Leadership is about predicting the future

I think entrepreneurship and leadership are about predicting the future and the place of your business in that future. According to “Lead from the Future: How to Turn Visionary Thinking Into Breakthrough Growth” that 75% of the people they surveyed reported that their planning and forecasting horizons are never more than five years out. Only 10% plan for eight to ten years or more. If you are only thinking two or three years ahead, years five to ten might bring you an unwelcome surprise that you haven’t planned for.

Routine management

At the root of the problem is the processes by which senior management develop its strategic choices and priorities, which are overdetermined by their existing ways of doing things. That is the present-forward fallacy, the seductive notion that an existing business can be extended out in time indefinitely by continuously making improvements to it. Where the job at hand is routine management. But when markets shift, consumer preferences change, or new technologies emerge, leaders who solely think in a present-forward way are often caught unawares, busily working to solve today’s problems but utterly unprepared for the even bigger ones that are on their way. If a strategy is simply extrapolated from the present forward, your existing processes, rules, norms, and metrics will get in your way.

Future back thinking

Instead of present-forward, the authors suggest you go future-back. Developing it from the future back reduces the likelihood that you will perpetuate your existing realities. Future-back is iterative and nonlinear. It’s the way of thinking that is needed when the objective is to go beyond your organisation’s established ways of doing things. Virtually every mature company tries to produce breakthrough innovations, but often what they tout as the wave of the future is just an incremental improvement on what they are already doing. To fully leverage the potential of inventions like these, you need to think in a different direction, from the future back. Future-back thinking and planning begin with exploring and envisioning—that is, actively, intensively, and imaginatively immersing yourself in your organisation’s likely future environment and then determining what you must do to not only fit into that environment but to actively shape it to your needs so you can thrive in.

3 books to read

There are many books on this topic.

How to future-proof your business. Be athletic and apply citizen development

Strategy is about creating corporate memories of the future

How to develop future scenarios and your strategy

 

Inertia

If Newton’s first law is the law of inertia, it is also, alas, the first law of incumbent organisations. When they are at rest, they tend to stay at rest. Most incumbent organisations are led by people who are much less future-facing than their founders. The managers of big organisations tend to be administrative men and women by definition. Bonuses are generally based on the annual results they deliver; even their so-called long-term incentives seldom run any longer than three to five years. Getting lulled into thinking that the future must be fine because they’re making their quarters. Suffering from automaticity, the availability bias, the confirmation bias, loss aversion, the sunk cost fallacy and the normalcy bias. Spending time on Total Quality Management, Lean Management and Six Sigma honing the existing enterprise rather than evolving or transforming it into something new. Read “Business exposed” 

Invent the future

Senior leaders should continually shape and reshape their vision for the future of their organisations. You can’t connect the dots looking forward. You can only connect them looking backwards. The future cannot be predicted, but futures can be invented. A quantum approachThat means strategic dialogues, zero-based budgeting, jobs to be done market Research, discovery-driven planning and future-back vision and strategy development.

Step 1: Paint a picture of the future environment 

Identify the potential inflexion points in your industry and focus on the timeframe when they are likely to occur—when new paradigms will mature to the point of significance, and new technologies will converge to open up both potential disruptions and new opportunities. Focusing on the jobs to be done of the future, the diverge for a bit to explore trends and then, through debate and discussion, converge on a core set of assumptions about the future. This demands a highly intuitive approach, and intuition is fed by a diversity of inputs. If you and your team are going to believe in your future state vision on a gut level—and you will have to if you are going to be able to convince others to feel the same way—you will need to take the time to really soak in it and reflect on its implications together. This can’t be rushed. 

Step 2 Develop view-of-the-world statements 

For example. “By 2030, 50% of all new cars sold globally will be electric.” Develop these statements by collecting twenty or thirty key assumptions about what the future might hold. The goal is not to predict the future with certainty (nobody can) but to paint an impressionist painting of it detailed enough to build clarity and alignment on what will have to be done to meet its challenges and opportunities. 

Step 3: Identify the major implications of the future for your enterprise 

Are you facing a revolution or an evolution? What will your customers have to say about your offerings in the future state? Will they remain loyal, or will they look elsewhere for new sources of value? The aha moment that comes out of this work isn’t always a brilliant new thought or a penetrating analysis. Often it comes from a place of emotion, as leaders let go of their defensive denials and embrace a reality that they had subconsciously anticipated or feared. 

Step 4: Envision the future state of your business 

You can split that up in core, adjacent and new growth. But first, you should ask what your company could be in its envisioned future. Set your planning horizon all the way out to 2035. What role could and should it play? What would best serve its legacy and values? What would be deeply meaningful and inspiring to your employees and other stakeholders? Using your deepest aspirations as your touchstone. 

Core: Opportunities to extend or evolve your core offerings to maximise their relevance in the future environment. 

Adjacencies: Distinct new products and services that can augment your core offerings or opportunities to take your core offerings into different geographies and markets, with either option (or combined options) leveraging the existing business model. 

New growth: Growth initiatives that may leverage the core capabilities of the organisation but in new and distinct businesses, typically with new business models. 

