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Management in Practice

How Do You Plan for Uncertainty?

In a changing global environment, leaders must be able to make decisions about future risks and opportunities despite uncertainty. Kristel Van der Elst ’02 describes the process of strategic foresight and its value in preparing organizations to be robust whatever the future holds.

Q: You were previously head of strategic foresight at the World Economic Forum, and have now founded your own company, the Global Foresight Group. What is strategic foresight and why should people do it?

Foresight is the assessment of what might happen or be needed in the future. It is needed in order to be prepared for the future from a risk perspective, and it’s a way to look for new opportunities.

In my view, the future is built out of three pieces. It’s what comes from the past—existing trends and established commitments. It’s what comes from the future—new business models, new technologies, or new value systems. And it’s the decisions we make today.

Whether it’s a country, a business, or an individual looking at family and career, foresight is a means to be adaptable and robust in the face of scenarios that might knock you off a path to success. And it’s a means to identify new models that might be opportunities to deliver new value.

Q: What makes for an effective process? Who’s involved? What sort of questions should be asked?

Good foresight needs to engage the relevant decision makers. If you bring in experts to offer their insight but fail to involve the decision makers, you’re quite sure not to have impact.

Foresight also needs a purpose and a focus on a question you’re trying to solve. Foresight uses the contemplation of the future as a means to learn, to envision, to define ways forward, to generate ideas, and to engage.

It’s also very important that the process is neutral, in the sense that you need to be able to look at all possible scenarios, whether you like them or not. A neutral, independent platform, process, and research effort is extremely important for putting issues on the table that, sometimes, people have difficulties talking about because their implications might be scary or uncomfortable.

One of the challenges when engaging decision makers and experts on foresight is that they are valued to know and paid to be decisive. Put them together and the first thing the decision maker asks of the expert: “Is A or B going to happen?” Acknowledging uncertainty has traditionally not been a value proposition that they are incentivized for.

The discomfort that uncertainty creates in people is, I think, one of the major aspects that you can’t miss out on. Otherwise, as you help people think through possible futures, you will get a lot of rejection of the ideas and you will achieve nothing. If you can’t help people sit with uncomfortable ideas, they just push it away. You need to open people up enough that they can be comfortable with the uncomfortable. They have to learn to make decisions under uncertainty.

Q: Foresight can be done both within an organization and in a multi-stakeholder forum. How do they differ?

From a methodological perspective both are quite similar. From a process standpoint, however, multi-stakeholder foresight work is more complex, and creating impact requires mastery of the process elements of a successful foresight intervention.

Foresight across stakeholders is, however, very powerful, especially when opinions around the way forward diverge. The process and thought leadership than provides a powerful sense-making mechanism, where you get a better understanding of possible scenarios and options. And with proper stakeholder engagement you do create greater mutual understanding and trust among them.

As an example, we were brought into a project on “resource scarcity.” Through a lot of interviews with experts and decision makers we defined three different narratives around the future of resource availability.

One narrative was, “We have a fixed supply of resources, so at some point we are going to run out.” The people who subscribe to that narrative discuss solutions like recycling and cradle-to-cradle manufacturing. Those are the options they think are relevant. They make sense if you think resources are limited and we need to avert a hard stop.

Another group of people talked about cheaper technologies, economic drivers, incentives, and risk management. They assume there is always going to be enough. We will be extracting resources from under the ocean or from geopolitically unstable places, which will mean the cost is higher, but it’ll be available.

A third group of people says, “We don’t have a problem. In the future, new technologies will offer new solutions. We will get fresh water out of the air. We’ll have sufficient food because we can optimize production and reduce waste.” These are the big optimists.

When you bring them all together, you have very interesting discussions, but you can’t move ahead because they are implicitly solving different problems. By being explicit about their thought processes, about the assumptions built into each narrative, a whole different conversation opens up. For some participants, simply making their assumptions explicit to themselves has an impact. You can start to have a discussion about the context, about which future we’re likely to see.

The project changed from being called “Resource Scarcity” to “The Future of Resource Availability.” If the parties fully understand why someone thinks A is better than B as a solution, even if they don’t agree, the process of getting to that point has built some social capital. That can be enough to actually put plans in place and create options for different scenarios that can all have some impact.

Q: How do leaders move from understanding the potential futures to setting strategy?

By playing out different potential contexts and the consequences on the various players, you start to see possible outcomes. Then you decide how you optimize your strategy in light of what you learned about alternative possible futures.

