Proceedings of IMCIC - ICSIT 2016

Foresight: A new paradigm in organizational strategy

Authors: Jan A.C. Klakurka, C.Dir., CPA, CA, MBA, CMC Assistant Professor & Director, Management & Organizational Studies, Huron University College, Western University and Bill Irwin, MPA, PhD. Assistant Professor, Management & Organizational Studies, Huron University College, Western University

Abstract: Although inspiration and recognition of these concepts as having In this paper, the authors address the issue of strategic merit – let alone being cutting-edge – may exist at any level, it foresight or 'futuring', from their perspective as management seems that the logical structural home for such reasoning in professors charged with educating a new generation of organizations would be formally housed in the function that is ambidextrous, creative, and complexity-savvy future leaders. charged with longest-range planning, strategy. This is not to While not a new practice, they point to examples of firms suggest that the functionalist view of foresight is desirable, as utilizing this technique since the 1960s, they postulate why ideally, such skills would be imbedded across functions and foresight is not a mainstream strategy practitioner competency survive the test of time and/or the changes of names on the nor curriculum topic at many business schools and management organizational chart. programs. In the process, they define strategic foresight from the strategists’ perspective, illustrating key principles and What is Strategic Foresight? deliverables attributed to the exercise. Each author shares a Strategic foresight is about combining historical data, strategy practitioner-and-academic perspective, informing applying forecasting techniques and scenario planning, and consideration of lingering disconnects between traditional working with cross-functional experts to arrive at various strategy work and strategic foresight, and how this might change depictions of possible business futures. It is not traditional in practice going forward. Along the way, the authors postulate planning, but is differentiated from it by the “cultivating [of] on sources of potential resistance to the teaching of this practice experience, intuition, minority views and contrary thinking” ranging from; a misunderstanding of its worth, to entrenched (MacKay and McKiernan, 2009) that enable a systems-view and paradigms unwilling to try something out of the 'norm'. They “sense-making” (Weick, 1995). Notwithstanding this conclude by posing a series of questions regarding the future of importance, the technique is scarcely applied in practice and the strategic foresight to be imbedded as a key corporate cultural plays not more than a 'bit part' within mainstream business component, its wider merit up-and-down the corporate education curricula (Vecchiato, 2012). When undertaken, the hierarchy, and its potential introduction into the academy as a techniques are applied in a rather unrefined manner. Ringland core teachable. (2010) suggests that traditional planning will not be acceptable for the coming decade due to unprecedented levels of Keywords: Strategic foresight, capabilities, futuring, strategy, uncertainty that now exist for organizations. planning, scenario, higher education, organization, sustainability Strategists have a traditional tool kit from which to operate that produces repeatable plans and choices, a set of competencies that are often the admiration of the rest of the Purpose: organization, but to assert that completeness and sufficiency of In this paper we unpack the proposition that strategic skills exists belies the failed strategy – and failed organization – foresight capabilities will allow firms to better direct their long- examples that abound. We contend that complementary skills in term, sustainability activities, driving necessary innovations that the area broadly called strategic foresight will aide strategists in result in positive organizational performance. Foresight, reinvigorating strategic planning, enhancing and evolving sometimes referred to as the process of ‘futuring’, is a planning monitoring from variance-focused to scenario-bounded focus, technique and mindset critical for business in development of assimilating information, and garnering the innovative input of effective long-term strategies. the whole organization. The term ‘foresight’ is also widely used to encompass As management educators we are particular interested a wide range of approaches and methodologies (Vecchiato & in the lack of attention given to the practice of strategic foresight Roveda, 2010, p.99) specifically designed to improve future in the mainstream curricula. The dearth of a wholesome oriented decisions. Adherences to this method take a long-term curricula approach to the practice of foresight in broader approach to organizational strategy; an approach that may be academia is both troublesome - given our understanding of the seen as antithetical to the more popular approach of short-term value this practice can bring to organizations, and extremely profit taking decision-making. It presents an alternative an curious. Are there particular biases that are effectively limiting organization’s strategy formulation process. its inclusion by the majority of educators? ‘Futurist’ is certainly among the rarest of job titles at As Vecchiato and Roveda (2010) demonstrate the your average organization. Typically reserved for think tanks, practice of strategic foresight has evolved from the benchmark novel consulting firms, and far-from-core parts of multi-lateral program of Royal Dutch Shell, widely used to justify the organizations, the work and lexicon of these entities is only benefits of evoking a long-term orientation in planning. slowly finding its way into the fringes of the mainstream. Foresight literature varies in terms of definition ranging from

