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“Britain in 2030: Scenarios for post-Brexit Britain”

October 5, 2017

For party conference season, SAMI has produced “Britain in 2030: Four Scenarios for post-Brexit Britain”. Conscious that much of the conversation around the UK leaving the European Union is inevitably influenced by the various political positions of both sides, we wanted to allow policymakers to have an apolitical space in which to consider the possible futures for the country.

The UK does not operate in isolation, of course, so we were concerned with outlining some versions of what the world itself looked like, to provide context for the UK’s future. We will be covering this piece of work in this blog and the three following. This blog covers the methodology we used; the next one the two options best described as ‘globalisation, then ‘localisation’, and finally we will draw out some conclusions from the whole exercise.

A scenario is not a forecast: it is a tool for thinking, an assembly of evidence and imagination, projected forwards to enable anticipatory thinking and planning. Scenarios tend to avoid wide variations from the path as visible from the now, so we regret that we do not anticipate, for instance, radical variations from a reasonably wide cone of possibilities.

Scenario vs forecast

After some consideration we chose two axes to build up a model for our scenarios. Whilst of course there are many factors in the decision to leave the EU, we chose what seemed to us to be two clear contradictions: the drive to globalisation (open borders and international organisations) compared to the desire for localisation (closed borders and bilateral trade deals); and the increasing debate between the free market, economically focussed approach on the one side compared to the social cohesion approach on the other – essentially, neo-liberalism versus the Podemos approach. This gives us four distinct quadrants, allowing us to develop scenarios for each.

SAMI Futures model

As we work through them, it will be clear that there are some recurring elements – and some which do not appear at all. Most obviously, this is a scenario set for 2030, and we have therefore not included climate change to any significant degree – the consensus is that this horizon is too short for major effects. We have, though, assumed a crisis of one sort or another in the near-medium term, though we have not specified it: it may be Brexit in itself; it may equally be another financial crisis or a geopolitical event. We have also assumed that the continuing development in biotechnology will continue, though we have located this development in Asia, partly to avoid it contaminating the model for UK and Europe.

Our next blog will examine the two quadrants above the horizontal axis – Global competition; and the Global common approach. We welcome your thoughts and comments.

Written by Jonathan Blanchard Smith, SAMI Associate.

The views expressed are those of the author and not necessarily of SAMI Consulting.

If you enjoyed this blog from SAMI Consulting, the home of scenario planning, please sign up for our monthly newsletter at eSAMIsignup@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

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‘Separate Worlds or Shared Prosperity’. Centre for Cities ‘City Horizons’ Lecture series

September 29, 2017

On a very pleasant September afternoon I made my way to The Shard and the floor occupied by Warwick Business School to listen to one of the lectures in the Centre for Cities ‘City Horizons’ series.

After a short time to admire the view across London I, and the other attendees, gathered to listen to Prof Michael Storper, author of ‘The Rise and Fall of Urban Economies’ and teacher at UCLA, Sciences PO and the LSE, discuss trends in urbanisation across the world.

Cities photo

The talk focussed on the growing divide between cities and ‘the rest ‘ of a country which has shown up in various ways recently. It’s clear that there has been, and continues to be, growing interregional inequality in terms of income, job creation and productivity – known as ‘The Great Inversion’.

Over time prosperity has tended to even out between the cities and the suburbs and rural communities. This no longer appears to be happening. Rather there seems to be a strong shift to inner metropolitan areas which can be dated from the 1980s with a ‘new geography of jobs (skills, opportunities, etc)’ creating increasingly separate worlds.

There has been a major change in the focus of growth since the 1970s/1980s. The increase in digital work, lower long distance trade costs and growth in the finance industry means that the core functions of the new industries have become more and more urban and oriented to big cities.

These cities are still attracting talent despite their high costs and travel issues because they have more amenities, a residential economy and the income is higher as opposed to the rural work even in skilled jobs.