Storytelling

Ground your ideas in analysis, but don’t rely too heavily on data, as no data set will be accurate enough to drive your decisions. At this point, your vision should take a narrative form: you should be able to tell a succinct story about what the future will hold, what it means for you, and how your company will shape it. It should be exciting, galvanising, and imbued with purpose, so it will inspire your internal and external stakeholders, breaking down at least some of the barriers to long-term thinking. Strategic storytelling

Purpose

Having a higher purpose is not strictly necessary for a business to succeed, but as countless studies have found, it can go a long way toward motivating its employees and stakeholders, and it helps in recruiting new talent. An analysis conducted by Gallup of 49,928 business units across 192 organisations in thirty-four countries and forty-nine industries found a close correlation between missions and margins. In 2019, Innosight sought to identify the twenty global companies that have achieved the highest-impact business transformations of the decade, choosing candidates based on the percentage of revenue they receive from new, outside-the-core growth areas; how successfully they repositioned their cores; and their overall financial growth. The common denominator for all of them, we found, was having a newly strengthened sense of purpose. In an era of relentless change, a company survives and thrives based not on its size or performance at any given time but on its ability to reposition itself to create a new future and to leverage a purpose-driven mission to that end.That is why a well-developed vision is crucial, but it is never enough; you also need a concrete plan to make that vision real. This calls for a shift in mindset, from storyteller to engineer, that is accomplished by delineating and systemising a set of business choices. 

The three portfolios 

If you want to understand a company’s strategy, don’t listen to what it says; look at where it spends its money. A future-back strategy is always about the allocation (and reallocation) of scarce resources.

  1. The future state portfolio is typically a financial projection of your enterprise at your target end date, in which your high-level assertions about your future businesses are translated into dollars and cents. 
  2. The innovation portfolio is a set of planned projects or initiatives, prioritised for the next one to three years, reflecting the future state portfolio. 
  3. The investment portfolio specifies the resources (in dollars and people) that will fund the innovation portfolio. 

One of the most critical aspects of the three portfolios work is deciding what to slow down or shut down. A future state portfolio is a visual representation of your enterprise at its target end state. Once you have defined your future state portfolio, the next step is to walk it back to the present. To do this, you work backwards from your future state, setting milestones at roughly two- to three-year intervals. What will your portfolio mix across core and new businesses be? What new capabilities and business structures will need to be in place? How mature will each of your new initiatives be? It can be overwhelming to contemplate the implications of visionary strategies. Setting achievable near-term goals for your efforts (for example, key talent hired, programs launched, proof of concept achieved, partnerships developed, M&A deals executed) instils confidence, creates momentum, and ensures accountability. 

Things to do

  • Formalise the roles and responsibilities of the senior leadership team as champions of both the strategy and the breakthrough innovation teams set up to carry it out 
  • Set up an organisational model that protects breakthrough innovation teams from the countervailing influences of the core 
  • Manage initiatives with an explore, envision, and discover process so senior teams and innovation teams can learn their way to success together  
  • Design a governance system that will allow the implementation of the strategy as efficiently as possible, given all the competing demands on their time and attention. 
  • Aim for a minimally viable bureaucracy. 
  • Ensure that the breakthrough innovation teams report directly to senior leadership and retain autonomy from the core business. 
  • Create a “New Growth Board” or “New Growth Council” to oversee new growth initiatives. 
  • Create a transformation management office 
  • Ring fence and protect funding for breakthrough initiatives 
  • Meter to manage risk, ensuring that you’re not investing too much or too long in any given idea before you’re confident it’s on a path to success. 
  • Your new growth innovation teams should be small at first and staffed with cross-functional, co-located, and fully allocated (or nearly fully allocated) personnel. 
  • Realign performance metrics and incentives. 
  • Entice top talent with an entrepreneurial bent who aren’t overly deterred by risk.
  • Look for people who see this as their opportunity to make a real difference, to build a legacy. 
  • The future-back strategy should cascade down to business units and even product lines as each develops its own future-back position in line with the new vision. 
  • Provide a constant activation energy to keep the program alive, or else it gets swallowed up.
  • Create anchors. Anchors are moves—usually acquisitions or major partnerships—that in a single stroke make the strategy more real by bringing it heft and momentum. The best anchors also create tangible value for the core business, generating goodwill and helping to keep sceptics at bay. 
  • Develop power metrics about future-year performance.
  • Read “Dual Transformation and “Zone to win“.

It needs to become an organisational capability

Creating a vision, translating it into a future-back strategy, and then programming and implementing it is not a discrete event within a corporation’s life. In a way, it is its life. As such, future-back needs to become an organisational capability, led at the top, and permanently embedded in leadership mindsets, strategic planning processes, and organisational culture. Therefore enterprise leaders need to delegate more of their routine management tasks than they currently do so they can take a greater share of the burden of long-view thinking onto themselves. Without sufficient high-level attention, most breakthrough ventures won’t even get off the ground.

Money talks

Business thinkers like Gary Hamel have proposed that top-down leadership and organisational creativity are inherently in conflict. Read “Humanocracy”The more decentralised and flatter an organisation becomes, the more aligned and committed its top leaders must be in setting its overarching vision and the guiding growth principles that it entails. You need a good team, you need diversity, and you need a unity of purpose, and you need the full support and engagement of your board. The CEO needs to be thinking far, far into the future. And the board has to be a part of that. However, ultimately capital allocation matters, and everything else is a game. 

sensemaking cover

WHY REINVENT THE WHEEL AND WHY NOT LEARN FROM THE BEST BUSINESS THINKERS? AND WHY NOT USE THAT AS A PLATFORM TO MAKE BETTER BUSINESS DECISIONS? ALONE OR AS A TEAM.

Sense making; morality, humanity, leadership and slow flow. A book about the 14 books about the impact and implications of technology on business and humanity.

Ron Immink

I help companies by developing an inspiring and clear future perspective, which creates better business models, higher productivity, more profit and a higher valuation. Best-selling author, speaker, writer.

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