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Post-COVID Futures (Real Estate)

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The COVID-19 pandemic has caused widespread shock at an unprecedented global scale. Much of the commentary we see, especially in the press and on social media, about the impacts and prospects for the real estate industry borders on self-proclaimed gospel telling. The issues and the responses needed are often presented in black-and-white; as binary choices. They aren’t. There are plenty of nuances, and the future remains very uncertain. So, as the reality of the economic, social and environmental fallout begins to hit, we’ve taken a look at some of the more thoughtful emerging analysis to explore longer term implications for the real estate sector.

Fallout

The immediate implications of the pandemic for the sector have been significant. The housing market hit pause, significant amounts of office and retail space were all but deserted, and many tenants began to struggle to pay rent. For those buildings still in operation, sanitation, health and safety, and leveraging technological solutions were prioritised. Government support kicked in to soften the blow, with measures ranging from financial support for businesses to placing a moratorium on evictions and waiving stamp duty.

But what next? In many countries, lockdowns have begun to open up, while in others a second wave of infection has already led to new restrictions. Even with the emergence of potential vaccines, uncertainty over their longevity and efficacy means it would seem premature to begin talking about life after COVID-19. Instead, it seems far more realistic to discuss life with COVID-19. What does it mean to live and work in the shadow of an ongoing pandemic, and the prospect of more to come in the future? To what extent are the shifts happening now likely to continue or evolve?

Future scenarios

Recovery: For the global economy overall and the property sector specifically, different scenarios show different curves for recovery in the longer term. Several predictions suggest some form of tick shape, with the initial downward trend kicked off by the start of the pandemic, followed by a long tail of recovery. It’s suggested that the pace, consistency, and overall extent of that recovery depends upon the level of containment or recurrence of the virus and the measures put in place by governments and companies regionally and globally.

Alternative scenarios: Many of the predicted scenarios tend to be based upon a broad assumption of a return to pre-COVID growth-based models and economic drivers. Others raise the possibility of alternative future shifts. These include, for example, a move towards restricted growth or constraint that prioritises human wellbeing, or shifts to alternative models such as doughnut or circular economics. Another option is a transformation to a decentralised system, with economies and societies defined by local levels of disease burden and immunity. And at the extreme end of the spectrum is the possibility that, without effective control and vaccination, there could be a more severe economic and social collapse ahead.

Below, we explore some of the common predictions for various aspects of the real estate sector, alongside speculation of where things could head should one of those alternative scenarios[1] begin to play out.

Sub-sector impacts and trends

Office: With a sudden shift to mass home working, many offices have been left with only essential staff in attendance. The home and flexible working trend looks set to continue – with Facebook, for example, predicting 50% of its staff could be working from home in the next decade. But this doesn’t mean the death of the office. Many are predicting a longer term shift to a new form of hybrid working, in which head offices are centres for collaboration, socialisation and innovation, supported by a mix of regional hub offices and home working. This in turn could drive a renaissance in suburban commercial property and the transformation of town centres into mixed use residential and leisure hubs.

Shifts in working patterns potentially mean less use for office space, which (along with unused retail space) could see increased repurposing into affordable residential assets to help meet ongoing supply vacuums. And it almost certainly means a change in how the purpose of office space is conceived in the future, with occupier choice likely to be driven by aspects such as connectivity, sanitation, seamless design and technology for handsfree interactions, and provision of key facilities onsite.

Residential: Impacts on and experience of residential assets and home working has varied significantly depending on circumstances. For example, in some places initial pauses in housing markets have already seen some recovery, including increased interest from city dwellers in suburban or rural areas. The degree to which this sticks once aspects such as fluctuating weather and social drivers kick in will be interesting to watch. Predictions tend to place residential assets in the medium resilience category, although this will depend upon ongoing tenant ability to pay, and the narrowing of current differences in pricing expectations between sellers and buyers. And overall, the ability to comfortably and effectively work from home and have access to outside space look set to be ongoing priorities for customer choice.

Retail and hospitality: Hospitality and large portions of the retail sector have been among the hardest hit. For those that survive the initial economic shock, predictions are mixed about the degree to which the hospitality sector will recover. And in light of ongoing trends towards online and local retail, physical retail is likely to need to set itself apart through innovative customer experiences and strong purpose-led branding to compete in a less favourable environment.

Supply chains: Supply chains look set to change too, with the likelihood that increased diversification and localisation of supply could help to ensure future stability.

Winners and losers. Overall, predictions tend to point towards a few subsectors that will remain resilient in the coming years. These include logistics and warehousing, digital and tech-led assets, medical and life science assets, cold storage, independent living, and affordable housing. Traditional offices and malls look set to struggle.

What if…

Increased poverty and marginalisation accelerate ghettoization of urban areas?

  • Opportunity: Take proactive measures to improve inclusivity and multi-use attributes of workplaces, buildings and communities.
  • Risk: Lack of action contributes to further marginalisation by creating exclusive and isolated workforces and buildings.

Community identity shifts towards data and health focus.

  • Opportunity: Focus on building unique, future-proof communities, with bottom up engagement around objectives and needs.
  • Risk: One-size fits all approaches to development likely to be less attractive and successful.

Some states take control of supply chains.

  • Opportunity: Focus on building relationships / partnerships with relevant local and national government agencies.
  • Risk: Limited control over pricing and quality.

There are shifts in living and working patterns centred around new “pod” communities (e.g. based on health status) and / or a rise in community / regional micro-economies characterised by circular economic principles.

  • Opportunity: Engage in local networks to understand direction of travel and role of property sector in emerging micro-economies. Partner with innovators and start ups to enable flexible adaptation to emerging requirements.
  • Risk: Lack of engagement and active listening leads to loss of investment and occupation. Inflexibility risks being too slow to move / adapt to shifting needs.

Lab and tech start-ups flourish and require state of the art premises.

  • Opportunity: Pre-empt future requirements for infrastructure / sanitation etc to ensure assets are attractive to relevant innovators and start ups.
  • Risk: Those not prepared Loss of investment, increase in voids.

There’s a collapse in the real estate market / investment.

  • Opportunity: Early investment in alternatives.
  • Risk: Lack of preparation leads to financial collapse.

Financing and investment

With unemployment likely to skyrocket, there’s currently a rush for governments to agree and implement rescue plans that will lessen the blow and prevent a 1930s-style crash.

Interest rates are likely to remain low for the foreseeable future. An ongoing focus on efficiency, continuity, COVID-19 governance, and the ability to generate cash is likely to impact all aspects of the real estate cycle. And location criteria could well be revisited in light of shifting use patterns – with closer physical connections and relationships between different property functions and types.

We might expect to see lending criteria adjusted with increased margins to compensate for increased risk, and increases in certain types of transactions such as sale and leaseback. And the door may open wider for creative financing, refinancing, and alternative finance providers to increase market share.

