Research Tecnology Management - 2010 - The Foresight Process Futures Studies and Scenario Planning

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Resources and Reviews For

Leaders of

Technotogical

Innovation

With

this

issue

we

introduce

a

reimagined nformation

Reso urces. What was a simple list

of provocative but unrelated

current readings now becomes another durable resource to

complem ent our feature articles and other columns. In this space we

I I

offer a series of

primers on key topics

with

pointers to important resources to keep you informed of new

developments and

help

you expand

your repertoire of tools and

ideas.

In some issues this

column will be written by the editors but we welcome your contributions in

th e

form of

suggestions for topics and of column su bmissions.

T h e F o r e s i g h t P r o c e s s F u t u r e s

S t u d i e s

a u d

S c e n a r i o P i a u u i u g

In an increasingly dynamic (some would

say unstable) global economy, every

business decision is a bet on the future.

Those bets are even bigger for innovation

and R&D managers, whose job it is to

single out the products, services, or

business models on which the next w ave

of their company's future will ride.

What will consumers want? What will

they value? Where will technology go

next? What effect will the climate crisis

and a growing ecological awareness

have on business—on our business?

Will the economy stabilize? Or move

into some new paradigm? Do we even

know what questions to ask? Too often,

even when they are based on research,

these decisions are made in a moment,

based on a decision m aker's (often

fragmented) understanding of the past

and vision of t h e present.

Futures studies, also known as

Foresight, offers one way of

approaching the problem of th e future

(Wikipedia offers reasonably useful

summaries of t h e field u nder both

terms). Broadly speaking, futures

studies is exactly what it sounds like: a

field dedicated to studying the future.

It's not prognostication; rather, futurists

work froin a solid understanding of the

past and the key forces driving the

present to extrapolate to possible

futures. The plural is not a typo.

Futurists don't predict

the

ñiture; they

explore the range of possible futures.

The field emerged as an academic

discipline in the 1960s, with the work of

people like Hemian Kahn (who assessed

the possible outcomes of nuclear war in

Thinking about the Unthinkable and

predicted the economic boom of the

1980s and 1990s in The Coming Boom:

Economic Political and Social

[New

York: Horizon, 1982]) and W endell

Bell, whose two-volume

Foundations of

Future Studies: Human Science for a

New Era

(New Brunswick, NJ:

Transaction, 1997) offers a

comprehensive survey of

th e

foundation

and intellectual framework of the field.

Pierre Wack brought Herman Kahn's

thinking into the business world with his

work at Royal Dutch Shell in the 1960s

and early 1970s, when he foresaw the

possibility of a severe oil shock—

allowing Shell executives to respond

appropriately when the shocks arrived.

Wack documents his experience at Shell

and offers insight into his process in a

two-part

Harvard Business Review

article, The Gentle Art of

Repe rceiving (part one appeared as

Scenarios: Uncharted Waters Ahead,

Sept.-Oct. 1985, and part two as

Scenarios: Shooting the Rapids,

Nov.-Dec. 1985).

Kahn and W ack focused on a particular

tool of futures studies, scenario

planning. Scenario planning involves

identifying the major forces in play in

the environment and projecting how

September— October 2 1

changes in those forces will affect other

elements to produce a particular future.

The result is a range of possibilities,

each accompanied by a vivid description

of the future produced by each set of

possible factors. The po int, as Wack

puts it, is not so much to have one

scenario that 'gets it right' as to have a

set of scenarios that illuminates the

major forces driving the system, their

interrelationships, and the critical

uncertainties ( Shooting the Rapids

1 4 6 .

But foresight is a process, not a product.

In order to benefit from scenarios and

scenario planning, company leaders

must be willing to engage in a strategic

conversation that encompasses the

entire foresight process, from

identifying the focus question for the

process through to integrating the

insight gained back into business

strategy and operations. As Ari de Geus

argues in

The Living C ompany

(Cambridge, MA: Harvard Business

Press, 1997), the sensitivity to

environmental forces and the

willingness to engage change that both

drive and emerge from the foresight

process are key attributes of companies

that survive. For de Geus, the living

company is a learning company—de

Geus pioneered the term learning

organization —one that goes beyond

forecasting the future to learning from

and preparing for it.

De Geus worked with Pierre Wack in

Shell's Strategic Planning Group, as did

Peter Schwartz. Schwartz's

T h e Art of

the Long

View:

Planning for the Future

in an Uncertain orld (New York:

Currency-Doubleday, 1991; rptd. with

additional material 1996) offers an

overview of the scenario planning

process. Although—as some Amazon

reviewers have pointed out—Schwartz's

predictions for 2005 aren't exactly on

point, the real value of Schwartz's book

is in the careful overview of scenario

planning and in the idea that scenario

planning can go beyond illuminating the

future; rather, Schwartz argues,

exploring the future can reveal the blind

spots in managers' vision of today.

