What's NXT: Long-term thinking in uncertain times
In the light of last year's events, many wonder if planning for the long-term is worth it. Many, if not most, were taken aback by just how much a virus could disrupt the "normal" state of the world. Back in February 2020, for example, the Swedish Public Health Agency predicted the impacts wouldn't significantly affect Sweden.
Over a year later, this looks and feels very different. Most countries, including Sweden, tried to handle the Corona pandemic reactively, often in a somewhat panicked way. In February 2021, the borders between the Nordic countries were closed for the first time since World War II. In April, India was struggling with a mass eruption of Covid-19, when it was thought only a few months prior that we had successfully overcome the most challenging part.
Many have talked about the so-called black swan theory, implying that the Corona pandemic could not be predicted. However, others argue pandemics have been on the table for several years, with researchers and politicians issuing repeated warnings about the consequences of such events. Thus, they believe that the pandemic was predictable, albeit not the exact time or course.
So naturally, one may ask how to understand and prepare for disruptions of this magnitude when performing long-term planning?
Can both business and the public sector think long-term?
Municipalities are often obliged to plan long-term, not least when planning new residential areas, roads, nature reserves, etc. Of course, it is relatively straightforward to sketch out a municipality's desired plan, with so and so many homes, schools, communications, and more. The risk is that you plan wrong.
In the 1960s, the Swedish government conducted its long-term study (“Långtidsutredningen” in Swedish) in which municipalities around the country were asked about their development plans up to the turn of the century. All municipalities answered that they would grow. It turns out that if everyone's forecasts had been correct, Sweden would have had a population of over 20 million people in 2000. That did not happen: we're still floating around 10-11 million today. What went wrong?
What the municipalities had done wrong was planning for a desired development, thus not considering all the trends and uncertainties occurring in the outside world, in the contextual environment, which could affect their development in one way or another. They did not perform scenario planning.
Many companies seem to think and act in similar ways, but they do it in the short term. Think something along the lines of "we follow the market and changes go too fast to think long-term, so there is no point in doing that."
Our research, based on hundreds of thousands of interviews with representatives from both business and academic research, shows that foresight and the ability to understand trends have a significant impact on generating successful organizations. For example, Rohrbeck & Kum* showed in their research that multinational companies that conducted active and long-term external and futures analysis had 33% higher profits and 200% faster market cap growth compared to the average over 7 years. That's why this is so important!
The Futures Cone
To understand the future, one must understand and analyze the present. The futures cone, or the scenario perspective, guides us to think further in time.
Figure 1. The futures cone
Future development depends on many changes in the world around us: trends, whose development we generally feel confident about, and uncertainties, whose future developments are, as the name indicates, much harder to get an image of. The uncertainties may be about whether something will happen or not, when it will happen, or what impact it will have on our particular case. The uncertainties surrounding the Corona pandemic mainly were about timing and impact.
Since the future is uncertain – no one knows what will happen – we must integrate and understand the uncertainties in our planning. Alternative scenarios depend on you fundamentally taking on the uncertainties, which you cannot control but prepare well for.
Being Alone is not a Feature of Strength
Developing strategic readiness for the future by analyzing the world around us and scenarios is not a task for lone wolves. On the opposite, you need to engage several different parts of the organization and the people that know these parts well. The more people who take part in the journey, the better the anchoring and acceptance within the organization will be. But at the same time, too many people involved can hamper analysis and acumen. Finding the sweet spot is best, so mix broad workshops with many participants together with smaller, sharp analysis teams.
What are the Benefits, then?
What then is the use of this type of work – is it not just an intellectual exercise?
The main benefit is that you get to think beyond the familiar and dare to question your usual mental models and preferred futures. Remember, as with the Swedish municipalities, it is far too common to think about the desired outcomes rather than the possible ones. If you know that a pandemic could very well hit us, then your likelihood of knowing what to do when one appears is far higher than if you have not prepared.
Scenarios are memories from the future, as the world-famous neurologist David Ingvar said. By thinking through a scenario in an unknown future, we generate memories of that future. So when things happen, reminiscent of a specific scenario, we can recall the memories and thus benefit from our preparations.
Of course, it is, after all, an intellectual exercise, but it is an exercise with a serious purpose, which can involve many people and is based on facts and research. Because when people know more about possible and plausible futures, they can make better decisions, develop more robust strategies, and be well equipped for when the world changes. This can end up being a critical moment for an organization's survival or prosperity.
What are the takeaways here?
There are a few things you need to keep in mind to succeed with strategic and long-term planning.
1. See the world as it is!
Long-term thinking is about daring to see the world as it is and what is happening now - not what you want to happen. Distinguish between desires and reality.
2. Dare to be insecure!
None of us know what will happen. Be humble about the future and take advantage of your uncertainties.
3. Think three times as far!
The development is not just about the coming business cycle or the next term. Think beyond that. Dare to take the long perspective: to 2030 or 2040, for example!
4. Alone is not strong!
Engage and enlist the help of wise employees and anchor the results at all levels.
5. Think of alternatives!
Use the trend analysis and the uncertainties to formulate alternative future images – those will form your different scenarios.
6. Think strategically!
Understanding the world around you is one thing. Utilizing the insights about the future in strategic planning provides benefits and generally an advantage over others.
7. Follow the development!
One swallow does not make a summer. Develop a continuous system for strategic external and future analysis.
Kairos Future knows scenarios and strategies
Ever since its inception in 1993, Kairos Future has worked with scenarios and scenario planning. We have developed our own methods and written books on the subject. We highly recommend Scenario Planning by Mats Lindgren and Hans Bandhold.
Over the years, we have helped hundreds of customers to create preparedness for the future through scenario planning. Scenarios that have often formed the basis for the strategies that the organization has since developed. We have worked together with municipalities, government agencies, and businesses both in Sweden and internationally.
In addition to pure consulting efforts, we also conduct training in situational analysis, business intelligence, scenario planning, and strategy development. At Kairos Future Academy, we have a wide range of educational tracks.
By Ulf Boman