Strategic Foresight=Good Projections + Action

If you successfully identify the future consequences of your actions, and no one acts on your projection, does it matter?

A senior manager developing an internal strategic foresight program asked us to identify cases in which people ascertained the future outcomes of actions in the present. He wanted to know what methods they used. Great question.

And one that futurists hate to answer because there are so few examples with measurable results: How do you prove in a probabilistic universe that one path taken was more profitable, or less disastrous, than one never taken? Not easy to show outside of a model. So here’s one way to do it. Look at the consequences of badly-calculated actions, in multi-faceted, complex situations that were predicted, and how much they did or could cost:

  • The problematic end-game for Brexit that is currently unfolding was suggested in 2018 by a number of commentators. The Economist’s Bagehot predicted last January that British politics would be characterized by a state of angsty drift in 2018, and increasing Americanization–read polarization–of identity politics. The potential costs of this drift are now being counted and they are not trivial.
  • Increasingly devastating wildfires in the western United States in 2018 were predicted. The costs have been calamitous and enduring from a human and financial perspective.
  • People foresaw the housing market crash in 2008 (foresight dramatized with great flair in Michael Lewis’s book-cum-movie The Big Short), although it has been pointed out since that there were few who made the connection to the financial crisis it portended. As they predicted, the housing market crashed.

These cases make it clear how much wise forecasts can be worth: trillions of dollars and boundless human suffering. But only if someone acts on them. P

Good projections only matter if someone acts on them

There is one more important characteristic of these examples.  They weren’t acted on; alternative courses were not taken.

The alignment projections and action is what makes the  most famous example of forecasting, at Royal Dutch Shell (now Shell) in the 1970s, so powerful.

In the highly-cited case, an in-house futurist team created scenarios demonstrating how oil prices might rise and supplies fall, if member countries of the newly formed Organization of Petroleum Exporting Countries (OPEC) used the oil market as a proxy for geopolitics. Unused to straying into tangential domains such as politics, this was an unusual thought for industry executives. However, it was considered plausible by the oil company’s leadership. As a result, Royal Dutch Shell reallocated its investments and took other measures that helped it weather potential shocks.

It was this readiness to take proactive steps that has made the Shell case so striking and unique. Moreover, the company considered various alternative futures in relation to each other in order to place their strategic bets.

Methods don’t matter unless the results of those methods are accepted by decision-makers

In an organizational setting, the most vital “method” of all is engendering a culture in which leaders and their futurist team can communicate well, and building a process infrastructure in which future considerations inform current decision-making.

Without these, it doesn’t matter what methods were used to arrive at plausible future scenarios, because they won’t be acted on in any event. But those who are looking into the future and those who are making decisions today are not always motivated in the same way:

  • Leaders are often incentivized by short term resultsThere are few incentives for leaders or managers to seek long-term sustainability when short term rewards (and punishments) hang in the balance. Analysts may not be incentivized in the same ways.
  • Leaders are professionally required to take positions on the future based on commitments to external stakeholders and politics. Analysts may have the important luxury of being dispassionate about their findings. Rather it means that they are professionally dedicated to hearing what present evidence tells them, than to a particular answer.
  • Analysts can shift judgments according to the evidence or alternative reasoning. Most leaders will view consistency as a virtue, rather than a potential liability.

There is no pretending that these significant pushes and pulls can be airbrushed away. But it is possible for the heads of organizations to be adult about the ways in which failures of alignment between incentives and the evidence supplied by future projections can lead to inaction. Coming to grips with the potential costs than can come from not doing anything about reasonable projections of future bad outcomes should at the least be bracing.

There are many good methods available for structuring an analysis of future impacts of current actions.  These will serve best, though, in contexts in which people have committed culturally to the importance of alternative future visions, and structurally to the processes to integrate foresight into strategy and decision making.

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