Tuesday, March 09, 2010

Innovation and the Future

It would seem logical that innovators would be concerned about the future, given that spotting new opportunities or markets before your competitors would provide an innovation advantage.  However I am constantly surprised by how little investigation there is in many firms about the future and the likely scenarios and outcomes.  I have to admit I'm a bit flummoxed by this lack of focus on the future.  Whether your firm is an innovator, or a fast follower, or is simply trying to get by, understanding the likely future provides insights that can make your firm more profitable and more competitive.

I guess there are at least four responses I get when we talk to firms about understanding the future.  They are, in increasing order of involvement and understanding:

  1. We'll simply wait for it to unfold.  The future is too complex and arbitrary and we'd rather react to real opportunities as they are validated than risk creating new products or services that may not unfold.
  2. We try to understand the future but we don't do much beyond extending our present day offerings and competitors.  We assume the future looks a lot like the present, and we plan for it in that way.
  3. We try to understand the future by examining trends and creating scenarios.  We aren't sure which scenarios are right, but we gain insights by constantly shifting the future trends.
  4. We try to dictate the future by creating new products that disrupt other markets.  Rather than understand trends, we try to create trends that shift the future to our favor.
I've witnessed all four strategies at play in different firms, even firms I'd consider innovative.  The majority of the firms I interact with usually practice strategy two - they forecast the future but it looks a lot like today.  They don't account for disruptions or sudden changes or new entrants, and are usually surprised by things they didn't think about or expect.  Many of these firms are starting to look at trend spotting and scenario planning as a worthwhile exercise.

That is a happy medium between doing little to nothing, and becoming the trend setter.  The fourth strategy is simply too daunting and risky for many firms, so the only option left is to start developing scenarios about alternative futures.  I like to call this the "low hanging fruit" of innovation.

It's low hanging fruit because much of the data you need to collect is readily available.  You don't have to be a CIA agent to gather intelligence about the future.  The government will tell you its plans.  There are a number of economists who will make predictions about the future.  It's possible your organization has a chief economist or purchases reports and analysis from an econometric firm.  You can get a lot of demographic and societal trends from a range of online sources, such as www.trendwatching.com or www.psfk.com.  Then you simply have to have the stamina to make sense of the trends by aggregating them and creating scenarios.  The data is out there. Now you simply have to have the right methodologies to assess the information and build credible scenarios.

A scenario is simply a story we tell ourselves about one alternative future.  The scenario is based on amplifying a selected set of trends and projecting those trends into a 5 to 10 year future.  Then we can create a story about that economy and its opportunities, challenges and problems, and then understand the implications for our business if the future unfolds in this manner.  Note that no one scenario will accurately predict the future, you should create several scenarios that emphasize different trends in different ways.

This effort doesn't require a lot of work, other than imagination, and can help you spot new opportunities, new markets or new threats to your existing business.  Given that the few things we know about the future are that it is more complex, approaching faster than ever, more global with fewer barriers, understanding something, anything about the future and acting on it now can only convey an advantage.

If you need help building a trend spotting and scenario planning model, contact OVO.  We can help.  If you'd like to read more about scenario planning, check out The Art of the Long View.  It is one of the best books on scenario planning and is a very easy to read book as well.
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posted by Jeffrey Phillips at 8:50 AM


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