The ROI of Strategic Foresight: Picturing the Future Pays Off
Organisations that systematically think about the future could be looking at up to 33% higher profitability and 200% higher market capitalisation growth within their industries.
FUTURE PROOF – BLOG BY FUTURES PLATFORM
The benefits of strategic foresight may seem intangible at first, and measuring its ROI can be challenging as returns usually manifest over several years. But research has found that strategic foresight has a significant impact on an organisation’s bottom line, and those who think about the future could be looking at up to 33% higher profitability and 200% higher market capitalisation growth within their industries.
DEVELOPING FUTURE PREPAREDNESS FOR SUCCESS
Future-proofing is a bespoke process. To succeed in any industry, a business must be among the best at something, and it must recognise its limitations and plan accordingly to change with (and preferably ahead of) the times.
Each business has a unique set of strengths and weaknesses, of wins and losses. Consider, for instance, one of Futures Platform’s Fortune 500 clients, a top-five company in its industry. Within just a few years, this company witnessed one business line skyrocket from $500 million to a whopping $3 billion. For this business, the biggest question – and its biggest fear – was how long would this exponential growth continue? And what could trigger a crash?
Strategic foresight can provide answers to such questions. By exploring a spectrum of future scenarios, including both likely and even seemingly unimaginable ones, organisations can play them out in safe mode. This proactive examination of potential futures ensures that strategic decisions are future-proofed, safeguarding the business against potential disruptions.
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Yet, while the benefits of strategic foresight are evident, measuring the financial returns of investing in systematic foresight practices can be difficult. The results of these activities are often not immediately visible or quantifiable, as they unfold over several years. However, research has shown that businesses focusing on the future can achieve up to 33% higher profitability and 200% higher market capitalisation within their industries.
MEASURING THE TANGIBLE RESULTS OF STRATEGIC FORESIGHT
In 2018, researchers René Rohrbeck and Ménès Etingue Kum released the results from their study of 83 firms across a wide spectrum of industries, from medicine to manufacturing, finance to fashion to food production. The firms reported the corporate foresight practices they had in place in 2008, and the researchers tracked each firm forward to 2015, documenting which had seen improved performance, which had remained the same and which had declined over that seven-year period.
Rohrbeck and Kum’s findings clearly showed that “future-prepared firms have a significantly higher likelihood of making it to the group of industry outperformers”. These firms attained superior profitability, competitive position and market growth.
Study participants had their corporate foresight practices analysed across three phases:
Perceiving: Practices to identify factors driving environmental/industry change and pick up on weak signals before the competition for a head-start advantage.
Prospecting: Manipulating, analysing and mapping data collected in the perceiving phase to identify trajectories, trends and tipping points for targeting when and how to strike for maximum advantage over competitors.
Probing: Any combination of, among other things, prototyping, test marketing and R&D projects aimed at proving plan viability in preparation for action that results in a competitive edge.
SELECTING THE RIGHT LENS FOR LOOKING INTO THE FUTURE
Selecting the correct lens for looking into the future is critical – too zoomed in, you lose the broader context and the scenarios that could play out over the longer term. Too panoramic or wide-angle, you gather more irrelevant than relevant data that’s difficult to crop into a portrait centred by the paths to choose or the trails to blaze.
After calculating the firms’ corporate foresight maturity levels in the three-phase matrix (perceiving, prospecting and probing), Rohrbeck and Kum sorted the firms into four performance categories:
Vigilant: These firms had correctly focused their foresight practices, looking just far enough and just wide enough to envisage future scenarios. They then planned for and proactively dealt with anticipated change rather than react after it occurs.
Neurotic: These firms chose the panoramic and/or telephoto lens, devoting time, money and effort to studying trends or considering paths that were outside appropriate parameters or were too distant – often at the expense of preparing for nearer-term issues and missing critical data hidden within an oversized picture.
Vulnerable: These firms were underprepared, not looking deep enough, wide enough or long enough at future scenarios to plan properly. In our photography analogy, the issues here were not so much a matter of lens selection as a matter of processing, resulting in underdeveloped images that made future preparedness difficult.
In danger: These firms made the same or similar mistakes as the vulnerable firms but to a more impactful degree. Or they simply did not put the effort to load the film into the camera, get it developed or possibly even remove the lens cap at the outset.
Success Stories: How Future Preparedness Boosts Performance
By selecting the right corporate foresight practices and making informed decisions based on them, firms in the vigilant group were able to maintain their outperformer status or even improve from average or underperformer status to become industry leaders.
For instance, an automobile manufacturer rose from average to outperformer status by assembling a global scouting team that screened future technologies. As a result, they emerged as a pioneering force in their industry, leading the integration of cutting-edge car features like personalised infotainment, and autonomous drive and parking.
Similarly, a healthcare service provider transformed from an underperformer to an outperformer by establishing a global foresight unit and integrating market insights into strategic decision-making. This enabled the company to launch innovative tech services tailored to meet consumer needs in emerging countries, including pharmacy finder apps, malaria detection apps, and telemedicine solutions.
Lessons Learned: The Consequences of Neglecting Strategic Foresight
Firms in the neurotic, vulnerable, and in-danger groups faced dire consequences, ranging from stagnant underperformance to even outperformers plummeting into mediocrity. A chemical products supplier lost its coveted market outperformer status when it failed to establish effective sensors for market signals and underestimated the risk of commoditisation in its core business of graphite electrodes. Consequently, they suffered a substantial loss in market share, having failed to diversify their revenue streams.
A financial services provider also tumbled into underperformance due to not having any systematic corporate foresight practices in place, and only relying on sporadic, ad hoc market research. This oversight caused them to miss out on emerging opportunities in the banking landscape, such as digital banking, mobile wallets, and analytics. Their stagnant product line contributed to a decline in sales performance.
UNLOCK THE POWER OF FORESIGHT WITH FUTURES PLATFORM
The results of Rohrbeck and Kum's research leave no doubt: strategic foresight pays off. By conducting systematic foresight, organisations can secure their position at the forefront of their industries, or even come from behind and win – big.
Futures Platform's all-in-one solution for strategic foresight makes it effortless to establish and maintain systematic foresight practices. With over 1500 trend and scenario analyses by professional futurists, AI-powered news signals, and a user-friendly visual collaboration platform to collect insights from your team, you can streamline your foresight process and save hours of valuable time on signal collection and trend analysis.
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References
Rohrbeck, R., & Kum, M. E. (2018). Corporate foresight and its impact on firm performance: A longitudinal analysis. Technological Forecasting and Social Change, 129, 105-116.
To stay ahead, organisations must widen their lens, exploring not just their own industry but what’s happening on the edges.