Historically, people moved to cities to gain skills, ‘move up’ the social ladder and take advantage of new opportunities. However, since 1980, the migration has been of skilled people moving between a range of skilled areas; that is, other cities. Some say this is to do with housing price differential but that is not sufficient to account for the overall trend.

It appears that skills are increasingly important – not just the availability of the necessary education but also the access to other people and networks. It seems that it’s about being there in person to know what is going on, what jobs are available, what skills are required – to be ‘in the know’.

There are many challenges in this world – the need for the creation of good jobs outside the metropolitan area, how universities get students into ‘areas of access’ although, of course, not everyone needs a degree and how to overcome the ‘middle-trap’ for the regions.

Research also shows that values are diverging interregionally with manual versus cognitive work showing a strong correlation in values surveys. This is leading to a situation where the ‘professional elite’ and the ‘manual working class’ do not understand each other, with differing sources of validation, honour and self-worth across the various geographies. It seems likely that this is, in part, leading to the social and spatial ‘traps’ we see in communities around the world, including increased rates of depression and drug use along with lower intergenerational social mobility.

All these themes raise a number of challenges and questions. For example, what happens if we just ‘let the cities get on with it’ and they continue to get increasingly prosperous? Will we be able to work out how to share across the apparent divisions? Alternatively we know from history that cities are naturally changing ecosystems so could we see the end of big prosperous cities? This could be foreshadowed by the rise in artificial intelligence as it could change the need and availability of skilled workers and damage the amount of money available to the large cities.

Prof. Storper’s talk raised a number of issues about the prosperity or otherwise of big urban agglomerations and made for a fascinating hour with many areas for further thought and exploration as the conversations afterwards demonstrated. As ever, though, there are no easy answers.

If this short review has piqued your interest you can catch up with the talk at:

http://www.centreforcities.org/multimedia/event-catch-up-city-horizons-with-prof-michael-storper/

Written by Cathy Dunn, SAMI Principal.

The views expressed are those of the author and not necessarily of SAMI Consulting.

If you enjoyed this blog from SAMI Consulting, the home of scenario planning, please sign up for our monthly newsletter at eSAMIsignup@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

 

 

Boards & Risk – improving risk literacy in the boardroom?

September 20, 2017

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Executive boards have a responsibility for good governance and responsible stewardship, yet persist in treating risk as a control function, not a decision process. A board is required to take collective responsibility for the organisation’s risk appetite, yet in most board meetings risk is treated as the privileged domain of the Head of Risk, or Chair of the Risk & Audit Committee. Other directors defer to this person as a risk ‘expert’. Consequently risk is confined to imaginable threats to business continuity, a very limited perspective especially as most crises result from unimagined incidents.

Consider two very different unimagined incidents: Ratner jewellery in 1991 and United Airlines in 2017, years apart but with a common theme. In Ratner’s case, a disparaging flippant remark, intended for the financial press, reached the tabloid press where Ratner’s customers took offence and boycotted the brand. In United’s case, an incentive scheme to encourage over-booked passengers to move failed to motivate a customer, who as a result was removed by airport security. In each case the consequences were never imagined because the situations were not itemised on any risk register.

In the past 30 years almost every reputational crisis of note was caused by an incident that had not been foreseen or imagined. This is not a fault of risk management itself, but of how myopic boards have become in their perception of risk. Risk is future uncertainty, good and bad, opportunity and threat. Risk has become a discrete function rather than a vision of future outcomes and bedfellow to Strategy. The same happened to Corporate Responsibility in the recent past: a collective responsibility was identified, attributed to an owner, who became the expert at the board table. What is it in the psychology of boards where authority is sought but collective responsibility is shunned?

