Why aren't we better at Anticipating the Future?

I had an interesting series of discussions at a recent board-strategy meeting.  I was asked why their business was so poor at anticipating the changes in their market.

After some reflection, I reverted with these observations:

1]. The board and management had a keen interest in the risks faced by the business and managed a comprehensive risk register. While each risk had a probability rating and mitigation strategy, the risk register was not integrated into the strategy process.

The risks were viewed as a threat to the strategy, and the strategy process proceeded as if these risks did not exist. I pointed out how these risks - which are usually uncertainties - offered insights into the fracture lines within the market. They outlined some of the future pathways along which the market could evolve. We discussed how these pathways could be interpreted as alternative futures the business might face - a key to anticipating change in the market.

2]. The existing strategy process in the business had a strong underpinning of Cartesian logic — a rational approach in which opposing facts cannot exist simultaneously. This is the traditional approach used in engineering, mathematics and science, where we seek to prove that something is correct or incorrect. While this traditional planning approach suits the nature of the business, it can limit the concept of “possibility thinking”. 

The discussion revolved around the notion of “fuzzy logic”, the idea that multiple possible truths can exist at the same time. This concept mimics real-life circumstances, where statements of absolute truth or falsehood are rare. The application of scenario thinking — where the future is represented by several alternative scenarios — is more appropriate in conditions of uncertainty, particularly if the business is seeking to prepare itself for change.

3]. A feature in the business’s performance monitoring was the extensive use of competitor benchmarking in the industry. Accordingly, many of the metrics in the strategy were related to the “best practice” outcomes of similar businesses. 

The cliche that “best practice is PAST practice” is relevant here. The practice of benchmarking encouraged the business to focus on what other competitors were doing, rather than the way in which the market might evolve. While a degree of benchmarking is desirable to avoid complacency, this can be supplemented by an approach that encourages a study of different industries to understand paths of industry evolution and disruption.

There are few quick fixes in these situations. Anticipating and preparing for change in an industry requires a combination of:

• recognising that multiple futures exist under conditions of uncertainty in your environment

• developing a more agile and less linear approach to strategic thinking in which we explore alternative scenarios for the future

• accepting that we will rarely understand all issues or answers at the beginning of a journey.