Corporate Foresight

Anticipating the Future

Alberto F. De Toni, Roberto Siagri, Cinzia Battistella

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000216189
• Edition: 2
• Topic: Business
• Subtopic: Corporate Governance
• Index: Business

The world changes like the patterns in a kaleidoscope: trends expand, contract, break up, melt, disintegrate and disappear, while others are formed. Change – as opposed to stasis – is our normal condition, the only certainty in our lives, hence the need to create tools that provide organizations with the means to tackle change and navigate complexity. We must accept the reality of constant change and be prepared for a heavy shift in perspective: interconnection versus separation, acceleration versus linearity and discontinuity versus continuity.

Anticipating the future requires more than the traditional predictive models ( forecasting ) based on the forward projection of past experiences. Advanced methods use anticipation logic ( foresight ) and build probable scenarios taking into account weak signals, emerging trends, coexisting presents and potential paths of evolution.

Corporate foresight is fundamental to interpret and lead change. The two cornerstones of foresight are organization and management. As concerns organization, the authors advocate the separation of research (oriented to the market of tomorrow) from development (oriented to the market of today), the establishment of a foresight unit and the concentration of research activities mainly on the acquisition and recombination of external know-how. As regards management, after an overview of state-of-the-art literature on forecasting methods, the authors propose the implementation of a "future coverage" methodology, which enables companies to measure and verify the consistency between trends, strategic vision and offered products. These organizational and managing tools are then tested in a case study: the Italian company Eurotech SpA, a leader in the ICT sector.

Part I

Anticipating the future

1The future is increasingly unpredictable, near and singular

“Now, here, you see, it takes all the running you can do, to keep in the same place.

If you want to get somewhere else, you must run at least twice as fast as that!”

Lewis Carroll

1.1All is not as it seems

Do you know the story of the king's chessboard? A courtier presented the Persian king with a wonderful handmade chessboard. Praising the beauty of the object, the king asked him what he wanted in return for his gift. He was very surprised when the courtier said he would like some rice, but according to the following rule: starting from one grain on the first square of the chessboard, the number of grains had to be doubled on each subsequent square. The king thought it was a ridiculous request, but he readily agreed and ordered his servants to bring forth the rice. But how much rice did the king need in order to meet his courtier's demand?

At first all went well: one grain on the first square, two grains on the second, four on the third and so on. But in the second half of the chessboard, the demand for grains became increasingly impossible to meet: the 21st square required over one million grains, the 41st more than a quadrillion! In the end the king had to hand over his entire kingdom, because there was not enough rice on Earth to fill the last squares and honor the pact.¹

How is this possible? Mathematically a chessboard is an 8*8 square with 64 cells. If you double the amount on each subsequent cell and sum up all the results, you obtain the following series: each cell contains 2n-1 grains, where n is the cell's progressive number.

T64=1+2+4+…+263=20+21+22+…+263=∑(for i going from 0 to 63)2i=264−1=18.446.744.073.709.551.615=over 18 billion billion grains.

This number is about 80 times larger than one year's harvest of all the arable land on the planet. Why didn't the king guess as much? Because men's minds are accustomed to thinking in linear terms.

Let's make another example. Take a sheet of paper, fold it in two, and then again in two for as many times as possible. Obviously there is a physical limit due to the thickness of the paper sheet, which is about 12 folds.² But in theory (see Figure 1.1), if you could fold a sheet of paper 51 times, it would reach a height of over 225 million kilometers, far greater than the distance between the Earth and the Sun!³

Figure 1.1Number of folds and corresponding heights.

These simple examples show how difficult it can be, for men and organizations alike, to think “exponentially” (Figure 1.2), accustomed as they are to think in linear terms. This lack of familiarity with exponential thinking has an important consequence: when the exponential curve meets the socalled knee (where the tangent-chord angle is over 45 degrees) and starts to grow vertically, both men and companies are unable to respond effectively, because the sudden pace change catches them by surprise. Change can be exponential: it is of the utmost importance to find new ways to imagine it and act accordingly.

Figure 1.2Things aren't always as they seem.

People, products and ideas are starting to move faster and faster in every direction, and society is facing unprecedented challenges. The knowledge society, the emerging technologies and the globalized economy force men and organizations to cope with rapid change, complexity, uncertainty, chaos and paradoxes. Like Berger (1957, in Gordon 2009), we can say that the acceleration of history compels men to predict their actions differently, because tomorrow can never be the same as yesterday.

Sometimes the turbulence is of mild intensity. Other times it is stronger, like in 2008 when the global financial crisis left us dumbfounded as markets recorded huge losses. Theories based on the assumption that change proceeds at a constant or linear rate, or that change is cyclical, no longer explain what is going on today. Acceleration is apparently a sign of our times. Those theories can still be applied in contexts of limited turbulence, but if the rate of change keeps accelerating, there will be unexpected consequences for men and organizations.

In order to deal effectively with the future, we must absolutely learn how to manage two equally inevitable conditions: uncertainty and risk. Some trends are clear, like the strong decline in telecommunication costs and the aging of the population in many Western European countries. But even if they are not particularly difficult to identify, it can be extremely hard to understand exactly when and how they will begin to impact in the medium term.

Other trends are very difficult to foresee. Among them, a number of unpredictable events with devastating impact commonly called wild cards: the September 11 attack on the Twin Towers, the Indian Ocean tsunami of 2004, the rise of Hitler and the war that followed, the rapid fall of the USSR, the spread of the Internet, the collapse of Wall Street, the success of Google, Facebook, WhatsApp and so on. As Nassim Taleb explains in his book The Black Swan (2008), these are single events which invalidate a conviction supported by unfailing evidence, just as black swans surprised European explorers when, upon landing on the shores of Australia, they saw them for the first time. For men as well as organizations, black swans are a significant part of today's world and developing effective coping strategies is essential.

