive innovation scenarios/paths.
Visualized scenarios probably aren’t going to happen exactly as you imagine it, but pieces of multiple scenarios might well happen, and identifying possible weaknesses or opportunities early on can allow you to plan more effectively for them.
Majorly Employed Methods in Futures Thinking
Horizon Scanning is a technique for detecting early signs of potentially important developments through a systematic examination of potential threats and opportunities, with emphasis on new technology and its effects on the issue at hand
Futures Wheel is a method for graphical visualisation of direct and indirect future consequences of a particular change or development.
Backcasting is a planning method that starts with defining a desirable future and then works backwards to identify policies and programs that will connect that specified future to the present.
Scenarios are defined as structurally different stories about how the future might develop. By using scenarios companies are able to establish a broader framework for strategic planning and they are provided with new ways of thinking about and planning for the future.
Note: These methods may sound simple but it requires a mindset with a lot of creativity, innovation, critical thinking & system thinking.
Multiple Linear Regression is a statistical technique that uses several explanatory variables to predict the outcome of a response variable.
Random Forests is a machine learning technique that’s used to solve regression and classification problems. It utilizes ensemble learning, which is a technique that combines many classifiers to provide solutions to complex problems.
Moving average is a calculation to analyze data points by creating a series of averages of different subsets of the full data set. A moving average model is used for forecasting future values while moving average smoothing is used for estimating the trend cycle of past values
Related Job Roles
Foresight Strategist: Devise strategies and action plans for increasing the probability of the most desired futures.
Foresight Researcher: Explore multiple alternative futures in long term. Analyze the comparative risks and benefits of each that will help to provocate competitive strategy and Innovation.
Futures Thinking is all about constructing logically possible stories from the future that provokes insight into the present. Definitely, It is not a blind prediction, but a provocation.
Feel Free to connect with me on Linkedin! https://www.linkedin.com/in/isanthoshgandhi
Futures Thinking and Design Thinking Simply Explained! (https://isanthoshgandhi.medium.com/future-thinking-and-design-thinking-simply-explained-d65716d67651)
How do Systems Thinking help futures Thinking? (https://isanthoshgandhi.medium.com/future-thinking-and-design-thinking-simply-explained-d65716d67651)
The Essential Business Strategy Formulation Process (http://www.transitioncapital.com.au/strategic-thinking-and-business-strategy/)
Institute for the Future (https://www.iftf.org)
What Is Business Strategy? — Components, Levels, & Examples (https://www.feedough.com/business-strategy-definition-levels-examples/)