The answer to why so many scandals and crises still occur decades after risk became a hot boardroom topic is because boards are looking at risk the wrong way. It also explains why so many communicate it ineffectively. To investors and sponsors risk is presented as a commercial opportunity, the precursor of reward; but to regulators and customers it is presented as something under firm control, a threat that has been confidently mitigated. The language of risk is muddled and so boards need to develop collective risk literacy. This is necessary to articulate not only the board’s shared appreciation of risk, but also its powerlessness to offer certainty about the future.

What is the best way to develop risk literacy? The first step is to shake off the fear of uncertainty and this might seem unnatural. Boards feel they are expected to deliver certainty to investors, customers and a variety of other stakeholders in order to retain their mandate to operate and instil confidence. Nevertheless certainty about the future is a dangerous place and it has been said there are only two types of forecast – lucky and wrong! Admitting uncertainty is not a sign of weakness or incompetence, provided of course it is qualified. Effective risk literacy requires an appreciation of the different degrees off uncertainty, from known-knowns to unknown-unknowns and all the intervening stages.

Improved risk literacy among boards will reduce the risk of performance getting significantly out of line with promise. In the case of Ratner and United a gap opened up between what investors & customers expected and what proved to be reality. This is the gap into which reputation falls. In Ratner’s case customers learnt that he believed his products were ‘crap’ and by implication they were gullible. In United’s case customers believed the airline ‘flew the friendly skies’ but video footage of a customer being beaten up quickly disabused them of this notion. In both cases discovering reality was a complete shock: in 1991 through mainstream press and in 2017 by social media. It is ‘dissonance shock’ that damages reputation: trust flees with value not far behind. Reputation is how you behave.

A higher level of risk literacy in boards would also help to address the dissonance when different parts of an organisation exhibit different approaches to risk. This is most common in the public sector but can also be found in the private sector. Public services like schools and hospitals tend to have a risk-averse culture, implicit in the nature of their duty of care. An imposed management level tasked with cost cutting or revenue generation imposes a higher appetite for risk than the operational culture because it will be looking for commercial gain. The clash of risk culture between management and operations can be recognised and tackled with higher levels of risk literacy in the boardroom.

The amount of risk literacy in a board will depend on the industry sector and the extent to which risk is or is not an intrinsic part of the operational environment. Most organisations already know whether they have a risk seeking or risk avoiding culture, the challenge is to ensure the board has the right balance of viewpoints to equip the enterprise for the future operating environment. The statutory requirement to report on risk appetite is a good start, and most professional organisations accept that appetite will vary according to a variety of internal and external factors so report it accordingly. There does however need to be greater attention to strategic as opposed to operational risk by the board.

Strategic risks should be discussed by the board but are often unseen or unspoken, either by accident or design. Unseen risks include those which cannot be attributed such a reputation, and those which are simply too complex or political. Some risks are unseen because they are so obvious they have become invisible such as culture itself. Unspoken risks include those which powerful members of the board do not want discussed or which for legal reasons cannot be openly discussed. Some unspoken risks remain unvoiced because to do so would question the ethics of the organisation. Nevertheless both unseen and unspoken risks fall to the category of strategic risk which the board should discuss.

In conclusion, boards could improve risk literacy through taking collective responsibility for decisions about the organisation’s future direction (strategy) in tandem with uncertainties relating to this (risk). Perception of risk as threat or opportunity will vary among individual board members in accordance with their personalities, disposition, outlook and experience but collectively it needs to be corralled into a consensus view in terms of both perception and attitude for the organisation as a whole. This will probably require a CEO or Company Secretary to pull together the consolidated opinion of both executive and non-executive board members, but in the long run the organisation will be in a healthier place and earn greater respect from investors, customers and other stakeholder sources of income.

Written by Garry Honey, Chiron Reputation Risk CEO, Better Boards and SAMI Associate. Longer version first published on September 2017 at Board Agenda.

The views expressed are those of the author and not necessarily of SAMI Consulting.

If you enjoyed this blog from SAMI Consulting, the home of scenario planning, please sign up for our monthly newsletter at eSAMIsignup@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

 

Does Foresight work? Case studies

September 13, 2017

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We know that there is evidence that long term thinking is linked to superior performance .