Renegotiation is likely to be a watchword – from rent payments, flexible leases and management fees, to valuations of new developments and existing stock, and supplier contracts.

Across the sector, data will be key. The ability to monitor and understand everything about real estate investments – from building efficiency and usage to tenant needs and real time local or global trends – is likely to contribute to resilience and profitability for those ahead of the curve. Most of these facets are covered individually by comprehensive solutions, but no one has yet cracked the market by bringing together the full array of decision-critical property data into one holistic platform.

Although real estate may remain a compelling asset class for investors, we can expect more questions to be asked around financial models and assumptions, as well as a preference for those asset types generally considered to be more resilient for the medium and long term.

There also appears to be a common perspective that environment, social and governance (ESG) factors will continue to gain increasing attention from investors, with some predicting an increasing blurring of lines between traditional and ESG-focused investment and a further shift towards impact investment styles.

What if…

There’s a trend toward public / private partnerships and investment in infrastructure with wellbeing / community-focused objectives.

  • Opportunity: Develop exemplar projects to build experience and reputation as a trusted partner.
  • Risk: More complex procurement / supply / development processes with additional delivery requirements.

Governments provide public funding for basic assets and services.

  • Opportunity: Focus on value added to increase competitiveness.
  • Risk: Limited control over price and quality of certain services and products.

Investor focus shifts significantly in one direction (e.g. ESG; safety, security and safe bets; health and tech)

  • Opportunity: Those who prepare for specific questions / requirements from investors get ahead of the curve.
  • Risk: Loss of businesses, increase in voids.

Building design, utilisation and management

Space allocation: We’ve already seen major shifts in space allocation across existing assets, with the sudden reversal of the densification trend in offices, and new requirements for home working.

Ongoing lower density occupation might be matched to some degree by lower headcount across offices, retail, and food and beverage assets. The need to balance feeling safe with feeling connected for those occupying and visiting buildings is likely to require ongoing monitoring and flexible footprint management – including the rebalancing of private and communal spaces in residential and commercial buildings.

Rating schemes: Building rating schemes such as BREEAM, Fitwel, LEED and WELL are likely to continue to evolve to accommodate new trends as a result of COVID-19. And we might also see increased occupier attention to specific aspects of these schemes such as health and wellbeing – the most recent Leesman Index shows a marginal increase in overall satisfaction across Well and Fitwel certified workplaces compared with those not certified.

Design aspects: For new developments and refits, key considerations around aspects such as access and facilities, occupier density, sanitation, technology, collaboration and connectivity are likely to play a central role in design. Internal features such as communal areas, waiting areas, pop-ups, food and beverage establishments, shops and concessions will need to account for any continuation of social distancing measures.

A reduction in common-use items and contact areas (e.g. cupboard doors) is likely to be welcomed by occupiers. And with many feeling safer to cycle, drive or walk rather than take public transport, space and facilities will also need to accommodate changing travel preferences.

The journey into and through any building is likely to look and feel quite different from now on. For example, in a typical office, automatic doors might lead to a low or no-desk reception protected by screens, with automated or e-badge delivery and sanitation stations. Accessible stairwells and well-managed, low occupancy lifts will be essential features.

For retail and food & beverage assets, sanitation and registration points, one way systems and tech-assisted, low-contact experiences could become the norm.

Green construction: We are likely to also see an acceleration in the drive for greener construction, in the context of a growing number of zero carbon commitments and ever-increasing calls to #buildbackbetter in the wake of the pandemic. Many are seeing this as an opportunity to reset and rethink, although the extent to which this plays out in practice remains to be seen.

New systems: To reduce the risks of infection, ventilation and humidity controls may need upgrading, and will need careful monitoring and management across the board. Meticulous, conspicuous cleaning and sanitation regimes have already been widely introduced and look set to remain essential – both to reassure tenants and visitors, and to limit virus transmission.

Any new policies and protocols will have to take account of evolving expectations for social and physical distancing, working from home, cybersecurity, flexible working and flexible people, transport – alongside wellbeing, safety and hygiene.

Clear, visible communications and signposting will be key in supporting visitors and occupiers to understand what measures are in place within a specific building, and to be clear about what’s expected of them. Training and education programmes for tenants and onsite staff are also likely to play an important role in ensuring good COVID governance and bolstering confidence.

With the full extent of the physical and mental health impacts of the pandemic still unknown, easily accessible support services will be essential across all asset types.

What if...

There’s an increase in zero hour contract / no contract workers for low paid workers (e.g. cleaners / FM).

  • Opportunity: Displaying leadership by ensuring good working conditions, employment security and fair living wages for suppliers and contractors.
  • Risk: Lack of action leads to widening inequalities and an unmotivated, high turnover, staff base.

Regular testing is required for all employees and occupants and / or civil and political unrest increase use of private security firms and require more advanced security infrastructure within and around buildings.

  • Opportunity: Prepare assets for increased health / testing requirements and potentially increased surveillance / security requirements. Develop in-house expertise.
  • Risk: Increased costs from use of external agencies. Lack of preparation leaves some assets unfit for occupation / at risk of health or security breaches.

Increased on-street and in-building security (checks and surveillance) become the norm, alongside immunity IDs determining who can and cannot enter buildings and spaces.

  • Opportunity: Development of health surveillance-ready buildings and guidance.
  • Risk: Increased inequality among employees and occupiers – risk of exclusion based on health status and potentially other factors (e.g. if immunity IDs are easier to access for certain groups).

Innovation and tech

New applications: The rapid utilisation of technological solutions has facilitated changing working patterns during the pandemic. It’s also enabled the reopening of several sectors through remote property viewings, at-table ordering, and a range of other hands-free, no-contact applications.

It’s no surprise that tech and data look set to play an ever increasing role in the aftermath. Wearable tech and apps within buildings could become the norm – providing reminders to use hand sanitiser or clean desks, monitoring face touching, giving updates on health and security statuses, and providing information on who else is in the building. Shopping, ordering and registration apps could remain commonplace in pubs, restaurants and retail establishments.

The visibility and usability of this type of tech is likely to be central to the rebuilding trust between occupiers and landlords, with tenant experience platforms already playing an important role in understanding behaviours, concerns and needs.

Smart systems: Data-led, smart solutions should enable building managers to track occupancy, and generate insights about local health and economic scenarios and the needs of individual tenants. And depending on how the pandemic plays out, we might see a long-term shift to ongoing employee, visitor and occupier health screening.

Up-to-date digital and analytical capability is likely to be important for tenant attraction, commercial lease negotiations, asset valuation, and operational efficiency. Tech is also likely to continue playing a key role in collaboration, as well as enhancing occupier experience through telehealth, on-demand concierge, digital leasing processes, and the formation of digital communities.