Typically, you will have a few relevant scenarios laid out. From there, one option is to bet the farm—put everything on one scenario and say, “If that’s what happens we’re going to do really well and otherwise, well, bad luck.” Another option is to prepare for all possible scenarios equally. While that sounds good, usually it’s not, because you won’t be positioned to be very successful with any of them, unless you have unlimited resources. It’s like you’re making no decision. Usually people optimize the robustness of their strategy—including the elements that are good ideas independent of which scenario actually unfolds—and make some bets. The importance is to be adaptive and agile.

To do so, you have to establish indicators—information and trends that let you know when you’re moving in the direction of one scenario over another. You shift your decisions based on which future is actually playing out. Because you have already thought about different possible futures and options that succeed with each future, you will be more adaptable. You have already built some capabilities by exploring each scenario, so the new steps will be faster to implement. You may look at different alternatives and may make different decisions, but having made a plan makes you more robust and more adaptable.

If you’re on an open forum, once they have credible content, and they understand why it is important, the conversations become a bit more confidential. When it comes to real decision making, whether it’s companies or governments, they will take it inside, which is the right thing to do, I think. If you’re a company, you don’t tell your competitors your strategy. You act on it. That can mean sometimes it’s hard to see the consequences when you work at a platform like the World Economic Forum. From interactions with stakeholders, however, you do know you managed to provide value.

Q: Can you describe situations where foresight would be useful now?

I worked on assessing the impact of the convergence of IT, telecom, and media and entertainment. It was really important for people to think about how three different industries were moving to become one industry.

For companies in that sector, it was about devising strategies to adapt and succeed. Who do you partner with? Who will your competitors be? From a government perspective, it was about, how do you make sure policy is in place to help this new sector develop, help the overall economy, and at the same time protect society? Where do you put innovation funds? Where do you put antitrust frameworks?

A similar convergence is happening in the healthcare industry now as the technology sector is entering healthcare. Big data is reshaping the field. There are a lot of questions and uncertainties about how it might play out, but it is an area for attention.

Very few people have the opportunity and the luxury to be able to actually step back and look at the broad possibilities, but it’s becoming less a luxury and more a necessity. For example, there’s a sense in Europe that we’ve been managing by urgency; we need to manage more by foresight. For quite some time, people have warned that the migration crisis was coming up. You could see it was a possibility. The lack of preparation there has been a big call to manage by foresight, to really think about possible futures and what is needed to make sure Europe is competitive, sustainable, and socially inclusive.

It’s important to play events forward to learn what actions today can shape a future that you want as opposed to one that is going to happen if you don’t do anything. The decisions policymakers make now will play out in the next 10 or 15 years and will have profound consequences. They’re in charge of shaping the future.

Q: Would you give an example of a complex issue that’s gone all the way from the initial discussion to setting a strategy?

About 10 years ago Mongolia discovered they have a lot of resources in the ground. Suddenly, the country went from poor to potentially very rich. They had questions about how to manage that transition. We worked with government and business decision makers on how to move forward.

We examined the best way to best leverage the resources. Do they mine it as fast as possible? Or, as some in that traditionally nomadic society suggested, move more slowly with an eye on future generations? Do you concentrate on mining or use the windfall as a means to diversify the economy? There was also a disconnect on philosophies about the economy. The older generation had been raised in a planned economy. The younger people tended to prefer a market economy. That, in turn, shaped views on the role of foreign investors, state ownership, and taxes.

When you have differences of opinions, it remains stuck in opinion and preference if you don’t have a platform to rationalize discussion. The project brought everyone together to think about what future they wanted and how commodity prices might impact the options.

We had top-ranking government officials from the president and prime minister on, including members of the opposition. We had the CEOs of major companies. We had the governors of the national bank. We had representatives of some of the foreign companies that had interests in Mongolia. We had a lot of the international organizations, including UNICEF and the IMF. We also had domestic civil society organizations that work on education, development, employment, and more. It was a very broad set of stakeholders.

The process took a year. Some narrower projects might be done in a couple months, but I believe there is a lot of value in the process that’s just not plausible in short timeframes. Everyone involved needs time to talk and think about the scenarios. And of course, you also have the logistics of getting the right engagement with the right people in the right sequence.

We looked at which strategies would produce good outcomes independent of which possible future comes to pass. The president has made clear they are invested in a diversification strategy. They are very dependent on Russia and China, and so they are expanding engagements with other countries. Under some of the scenarios, they could play an important regional role. They are developing their ability to do that.

Q: What do you do at the Global Foresight Group?

I still lead foresight projects, but I’m really interested in helping organizations develop their own strategic foresight capacities. The world is shifting. It is pluralistic, ambiguous and full of novelty. Organizations, both public and private, need to become much more forward looking. We all need to become adept at adapting.

Interview conducted and edited by Ted O’Callahan.