How does foresight contribute to long term thinking? Can the effect be measured? As I was taught at Stanford Business School, it is impossible to directly measure the effect of strategy because strategy only has effect through implementation – and good strategy, bad implementation may be worse than bad strategy, good implementation. But it seems obvious nevertheless that long term thinking underpinned by effective foresight must be better than long term thinking underpinned by un-examined assumptions that the future will be very like the past.

So it is worth looking at case studies of foresight used to underpin decisions.

There are a range of studies of the effect of foresight in the form of scenario thinking at Shell, since the early 1970’s. For instance:

Another perspective can be found in “Scenario projects in Japanese government: Twenty years of experience, five tales from the front line” which can be found at http://unlocking-foresight.tizrapublisher.com/ka4o8s/

Directly tackling the evidence through evaluation in different environments, we know of a classic book on the use of Foresight in Research – which for instance evaluated how to get better results from Delphi following 25 years of experience in Japan – Research Foresight, Ben R Martin and John Irvine, Pinter, 1989. A more recent article is Martin, Ben (2010) The origins of the concept of `foresight’ in science and technology: an insider’s perspective. Technological Forecasting and Social Change, 77 (9). pp. 1438-47. ISSN 0040-1625

In SAMI we have seen many organisations use foresight to improve their long term thinking. For instance:

  • In the insurance industry, Legal and General used scenarios to explore changes through regulation, demographics and technology – concluding that the only two scenarios were Evolution or Revolution
  • In asset management, the Man Group used Scenarios for the City of London to gain insights into their different businesses, leading to divestment and re-alignment: and the European Bank of Reconstruction and Development wanted to take stock after 25 years of operation.
  • Angel Trains developed scenarios for the rail industry and realised that they were in the risk business rather than the rail industry
  • Global lawyer Allen & Overy bought a number of firms in North Africa after using scenario thinking to surface their exposure to Sharia Law.
  • Accountants Grant Thornton UK developed scenarios the business environment in the UK as part of their Future Perspectives project and found that this led naturally to their Vibrant England strategy to work with innovative, and small and mid-size, businesses.
  • Scenarios for Europe were developed to advise on research agendas and policy options related to converging technologies. These are often defined as nanotechnology, biotechnology, information technology, and cognitive sciences (NBIC). The recommendations were used widely to inform research programmes in national laboratories across Europe.
  • In Higher Education, scenarios for Scotland were used to frame the development of Napier University: and scenarios for Higher Education in Romania led to Government White Papers and the secondment of three of the team to the World Bank to plan implementation.

What can be learnt from these case studies?

Perhaps, unsurprisingly, that

  • foresight is often undertaken for a reason, such as a new Principal (Napier University) or new CEO (Legal and General), unacceptable losses in a division (Man Group), perceived need to restructure (Romanian Higher Education), the need to seek new investors (Angel Trains), the need to make assumptions explicit across cultures (Scenarios for Europe) or because of perceived challenges in the business environment (Allen & Overy, Grant Thornton)
  • Decisions can be made and actions can be taken with more confidence after foresight work has explored alternative futures – Shell have estimated that they can take decisions 3 to 6 months earlier than their competition through scenario thinking.

Written by Gill Ringland, SAMI Fellow and CEO.

The views expressed are those of the author and not necessarily of SAMI Consulting.

If you enjoyed this blog from SAMI Consulting, the home of scenario planning, please sign up for our monthly newsletter at eSAMIsignup@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

Tools for long term thinking

September 6, 2017

As practitioners of strategy in the context of the future, we at SAMI have always instinctively believed that this approach is better than strategy with a good view in the rear view mirror. Views of the future allow you to think long term and make informed decisions for the long term.

What tools are there to improve thinking about the future?