Privacy: All of this has implications for data protection and privacy – an aspect that perhaps gets less attention in the midst of a health emergency, but which is likely to rise up public consciousness as the implications of a significant increase in points of contact with new apps and private companies becomes apparent. Careful data handling and privacy controls should remain central to any new digital systems.

What if...

Building and company health statuses are required and reported, defined by real-time data and testing.

  • Opportunity: Prepare for increased health data requirements and reporting lines.
  • Risk: Lack of preparation leaves some assets unfit or undesirable for occupation / at risk of health breaches. Potential customer push-back if health / privacy balance isn’t right.

Balancing priorities for a sustainable recovery

Calls for a sustainable recovery are on the increase, for example the open letter from more than 200 leading businesses – including Hillbreak – to the UK Prime Minister urging the delivery of a clean, inclusive and resilient recovery plan. Many in the public and private sectors are committing to putting aspects such as wellbeing and climate at the heart of recovery plans. This is heartening, but in reality will require a keen focus on balancing priorities and – crucially – understanding the data.

Already, the environmental implications are complex. On the one hand we’ve seen an increase in the use of disposable, single use items as hygiene has taken priority – requiring a longer-term rethink of in-building waste facilities and recycling streams. And increased ventilation and maintenance regimes alongside extended operating periods are likely to increase energy use and carbon emissions. But on the flip side, a reduction in travel, a renewed focus on sustainable building design, digitisation, and shorter supply chains should contribute to a decrease in emissions.

As recovery plans kick in, data collection and analysis tools will be essential to understanding the range of causes and ultimate effects on energy and water use, waste and emissions.
This extends to understanding the needs and drivers of individuals and communities. For example, there is evidence of growing consumer preference for story or purpose-led brands with strong sustainability credentials, and of a desire from some for wellbeing to be prioritised above economics. But in reality, how this balances with concerns about hygiene, sanitation, cost-cutting and convenience is uncertain.

With ongoing uncertainty, dialogue with employees, occupiers, investors, and other key stakeholders will be essential in understanding evolving needs and concerns. A much closer partnership between landlord, occupiers and managers could become the norm from now on, with a shared focus on safety and in-building experience. Trust, value and responsiveness are likely to be essential factors in future occupancy choices, with good engagement playing a vital role in all three.

The pandemic has caused global shock, but also offers an opportunity to rethink organisational resilience, sustainability and wellbeing. Much of the way forward will depend upon the ability to control the virus through testing, treatment and potential vaccines, alongside the fiscal, social, and environmental measures put in place across different regions. And any number of new unexpected global events could change things all together. Leading companies might be wise to engage with sociologists, futurists and tech experts, to gain insights into likely scenarios and be prepared for a range of possible futures.

Read more about Hillbreak’s strategic foresight resources.

What if…

Circular economy / doughnut economics lead many public and private sector strategies.

  • Opportunity: Develop exemplar projects and data collection to prepare for increased focus on circularity and non-financial objectives.
  • Risk: Those slow to prepare for circular / non-financial focus will get left behind.

Society and governments placed increased attention on community and diversity (including social diversity, diversity of production, etc).

  • Opportunity: Focus on building unique communities, with bottom up engagement around objectives and needs.
  • Risk: One-size fits all approaches to development likely to be less attractive.

The preference for companies with purpose sticks.

  • Opportunity: Companies with strong ESG focus and mission / purpose will perform better.
  • Risk: Battle for niche / positioning dilutes impact.

Strict border controls limit immigration and potential for economic migration for work

  • Opportunity: Investment in upskilling and education for local workforces.
  • Risk: Lack of essential skills and experience. Limits on within-company moves (e.g. to new jobs / regions).

The desire to volunteer sticks and becomes central to personal identity.

  • Opportunity: Implement business-relevant volunteering programmes / support, flexible to local need and interests.
  • Risk: Volunteers from the sector volunteering outside the sector may begin to fill voids left by high unemployment, risking burn-out and reduced workforce capacity. Volunteers working within the sector require ongoing investment to ensure appropriate skills and knowledge.

Social and environmental conditions are attached to new developments.

  • Opportunity: Assets with high social and environmental performance will perform better.
  • Risk: Those unprepared for higher social and environmental standards will lose out.

There are restrictions placed on growth / new developments.

  • Opportunity: Focus on upgrading existing assets to meet ESG and futureproof expectations.
  • Risk: Loss of skills/experience within the sector.

Main sources

BCO
Cushman & Wakefield
Deloitte (1)
Deloitte (2)
Equiem
EY
Institute for the Future
JLL
Kate Raworth
KPMG (1)
KPMG (2)
Leesman
McKinsey (1)
McKinsey (2)
Said Business School
Savills
WEF

 

[1] Doughnut economics is based on the concept of fulfilling the basic needs of everyone on the planet within the environmental limits of the planet – with the doughnut offering a “safe operating space for humanity”. It is build on the idea of regenerative, distributive and collaborative economies, where success is measured by measures other than growth – e.g. equity, wellbeing, and innovation. A circular economy is one that keeps resources in use for as long as possible, through recovery,  reuse, recycling, repurposing and regeneration, thus minimising waste.

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Introducing the new Hillbreak Podcast

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Over recent weeks, Hillbreak has released a mini-series of podcasts focusing on the top ESG topics for the real estate sector in 2020.

The first episode talks about the key trends driving the ESG agenda and then introduces our picks for the three principal topics for real estate organisations to be prepared for this year, in both public and private markets. The following episodes dive into greater detail, discussing each of those themes in turn, invariably highlighting some of the key risks and opportunities to look out for.

You can jump straight to each episode from the list below:

Episode 1: Top 3 Strategic Topics for 2020

Episode 2: Ambition & Leadership on ESG

Episode 3: Better Reporting & Disclosure

Episode 4: Climate Risk & Net Zero

We’ve really enjoyed recording this first Hillbreak Podcast series and we plan to do more soon. We’d love to hear what you think and would be delighted to hear any suggestions for topics you’d like to hear us tackle. And if you’ve got a burning opinion you’d like to air, then why not join us behind the mic on a future episode?

Do get in touch…

Miles Keeping to address Hermes’ RPI Awards

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Hillbreak Director and Co-Founder, Miles Keeping, will be speaking at the renowned Hermes’ RPI Awards on Monday 13th of November, alongside Hermes’ Andrew Parry (Head of Equities & Impact investment) and Ben Sanderson (Director of Fund Management.)

In addition to the annual tradition of recognising outstanding performance on environmental and social matters amongst Hermes’ external property managers, the event this year will focus on the role of real estate in helping to meet the UN’s Sustainable Development Goals, particularly through the promotion and deployment of “Positive Impact Finance”. Real estate can play an important role on many of these global priorities, including by helping transition to a low-carbon economy by scaling-up finance for energy efficiency, as well through sustainable place making and urban regeneration and the provision of social housing to support sustainable, resilient cities.

