Monday, 30 March 2009
Thursday, 26 March 2009
Wednesday, 25 March 2009
Tuesday, 10 March 2009
What I am suggesting is that in traditional practice we consider three time horizons, whereas there are, in fact, four. The fourth – that of weak signals is not normally considered because it is subsumed into our consideration of ‘the long term’. However, what recent events have done is to challenge that presumption because, even in the short term now, we cannot presume that our underlying business model will be stable.
I suspect that this may settle down again once order is restored to the financial system. However, in the meantime, organisations may need to resort to scenario planning in order to generate a range of budgets. In part this is a reflection of the degree of risk and uncertainty that exists in the current environment. In part it reflects the chaotic systemic change that we are all experiencing.
To extend a previous argument (see post), if a lesser reliance can be placed on financial forecasts, then this would in part explain the reluctance on the part of the banks to lend to businesses. In order to restore normal lending conditions, a necessary (but not sufficient) condition would be to stabilise the business environment to allow a degree of certainty to return to financial forecasts.
Monday, 9 March 2009
In the short term, the basic business model is fixed, as are the available number of factor inputs. When you think about it, there are problems with varying the scale of an enterprise. On the upside, it takes time to recruit staff, premises have to be found, and systems have to be integrated. On the downside, it takes time to make staff redundant, to unwind a position regarding premises, and to dispose of systems machinery. This is why budgeting is a useful planning tool in the short term – it works on the presumption that the scale of the operation and the basic business model is fixed.
As we move into a future horizon, the scale of the organisational undertaking becomes more fluid. In the medium term, whilst the basic operational business model remains fixed, the available number of inputs (the scale of the operation) can become variable. This is the world of the trendspotter and the horizon scanner, where we can look sufficiently far enough into the future to derive valuable insights, but without disturbing the comfort of the underlying business model that would represent a complete paradigm shift. This is the area inhabited by the strategic planners.
Moving further into the future, we can start to explore the consequences of not only the scale of operations changing, but also the impact of changes in the basic business model. This is the world of the scenario writer, for whom nothing is fixed and for whom everything may change in a plethora of alternative futures. This type of thinking does require an ability to grasp a change in paradigm, and is not one that comes readily to most organisations. What passes for scenario work is often horizon scanning in disguise.
There is also a fourth possibility – one that has been more of a theoretical nature until recent times. There is the case where the scale of operations is relatively fixed, but the basic business model is variable. This is the world of weak signals of an emerging future. At face value, this looks like a form of trendspotting, but, on reflection, it is the shift in the business model that makes this activity different. Much weak signals work is in its infancy at the moment, but it is definitely an up and coming area of futurism.
And so we have a continuum – the short, medium, and long terms – that has an associated continuum of tools – from budgets to trends and on to scenarios. Until recently, this has occupied a fairly stable pattern. The current recession is shaking up that pattern. The fixed nature of the short term is being challenged. The changes in the economy are calling into question many of the axioms that are implicit in current business models. For example, an SME client last week reported anxiety over that fact that the bank through which they conduct business might go bust. The net result of this anxiety is to increase the background level of risk and uncertainty in the organisational setting, which is having an impact on the ability of organisations to plan ahead.
The certainty that is needed for effective budgeting is not present at the moment. One response of organisations is to continue with the creation of the works of fiction that are called budgets. Another response is to take the view that planning is a haphazard activity and to abandon any serious attempt at planning. However, as reported in The Economist (see article), a number of organisations are embracing the current uncertainty by using the long term technique of scenario building for the short term purpose of constructing budgets.
Of course, there are those in the profession who would see the irony here. The Economist famously lambasted the profession in an article on the future of futurology a couple of years ago (see article). In an interesting twist, it would now appear that the techniques that were ridiculed in 2007 are in great demand in 2009. There is a saying that every dog has its day, and it would appear that the day of the futurist has come.
At a time when the business world needs to better deal with the issues of ambiguity and uncertainty, here we have a profession that is devoted to reconciling those issues. The proper use of future studies can allow organisations to plan better. It can allow organisations to identify and manage risks better. More importantly, it can also allow organisations to identify and appraise opportunities as they arise in the shake out of the economy. A good futures project will prepare for the upside as well as preparing for the disasters that befall us.
The case for the futurist has rarely been as strong as it is today.
© The European Futures Observatory 2009