A tool that is useful for thinking about factors that could cause the organisation’s assumptions to change (drivers of change) is Three Horizons. It is quickly adopted by groups of people and is often combined with a “looking back” exercise in which the group relates to their organisation, industry or country twice as many years in the past as the group is going to think forward – ethnographers suggest that change in the future will be twice as fast as in the past. Three Horizons is the subject of a book by Bill Sharpe.

Horizon 1 takes into account the current working assumptions and systems that we take for granted when we make decisions.

3 Horizons

  • Example – the ongoing trend for decreasing family size, for migration, and for people to live longer, causes us to re-examine our assumptions on demographics.

Horizon 3 is about changes emerging that are completely new paradigms and ways of understanding and undertaking various human activities. What are visionary leaders saying?

  • Example – The World Business Council for Sustainable Development believes that nine billion people can live well on the planet.

Horizon 2 is about drivers which represent a transition or accommodation for evolving tensions as current assumptions and work patterns obsolesce, and transformative changes affect industries and markets.

  • Example – the CEO of GM, Mary Barra “I believe we will see more change in our industry in the next five to ten years than we have in the last 50. We are at the start of a technological revolution that is going to change the way we drive and interact with our cars, trucks, and crossovers”

Once you have used Three Horizons to identify drivers of change to build into strategy now (Horizon One), a tool for thinking about the effect this could have on your organisation, through customers, stakeholders, regulation, etc, is an Impact (aka Futures) Wheel. Starting from the driver at the centre, effects are mapped outwards. This is a structured brainstorming method used to organise thinking about potential impacts.

Futures Wheels are described in “Strategic Foresight” by Patricia Lustig .

Strat foresight tool

A tool that is explicitly designed to explore a range of possible futures is scenario planning. The strength of this is to create mental models and a shared language for potential futures. These can then get wider traction and help organisational self knowledge. For instance at a computer firm, two scenarios were developed for the industry:

  • Coral Reef, in which an exciting and innovative industry was represented by smiling clown fish, visible to customers and working with them
  • Deep Sea, in which an industry largely invisible to customers was treated with suspicion by customers,

These terms were used to discuss the changing nature of the industry – from Coral Reef to Deep Sea – to reshape the marketing and sales approach, and by account managers to discuss customers. The names were intuitive enough for those not involved in scenario development to find them useful, even without the full description, timeline, etc.

The process of scenario development has been described in a number of books nd articles, and one of the most succinct is on www.samiconsulting.co.uk/4scenario planning a primer.pdf .

Written by Gill Ringland, SAMI Fellow and CEO.

The views expressed are those of the author and not necessarily of SAMI Consulting.

If you enjoyed this blog from SAMI Consulting, the home of scenario planning, please sign up for our monthly newsletter at eSAMIsignup@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

 

Thinking about the future.

August 31, 2017

As practitioners of strategy in the context of the future, we at SAMI have always instinctively believed that this approach is better than strategy with a good view in the rear view mirror. Views of the future allow you to think long term and make informed decisions for the long term.

How to improve thinking about the future?

One way of approaching this question uses Hedgehogs and Foxes to describe styles of thinking. Originally from Greek mythology, Isaiah Berlin introduced the analogy for discussing management styles in 1953:

“The Fox knows many things but the Hedgehog knows one big thing”

As Berlin uses it, Hedgehogs relate everything to single concrete narrative, through which everything in life is reduced to a single set of certainties. Foxes, on the other hand, distrust grand designs and absolute truths, and instead pursue many ends, often unrelated and even contradictory. They use a flexible array of insights that guide them as they experiment, play with ideas and experience, explore and, on occasion, pounce.

Recent psychological testing has shown that this is a valid and powerful way of classifying people. As psychologists have defined the type, Hedgehogs are people who are happiest operating within a closed problem domain, in which standard tools and focused effort allow them to compete with their peers. They are happy with the existing system or implementing a formula to change it.