Miles will focus on the role and benefits of Strategic Foresight in the context of impact investing, contributing to the delivery of UN SDG outcomes, and advancing the climate agenda.

Following presentations, the speakers will be bringing their various expertise to a round table discussion, and exploring what Positive Impact Finance means for investors and real estate professionals in an active debate.

The Hermes’ Presentation of Responsible Property Investment Awards will be chaired by Hermes Real Estate CEO Chris Taylor.
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Strategic Foresight: Stage 6 – Acting on an Agreed Agenda

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Acting on an Agreed Agenda

Given that strategic foresight inherently has a long and broad horizon, the challenge to those concerned with taking action today to secure a better future tomorrow lies largely in forging the link between the vision ahead and the bottom-line now. This final phase of “Acting” is primarily about communication – making the conceptual more material, and getting the individual and collective ‘buy-in’ of all involved. Successful implementation also entails creating an acceptable action agenda, establishing an appropriate intelligence system and effectively institutionalising strategic thinking.

Communicating Policy Proposals

A presentation protocol for policy proposals should have been designed and agreed from the outset. So far as possible, all significant stakeholders should be engaged and key decision-makers committed. Great care has to be taken, moreover, to construct a communication plan that conforms to the culture of the organisation and confronts it on its own terms. Furthermore, it should have been tested and refined in a variety of feedback activities prior to public launch. From experience, we have found the following factors worthy of consideration:

  • The forum and format for the final presentation should carefully be determined.
  • Time spent rehearsing the best style for the particular audience is never wasted.
  • The message often has to be tailored specifically recognising the complexity involved.
  • Beware a mismatch in the mindset of the consultant and the client in considering expectations within different timeframes.
  • Do not be afraid of being provocative and providing an element of surprise.
  • Ensure an adequate explanation of alternative pathways and their consequences.
  • Never sacrifice integrity simply telling an organisation what it wants to hear.

Plans, policies and proposals alone, however perceptive they may be, do not always readily convince organisations to address change. Scepticism of the findings from strategic foresight is not uncommon, and special skills on the part of the consultant are required to shape and advance an organisation’s awareness of the need to revise, reform and renew. We have always found that the ‘scenarios’ developed earlier in the process also promote a better understanding of the organisation’s position in terms of policy implementation.

Creating an Action Plan

It is a common conception, to which we concur, that ‘real’ change invariably only occurs through a sense of either potential crisis or great opportunity. Many organisations and their decision-makers are difficult to disturb from their comfort zones. It is often necessary, therefore, to generate a belief that the organisation cannot continue to operate in the way that it has – either through fear of imminent failure or the missed chance of boundless success. Again, there are a few pointers toward best practice.

  • Creating a sense of urgency challenges the complacency of the client organisation.
  • Beware of under-communicating the vision, and neglecting to connect proposed change to the organisational culture.
  • Reinforce what the organisation is already doing and build from there.
  • Challenge the assumptions that underlie the organisation’s expectations. Too many organisations expect the future to be like the present, only bigger and faster.
  • Remember, all of the information necessary to make perfect decisions is never there.
  • Identify ‘milestones’ along the path to the preferred future, and celebrate small successes on the way.
  • Consider the possibility of investing in at least one “crazy idea”.

A common attitude towards the future is one of regret: “if only we had known earlier, then we could have……”. Constructing an action plan that has at least considered unconventional thinking will at least minimise the threat of this happening.

Establishing an Intelligence System

Any organisation large enough to have a formal planning process should also possess an ordered and customised system for developing business intelligence. One that feeds into it and is properly aligned. This intelligence system should constantly be monitoring and reporting on the external business environment. Further, it provides a common process for asking questions and formulating answers. Like a form of corporate radar, it also acts as an ‘early warning system’ to detect ‘weak signals’ flickering on the horizon that are the precursors of threats and opportunities. Commonly, it is held that there are a number of key steps to this.

  • Identifying the most important fields for observation.
  • Determining the pivotal questions to be posed about the future.
  • Clarifying the critical issues surrounding strategic threats and opportunities.
  • Deciding what are the most appropriate sensors – people, networks and search systems.
  • Selecting suitable sources in terms of specialist expertise.
  • Looking for reliable indicators of ‘discontinuous change ’ which are easy to collect and comprehend.

Increasingly, strategic foresight is being employed in response to ‘turbulence’ in the external environment. A lack of awareness, preparedness and adaptability can easily lead to organisations failing to accommodate disruption. Setting-up a satisfactory intelligence system as part of plan implementation becomes imperative.

Institutionalising Strategic Thinking

All too often ‘futures thinking’ and ‘strategic foresight’ are conducted by corporations on a one-off basis. It is, however, becoming progressively recognised that they need to be embedded within the organisational structure and decision-making processes of the firm or agency. Scanning for trends and issues should be part of corporate daily practice, and regular analysis to reflect on the insights thus garnered scheduled repeatedly into organisational programmes. A significant initial time investment is required to establish the framework and discipline, but, once done, the practice becomes second nature, and the mindset of the organisation invariably starts to change. Quite soon, the quality of the process and the added-value of the outcomes becomes evident. Indeed, to conclude, one is reminded of the adage coined by George Bernard Shaw: “You see things and say ‘Why?’ But I dream things that never were and I say ‘Why not?’”

Strategic Foresight: Stage 5 – Planning Strategic Options

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Planning Strategic Options

Strategic planning options are the policy pathways that transport the realm of long-term, big-picture vision to the reality of the need for a set of actionable tactics to tackle present circumstances. Such planning thus provides an organisation with a roadmap showing how it can get from where it is, to where it wants to be. At Hillbreak, we aim to consolidate a client’s future policy framework into no more than five strategic planning options. We have found, moreover, that there are an array of common characteristics that distinguish and define a successful strategic planning exercise. These can usefully be summarised as follows:

1.   Think Strategically

Strategic thinking is primarily about finding and developing a corporate foresight capacity for an organisation, by exploring all possible organisational futures, and challenging conventional thinking so as to foster better decision making today. It requires identifying assumptions about the future that might require examination, testing and subsequent modification. Most excitingly, such a futures approach through foresight can constitute an effective platform for collaborative planning. But, within client organisations, there has to be awareness, openness and a willingness to be disturbed! Strategy emerging from the bottom-up and employing unusual and remarkable sources is often best regarded.

Several major maxims make strategic thinking more impactful:

  • Make the unique culture of the organisation central.
  • Stimulate strategic conversation at all levels; don’t simply confine it to the ‘Executive’.
  • Construct a ‘scaffolding’ of ideas; connecting, integrating and developing views from all around.
  • Understand what needs changing, and what doesn’t. In the same context, recognise what essential processes and practices already existing within the organisation need preserving and promoting.
  • Identify critical ‘branching points’ where an organisation reaches a position of strategic choice when different pathways offer varying views of how the future might play-out.