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process to individual insight, internal (resource) to external Miller illuminates his position by demonstrating the (environmental scan), points of view, what Rasmussen et al. contrarian mental processes required to fully embrace foresight (2010) package as the trans-disciplinarily of strategic foresight. as a legitimate strategic process, "The challenge is not to find At its core, such trans-disciplinarily focus allows for better ways to ‘‘know’’ the future; rather we need to find ways contribution of non-scientific professions’ insight into the to embrace the creative novelty that is at the origin of not- complexity that is strategy development. Although strategic knowing the future (p. 29)." He rightly describes the resistance planning and the plan are the core activity and deliverable of to strategic foresight as an epistemological challenge, the need traditional strategy groups, the utilization of futures insight from to move from an agenda of utilizing problem and solution multiple parts of a company recognizes the organizational processes that focus on overcoming the unknowable to one that learning benefits of foresight. accepts and welcomes the unknown (ibid). This mental process Foresight involves taking a longer and broader view of represents a fundamental paradigm shift, and as such may decision-making. Foresight is used to provide early warning of indeed threaten the comfort level of the uninitiated. The emerging issues, understand challenges and opportunities, aforementioned suggests processes that allow individual clarify vision and goals, and check the appropriateness and expression and collective awareness of creative possibilities 'robustness' of strategies. It enables organizations, agencies, and would be wisely included in organizational strategic planning communities to more wisely create their futures. Foresight is activities, where the longest term focus in a firm normally essentially about the future – a place for which there is no facts resides. (it has not occurred yet). Key approaches to foresight include monitoring trends, developing forecasts and scenarios, checking 2. Do strategic foresight techniques utilized in strategic assumptions and mental maps. (Institute for Alternative Futures; planning moderate the impact of sustainability intent on Wiser Futures Compendium 2011). This approach requires a innovation? critical analysis and thinking model, an anticipatory mindset. Practioners of strategic foresight advocate for a very We can only postulate that perhaps some of our fellow educators broad review of the decision - making landscape, the widest are not comfortable with this frame of mind? possible environment assessment. Vecchiato & Roveda, (2010) describe foresight as an activity, "dependent on tacit knowledge Our Focus: rather than on the firm’s physical assets. (p. 100)” As they We have identified the need for a focus examination on describe the process macro-economic, 'non-market', forces are the concept and potential impacts that foresight has on given particular attention in the environmental scanning process. organizational strategy development and implementation. It is This can cast the strategic net very wide, and include gathering our contention that the knowledge in this area is currently information that may not at first appear to have any correlation limited by both the design and processes governing with the problem at hand. It opens up potentially the wide world organizational strategic planning in the general population of of possibilities, leading to a positive cultural shift in the twin organizations, and the dissemination levels of strategic concepts of sustainability and innovation. foresight-futures studies knowledge and approaches across Major et al. (2001) contend that foresight is a core stakeholder groups. We recommend a research agenda that seeks competence (p. 103). Successful foresight identifies and exploits to; articulate the practical benefits of foresight capabilities on new opportunities. Successful exploitation of opportunities from cross-functional planning; uncover the impact on innovation on new technologies requires integration of those technologies with sustainability objectives (intent), moderated positively by the firms’ existing skills and technologies. It is from this futuring and foresight capabilities; explore the nature and impact integration of individuals’ foresight competence with firms’ of foresight education and pedagogy on internal capability skills and technologies that a foresight culture can develop. Core development and organizational learning. competencies are knowledge-based rather than asset based. The paper raises important research questions, and Foresight is an activity, dependent on tacit knowledge rather blueprints a process for future exploration and inquiry: than on the firm’s physical assets.

