The notion of Black swans has become an integral part of futurizing discussions, although few have read Nicholas Taleb’s original text. Black swans did exist all the time, but as we did not know of their existence, all swans were white. No need to look for alternatives, we knew! Right. So did we really know that nobody is so stupid that he starts a war in Europe? Or did we just not explore different possibilities that seemed undesirable or not probable to us? Ignorance, based on a false perception of knowing might have undesirable consequences.

One should not underestimate the complexity most organizations face, and the need to reduce complexity to create meaning and facilitate decision making. Strong leaders know, and they make decisions, if you allow some irony. In many cases this works, for incremental shorth term development of the organization, specially in stable environments. But what if the environment is turbulent? And if there is a particularly important universe of phenomena, relevant to the decision, that you have not explored because you think you know, although you know only a fraction of the relevant issues? Thinking that you know reduces the perceived risk, but de facto the actual risk you face is bigger although you do not recognize it.

Every organization is a system of power and political structures. This does impact every exploration into the not known. Strong cultures of “command and control” might foster single-loop learning processes, mainly achieving adaptation and correction goals. But what if you start to question the assumptions underlying many of your strategic beliefs, if you realize the boundaries in your mental models and start to up- and timeframe your thinking? In a double-loop learning process you might see something new coming at you in the future, not only another yesterday.

Is there a way to escape the knowing-trap and use a larger part of the universe to influence our way to think about futures, and options laying ahead for us? Our friend Christophe Kempkes from shiftN [1] in Belgium, helped to formulate a set of very helpful question:   

What if…..?

What if we knew less and learn more?

What if we knew less and imagine more?

What if we knew less and experience more?

These “what if” question can trigger a process leading to an expanded intellectual realm. Richard Normann in Reframing Business called the process “Knowing how to know”. Languaging, use of opening and catalysing artefacts, structural coupling etc. are key elements in such a process. The analytical and intellectual debate, “let disagreement be an asset”, were competing views of how futures might come at us is core to every successful futurizing, and scenario, endeavour. Turning this into an ongoing process, integrated in the organizational DNA, can create a platform for “knowing” less and learning more.

On our learning journey we might stumble upon black swans, which existence perhaps were clear and understandable to others. And we might have been able to understand that there are people stupid enough to start a war in Europe in 2020’s.

We invite you to join the escape from the knowing-trap.

[1] https://shiftn.com/team/christophe-kempkes

The business environment has, for decades, not been as foggy as it is today. In this blog, I will discuss how management teams can start to regain a sense of control in the so-called VUCA² world of extreme uncertainty, using continuous strategic foresight. To begin with, three things are needed: time, a clear strategic agenda, and shared assumptions about the future of the business environment.  

A client of mine, a CEO in a major Finnish company, admitted to his management team a month or so ago that, during his long history as a business executive, the business environment had never been as foggy as it is now. And he is not alone. The acronym VUCA has been used for years to describe a rapidly changing business environment characterized by Volatility, Uncertainty, Complexity and Ambiguity. However, the recent geopolitical stress has induced an environment I would describe as “VUCA on steroids”, or VUCA². As the Ukrainians are literally fighting for their lives – and while there’s, of course, no comparison – the companies I work with have to cope with the ripple effects. Part of this struggle is strategic management. But how can one lead a strategy in a VUCA² environment? 

“Be like water, friend,” said Bruce Lee. “What stands in the way becomes the way,” said the stoic Marcus Aurelius. Wise words about becoming adaptable and agile in times of hardship. Strategists could claim a VUCA² era demands extreme adaptability and learning, where the strategy IS agility – a means, not an end. Vision, mission, strategic priorities, objectives and tasks – elements of a deliberate strategy – can be adjusted on the spot if necessary to accommodate the rapidly emerging changes in the market. This might be reality for startups, but not for most established companies. And I’d argue, it shouldn’t be either. People by nature want predictability, continuity, and safety in addition to hope and positive development. Only a few companies can be like Bruce Lee – there was, after all, only one Bruce Lee. So what should the others do in a VUCA² environment? 

I argue that the current times demand strategic foresight more than ever. “We need to regain a sense of control,” said the same CEO to his team. High performance is as much about action as it is about emotion. And the feeling of being in control can be strengthened with structured, continuous foresight that is integrated into strategic management. Here, strategic foresight provides both insights about what is happening around us, what we could do, what we should do AND the sense that we are staying on top of the uncertainty and our options.     

Three things are necessary for any management team to start regaining the sense of control.  

The first is of course time and headspace to perform foresight and sense-making. Consultants and advisors can provide information and facilitate sense-making, but they cannot do the thinking for executives.  

The second is a clear strategic agenda: a set of strategic questions and priorities that reach from the now to the long term. I’m seeing too many agendas muddled by operational and short-term items, or analysis of risks, which might be critical to the firm’s survival, but with a focus only on a very limited set of risks and only their probabilities. Instead, the CEO must maintain a firm grip of the agenda and keep his or her team engaged with both the short and the long term questions, the risks and the opportunities and the emergent and planned issues. In other words, the agenda consists of the organization’s strategic questions, decisions, and their execution. 

