The article provides a new framework to manage and develop corporate foresight, guiding strategic thinking and business growth. Systematically managed strategic foresight is one of the keys to successful corporate transformation and to business success in the 2020s. It also paves the way to identifying strategic paths and to defining roadmaps that will allow the companies to navigate the highly uncertain times.
Future technologies, products, and markets are a subject of intense public interest, but even so, it seems that companies are hesitant to invest in corporate foresight as a way of better understanding their future business environment. Indeed, strategic foresight remains an unexploited potential for many companies. The benefits of future knowledge for business development are not always properly recognized.
Executives often think that foresight information has only limited relevance for practical business purposes. There is little concrete evidence on the value and benefits of systematically generated information about the future. We interviewed 15 business executives from companies operating in the global marketplace. They said that foresight often produces “nice-to-know information,” and “it’s a luxury we can ill afford.” It’s hard to prove the value of foresight by financial indicators. It takes a long time, often years, for the benefits to become apparent.
All this means that strategic investments in foresight are often neglected. The company management’s main interest and focus are usually on hitting this year’s targets, so looking forward to what lies ahead a decade down the road may well seem redundant. At the same time, however, that may lead to failing to take decisions and actions that would help develop a future-proof company and lay the foundation for a more profitable business in the future.
The value of future-preparedness
If the strategic value of foresight is not recognized and the organization lacks the capability to use knowledge about the possible futures, the company will be unprepared to cope with unexpected market turbulence, technological disruption, and changes in customer behavior. Kodak and Nokia are two well-known stories of just such failures. Their senior management was not unaware of the possibility of disruption, but they were too slow to respond and reorient. The foundations for their businesses collapsed.
Yet studies have shown that systematic corporate foresight practices can significantly and measurably improve competitiveness. According to results from long-term studies, forward-looking companies that engage in systematic foresight are 33 percent more profitable and can achieve 200 percent higher growth rates than average.
Moreover, major international companies such as Daimler, Pepsi, and Siemens have shown in practice how systematic foresight can support business performance. For example, Daimler created its Society and Technology Research Group in 1979 to monitor and analyze the company’s operation in the context of broader changes in society. One of the unit’s foresight most impressive achievements was recognizing a new emerging customer need in the areas of car rentals, which led to the creation of the internationally scalable car2go business model.
Both the theoretical and practical examples go to show that business does indeed benefit from future foresight. A company that bases its decisions and actions on foresight can be described as a genuinely future-oriented organization.
However, these success stories usually come from select major companies that may be regarded as pioneers of corporate foresight. Most businesses and industry sectors don’t systematically invest in foresight.
For this article, we interviewed top executives from manufacturing companies that operate internationally and provide machinery, equipment, and services. We surveyed the top 20 biggest manufacturing companies in Finland and identified executives responsible for business development and strategic management: mainly C-level officers, business unit directors, and functional leaders. We interviewed 15 executives from 10 companies and had intensive discussions on the significance of corporate foresight and how it is implemented in practice. We systematically analyzed the interview transcripts and organized a workshop with a sample of the informants in order to validate our findings.
In our research, we found that:
- companies often don’t recognize the strategic value and benefits of foresight,
- foresight activities are sporadic, unsystematic and confined to narrow areas of focus,
- the use of foresight in organizations is often limited to specific operations and functions, and
- foresight is not used extensively for business development purposes.
Indeed, companies have many potential opportunities to develop their foresight capabilities and make better use of foresight practices and methods.
How to lead a future-proof company?
How then to manage strategic foresight activities? How to organize corporate foresight so that it is beneficial and valuable?
In our empirical research, we identified four cornerstones of transformative corporate foresight. They are as follows:
Four cornerstones of transformative corporate foresight
|Principle: Foresight is a key strategic tool and an integral part of strategizing processes.
Impact: Evidence-based view of possible futures steers strategic decision-making and facilitates the development of a future-proof organization.
|Principle: Foresight is an on-going, systematic and well-resourced activity.
Impact: Facilitates the early detection of signals, trends and disruption and the use of this information in continuous organizational renewal.
|Principle: Company staff, customers and stakeholders are broadly engaged in the acquisition and application of future knowledge.
Impact: Develops a future-oriented workplace and fosters co-creative interaction about future possibilities.
|Principle: Foresight supports practical business operations and understanding of current and future customer needs.