1. Can foresight incubate and thrive in the stymieing 3. How does an organization’s strategic foresight realm of organizations? capability affect sustainability and long-term focus? Foresight dictates a need for living creatively. Prior to Tevis (2012) states that foresight has to be both the onset of creative stagnation that has characterized many predictive and creative (p. 339) as we have noted it requires a organizations and 'by rote' strategy developers, the authors long-term orientation. For the practice of foresight Vecchiato & suggest there exists a time when individuals are resistant to the Roveda (2010) have defined long-term by industry, "in the creative stymieing of the incremental mindset. As educators, the energy industry, for instance, it is usually over 20 years; in the authors are particularly concerned with the disconnect between information and communications technology (ICT) industry it often observed great student exuberance and the practical usually falls between 5 and 10 years (p. 101)." As they state this limiting realities of today’s organizations. Miller (2011) has approach allows the practice of strategic foresight to reasonably identified this need as the principal challenge for proponents of aligned itself with the relevant rate of industry change. It is this need, "This challenge has in many ways been the siren song viewed as a realistic, relevant practice, and handily has potential of future studies, tempting futures thinking onto the rocks of to address issues of sustainability should timeframe, industry probability and planning. (p. 27)" As he states further "the and general knowledge, and creativity marry, among other embrace of constant novelty" does not align with the paradigm potential factors, to drive ideas through either the dogmatic of data absolutism, a cornerstone of our current understanding of planning process or some alternative process to allow these academic rigour. concepts to flourish in an accretive manner. The ability to source within and nurture to commercialization such novel ideas