The challenge for corporate foresight in thinking strategically, therefore, is to help organisations achieve and sustain a ‘good fit’ within their evolving policy landscape so as to be able to anticipate and respond to transformational change effectively. This is about people every bit as much as it is about process.

2.   Developing Strategic Policy Options

First, and foremost, strategic recommendations must be based on the distinctive attributes and abilities of an organisation. Foresight, of course, should always emphasise the external environment and take a longer, broader view; but the consultant must also be aware of the client organisation’s internal strengths and inherent deficiencies. Strategy, perforce, has to be developed around an organisation’s core resources and capabilities, and the need for building policy options from the inside out. Again, from experience, there are a few guidelines worthy of mention:

  • Determine the way in which the organisation is ‘inimitably unique’, and how that uniqueness can best be turned into a continuing valuable concept, commodity or service. It is not always being good at something that counts, but being different!
  • Imitating the best policies and practices of others is notoriously difficult and rarely successful. Anyway, if a plan, product, or process can readily be copied, its value will soon be competed away.
  • Once the unique competency is developed, it can be leveraged across different parts of the organisation and the markets in which it operates.
  • Before strategy is fully implemented, it should first be evaluated across multiple dimensions – performance measures, stakeholder perspectives and prospective timeframes.
  • Include the “No-Go”, the “Most Plausible”, and the “Preferred” when recommending strategic policy options, so as to cover what to avoid, what is most likely to happen, and what to work towards.

It is, of course, good practice to stress-test strategy as much as practicable during its formulation; fixing any major mistakes after implementation can be extremely costly.

3. Examine the Issues

Defining a problem, and communicating it to others, so as to prepare an effective planning solution is a familiar task to all concerned in decision-making processes. A technique favoured and followed by Hillbreak comprises the following investigative process:

  • Situation. Where are we now? What has been going on? And how do we think it’s working – or not?
  • Complication. Something is happening, or looks likely to happen, that could significantly change the way we do things.
  • Evaluation. There are a number of consequential factors influencing the way matters could materialise.
  • Options. Several alternative courses of action present themselves, all of which have different outcomes.
  • Recommendation. Given all the circumstances, a preferred policy option is selected.

In the context of strategic thinking in corporate foresight the recommendation would be framed as a positive policy option.

Conclude with contingency! In these volatile days of increasing risk and greater uncertainty, it should almost go without stating that the corporate foresight consultant must help the client prepare and rehearse contingency plans for the inevitable surprises that will occur over the longer, and even shorter, term. As Aristotle discerningly declaimed: “Probably something improbable will happen”!

Strategic Foresight: Stage 4 – Visioning a Preferred Future

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Visioning a Preferred Future

The essential purpose of Strategic Foresight is to make better, and more informed decisions in the present. All organisations, however, need to ask the basic questions about their future: “Where are we going? What do we want to be? And how do we know what we want to be doing?” In achieving this, they not only need to identify all the implications of alternative futures; challenge the basic assumptions of their thinking and operation; but also “think big” about their aspirations ahead.

One of our favourite sayings at Hillbreak when conducting a Strategic Foresight Exercise and arriving at the ‘Visioning’ stage is: “Imagine ahead and plan backwards”. ‘Presencing’  is the professional term. This is the reverse of the conventional ‘trend extrapolation’ mindset of most planning practices, but we believe that creating a vision for the future is vital in helping identify long-term goals and strategies. Nevertheless, it should be recognised that a strategic vision is akin to a ‘lodestar’ in that it provides an image of the future that offers direction yet is never reached. In this way, visioning is also an iterative process, as the formulation of strategies and plans may raise issues and questions that make it wise to revise the vision and the consequent strategy over time.

A strategic vision serves organisations as a template, model, or interpretive framework for making sense of the daily puzzle; as well as providing a rallying point for focusing the organisation’s work. In tough times, moreover, it can provide reassurance that current challenges will pass and are worth navigating through. It also aligns the organisation and its stakeholders around a common purpose communicating expectations to all concerned. A great vision statement, however, does not guarantee great results. Unless everyone involved believes in the vision, and acts accordingly, it is simply words on paper.

Guiding Principles

The main advantages of creating a vision of an organisation’s preferred future is that it helps:

  • look toward the horizon;
  • consider the multi-faceted changes facing society, the sector, and the organisation;
  • incorporate the entrepreneurial forces that it takes for organisations to succeed;
  • develop a high-performance appraisal and incentive system;
  • support continuous improvement; and,
  • foster symbiotic relationships.

The following guiding principles should be considered when developing the preferred future vision during any workshop.

  1. Visualisation: in order to achieve a preferred future, it is important to be able to imagine it. Rushing towards a hazy ideal is wasteful of energy and resources, and, to that end, the visual conceptualisation of the future is vital.
  2. Communication: the realisation of future goals is only of value if all are willing to support and encourage their implementation. Effective communication of ideas between, and from, people and organisations is strategically crucial in creating the broadest base from which to achieve the preferred future. Involve ‘remarkable people’ throughout.
  3. Integration: a preferred future which is clearly exclusive and selective should not form the basis of the vision. Selectivity leads to the creation of a preferred future for some people, but not for all. Integration of people and ideas at this stage of the process is a key factor in determining the long-term success or failure of the work.

How to Envision a Preferred Future

Somewhat prosaically perhaps, the following procedure is illustrative of how to envision a preferred future in a workshop setting:

  1. The participants should seat themselves in a horseshoe or semi-circle arrangement in the main room.
  2. Every participant is asked by the facilitator to spend time thinking carefully about what aspects of a desired future they consider important. (It is imperative that everybody does this with respect to the issues fleshed out during the day, particularly the scenarios and their turning points).
  3. Approximately 2 to 3 aspects should be written down by each participant in a ‘statement-like’ format on cards or post-it notes.
  4. Each participant is then asked to read out their contribution to the rest of the group.
  5. The facilitator collects each of the cards or post-it notes and arranges or pins them onto a table or board at the centre of the room.
  6. A short discussion is then encouraged to consider each of the aspects proposed: similarities, differences, connections and new ideas.
  7. Once this discussion has taken place, the final aspects of the vision should be agreed by the participants and then compiled by the facilitator.

It is worth striking a note of caution regarding the very term “vision” in the context of an organisational setting, for the word itself can conjure up notions of ‘rapture’ rather than ‘reality’! Envisioning a preferred future is far more about perceptive and aspirational foresight than organisational yearning and wish fulfilment.

The Lasting Benefit

It has long been recognised that visionary corporations attain extraordinary long-term performance. Successive studies have found evidence that companies striving to learn and grow through futures-oriented thinking outlast companies focused solely on economic returns. A famed example by Royal Dutch/Shell found that the average life expectancy of Fortune 500 companies was under fifty years, but many were over two hundred years old. The key difference between the short- and long-lived companies was that the former focused on financial returns while the latter concentrated on the community of people comprising the organisation, maintaining a strong sense of identity and purpose through shared vision of a preferred future in good times as well as bad.

