How to become future-prepared: Strategic foresight for SMEs
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Posted: Thu 1st Feb 2024
Running a small- and medium-sized enterprise (SME) is challenging. Sometimes, it feels like all your energy is consumed just to keep things moving. At other times, you're rushing from one crisis to another.
It can seem like a luxury to just "think about the future". I get it, it's understandable. But, ignoring the future doesn't prevent it from coming. It's like driving down the motorway with your eyes closed because it's too scary to look. It might feel better for a while but it's unlikely to end well.
Fortunately, there is a way to look into the future, known as strategic foresight. This consists of a set of tools, frameworks and approaches to think about the future.
It's not a crystal ball and won't tell you the precise future (many smart people have tried and failed), but it's more like driving on a foggy day. You can't see everything, but if you're careful, you're more likely than not to avoid potholes and arrive safely.
By implementing foresight practices in your business, you will be better prepared for future changes.
Why build strategic foresight
If the above analogy hasn't convinced you and you want real-world data, no problem. There is empirical research and industry practice to back up the value of foresight.
1. Future-prepared firms perform better
Professor René Rohrbeck at Edhec Business School developed a framework to evaluate corporate future preparedness and tracked the performance of over 40 companies over seven years. He found that future-prepared firms outperformed on average with a 33% higher profitability and a 200% higher market capitalisation growth.
In contrast, firms deficient in future preparedness faced a performance discount of 37% to 108%.
2. Industry-leading firms are proactively adopting foresight
According to a survey by The Nuremberg Institute for Market Decisions (NIM), a non-profit research institute, over 90% of the largest companies in Europe and North America have some form of foresight practice.
But strategic foresight shouldn't be a privilege reserved only for multi-billion, multi-national mega-corporations. SME owners and teams may not have the resources to recruit full-time in-house futurists or run multi-month foresight projects, but there are efficient ways to do it.
Since it's a practice not yet widely adopted in standard business practice, foresight will not only help you better prepare for the ups and downs of the future, but it will also give you a competitive advantage.
Five tips on strategic foresight for SMEs
1. Practice your future thinking muscle
We think about the future all the time. What to eat tonight? Where to go for the weekend? What will we do when we finally get that client or project?
The problem is that all those futures are very short-term, where changes in both ourselves (our values, preferences and goals) and the external world are negligible. We tend to project our present selves and the world into the future. However, if you think back over the last 10 or 20 years, you'll realise both the world and yourself have changed a lot.
Future thinking is like a muscle, most healthy adults can run a few steps but few can run a marathon without extensive training. The same can be said about foresight capacity.
You don't need sophisticated methodologies, although they do help, just like good running gear. By simply spending more time mentally travelling, imagining what it's like 10 years from now and envisioning your business, you are building up mental capacity.
2. Unstick your mind
Ask "What if?" and "What else could happen?" Now that you're spending some time thinking about the future, the second key is to think about a wide range of different futures.
In everyday use, people talk about the future but as futurists, we prefer to use futures, precisely to remind us that the future is not singularly determined but open and plural. It doesn't matter how long you spend imagining the day you win the lottery, or IPO your venture for those more work-driven if that's the only future you're thinking about. That's not foresight, that's daydreaming.
One important aspect of foresight is to see multiple futures and have mental flexibility.
What's going to threaten your business is probably not the shop down the street that has been competing with you for a decade. What will boost your business to the next level is most likely not what's next on your to-do list. When you unstick your mind, you can look broader and in unexpected places and discover opportunities others have missed.
The first two tips are on the 'how to' of foresight and the last three tips are more tailored to small- and medium-sized companies.
3. Don't reinvent the wheel
Use trend research but situate it to your business case. Unlike mega corporations, SMEs often don't have the resources to conduct their own in-depth trend research. The good news is, there are plenty of white papers and industry reports available online.
The challenge lies not in identifying those changes but in making sense of how those changes will impact your business. Scenarios are imagined of future situations that could happen.
One question I often get asked is, what's the difference between strategy and scenario?
One way to look at it is that strategy deals with what your decisions can influence, for example, competitive strategy, talent acquisition strategy and product marketing strategy, while scenarios deal with larger factors that you (mostly) can't influence or control, like technological breakthroughs, demographic shifts, energy prices and global geopolitics.
But even though these forces are larger than us, by actively anticipating how things could play out, we can be more prepared and better adapted to whatever future eventually materialises.
4. All hands on board: Approach and cultivate a futures-oriented culture
In his research, René found two distinctive approaches for future-prepared firms – the structured approach and the cultured approach. In the structured approach, formal units in the organisation were set up and tasked with foresight. In the cultured approach, nobody had the job title but everyone in the team was expected to think about the future.
René's research focuses on large corporations, partly because publicly traded companies have financial reporting that can be used to evaluate performance. For SMEs, the cultured approach is likely more fitting. By empowering, encouraging and rewarding everyone in the team to think about the future, small teams can be as good at future preparedness as their much larger counterparts.
5. The 5% rule
A final objection might be: "We can't afford to have our entire team think about long-term futures, we have a business to run!"
Very true, but how about committing only 5%? Commit 5% of your time, energy and resources to the future and you can spend the rest 95% running your business as usual. That's 2 hours in a 40-hour work week.
You might have heard of the Pareto principle, the phenomenon of disproportional input and output. Thinking about the future could be one of the most disproportionately rewarding activities from this viewpoint.
To the future
By this point, you have learnt the five tips on how to apply strategic foresight in your business to become better future-prepared. Of course, this is a complex topic and it's impossible to comprehensively discuss the process of doing top-quality foresight work in just a short read. Hopefully, if you have never heard of strategic foresight, I have given you a good starting point on your future-thinking journey.
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