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appears at the heart of what Cunha & Cunha (2006) term as to implement pursuant to not only chosen strategies, but also improvisational bricolage. This organizational 'thinking on your accounting for the diversity of likelihoods that may arise. feet', multiplied across the organization, is at the heart of foresight. The Importance of a Foresight Focus The creative use of foresight allows managers to Sustainability has become a burning issue in our effectively "overcome the usual errors in decision-making: society. Issues range from poverty, to water crisis and global overconfidence and tunnel vision (Varum & Melo, 2010, p. warming. It is also an emerging topic amongst businesses. 356)." Through scenario planning, and the use of a diverse range Sustainability is about meeting the needs of the present without of experts, options are opened up creating networks of compromising the future – the exact dichotomous marrying of "alternative representations of the future (ibid)." This approach horizon scanning-foresight with shareholder-driven immediacy challenges the current boundaries of strategic thinking. that organizations face today. It relates to not only Being in a strategy group is generally a reward for, environmental concerns, but also economic and social issues and recognition of, having a composite set of competencies. (Hart and Milstein, 2003). However, companies have largely Yet, in a dynamic world, are even such evolved skills enough? ignored the opportunities to meet societal needs and that Are there another set of skills, lying just outside the door of the ignorance could reduce the effectiveness of companies’ strategic strategy manager, that are now necessary to compete? We execution by failing to grasp the implication of the broader suggest yes. The time has come for all practicing strategists to business environment and sustainability. Case-in-point, Hart safely agree that while their general skills set is wide relative to (1995) over 20 years ago identified pollution prevention, product many in a typical organization, it now needs to take a 'great leap stewardship, and sustainable development as three critical forward' and to ask what is unknown and could inform the elements within his Natural-Resource-Based View of the Firm function – forward into a view of the future imbued with the that characterize sustainability. Today, in 2016, it can skills of strategic foresight. legitimately be argued that the three elements identified by Hart Foresighting aids firms to recognize future markets. are at the forefront of organizational strategy and operations. Recognising emerging trends, with future problems and Scenario identification is at the centre of good demographic shifts is not science fiction. Micic (2010) defines a foresight practice (Wack, 1985; Schwartz, 1992; Gausemeier et future market as, "a combination of a future solution, e.g., a al., 1998). The duality of this approach can best be described as: product or a service, and a future problem or desire for the image of the future - a state of affairs, describing the solution of a problem for which certain people are prepared to circumstances at a particular point in future time; and, future pay (p. 1500)." Previous futuristic products like robotic arms, history - a 'story' of the evolution of affairs, in the form of a self-driving cars, and smart houses are today a reality with very sequence of events or developments of trends. This duality real growing market realities. Recognition of the importance requires the practioner to develop simultaneous inward and and applicability of future possibilities though, the authors outward looking scenarios. Outward scenarios dictate a need to content, remains constrained by organizational momentum. take an exploratory stance starting from the present and asking the questions: 'what next?' and 'what if?'. In parallel, inward 4. How is corporate performance impacted by scenarios – future incorporation of foresight? speculation from a normative position – will take place, asking We contend that foresight needs to be an identified the questions: 'where to?' and 'how to?". Major, Asch & capability for future leadership. Future-focused leaders focus on Cordley-Hayes (2001) contend that normative scenarios long-term results and have high level of peripheral vision and move foresight beyond guidance into proactive consideration of sensory acuity (O'Brien & Robertson, 2009, p. 376). This desired futures. As such scenarios become mental recognition of what makes an effective future organizational representations of the range of what may be, addressing the twin leader is where we, as management educators, can make a real questions of 'what next?' and 'what if’. difference. Tevis (2010) labels the Western model of strategic Ringland (2010) describes the usefulness of scenarios planning, the 'Intelligent Machine' model, and the Eastern model in providing “a set of mental models and providing a well- the 'Creative Imagination' model. (p. 339). He states that the understood methodology that permits exploration of futures (p. Eastern model is preferential as a living organism the 1493).” In contrast to assumption-based forecasts driven with organization "shar(es) an understanding of what the company extrapolation of historical data, scenarios can allow the stands for, where it is going, what kind of world it wants to live organization to conceptualize a personalized consideration set of in and how to make that world a reality becomes more crucial future states. To the deep functionalist in accounting or finance, than processing objective information (ibid)." After all, planning this may mistakenly be discounted as being sensitivity analysis is supposed to flow directly from corporate purpose, one of the or real options. Both concepts are important in their own right, initial topics taught in any introductory strategy class. Although but are concerned with changing variables and probabilities of these models appear at odds, the balanced approach would various outcomes in known plan elements, leaving out the include both elements in 'good strategy'. unknown. Scenarios are effective when framed in descriptive It should be noted that foresight may add as much to narratives that paint the future state scenario in the colleagues’ the incremental tactics of a firm than to strategy development mind. They can be informed with assimilation of myriad (Treyer, 2009). While strategic failures may be blamed on information sources, which can sometimes be discounted as inadequate strategy, issues in implementation are very often irrelevant. These 'weak signals' as described by Tuomi (2012), underlying poor performance. Foresight can therefore be are “narrative fragments that are used to compose meaningful insightful and integrative by linking longer-term, scenario-based stories that make sense of the present as an endpoint (p. 746).” perspectives at the development stage with the reflexive aptitude Beyond even the corporate push for concision in communications and seeming lack of writing skills among