The third thing necessary for regaining a sense of control are the assumptions behind strategic decisions. These are the shared, transparent assumptions an organizations make about the key uncertainties affecting the outcome of their decisions. Too often, the assumptions about the effects of the external environment are not fleshed out, are tacit and/or too general – decisions have been made because they seem obvious and are driven by path dependencies. Too often, the assumptions have not been documented and even less often, they reappear in day-to-day strategic management after being buried in strategy documents. Instead, the CEO should present the team with the assumptions, discuss them regularly and continuously monitor how they are becoming reality (or not) and scan what new assumptions should be made to steer the strategy.      

Strategic foresight as a continuous practice hence becomes an integrated part of a firm’s management model and forums of strategic decision-making. The practice, when fully implemented, needs resources, tools, processes and insightful people for monitoring and sense-making yes, but the first steps of adopting foresight as a continuous practice can be simple and made at the top management level. And for these, time, discipline, and transparent communication are required. Even the first steps can create a much stronger sense of control in a foggy business environment. 

Capful can help you take these first steps. Let’s connect if you want to talk more. 

Tomi Heikkinen
Director
+358 40 709 9530
tomi.heikkinen@capful.fi

Turbulence is an ever-present property of most organizations’ operating environment. Thus, different applications of futurizing have become an important practice as we navigate towards uncharted waters ahead. But, paraphrasing on a previous blog-text I wrote, one could ask if our futurizing approach is focusing on the wrong futures?

One frequently used illustration in the scenario field is the onion-like graph, developed from the writings of Kees van der Heijden. The contextual environment surrounding the transactional environment, incorporating the actors, which surrounds the focal actor. Very logical. At the same time, the future of most focal actors is to a great deal determined by the future of its customers. Can it be that focusing on the focal actor, our organization, might lead to an insufficient understanding of the waters ahead?

Let us take a brief look at some big companies that might have looked at the wrong futures. General Motors was for 100 years a dominant company in the automotive industry. Focusing on profiting from financing, they did not pay attention to the changing landscape and the new demands from customers. Bankruptcy was the consequence for one of the worlds biggest companies. Kodak, that was one of the world’s biggest film companies, did focus and protect its film business although they recognized, and invested in digital solutions. The focus on their traditional core led Kodak to file for bankruptcy in 2012. A third similar example could be Nokia. The company had very hard to recognize the potential of smartphones, perhaps it had a hard time connecting to people, their customers. A major downfall and restructuring followed.  These examples have strong connections to consumer markets. They also point out that focusing heavily on your own future may be an activity that focuses on a soon obsolete business. In industrial markets we see that for most B2B activities there is a small number of customers that form the core of the business. Disconnecting from the future of already a few might have profound consequences. Being too close to home might lead us to focus on the wrong futures, our owns in stead of those of our customers.

The customer as the core of strategic thinking is not a new idea. Personally, I have had the benefit of being a colleague to pioneering consumer centric strategic thinkers, the late “management guru” Richard Normann and Professor Christian Grönroos. Appreciating that the success of an organization is dependent on the success of its customers is key. And even broader, it is a question of the success of the value creating system that the company is part of, a system of interactions between actors like customers, suppliers etc., as so well highlighted in the seminal 1993 HBR article “Designing interactive strategy” by Richard Normann and Rafael Ramirez.

It seems to me that a very fruitful futurizing approach is to focus on the future of the value creating logic and its dynamic systemic future properties. This would naturally increase the complexity of the analysis, but at the same time reveals more potential opportunities and risks.  A futurizing approach like this would also redirect the strategic conversation. To build on Norman & Ramirez, one would say that the key strategic task is the design and reconfiguration of roles and relationships among the constellation of actors to mobilize the creation of value in new forms and by new players. Guided by our understanding of plausible futures, the organization would design and develop its own value creating system, which has customers as a very central position. Shifting the focal actor of the analysis from the own organization to its customers, or its value creating system, will also enable engagement in more strategic dialogues with stakeholders, thus enhancing the understanding of what might come at you, given that one has the proper processes and competencies to interpret signals.

Many scenario-building approaches deal with the changes coming from the contextual environment. We build scenarios from plausible outcomes of e.g., technologies, macroeconomics, changing consumer behaviour etc. These approaches seldom incorporate how actors in the transactional environment might drive change, seizing opportunities, and sometimes create new maps that might change the landscape. Fortunately, we start to see fruitful analyses incorporating iterative interaction between the contextual and transactional environments. Naturally, more demanding but the approach does pay off. We might understand coming moves of major players and emergence of disruptors from the start-up field. The analysis might lead us to discover pockets of the future in the present, to quote Bill Sharpe and Tony Hodgson in their Three Horizons conceptualization. Perhaps the new Teslas, Amazons, Facebooks and alike would pop-up in the analysis. Extending this thinking is a topic for coming writings.

To build scenarios for plausible futures of our customers is central for contemporary strategic planning. Doing so brings a better understanding how we can continuously support our customers, and other actors in our value creating system, to prosper and make good in times to come.