A concluding injunction for the visioning stage of the strategic foresight process is: “Dare to be the ridiculous!” The mindset should be close to Disney’s concept of: “the willing suspension of disbelief”; emphasising the presence of mind to consider even the most ‘off-the-wall’ alternative prospects, pathways and solutions, and searching for the kernel of a useful notions within them. Build, therefore, upon wild ideas and continue to ask the ‘What If?” questions.

Strategic Foresight: Stage 3 – Forecasting Alternative Scenarios

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Forecasting Alternative Scenarios

Essentially, forecasting involves generating the widest range of creative possibilities, then consolidating and prioritising the most useful for an organisation to consider and prepare for as it moves ahead. Appreciating that a key tenet of strategic foresight is that the future is inherently unknowable, and efforts to get it exactly right are futile, our role as consultant and facilitator is to offer an expansion of the range and depth of possibilities for the organisation to consider, thereby reducing the likelihood and magnitude of surprise. The principal means of challenging the official future, one favoured by Hillbreak, is to develop alternative futures in the form of “Scenarios”.

What Are Scenarios?

Scenarios are instruments for ordering people’s perceptions about alternative future environments in which today’s decisions might play out. Scenario planning is now widely regarded as a basic tool for thinking strategically about the future. And scenarios have long been used by government planners, corporate strategists and military analysts as powerful aids in decision-making in the face of uncertainty. In practice, scenarios resemble a set of stories — possible, plausible, probable and preferable — built around carefully constructed plots. Such stories can express multiple perspectives on complex events, with the scenarios themselves giving meaning to these events.

How Do You Create Scenarios?

The process is highly interactive, intense and imaginative. It begins by isolating the decision to be made, rigorously challenging the mental maps that shape people’s perceptions, and hunting and gathering information, often from unorthodox sources. The next steps are more analytical: identifying the driving forces, the predetermined elements and the critical uncertainties. These factors are then prioritised according to importance and uncertainty. Subsequently, three or four thoughtfully composed scenario “plots” are constructed, each representing credible alternative futures, against which policy options can be tested and implications identified.

Why Use Scenarios?

Scenarios are powerful planning tools because the future is unpredictable. Their main characteristics being:

  • Scenarios present alternative images instead of extrapolating trends from the present.
  • Scenarios embrace qualitative perspectives as well as quantitative data.
  • Scenarios allow for sharp discontinuities to be evaluated.
  • Scenarios require decision-makers to question their basic assumptions.
  • Scenarios create a learning organisation possessing a common vocabulary and an effective basis for communicating complex – sometimes paradoxical – conditions and options.

Good scenarios are conceivable and surprising. They have the power to break old stereotypes; and, by rehearsing tomorrow’s future, they produce better decisions today.

Example Scenarios developed by Hillbreak for a Strategic Foresight workshop for a leading global fund manager

How to Establish Scenario Logics

Scenario logics are the basic  building blocks from which the final scenarios will eventually evolve. Establishing them correctly, therefore, lays the foundations for the scenarios and is a vital prerequisite of good scenario planning as it:

  • produces the logical rationale and framework for the scenarios;
  • determines the underlying theme, structure and background of each scenario;
  • establishes the plot of each; and,
  • captures the dynamics of the situation in each scenario, so that they can be communicated effectively.

The most common method is to construct a cross-matrix formed by selecting the two most critical pivotal uncertainties which might play the most prominent roles in shaping the future for the organisation concerned. Selecting the pair of pivotal uncertainties can involve long debates between participants in the exercise, but if the group wants to create coherent, creative scenarios then a reasoned explanation of the rationale behind the selection can itself be richly rewarding.

Fleshing-out the Scenarios

There is no ‘correct’ way to flesh-out the scenarios, but there are a number of important guidelines that can be followed regarding ‘factors’ and ‘actors’.

With regard to ‘factors’ there should be:

  • a beginning, a middle and an end state;
  • an approximate time-line;
  • key events that make things happen;
  • early indicators of change (signals that the scenario is unfolding); and,
  • an evocative title.

In respect of ‘actors’ they should represent:

  • main players in the field of interest;
  • large, small and traditional stakeholders;
  • new entrants;
  • what regulators are doing; and,
  • what society is demanding.

The scenarios should be fleshed-out and exaggerated in opposite directions to create images of future worlds that are as different from each other as possible. The best scenarios are not only compellingly believable, but also present distinct alternatives, are internally self-consistent, vividly memorable, individually challenging, and sufficiently insightful and powerful enough for decision-making purposes.

A Layered Approach

Change occurs on many levels. Most organisations, short on time and beset with operational issues, spend insufficient time examining and understanding the deeper levels of change. This can be done by taking a ‘layered approach’, both ‘horizontally’ and ‘vertically’.

Horizontally, trends and drivers can be organised into areas or sectors by means of “STEEP” analysis (Social, Technological, Economic, Environmental, and Political) as explained in Part 2 of this blog series. Time-scales can also be examined horizontally by means of the “Three Horizons Method”, which, at Hillbreak, we apportion as “Evolutionary” (business developing as usual),”Transitional” (surveying emerging innovation and responding to present shortcomings) and “Transformative” (future systems of living, working, developing, operating and investing).

Vertically, a method known as “Causal Layered Analysis” (CLA) is employed to enable comparison of vertical ‘slices’ of reality and change. Popularly, most exponents of CLA identify four layers: surface/litany; social causes/systems; discourse/world view; and, metaphor/myth. At Hillbreak, we have devised a simpler version: Exploratory; Interpretive; and Empirical.

Layered approaches are important because organisations often become too narrowly focused on immediate problems, neglecting a broader and deeper exploration and understanding of the environment in which they operate. By adopting them, an organisation might realise that it has been focused on the wrong things, identify profound issues and changes that will impact upon it, and prompt the organisation to develop the necessary foresight to address those deeper drivers of change early enough to influence the outcomes — rather than just reacting to them after the event.

Stress Testing

Most organisations have used scenario analysis to examine the likely development of core risk factors over time. An approach that can work well in an era of gradual change. At times like the present, however, it is extreme risks, (especially the “unknown unknowns”), not the everyday ones, that most concern some organisations in such fields as finance, energy and health. More recently, therefore, a new form of scenario planning has emerged — “Stress Testing” — to tackle the prospect of chaotic and immediate change. At Hillbreak, we recommend to clients operating in fields within international financial frameworks that stress-testing should be an element within their risk-management system. Notably, the recently published Recommendations of the Financial Stability Board Task Force on Climate-Related Financial Disclosures position scenario analysis and stress-testing as a central feature of decision-useful financial reporting in relation to climate change impacts. Performed properly and more widely, it can be a valuable tool in building the resilience that today’s business environment demands across myriad trends and uncertainties.