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graduates (and employees), scenarios will be challenging for that foresight needs to be considered a core competence (p. 104). strategists who have grown up in the competitive Tevis (2010) furthers this positioning adding, "If we can, analysis/business case development realm that characterizes however, use a new perspective on the future based upon the many strategy departments. So too will be the challenge, the concept of enactment and a creative imaginative approach, we authors contend, in strategy’s interaction and coordination of open ourselves up to new opportunities and improve our ability deliverables with other departments whose concept of the future to plan (p. 344)." may be limited to a '9-3 forecast'. As Graefe et al (2009) remind us, historical data extrapolation limitations pervade the Why the Lack of Skill? underlying approaches used to predict the future. Even 'evolved' When recently speaking with a multi-billion-dollar approaches to forecasting like rolling forecasts, suffer from not company strategy director about the recruitment of into strategy knowing which important variables may have been excluded. groups, we were told that the sources of recruits were limited in So, strategy departments must educate their counterparts while terms of both business and management schools and consulting simultaneously building competencies in foresight. firms. While not limiting from a candidate perspective certainly, but perhaps some limitation exists in how such sources infuse The Risk of Improvidence: potential strategists with foresight-oriented skills or precursors. While no amount of scenario visioning and narrative According to Accelerating Studies Foundation, only thirteen development can eliminate risks and blank swan events Master’s and Doctoral-level foresight English-language completely, organizational ambidexterity in plan development programs exist globally, with another ten delivered in languages and monitoring, imbued with foresight and scenario refinement other than English. The number goes down to six at the over time, the authors content can broaden decision-makers’ undergraduate level (Accelerations Studies Foundation, 2016). perspective and avoid 'strategic improvidence'. As members of As Bishop (2014) suggests, “graduate programs will always be various boards, the authors feel the need for governance-level limited in teaching the general public about the future (p. 29).” foresight as well, with good reason. Whereas strategy and risk We agree with Bishop’s contention and add that the general are two of the three top roles of boards, foresight competencies prerequisite experience of typical (and certainly medium-to-top- discussed herein would assist in extinguishing fiduciary tier) graduate schools, provide an unfortunate opportunity for responsibilities more thoroughly. Our contention is that just as early career individuals to be conditioned to preexisting the term 'financial literacy' is now used to describe required corporate models, devoid of foresight, and therefore bring those board member skills in the areas of accounting and finance, potential preconceptions to graduate experiences. We also boards, their sole appointee (CEO) and other leadership would contend that undergraduate foresight learning combined with the be wise to hone their futures literacy (Miller, 2007) (or 'foresight same experiences has the potential to imbed foresight more literacy') or as a general competency necessary to adequately deeply at both personal and firm levels. Institutional lack of fulfill growing fiduciary responsibilities in an era where offerings may indicate a lack of research interest, a lack of organizations must look beyond traditional 3-5 year planning student knowledge and market pull, and/or reflect difficulties horizons. and limitations in new course introductions. From our experience, the delivery of foresight-related Impact: content comes down to the individual professor level. Those While there is literature that highlights the importance with an awareness of such topics and a vehicle (courses, of firms integrating sustainability into their core strategy, there publications, etc.) for delivery actively include the material exists a lack of understanding of the 'how' to clearly identify introducing the practice to students. However, this often opportunities in which firms can capitalize to create shared value manifests as a small element of other course content. One of the (Porter, 2011) or build sustainable development. We contend authors has included such concepts such as scenarios, futuring that it is therefore no surprise that firms often see corporate and foresight in his strategy course work for many years at both responsibility or sustainability effort as a mere marketing large research-oriented and small liberal arts institutions, but scheme to build brand and reputation. O'Brien & Robertson never yet as a stand-alone course. (2009) sum up this challenge best: At a large research-focused Canadian school, foresight "Increasing challenges and changing is included in a course covering design, offered through the business landscapes require a different set marketing department at both undergraduate and graduate levels. of leadership skills to be effective. Vecchiato and Roveda (2010) suggest that marketing (and However, preliminary results suggest that technology) focused foresight focus on firms and their both current and emerging organisational industries. This type of restrictive vision of the concept may leaders are significantly under prepared for lead to schools limiting their preparation of students to a narrow the challenges ahead (p. 377)." perspective of foresight. Such a risk is exacerbated when Our position, by highlighting the failure of firms courses of this nature are designated as electives that few arising from their lack of understanding of future economic, students then consider. We applaud the Mendoza School’s social and environmental requirements resulting from a program at University of Notre Dame which is both mandatory lackluster strategic planning process, proposes a new paradigm and multidisciplinary. Business schools are ideally positioned to in business strategy - one that includes a pivotal role for the deliver these courses. While non-business (design, political practice of foresight planning. This new paradigm challenges science, etc.) courses may offer unique perspectives on the current shortsightedness of organizations; a shortsightedness foresight, business graduates empowered with foresight tools, that leads to a lack of innovation and organizational cultures that awareness and experiences will be well equipped to do the are blind to those requirements that could create competitive heavy-lifting of integrating such techniques into existing advantage. We agree with Major et al. (2001) and their view corporate processes.