In

Scenarios: The Art of Strategic

Conversation (New York: Wiley, 1996),

Kees van der H eijden offers a wide-ranging

overview of

t h e

scenario process. The

strategic conv ersation, for van der



Heijden, is the mechanism by which

the insights gathered through scenarios

are linked to the business's driving

idea. Scenarios provides both the

history and ph ilosophical

underpinnings of the method and a

practical how-to for implementing

scenario planning and sparking the

strategic eonversation.

Seenario planning is but one tool of

foresight. In 20/20 Foresight: C rafting

Strategy in an Uncertain World

(Cambridge, MA: Harvard Business

Press, 2001), Hugh Courtney explores

the full range of future exploration tools,

providing an overview for the executive

unfamiliar w ith the field.

Courtney also explores how futures

thinking can be integrated into strategy.

The traditional business case model for

decision making relies almost

exclusively on qualitative data and

pinpoint forecasts of key value drivers

to make the case for action. This leaves

the executive stranded when

uncertainty intrudes, left either to

ignore the doubts or to engage in a

never-ending process of data gathering

in an effort to dispel the uncertainty.

But, as Courtney points out, the future

remains ever uncertain and ignoring the

possibility is not a strong strategic

ehoice. Rather, Courtney suggests,

executives should classify the

uncertainty by strength and importance

and make strategic choices according

to the risk presented by the unavoidable

uncertainties at hand.

More recently, Michael Raynor, author

of

The Strategy Paradox: Why

Comm itting to Success Leads to Failure

And What to do About it)

(New Y ork:

Broadway Business-Random House,

2007), also discusses how futures

thinking may be integrated into strategic

thinking. (The first chapter of Raynor's

book is available for down load at http://

www.michaelraynor.com/books.

html#strategy; y?rA/reviewed the book

in the July/August 2007 installment of

Information Resources.) For Raynor,

embedding futures planning tools in the

organization's structure and strategy can

create opportunities by fostering a

flexibility that will allow the com pany

to respond quickly and effectively to

changing circumstances. Raynor calls

this balance of overarching strategy and

local flexibility strategic flexibility .

A number of organizations and

businesses have embraced both futures

studies generally and scenario planning

specifically. Several of these have

extensive web resources that can h elp

guide an early exploration. For future

studies generally, the World Futures

Studies Federation http://www.wfsf.

org),

a nonprofit organization founded

in the 1960s to encourage and promote

the development of futures studies as a

transdisciplinary academic and

professional fleld in all parts of the

wo rld, offers a rich array of resou rces

about the state of futures stud ies. The

Institute for the Future (http://iftf org) is

a think tank that spun off from the Rand

Institute in the 1960s; the institute is

dedicated to using futures studies tools

to work with organizations of

ll

kinds

to help them make better, more

informed decisions about the future.

For a more business-focused approach,

visit the Global Business Network

(GBN), a network of consultants that

Resources

ooks and articles

Kahn, H. 1962.

Thinking the Unthinkable.

New York: Horizon.

Kahn, H. 1982.

The Coming Boom: Economic, Political, and Social.

New York:

Horizon.

Bell, W. 1997.

Foundations of Future Studies: Human S cience for a New Era. 2

vols.

New Brunswick, NJ: Transaction.

Wack, P. 1985. Scenarios: Uncharted waters ahead. Part 1 of The Gen tle Art of

Repereeiving.

Harvard Business Review

63(5): 73-89.

Waek, P 1985. Scenarios: Shooting the rapids. Part 2 of The Gentle Art of Reper-

eeiving. Harvard Business Review 63(6): 139-150.

de Geus, A. 1997.

The Living C ompany.

Cambridge, MA: H arvard B usiness Press.

Schwartz, P. 1991.

The Art of the Long View: P lanning for the Future in an U ncer-

tain

World

New York: Curreney-Doubleday. Rptd. with additional material 1996.

van der Heijden, K. 1996 Scenarios:

The

Art of Strategic Conversation. New York:

Wiley.

Courtney, H. 2001 . 20/20 Foresight: Crafting Strategy in an Uncertain World Cam

bridge, MA: Harvard Business Press.

Raynor, M. 2007.

The

Strategy Paradox: Why Comm itting to Sttccess Leads to Fail-

ure And W hat to do About it). New York: Broadway Business-Random House.

Online

World Futures Studies Federation

http://www.wfsf.org

Institute for the Future

http://iftf.org

Global Business Network material on scenarios and seenario planning

http://www.gbn.com/about/seenario_planning.php

Shell material on scenarios and scenario planning

http://www.shelLeom/home/content/aboutshell/our strategy/shell global scenarios/

dir global scenarios_07112006.html

Scenarios-An Explorer s Guide,

Shell publication

http://www.shell.com/home/content/aboutshell/our strategy/shell global_seenarios/

scenarios explorers guide/scenario explorers guide 30102006.html

Research • Technology Management



uses scenario planning and other tools to

help its clients plan for, and flourish in,

the future. With Peter Schwartz among

its five founders, GBN includes scenario

planning among its primary tools and

offers extensive information and case

studies about the process (http://www.

gbn.com/about/scenario_planning.php).