Conclusion

Thus, scenario planning, in all its manifestations, can: help explore and identify future possibilities; make people aware of risk and uncertainties; stretch the imagination; trigger the learning process; promote people’s participation in long-term decision-making and planning; and, evaluate current choices regarding the future. Nevertheless, always remember that you are NOT predicting the future but are trying to imagine it.

Foresight

Strategic Foresight: Stage 2 – Scanning the Horizon

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Scanning the Horizon

In this second article in our six-part series on Conducting Corporate Foresight, we focus on the Scanning the Horizon phase, which follows on from having established the Strategic Question that the Foresight process seeks to answer.

Purpose

A prerequisite of all serious strategic policy studies is “Horizon Scanning”, alternatively known as environmental scanning. This stage in the Corporate Foresight process is not about making predictions, or even forecasts, but is a systematic exploration and investigation of evidence and ideas about future issues and trends. Sometimes it is described as creating a ‘systems map’ of the activity or organisation under consideration; but we prefer to add the power of ‘radar’ to this simile. Profound change invariably starts as a ‘blip’ or ‘weak signal’ on the periphery, and companies in complex, rapidly changing environments require well-developed peripheral vision and an alert sense of anticipation.

Conceptual Method

Effective horizon scanning needs structure. Probably the most familiar framework for searching the external contextual system for emerging trends surrounding an issue or organisation is “STEEP”, an acronym which we have modified to mean:

  • Societal and Cultural;
  • Technological and Innovative;
  • Economic and Financial;
  • Environmental and Ethical; and,
  • Political and Governance.

Essentially, STEEP allows for a broad examination of the environment, identifies the major forces of change and detects signals that might drive, disrupt or deflect them.

Alongside the STEEP taxonomy, at Hillbreak, we employ a “Three Horizons” framework which gives a richer meaning to the more traditional ‘short-medium-long’ term thinking commonly adopted:

  1. Evolutionary; operating and developing within today’s dominant pattern along the lines of “business-as-usual” and extending the core.
  2. Transitional; a zone of ambiguous innovation where new ways of doing things are appearing and potential ‘rising stars’ are emerging that could, over time, become pioneering core business.
  3. Transformative; a future pattern and fresh landscape of conducting commerce arising from changing conditions, new knowledge and altered priorities and values which convert the very nature of the particular industry.

More of an exploratory perspective than a planning tool, the Three Horizons technique can be used as a second axis with STEEP in providing a fuller framework for researching and recording potential change over time. Metrics can also be applied, where appropriate, to the drivers and issues involved. Such scanning has been sophisticated over recent years with the rise in knowledge management software, but we would still verge on the qualitative rather than the quantitative side of consultancy practice at this stage in the corporate foresight process.

Practical Guidelines

Just over a decade ago, a revelatory survey of 140 corporate strategists, showed that fully two-thirds of respondents had been surprised by as many as three high-impact competitive events in the previous five years, and a shocking 97% said that their companies lacked an early-warning system. Little, we would argue, has changed since then, as subsequent happenings have surely demonstrated.

Horizon Scanning should be a permanent, structured and continuous process, embedded into the policy and planning procedures of any organisation. In doing so, and in addition to framing the right question, we would suggest the following practical guidelines:

  • Adopt a global perspective and a longer, broader view.
  • Start by looking backwards, assuming that the patterns of the past will largely continue into the future.
  • Do not reinvent the wheel; there are many excellent studies of future possibilities already published from which to draw.
  • Be wary that past success can lead to complacency and constrained thinking; remembering that all performance across organisations tends to follow the familiar “S-curve”.
  • Conduct a stakeholder analysis with the following questions in mind:
  • Who is key to decision-making at this time?
  • What really matters to the parties involved?
  • Who are the customers with a high interest in the organisation?
  • Which predatory stakeholders seek to do the organisation harm?
  • Integrate the internal workings of the organisation with the external developments of the world around.
  • Explore unfamiliar areas and consult ‘remarkable people’.
  • Organise effectively for scanning with responsibilities properly assigned.
  • Identify past blind-spots and question what is happening in these areas now.
  • Search to see if there is an instructive analogy from another industry.
  • Check to find who in your industry is skilled at picking-up early signals and acting on them ahead of everyone else.
  • Make sure you are not ‘rationalising away’ any important signal, for nearly all surprises have visible antecedents, yet people have a powerful tendency to ignore warning signs that contradict their own preconceptions.
  • Listen to what your maverick colleagues or informed ‘outliers’ across the industry are trying to tell you.
  • Find out what your peripheral customers and competitors are really thinking, for there is much to be learned from complainers and defectors, as well as obscure and less immediate rivals.
  • Ask what future surprises could really hurt, or indeed help, the organisation; as well as what emerging technologies could fundamentally change the game. Is there, in fact, an ‘unthinkable’ scenario?

Organisations with a constant horizon scanning capacity and strong peripheral vision will always gain significant advantage over their rivals. They will recognise risk more readily and reorganise accordingly. They will perceive and act on opportunity smartly and in front. As the business environment changes apace and becomes more uncertain, payoffs from scanning and vision will be greater than ever. As Charles Darwin popularly pronounced:

“It’s not the strongest of the species who survive, nor the most intelligent, but the ones most responsive to change.”

Foresight

Strategic Foresight: Stage 1 – Framing the Strategic Question

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Framing the Strategic Question

It might seem an overused assertion, but leadership in the corporate realm faces new uncertainties greater than at any time before. The global pace of change, and the ramifications of it, seriously tests the capacities of businesses, of all scales and sectors, to formulate and implement resilient plans and adaptive strategies.

It is why, at Hillbreak, we advocate frequently the adoption of ‘Strategic Foresight’ by our clients, whether as a feature of developing or refreshing Responsible Investment strategies, or as part of business planning processes more broadly. The concept, and the six-stage approach that we adopt, is one that we have summarised in a previous introductory article.

This post, the beginning of a new, monthly series that will provide greater depth on the six stages in the Strategic Foresight process, focuses on the first: Framing the Strategic Question.

Purpose

All too often insufficient time and thought is given at the outset of a project to defining the scope and focus of the issues facing an organisation. Not infrequently, studies end-up addressing the wrong problem or discovering the real issue halfway through having generated considerable confusion along the way. It is therefore not simply a matter of asking the right question, but of framing it within the context and purpose of the organisation. To achieve this, we have a few key guidelines, as follows:

1.    Understanding the organisation

No two organisations are alike; what works well with one might easily backfire with another. Central to our process is an opening series of tailored ‘strategic conversations’ with selected players from within and, where appropriate, outside the organisation.