1.2Complex events cannot be predicted

Whenever we look back in time, we inevitably find a rich collection of wrong predictions (see Box 1.1).

Box 1.1 Wrong predictions: some examples

Thomas Watson, head of IBM (1943): “I think there is a world market for about five computers”.

Bill Gates (1981): “640K ought to be enough for anybody”.

Popular Mechanics magazine, on the relentless march of science (1949): “Computers in the future may weigh no more than 1.5 tons”.

An engineer at the Advanced Computing Systems Division of IBM, commenting on the microchip (1968): “But what…is it good for?”

Ken Olson, founder and president of Digital Equipment Corporation (1977): “There is no reason anyone would want a computer in their home”.

But wrong predictions are not limited to computer science. In 1876, US President Rutherford B. Hayes said to Alexander Graham Bell when he patented the telephone (invented by Antonio Meucci): “It's a great invention, but who would ever want to use one?”

And a Western Union internal memo (1876): “This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us”.

David Sarnoff's associates, in response to a request for investment in the radio (1920): “The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular?”

Dr. Pierre Pachet, Professor of physiology in Toulouse (1872): “Louis Pasteur's theory of germs is ridiculous fiction”.

A president of the Michigan Savings Bank, talking to Henry Ford (1908): “The horse is here to stay, but the automobile is a novelty – a fad”.

Lord Kelvin, President of the Royal Society (1895): “No balloon and no aeroplane will ever be practically successful. Heavier-than-air flying machines are impossible”.

Charles H. Duell, commissioner of the US Patent and Trademark Office (1899): “Everything that can be invented has been invented”.

In truth, however, the central question is not whether the prediction is correct or not, but rather which actions and consequences result from it. Forecasts are crucial even when they are contradicted by facts, because they affect decisions and contribute to strategic change in development policies.

According to Bishop (1980): “People often ask me how often I find I havebeen right, when I look back and think about the forecasts I made in the past … but they are asking the wrong question. What we really ask of futures studies is how useful a forecast is. A forecast can be disproved and maintain its usefulness, especially if it is a negative forecast which outlines possible problems or even disasters. If the prediction is taken seriously, someone will work to prevent and avoid the problem. The forecast itself will therefore be ‘wrong’, but it will have contributed to the creation of a better future. In futures studies, the most useful forecasts do not necessarily give an accurate and faithful image of what will happen. Rather, they provide an understanding of the dynamics of change, of how certain events might occur, given specific circumstances; their aim is therefore to offer tools which enable people to choose their own future, and to start creating it” (Our translation, N.d.T.).

Most events, in their complexity, are not predictable (as Niels Bohr said, “Prediction is very difficult, especially if it's about the future”), but if we are generally unable to predict the future state of a complex system, we can predict its possible future states, in other words, its structure. Lindberg and Herzog (1998) quote the mathematician Ben Geoertzel, who distinguishes between prediction of state and prediction of structure: the state of a chaotic system is unpredictable (i.e., a specific weather condition), but the structure, the sum of its possible states, can be easily inferred (i.e., the climate of a specific region).

Complexity generates bewilderment since it makes it increasingly difficult to take decisions. To decide, you have to come to terms with the uncertainty and the impossibility of prediction, “because you can never know for sure how other choices would have turned out” (Jaques, 1991:108).

The future is not written, but remains to be done. It is multiple, indeterminate and open to a wide array of possibilities. The actions we take mold the future into what we expect it to be. As Charles Handy (1996) writes, we need to learn new ways of “handling” the future: “the past might not be the best guide to the future, […] we must, however, be wary that the future needs to be rooted in the past if it is to be real”.

The path is certainly fraught with obstacles. Nothing stays still. Complexity is the space of possibilities, the future is a combination of changing situations, and we must learn to accept uncertainty: in our environment, in our organizations, in every decision we make.

Because of our increasingly unstable and discontinuous context, and of the ever greater impact it has on our lives, we believe that the 21st century will bring about a big change in perspective for men and organizations alike. We just learned it the hard way with the financial crisis of 2008, which lasts to the present day.

The word “crisis” recalls the adjective “critical”: men and organizations live in a complex world, in a network made of diverse and manifold players, in a system where dynamism, uncertainty and acceleration are essential features. How can men and organizations manage the unpredictable? What is the most suitable approach to the future? What are we doing to prepare for the future today? If we wish to navigate the network of the present and the labyrinth of the future, we need to understand the complex forces that induce change. And to adopt the most suitable forms of organization and the right methodologies.

The good thing is that opportunities also increase exponentially. Indeed, “everything is possible, but, perhaps, nothing will be achieved. Conversely, anything can be. Perhaps it is about the immeasurable reserves of Being, the inexhaustible supply of forces not deployed. Forces that no dream forbids us to use tomorrow” (Neher, 1977, in De Toni and Comello, 2005) (our translation, N.d.T.). There are countless possible futures, and men and companies must be ready to seize upon every hint of opportunity. As Vicari (1998:61) argues: “Complexity can be a great opportunity, as long as we are able to convince ourselves that unpredictability is not a hindrance, not a problem, not a malfunction. On these premises, complexity can open new spaces for creativity, innovation, change” (our translation, N.d.T.).

For men and organizations alike, it is a bad idea to stop and wait for events to follow their course, or to simply bet on the future. But if they make an effort and try to act proactively, to grasp weak signals ahead of time, sometimes (and this is especially true for larger companies, or for those which are keystone in their field) th...