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Micic, P., (2010) Future Markets-Radar: A case study of applied Next steps: strategic foresight. Technological Forecasting & We conclude that just as the discipline of strategy evolved Social Change 77, 1499-1505 from its early days of competitive rivalries and core competencies to now reflect the dynamism of markets and Miller, R., (2011) Being without existing: the futures community capabilities, it must again do so to capture the benefits deriving at a turning point? A comment on Jay Ogilvy’s from a foresight perspective. While we do not wish to make ‘‘Facing the fold’’, Foresight, 13 (4), 24-34 broad generalizations about the extent of development and adoption of foresight capabilities, the benefits of strategy groups Miller, R. (2007) Futures literacy: A hybrid strategic scenario imbued with such skills is evident. This early probe into how method. Futures. 39, 341–362 foresight can ready organizations for the future justifies further research questions, including: O'Brien, E. & Robertson, P. (2009) Future leadership 1. How do we create a foresight culture based on competencies: from foresight to current practice. foresight literacy among those responsible for strategy Journal of European Industrial Training 33 (4), 371- (boards, CEO’s, strategists)? 380 2. What is our responsibility as management educators in facilitating a paradigm shift that embeds foresight as a Porter, M. and Kramer, M. (2011) Creating Shared Value. core product of higher education? Harvard Business Review, 89, 62-77 3. To what extent are other functional departments adopting foresight? Ramussen B., Andersen, P.D., and K. Borch. (2010) Managing A future organization comprised of foresight-guided strategists Transdisciplinarity in Strategic Foresight. Creativity is poised to be sustainable and bright indeed. and Innovation Management, 19 (1), 37-46

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Hart, S. (1995) A Natural-Resource-Based View Of the Firm. Varum, C. & Melo, C., (2010) Directions in scenario planning Academy of Management Review, 20 (4), 986- literature – A review of the past decades, Futures 42, 1014 355-369

Hart, S. and Milstein, M. (2003) Creating sustainable value. Vecchiato, R. (2012), Environmental uncertainty, foresight and Academy of Management Executive. 17 (2), 56-67 strategic decision making: An integrated study. Technological Forecasting & Social Change, 79, 436- Institute for Alternative Futures, Wiser Futures Compendium 447 2011 Vecchiato, R. and Roveda, C., (2010), Foresight in corporate MacKay, B. and Peter McKiernan (2009) Creativity and organizations. Technology Analysis & Strategic dysfunction in strategic processes: The case of Management. Vol. 22, No. 1, 99–112 scenario planning. Futures 42, 271–281 Wack, P. (1985) Scenarios: shooting the rapids; how medium- Major, E., Asch, D. & Cordley-Hayes M. (2001) Foresight as a term analysis illuminated the power of scenarios for core competence. Futures 33, 91–107 Shell management. Harvard Business Review. 63, Nov-Dec. 139-150

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Weick, K. (1995) Sensemaking in Organizations. Thousand Oaks – Sage.

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