How can we formulate strategy in the face of uncertainty?
That's the fundamental question leaders must ask as they prepare for the future. In the midst of a global pandemic, answering it has never felt more urgent. Even before the Covid-19 crisis, rapid technological change, growing economic interdependence, and mounting political instability had conspired to make the future increasingly murky.
In response, many leaders sought refuge in the more predictable short term - a mechanism for coping with the uncertainty that research has shown leaves billions of dollars of earnings on the table. By the start of 2020, the sense of uncertainty was so pervasive that any executives were doubling down on efficiency at the expense of innovation, favoring the present rather than the future. The pandemic was upon us.
Now the tyranny of the present is supreme. A lot of organizations have had no choice but to focus on serving immediate threats. But many business discussions still demand farsightedness. The stakes are high, and the decisions you as a leader make today may have ramifications for years or even decades. As you try and manage your way through the crisis, you need a way to link current moves to future outcomes. So how best to proceed?
Strategic foresight. The aim is not to predict the future but rather to make it possible to imagine multiple futures in creative ways that heighten your ability to sense, shape, and adapt to what happens in the years ahead. Strategic foresight does not help us figure out what to think about the future. It helps us figure out how to think about it. The most recognizable tool of strategic foresight is scenario planning. It involves several stages: identifying forces that will shape the future market and operating conditions; exploring how those drivers may interact; imagining a variety of plausible futures; revising mental models of the present on the basis if those futures; and then using those models to devise strategies that prepare organizations for whatever the future actually brings.
Today the use of scenarios is widespread. But all too often, organizations conduct just a single exercise and then set whatever they learn from it on the shelf. If companies want to make effective strategy in the face of uncertainty, they need to set up a process of constant exploration - one that allows top managers to build permanent but flexible bridges between their actions in the present and their thinking about the future. What's necessary, in short, is not just imagination but the institutionalization of strategic foresight.
Idea in brief
A good strategy creates a competitive advantage over time, but the uncertainty of the future makes it difficult to identify effective courses of action, particularly in the midst of a crisis. As a leader, how can you prepare for an unpredictable future while managing the urgent demands of the present?
The practice os strategic foresight provides the capacity to sense, shape, and adapt to change as it happens. One important element of the practice is scenario planning, which helps leaders navigate uncertainty by teaching them how to anticipate possible futures while still operating in the present
The way forward
To make an effective strategy in the face of uncertainty, leaders need to institutionalize strategic foresight, harnessing the power of imagination to build a dynamic ink between planning and operations.