Foxes are at their best exploring new terrain and re-thinking certainties. Their goals are largely self-actualisation and they are seldom concerned to rank themselves against their peers. Foxes are suspicious of commitment to any one way of seeing an issue; they prefer a loose insight that is calibrated from many perspectives. They are tolerant of dissonance within a model – for example, accepting that an enemy regime might have redeeming qualities – and are relatively ready to recalibrate their view when unexpected events cast doubt on what they had previously believed to be true.

Then a Professor at the University of California at Berkeley, Phillip Tetlock started to explore how to get better at predicting the future in 1987. It was then that he started to collect forecasts from about 300 experts – initially about preventing a nuclear war but then extending to encompass about 27,500 much wider political and geo-political events. The results were published in his book “Expert Political Judgement” in 2005.

Tetlock first discusses arguments about whether the world is too complex for people to find the tools to understand political phenomena, let alone predict the future. He evaluates predictions from experts in different fields, comparing them to predictions by well-informed laity or those based on simple extrapolation from current trends. He goes on to analyze which styles of thinking are more successful in forecasting. Classifying thinking styles using Isaiah Berlin’s prototypes of the fox and the hedgehog, Tetlock contends that the fox–the thinker who knows many little things, draws from an eclectic array of traditions, and is better able to improvise in response to changing events–is more successful in predicting the future than the hedgehog, who knows one big thing, toils devotedly within one tradition, and imposes formulaic soTetlocklutions on ill-defined problems. A famous diagram from this is on the lines below:

Here, calibration is the number of right predictions, and discrimination is the range of the predictions. So it is possible to have stellar discrimination and terrible calibration scores if you make bold and wrong predictions. As well as the lack of success of all forecasters compared with models, he also noted a perversely inverse relationship between the best scientific indicators of good judgement and the qualities that the media most prizes in pundits–the single-minded determination required to prevail in ideological combat.

Rather than decide that forecasting was too difficult for mere mortals, Tetlock started the Good Judgement Project in 2011. He has 20,000 volunteers who participate in an annual tournament, giving judgement on geopolitical issues and updating as and when appropriate. The early years of the tournament are already yielding exciting results.

For instance, – even brief training works – a 20 minute course on how to put a probability on a forecast, correcting for well-known biases, provides lasting improvements to performance.

A second insight is that teamwork helps – teams of forecasters who discussed and argued – produced better predictions.

He has produced advice for forecasters summarised as CHAMP

  • Comparisons are important
  • Historical trends can help
  • Average opinions over diverse groups
  • Mathematical models should be taken into account
  • Predictable biases exist and should be allowed for.

We are fans because this is the only systematic approach we have found to getting better at forecasting.

An HBR article summarising it is https://hbr.org/2015/02/what-research-tells-us-about-making-accurate-predictions .

To find out more, SAMI is running a number of training courses on aspects of foresight throughout the year – details can be found on www.samiconsulting.co.uk/training

Written by Gill Ringland, SAMI Fellow and CEO.

The views expressed are those of the author and not necessarily of SAMI Consulting.

If you enjoyed this blog from SAMI Consulting, the home of scenario planning, please sign up for our monthly newsletter at eSAMIsignup@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

The evidence that long term thinking gives better results

August 23, 2017

As practitioners of strategy in the context of the future, we at SAMI have always instinctively believed that this approach is better than strategy with a good view in the rear view mirror. Views of the future allow you to think long term and make informed decisions for the long term.

And there is increasing evidence that long term thinking pays results. Also this implies exploring how the long term might be different from the here and now. So in this blog we will review the evidence that long term thinking gives better results in the corporate sector, where visible indices can be derived from publicly available annual reports. In later blogs we will talk about the sources of disruption now, the characteristics of people successful at seeing potential futures, some tools to help this thinking, and some case studies of situations that provoke organisations to focus on acquiring views of possible futures. Further – we would argue that monitoring possible futures should be ongoing in disrupted times such as these – and in Beyond Crisis described how this could be achieved.

