- October 8, 2019
- Posted by: Ramkumar
- Category: Strategy
Importance of Strategic foresight
In this digitally disruptive and competitive business environment, we often see some companies with keen strategic foresight anticipating and responding to a disruption far earlier than other companies.
This begets a question – Why some companies are able anticipate to respond to disruption far earlier than other companies?
A big challenge for any company is to develop strategies that can mitigate threats and take advantage of any opportunities from innovation. This requires a foresight to identify patterns, risks and then respond accordingly.
Previously, strategic foresight involved only studying the industry landscape, performing competitor analysis and track important metrics like market share.As things were reasonably static, it was easy to understand the capabilities and build a strategic plan.Unfortunately, this model of Strategic planning is no longer adequate.
In this age, new and emerging technologies are disrupting every industry including hospitality, Transport, Manufacturing, Healthcare and Finance.RFID in logistics, Blockchain in Finance and 3D Printing in Manufacturing have already disrupted the respective industries.
As the new technologies emerge, the traditional businesses needs to decide its investments in these technologies. Often these decisions needs to be taken with inadequate information as these technologies have not matured and any adverse consequences of these decisions cannot be reversed.At the same time, inaction can also lead to disastrous consequences. Companies like Nokia and Kodak are famous examples of firms that just chose not to do anything.
In contrast, companies like Sony in case of image sensors and DHL in Digitization were able to anticipate and respond to disruptions far earlier than others. These firms made strategic bets before the market settled on a business model and this helped them to hold a strong position in the market.
Strategic foresight and nature of Innovation
- The true power of innovation lies in its imagination.The reason why many are not strong in innovation is because they see the future as the extension of present.Rarely, that is the case.
- In this digital era, innovation need not come from the players within the industry.Innovation has become industry agnostic and can disrupt multiple industries at the same time.This can have a cascading effect which cannot be seen in advance.
- At the same time, many new technologies have been failures.Hence the real strategic foresight lies in discerning the real opportunities from fake threats.This is really challenging.
- Let us take the case of Beyond meat which has been prominent for providing plant based burgers giving the same taste and experience of meat burgers.As the meat is produced in the labs, the question is whether it should be classified as Pharma industry or from agricultural industry.How would other player react to this disruption?
- Companies with strong strategic oversight often look beyond their industry which positions them to ignore, pre-empt and capitalize on new opportunities.
- The reason why many business lack this oversight is because the existing tools and frameworks focus only on the immediate industry environment.Most of these strategies are focused on short term, hence companies resort to experimentation by building prototypes to validate the viability.These innovations are incremental that are built on existing knowledge rather than acquiring new knowledge.
- It is necessary to have a structured framework that helps companies to correctly identify a threat as well as opportunities emerging out of a technology.This is because many of the recent innovations have reconfigured the entire industry’s ecosystem and the strategic interaction between the actors.
Playbook to develop Strategic Foresight
- People who have lateral thinking and a strong aptitude for curiosity generally have a good foresight. Such people needs to be provided resources so that they can test their innovative ideas.
- A strategic planning system is necessary to accurately identify the distant threats and opportunities. As all resources available are scarce and limited, business needs to decide whether to invest these resources to develop a clear view on distant threat or opportunity.The threat represents the potential disruption to the core business and the opportunity represent the ability of the business to respond to innovation.
- For identifying threats, one should measure the speed of entry, reliance on complementary resources, quality of network that the innovator has and the reconfiguration of customer relationships.
- For innovation, one should measure the business’s innovation awareness, its motivation to change, it’s current capabilities and its potential to develop new capabilities.
- Successful disruptors have a strategic foresight process that is not constrained by industry boundaries.Their framework correlate the emergence of innovation and the potential impact on its business.
- Hence their framework support in calibrating a response even with uncertain future.