Shell, where Pierre Wack initiated

modem scenario planning, remains very

active in the field. The strategy section

of its website includes a richly detailed

description of scenario planning in

general and of the scenarios they have

developed over the past several years

(see, specifically, http://www.shell.com/

home/content/aboutshell/ourstrategy/

shell global scenarios/dirglobal_

scenarios 07112006.html). Shell also

offers a detailed guide to the scenario

planning process,

Scenarios

~

An

Explorer s Guide,

available for

download from their site.

All executives engage in foresight,

whether or not their organization has

an established foresight proce ss. A

conscious foresight process, shaped by

strategic considerations and supported

by an ongoing strategic conversation,

can ensure that foresight supports

long-term suc cess.

/

would like to thank Christian Crew s,

principal at AndSpace consulting, a

foresight, design, and strategy

consultancy, for his generous assistance

in researching this column.

Reviews

Innovate the Future: A Radical New

Approach to IT Innovation

David roslin Ne w York Prentice-Hall,

20 W)

In

Innovate the Future,

David Cros l in

attacks the thorny problem of creating

and launching successful innovations

through the lens of transfomiative value.

Croslin, president of consulting finn

Innovate the Future and former

executive at Hew lett-Packard, Verizon,

and M CI, brings his extensive

experience to bear on the IT industry,

but offers insights and approaches that

can be used across other markets.

Croslin readily admits that every book

about innovation at some point suggests

that comp anies must think outside the

box in order to innovate. But Croslin

identifies how the bo x is constructed

by a company's tendency to seek future

success by perpetuating processes and

priorities that have worked in the past

without considering where the company

and the product are in the innovation life

cycle. The result is a complex but

compelling model of where innovation

fails to add value and how to restart the

innovation m achine.

The most valuable part of

Innovate the

Future

may be in the final chapter,

where Croslin presents four use cases

that exemplify key themes in the book:

identifying the customer, targeting

transformative value, working with

limitations to transformative value, and

maximizing lifestyle integration. Only

in these final examples does the real

depth and value of Croslin's model

become fully evident. In fact, this final

section could actually be read first to get

a sense of why the complex, difficult

graphics and models that pepper the

early chapters really matter.

The graphics, and the dense discussion

that accompanies them, make for hard

going at times, but in this case,

persistence pays off. The book offers a

concrete model for the innovation life

cycle that points to useful strategies for

sustaining—and creating—innovation.

Croslin's model suggests a number of

creative ways to evaluate competitor

value chains and anticipate ways to

disrupt them, thus providing key

guidance to innovators seeking to

develop a compelling and sustainable

market presence.

Croslin begins by differentiating

inventions, which emphasize features

and capabilities, from innovation, which

is best seen from the perspective of the

customer's consumption priorities.

Consumption priorities are those factors

that drive purchases, such as

convenience; they may be shaped by

such elements as increases in

consumers' available time or money or

their need to modify their lifestyle.

Croslin describes six innovation types,

emphasizing the importance of what he

terms targeted innovation, innovation

that matches the company's business

priorities with consumer consumption

priorities to maximize the

transformative value of the product.

Transformative value—recognizing,

developing, and exploiting it and

September

—

October 2 1

preventing competitors from doing the

same—is a key topic for Croslin.

Targeted innovation means doing more

of those innovations that add

transfomiative value and limiting those

that decrease it. Croslin expands on this

idea by describing the innovation life

cycle, which begins with the initial

invention and disruptive innovation. The

innovation life cycle continues to the

positive incremental invention and

innovation stage, where additional

transfonnative value is added in the

form of new features that continue to

position the company ahead of its

competitors in the eyes of the consumer.

Unfortunately, company pressures to

continue building revenue and reducing

costs in this stage can reduce the

flexibility that decision makers had in

the initial innovation stage, putting the

brakes on this positive incremental

stage. When this happens, the company

moves into a negative incremental

invention stage. Here, repetitive

incremental investments negatively

affect the transformational value by

increasing the product's complexity,

creating feature overkill with a

comm ensurate increase in cost or

maintenance requirements. This results

in a reduction in customer satisfaction;

thus, the company's innovation

investments actually hurt revenue

streams and market share.

In the final stage of

th

innovation life

cycle, incremental innovation goes from

negative to destructive. In this stage,

each additional investment decreases the

customer's perception of transfonnative

value of the company's product to the

point where the customer shifts

perceived value to a com petitor's

product. Here, company decision

makers continue to be constrained by

revenue growth and cost cutting

expectations, and their actions often

result in product commoditization and

market stagnation. The challenge,

Croslin asserts, is to restart the

innovation life cycle, escaping the

downward spiral of destructive

incremental innovation.

All of this leads to the real heart of the

book and the source of its value: Croslin's

discussion of how to disrupt the natural

flow of th innovation life cycle, his

Innovation Checklist, and a description

of various targeted innovation



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Research Tecnology Management - 2010 - The Foresight Process Futures Studies and Scenario Planning

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