Impact: Future knowledge enables developing of new businesses, and creates growth and competitive advantage.
Strategic management of foresight activities allows the company to continually make observations about the future and make its strategic decisions and investments accordingly. Therefore, it can anticipate future disruptions and take earlier and better advantage of future opportunities.
Corporate foresight helps to identify different strategic opportunities and to gauge their long-term effects. At the same time, the company will better understand how the operating environment is changing and a more extensive range of strategic options.
Foresight will also help the company conceptualize and narrativize its future, which might otherwise seem vague and ambiguous. Well-grounded information about the future is, therefore, also beneficial for defining and communicating strategic choices. It helps to describe and communicate what kind of future visions inform the company’s strategic decisions and what kind of goals they are intended to achieve.
Strategic decision-making will especially benefit from foresight activities, which are broadly based and aim for a holistic understanding of the future operating environment. Systematic corporate foresight presents an opportunity for many companies. With systematically generated knowledge about the future, they can continuously monitor the operating environment and anticipate its future direction. Rather than reactively responding to the future, organizations can take the strategic initiative and build a future aligned to their vision.
Systematic foresight requires a workforce with a future-oriented mindset, a diverse portfolio of foresight techniques, and adequate resources. All this helps to establish foresight as an organizational capability, allowing the company to recognize new business opportunities, comprehensively manage risks, and prepare for different kinds of threats and disruptions.
Systematic and continuous foresight is key to gaining a broad understanding of the various phenomena, trends, and forces of change impacting company’s operations. In this way, foresight can be seen as an investment in the future of business.
One of the main hindrances to corporate foresight is that many organizations lack the necessary practices and methods for the extensive use of future knowledge. One way to address this shortcoming is to develop tools for engaging staff and customers and their co-creative development efforts.
Organizations, networks, and ecosystems need to develop practices that support and facilitate future knowledge co-creation and its application in different organizational functions. Future knowledge is needed in various corporate functions, ranging from product innovation (R&D) to thought leadership (marketing) and the identification of future competences requirements (HR).
Participatory foresight activities that engage staff members help provide new ideas and insights in the organization and open up new directions for business development. Co-creation offers new perspectives, not only for the development of products and services but also for launching new strategic initiatives. At the same time, it contributes to developing a creative business culture with excessive capacity for self-renewal.
For foresight to be successful, it must tie in with practical business objectives and be harnessed for all-round business development. Foresight is needed particularly in companies that operate in a fast-changing marketplace with rapid changes in business models. In addition, strategic foresight is essential when new markets are being created, and new business opportunities are being identified.
Foresight must be customer-driven for it to benefit business development. In addition to analyses of the organization’s operating environment, foresight must also create an in-depth understanding of how customers’ values and behavior patterns will change in the future.
To put the outcomes of foresight to the best possible use in business development, organizational processes must be in place to translate information about the future into insights and recommendations for practical decision-making. In this way, foresight activities can produce a practical understanding of emergent customers’ needs and future markets and offer new information and insight for co-creation processes to innovate new concepts, products, and services.
Drawing on our research, we suggest in this article that developing and improving foresight capabilities is an unexploited opportunity for many companies. In an increasingly complex business environment and under the pressures of toughening international competition, systematic strategic foresight may provide the key to successful corporate transformation and to overall business success in the 2020s. It can also pave the way to identifying strategic paths and to defining roadmaps that will allow the company to navigate the highly uncertain times that lie ahead in the post-pandemic world.
About the Authors
Nando Malmelin, Ph.D., works at VTT Technical Research Centre of Finland as a Professor of Practice focusing on disruptive business. He is also an Adjunct Professor of media and communication studies at the University of Helsinki. Malmelin has published extensively on management, creativity, organizational renewal, and strategic thinking.
Matti Pihlajamaa, D.Sc. (Tech.), is a Senior Scientist at VTT Technical Research Centre of Finland. He is an expert on innovation management and innovation policy. His work centers on strategic innovation, sustainable business, and cross-sectoral collaboration.
Pauli Komonen, M.Soc.Sc., is a Research Scientist at VTT Technical Research Centre of Finland. As a researcher and advisor, Komonen specializes in strategic foresight and human insight. He is doing a PhD on consumer future orientation at the University of Helsinki.