Your company needs a unique vision on the future, on multiple levels
Does your organization have a unique point of view about the future?
If your answer to the question is no, Gary Hamel says that you do not have a strategy. So, how does one establish their own distinct vision for the future?
Working on trends and scenarios gives your organization opportunities to anticipate future events, to explore new possibilities and build optionality. Understanding business environment and industry trends is a crucial starting point for gaining all kinds of vital strategic foresight. But what are these trends and how do you get a hold of them?
The Four Levels of Trends You Need to Know
On level 1 are megatrends.
Megatrends are a part of a larger line of development, a recognizable whole consisting of phenomena with a distinct history and a development direction. These are things that we all know that do not entail any surprises. Examples of megatrends include climate change, digitalization, and urbanization. Megatrends should always be taken into consideration in strategic planning.
Recommended reading for making sense of megatrends: Hans Rosling: Factfullness (2018).
On level 2 are trends.
A trend is a change from something into some specific, clearly visible direction or a direction that has just started to emerge. Trends have a trajectory. Two rising trends can strengthen one another. Trends can be only local phenomena or tied to a single industry.
In a perfect situation, one company can be a trendsetter and, for example, shape the whole industry’s business logic. An example of this is Tesla who revolutionized both the technological solution (an electric car) and its sales (direct to consumer via online sales channel). Most organizations, however, just strive to notice relevant trends in time and to sufficiently answer and adapt to them.
Recommended reading for the COVID-19 pandemic’s trend context: Scott Galloway: Post Corona (2020).
On level 3 are weak signals.
A weak signal is a new and surprising event or phenomenon that can be seen as the first sign of change or a new course of development. Weak signals have no recognizable history, and they can remain singular. Discerning level 2 trends calls for a lot of work, but weak signals demand even more discipline due to their high signal-to-noise ratio. In a perfect situation, an organization practices systematic business environment monitoring that takes emerging events on the edges of the industry into account.
This sort of monitoring is the most cost-effective as a paid service and/or tool. For a smaller organization with a limited budget, this may mean collecting the signals themselves. Even this requires a systematic approach, and for example regularly reviewing observations made by employees in team meetings (for example, a peculiar comment from a customer, an interesting post on LinkedIn, etc.).
Recommended reading for getting better at spotting signals from peripheries: Rita McGrath: Seeing Around Corners (2019).
On level 4 are the so-called black swans.
Black swans are surprising and highly unlikely events that have significant influence and that change the course of development quickly, causing uncertainty. They are an “unknown unknown”, a radical context of ambiguousness where we cannot know things for sure.
A major part of decision-making in business involves uncertainty. Strategic choices must continuously be made in situations where there is only limited information available. There are no quick and easy formulas with which we can remove the uncertainty or identify the black swans waiting for us on the horizon. At worst, forecasts and Excel calculations taken from historical data give us a dangerous illusion of control.
Instead, amidst radical uncertainty, all of us on every level of our organizations must be able to say “I don’t know”. Admitting to not knowing something is a prerequisite for learning, renewing, and making discoveries. Combining things creatively, using abductive analysis and taking leaps of imagination, we can at least start to chart possible black swans, testing, preparing and building resilience.
Recommended reading for anticipating black swans: Nassim Taleb: Black Swan (2007) and John Kay & Mervyn King: Radical Uncertainty (2020).
Renew Your Business to Ensure Future Success
The coronavirus pandemic, when viewed in a trend context, is a black swan that has accelerated and strengthened many trends that were prominent before it (such as e-commerce, remote work, innovations in transportation). The pandemic made decades happen in weeks, as Scott Galloway aptly sums up.
In turbulent times, Gary Hamel sees strategy work as ever more significant in order for an organization to stay relevant. The most important question for management to ponder is: “How are we going to re-invent ourselves and the world around us during the next five years”? To answer this question, your organization needs to recognize and understand the trends that have an impact on your business environment, and what all this means to you.
Recommended reading for the new normal: Gary Hamel & Michele Zanini’s Humanocrazy (2020).
Author: Nora Kärkkäinen