Facing the future: the business challenge of the 2020s
by Andrew Curry and Emma Bennett
‘Business as usual’ is no longer enough. It won’t meet the growing pressures from consumers, policymakers and the planet, while also ensuring business value. The old ways of doing strategy are not fit for purpose in this environment. The new decade demands new approaches and new thinking.
Most of the models that drive our businesses are breaking down. The signs are all around. Profit margins are being squeezed. Each round of incremental innovation seems to produce less bang per buck than the last one. Suppliers are finding just-in-time deliveries harder to guarantee. It’s ever harder to ignore the impact of the value chain on the burgeoning ecological crisis.
Meanwhile, trust data for many countries show bigger gaps between mainstream and ‘elite’ opinion than ever before. The communities we operate in are telling us they expect us to live our values and purpose, and that ESG and ‘box ticking’ aren’t enough. Our employees — especially our younger employees — hold our business (their business) to account for its ethics and behaviour. More than two thirds of employees (67 percent) want us to take meaningful action on societal issues.
Workers increasingly hold to account the companies that employ them. Earlier this year, the Amazon Employees for Climate Justice group explained why they supported striking workers at an Amazon fulfilment centre:
“As a company, we are not taking ownership for the negative impacts (i.e. carbon emissions and pollution) of our business. This mindset of pushing costs to others (i.e. to communities around our operations) and extraction is also at play when it comes to the work environment that [fulfilment centre] workers in [Minnesota] are striking to improve.”
In some sectors, the problem of “stranded assets” — assets that potentially have less market value than their stated balance sheet value — is looming. The divestment movement, putting pressure on investments that still support the carbon economy, continues to gain strength.
In this new world, if the business sector is to prosper, it needs to be smarter about what’s going on outside of its offices, its distribution centres and its product development teams. The current models are running out of road.
Understanding the signals — the ever-present future
The future is almost always visible in the present; we just need to look a bit harder for it. Systems can decline for a long time before you notice that they are heading for a breakdown. The underlying rates of economic growth in richer markets started to decline in the mid-1960s. Ecological warnings surfaced in the early 1970s, with A Blueprint for Survival and The Limits to Growth. (Earlier, perhaps, with The Silent Spring.)
The shift in generational attitudes was signalled by a social panic in the 1990s about Gen X, then called the ‘slacker’ generation. Time magazine raised the alarm:
“They have trouble making decisions. They would rather hike in the Himalayas than climb a corporate ladder. They have few heroes, no anthems, no style to call their own. They crave entertainment, but their attention span is as short as one zap of a TV dial.”
The lead time on the warnings is significant. Systems collapse in two ways, in the same way people go bankrupt, “gradually and then suddenly.” The warning signs start as a trickle, and then they become a flood.
A wider and longer view — ensuring businesses stay relevant
The need to find different ways to do business has been becoming clearer, and there have been plenty of suggestions about how best to do it. Michael Porter, the doyen of conventional business strategy, pivoted a decade ago to the idea of ‘shared value’, the belief that commercial opportunities lie in unmet social needs. The B-corps movement, which embeds purpose in the legal structure of companies, now boasts 2,500 members worldwide, in 50 countries. Across sectors, companies of all sizes are seeing the link between purpose and profit, sustainability and sustainable business. B-corps members include Danone North America, part of the $25 bln turnover French food company. In the finance sector, the Global Alliance for Banking on Values, which promotes the use of finance to support economic, social and environmental sustainability, now has 55 members.
These are examples of businesses that have already started to face the future. They are, in their different ways, trying to be sustainable, not just financially but also socially and ecologically. They are taking a wider view of their present business environment, and also a longer view. As the insurance giant AXA has pointed out, a world of four-degree warming — now regarded by scientists as a credible risk — is “uninsurable”.
At its heart this is about business models that don’t make claims on the future, and therefore have inter-generational fairness at their heart. As the recent Davos 2020 Manifesto declared, “A company… responsibly manages near-term, medium-term and long-term value creation in pursuit of sustainable shareholder returns that do not sacrifice the future for the present.”
Nonetheless, dealing with all of this still represents a challenge for many businesses. They might be locked into particular delivery models, or working with business partners who expect things to be done in certain ways. They might have rewards and incentives systems that promote certain types of behaviours. They may have investors or shareholders who prioritise short-term returns over long-term durability.
We need something to break the frame.
Breaking the frame — using the future to improve decision-making
Futures and foresight approaches offer a way to do this. They provide a different approach to these complex issues, by changing the angle of investigation. Conventional strategic thinking tends to start from the business’s capabilities and a perspective on how the sector is changing. Design thinking tends to start from the user, or the potential user, to understand which of their needs can be met better.
In a world where systems are cracking, however, a bigger picture is needed. Futures and foresight work starts from the wider environment, to identify what’s changing there, and how this might affect the business operating environment, including customers, workers, suppliers, stakeholders, regulators, the environment and so on.
The theory of change that sits behind this approach is that no-one is immune from the impact of changes that are going on more broadly in society, whether these are demographic, ecological, technological, economic, or driven by values. It is only a matter of time before such changes appear in some form in business. To take one example, when the emergence of feminist values meant that women moved into the workforce in significant numbers, changes followed in after-work entertainment (such as the ‘wine bar’), in shopping preferences and formats, and in fashion. Or to take an emerging example, the arrival of the electric car — a values-led change as well as a technological one — will disrupt both the automotive industry and the utilities sector. Tesla is already crossing over into large-scale energy supply with its Megapack storage system.
Futures and foresight work, as its name implies, helps us both to see problems earlier and to adapt to them. No-one wants to be in an industry at the moment when it gets beached by change. The collapse of the market cap of America’s coal producers, in just five years, is a warning: gradually, then suddenly.
Market Capitalisation of Four Largest US Coal Companies US $ billion)
How to anticipate change — strategic action not hurried reaction
Although futures work doesn’t allow us to make predictions — we live in the middle of many complex systems that behave in unpredictable ways — it does allow us both to identify emerging patterns and to tune in to possible futures. From this, it is possible to assess impacts and spot both opportunities and risks. As the saying goes, it is better to be ready than to be right.
For these reasons, futures and foresight methods help businesses take a richer view of their strategy, identify new types of innovation opportunities and assess risks. In doing so, they help mobilise people around a clearer set of perspectives on what is changing and why. In turn, this creates a platform that helps the business respond better to an increasingly challenging environment. In this world, the winners are likely to be the companies that seek to shape their environments, rather than just responding to change. Futures and foresight work is one of the keys to business resilience and business evolution.
Futures and foresight methods help businesses identify new opportunities, assess risks, and improve business resilience
The teenagers who are striking on Fridays for the climate are telling us all something about the future, as are the 20-somethings who are protesting about the behaviour of the businesses they work for. But from the vantage point of the C-suite, it is sometimes easier to see the negatives than the positives. Yes, change is hard; and it often involves costs before it delivers benefits. But they are also telling us that there is the energy to make change happen, if we look at the world and our part in it in a different way. And more: that people want businesses to play their part in re-making the new world of the 21st century. It is a world to win. The future — -a better future- — starts with futures thinking.
SOIF is a specialist futures and foresight practice based in the UK with a global reach. It was founded in 2012. It uses foresight and futures methods to help clients deal with complex issues in a way that addresses issues in a systemic way, while also reinforcing purpose, values and impact.