But returning to the immediate question – what is the evidence that long term thinking leads to better results – a recent McKinsey report on Long Term Thinking looked at evidence over 10 years – see https://bymckinsey.com/global-themes/long-term-capitalism/where-companies-with-a-long-term-view-outperform-their-peers. The report has led to the launch of an index of long time horizon companies, as evidenced by their public reports relating to investment, earning growth, margin growth, quarterly management and earning per shares growth. “Finally, Evidence That Managing for the Long Term Pays Off” can be found at https://hbr.org/2017/02/finally-proof-that-managing-for-the-long-term-pays-off The implications for Finance Directors are drawn out in an article in the Harvard Business Review, https://hbr.org/2016/03/how-cfos-can-take-the-long-term-view-in-a-short-term-economy, and in May 2017 they published a series of articles under the Managing for the Long Term umbrella, with the overall theme: “In this package we examine how a focus on maximizing shareholder value can threaten companies’ health and financial performance”: https://hbr.org/2017/05/managing-for-the-long-term .

The topics covered are:

  • The Error at the Heart of Corporate Leadership
  • The CEO View: Defending a Good Company from Bad Investors
  • The Board View: Directors Must Balance All Interests
  • The Data: Where Long-Termism Pays Off

A paper evaluating corporate performance linked with foresight by Professor Renee Rohrbeck is https://www.researchgate.net/publication/236897761_The_Value_Contribution_of_Strategic_Foresight_Insights_From_an_Empirical_Study_of_Large_European_Companies.

Directly tackling the evidence through evaluation in different environments, we know of a classic book on the use of Foresight in Research – which for instance evaluated how to get better results from Delphi following 25 years of experience in Japan – Research Foresight, Ben R Martin and John Irvine, Pinter, 1989. A more recent article is Martin, Ben (2010) The origins of the concept of `foresight’ in science and technology: an insider’s perspective. Technological Forecasting and Social Change, 77 (9). pp. 1438-47. ISSN 0040-1625

So why do organisations make decisions for the short term, based on current and past conditions, despite the evidence that long term thinking gives better results?

The focus of much of the discussion on this is on whether metrics such as shareholder value, or regulatory environments, drive short termism. This debate is important, and it is also important to think about the other factors that underpin a shot term approach that disregards the fact that the world is changing.

We understand the reasons why many organisations find a strategy based on views of the future to be uncomfortable: the future may be different from the past. And experience – the rear view mirror – to be comfortable. After all, the senior people in the company have good experience of the business environment which has pertained as they made their way in the organisation or industry. So many organisations see no need for views of the future, until too late.

Our focus is on strategy in the context of the future, so we explore possible futures – one of which may be Business As Usual – before developing strategic options. Options which are good under all futures are called “robust” – other options may deliver only under some possible futures – and then a management view needs to be taken on the next steps, eg more investigation, research with customers and suppliers? Or set up early indicators, events that would happen under if a particular scenario was unfolding? One classic example of an early indicator is from Peter Schwartz’s “Art of the Long View”:

“In 1983, we presented the Royal Dutch/Shell managing directors with two scenarios; one called Incrementalism, and the other called the Greening of Russia. By that time, we knew enough about the Soviet Government to say that if a virtually unknown man named Gorbachev came to power, you’d see massive economic and political restructuring; an opening to the West; arms control; declining tensions in the West; and major shifts in international relationships. It was not that Gorbachev, as an individual, would cause the changes. Rather, his arrival in power would be a symptom of the same underlying causes.”

Organisations need signposts like these in our disrupted times in order to take a long term view.

Written by Gill Ringland, SAMI Fellow and CEO.

The views expressed are those of the author and not necessarily of SAMI Consulting.

If you enjoyed this blog from SAMI Consulting, the home of scenario planning, please sign up for our monthly newsletter at eSAMIsignup@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

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