We also favour the familiar, yet forever fruitful, Strengths-Weaknesses-Opportunities-Threats (SWOT) analysis. But it is important not to over-sophisticate the process; large measures of common sense are critical.

2.    Aligning attitudes and expectations

Getting all client stakeholders to buy-in to the strategic foresight process is not always easy. Internal participants can be sceptical and may perceive that the foresight consultant is not paying sufficient attention to the immediate concerns of the financial bottom-line. Time spent explaining the rationale and the method is, therefore, never wasted.

Neither is crafting a positive depiction of the future and exploring the biases of both the participating client groups and the facilitator. Too many foresight exercises concentrate narrowly on highlighting hazards and negative impacts. Of course, researching and evaluating risks is crucial, but it is only one side of the futures coin.

Primarily, foresight requires the ability to recognise patterns involving relationships and systems that are complex and non-linear. This often entails a significant realignment of mind-sets among participants.

3.    Clarifying the rationale

The essential purpose of employing futures-thinking and foresight methodology is to gain a better understanding of the opportunities and challenges that lie ahead, so that superior decisions can be taken today. Fundamentally, therefore, the client organisation must resolve what it wants to achieve. This is not as simple as it sounds. Aspirations and perceptions vary considerably over corporate time-horizons and across business imperatives.

Firms can be quite unclear as to what decisions they need to make to secure their future. Investing time and effort up-front clarifying the focal objectives, motivations and reasoning pays enormous dividends. In our experience, a prime outcome of foresighting is getting client companies to balance successfully the exploitation of the near-term (day-to-day operational management) with an exploration of the longer-term (blue-sky strategizing). The two, ideally, should feed off each other.

4.    Establishing clear objectives

Defining the purpose of the strategic foresight project and the related objectives of the organisation is imperative. Some of these might be quite specific, addressing a known issue (e.g. merger, relocation, new product development, re-organisation etc.); others more ethereal (e.g. creativity, innovation, corporate citizenship, responsible investment, well-being or enlightened leadership etc.).

Generally, the overriding objective is to bring fresh thinking, new ideas and a change of mind-set into organisations all too often stuck in self-constructed ‘silos’ of planning and operation. An effective foresight project should help a client focus on ‘outcomes’ not ‘outputs’ and work across multiple time-horizons.

5.    Choosing the right participants

It is essential that the support of the Executive is in place. That said, strategic foresight is a ‘team sport’. From experience, the core group driving the project should be no greater in number than five or six, whilst strategic conversations should be conducted with around a dozen or so carefully chosen ‘players’. It is often preferable for this to include a few well-informed, external stakeholders.

Strategic foresight workshops should comprise anything from 12 to 30 participants who are truly representative of the organisation. They should ideally be complemented by some provocateurs who can offer differing views of the organisation and the world at large.

It is important to recognise throughout that strategic foresight requires creative, collaborative and challenging thinking. The ultimate message might best be formed in a favourable light so that recommendations are evaluated positively, but we do not exist to tell organisations what they want to hear. In our experience, clients today place far more value on candour and integrity.

Are you ready?

Introduction to Strategic Foresight

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In this latest post, Professor John Ratcliffe, newly appointed Head of Strategic Foresight at Hillbreak, introduces the concept and corporate benefits of the discipline.

Leading an organisation through these turbulent times of market, technological and geo-political uncertainty is a major challenge. The risks attached to changing investment conditions and the ambiguity of professional pundits make it difficult for decision-makers to look ahead to the future and to frame the destiny of their organisation within it.

Yet the future is not predestined; we can shape and manipulate it if we know what we want it to be. Nor can the future be predicted. It can be explored and examined imaginatively though; challenging conventional assumptions, preparing for inevitable surprises and envisioning a range of scenarios from which to plan backwards.

This approach to viewing what can be done today – whether by organisations, individuals, cities or communities – to positively influence the future is known as “Strategic Foresight”.

The Process

At Hillbreak, we take a common-sense approach to Strategic Foresight comprising a six-stage formula.

  1. FRAMING the Strategic Question. Organisations often start with the wrong question. Almost invariably, they assume a ‘business-as-usual’ model projected forwards. So time taken at this initial stage – challenging the rationale and purpose of what they are and what they are doing – is never wasted.
  1. SCANNING the Horizon. Like a radar system, this should really be a formally structured and continuous activity across any organisation which has plans to be successful beyond the immediate term. It encompasses mapping of the trading territory and business environment, conducting thorough stakeholder analysis, exploring the unfamiliar, and looking backwards to learn from the past. More particularly, it involves:
  • looking ahead – beyond usual timescales;
  • looking across – beyond usual sources;
  • gazing beyond – moving from a single ‘expected future’ to a range of alternative ‘possible futures’;
  • considering – implications for today’s decisions; and,
  • promoting – a sense of ‘resilience’ and ‘adaptability’ in strategy.
  1. FORECASTING Alternative Futures. It is crucial to identify the driving forces of change affecting the organisation’s place in the world. It is important to look for turning or tipping points, to embrace divergent ideas, to prioritise convergent views, and to construct alternative futures. These ‘scenarios’ should be plausible and surprising, structurally different, internally consistent, useful and challenging. They help to create a better learning organisation.
  1. VISIONING a Preferred Future. Having challenged some accepted assumptions, posed relevant “what-if?” questions, identified likely implications and possible unintended consequences, and thought creatively about the longer-term, this process seeks to concoct from the various scenarios a chosen ‘preferred future’ for the organisation.
  1. PLANNING Strategic Options. The attitude of imagining ahead and planning backwards is the opposite of conventional planning but is central to our philosophy. It involves: thinking strategically to provoke constructive and reflective conversations; spotting areas of strategic choice; and evaluating any proposed strategy along multiple dimensions. Vitally, it demands contingency plans for unexpected surprises.
  1. ACTING on an Agreed Agenda. Invariably, we encourage:
  • creating an Action Plan with a sense of urgency;
  • determining ‘milestones’ on the path towards a ‘preferred future’;
  • establishing an ‘intelligence system’ to keep the radar scanning;
  • effective communication of the results to stakeholders; and
  • inculcating strategic thinking within the organisation.

Frequently, our last question to the client is: “What are you going to do first, and now?”

The benefits

Apart from the goals of capturing materiality, producing a strategic plan to guide organisations into the future, and giving their stakeholders confidence in their ability to adapt and manage risk, we find that the simple act of getting people together to share a common interest to think, talk, plan and act – creatively and differently – is exhilarating and corporately fruitful.

At Hillbreak we provide strategic consultancy services to organisations seeking competitive advantage in a changing urban world. This ranges from extensive professional studies of client organisations – challenging where they are going, what they are going to do, and how they are going to get there – to workshops and symposia for companies and their stakeholder networks.

“We do not need magic to transform our world. We carry all the power we need inside ourselves already. We have the power to imagine better.” J.K. Rowling, Harvard, 2008.