Corporate foresight
Encyclopedia
Corporate foresight is an ability that includes any structural or cultural element that enables the company to detect discontinuous change early, interpret the consequences for the company, and formulate effective responses to ensure the long-term survival and success of the company.
The motivation to develop the corporate foresight ability has two sources:
To operationalize the need for "peripheral vision", a concept closely linked to corporate foresight George S. Day
and Paul J. H. Schoemaker
propose 24 questions.
To operationalize his model Rohrbeck used 20 elements which have four maturity levels each. These maturity levels are defined and described qualitatively, i.e. by short descriptions that are either true or not true for a given organization.
The motivation to develop the corporate foresight ability has two sources:
- the high mortality of companies that are faced by external change. For example a study by Arie de GeusArie de GeusArie de Geus was the head of Shell Oil Company's Strategic Planning Group and is a public speaker.-Background:De Geus was born in Rotterdam in 1930. He joined Royal Dutch/Shell in 1951 and remained there until his retirement in 1989. During his tenure as head of Shell's Strategic Planning Group,...
of Royal Dutch ShellRoyal Dutch ShellRoyal Dutch Shell plc , commonly known as Shell, is a global oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the fifth-largest company in the world according to a composite measure by Forbes magazine and one of the six...
came to the result that the life expectancy of a Fortune 500Fortune 500The Fortune 500 is an annual list compiled and published by Fortune magazine that ranks the top 500 U.S. closely held and public corporations as ranked by their gross revenue after adjustments made by Fortune to exclude the impact of excise taxes companies collect. The list includes publicly and...
company is below 50 years, because most companies are unable to adapt their organization to changes in their environment. - the continuous need for companies to explore and develop new business fields, when their current business fields become unprofitable. For this reason companies need to develop specific abilities that allow them to identify new promising business fields and the ability to develop them.
Corporate foresight to overcome three major challenges
There are three major challenges that make it so difficult for organizations to respond to external change:- a high rate of change that can be seen in (1) shortening of product lifecycles, (2) increased technological change, (3) increased speed of innovation, and (4) increased speed of the diffusion of innovations
- an inherent ignorance of large organizations that results from (1) a time frame that is too short for corporate strategic-planning cycles to produce a timely response, (2) corporate sensors that fail to detect changes in the periphery of the organizations, (3) an overflow of information that prevents top management to assess the potential impact, (4) the information does not reach the appropriate management level to decide on responses, and (5) information is systematically filtered by middle management that aims to protect their business unit.
- inertia which is a result from: (1) the complexity of internal structures, (2) the complexity of external structures, such as global supply and value chains, (3) a lack of willingness to cannibalize current business fields, and extensive focus on current technologies that lead to cognitive inertiaCognitive inertiaCognitive inertia refers the tendency for beliefs or sets of beliefs to endure once formed. In particular, cognitive inertia describes the human inclination to rely on familiar assumptions and exhibit a reluctance and/or inability to revise those assumptions, even when the evidence supporting them...
that inhibits organizations to perceive emerging technological breakthroughs.
Need for corporate foresight
In addition to the need to overcome the barriers to future orientation a need to build corporate foresight abilities might also come from:- a certain nature of the corporate strategy, for example aiming to be "agessively growth oriented"
- a high complexity of the environment
- a particularly volatile environment
To operationalize the need for "peripheral vision", a concept closely linked to corporate foresight George S. Day
George S. Day
George S. Day is the Geoffrey T. Boisi Professor, Professor of Marketing and co-Director of the Mack Center for Technological Innovation at the Wharton School of the University of Pennsylvania...
and Paul J. H. Schoemaker
Paul J. H. Schoemaker
Paul J. H. Schoemaker, Ph.D. is an academic, author, and leader in the fields of strategic management and decision making...
propose 24 questions.
The five dimensions of the corporate foresight ability
Based on case study research in 20 multinational companies René Rohrbeck proposes a "Maturity Model for the Future Orientation of a Firm". Its five dimensions are:- information usage describes the information which is collected
- method sophistication describes methods used to interpret the information
- people & networks describes characteristics of individual employees and networks used by the organization to acquire and disseminate information on change
- organization describes how information is gathered, interpreted and used in the organization
- culture describes the extent to which the corporate culture is supportive to the organizational future orientation
To operationalize his model Rohrbeck used 20 elements which have four maturity levels each. These maturity levels are defined and described qualitatively, i.e. by short descriptions that are either true or not true for a given organization.
See also
- Dynamic capabilitiesDynamic capabilitiesDynamic capability is defined as “the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments”...
- ForecastingForecastingForecasting is the process of making statements about events whose actual outcomes have not yet been observed. A commonplace example might be estimation for some variable of interest at some specified future date. Prediction is a similar, but more general term...
- foresight (future studies)Foresight (future studies)In futures studies, especially in Europe, the term "foresight" has become widely used to describe activities such as:*critical thinking concerning long-term developments,*debate and effort to create wider participatory democracy,...
- FuturologyFuturologyFutures studies is the study of postulating possible, probable, and preferable futures and the worldviews and myths that underlie them. There is a debate as to whether this discipline is an art or science. In general, it can be considered as a branch under the more general scope of the field of...
- Strategic foresightStrategic foresightStrategic foresight is a fairly recent attempt to differentiate "futurology" from "futures studies". It arises from the premise that:*The future is not predictable;*The future is not predetermined; and...
- Technology forecastingTechnology forecastingTechnology forecasting attempts to predict the future characteristics of useful technological machines, procedures or techniques.-Important aspects:...
- Technology ScoutingTechnology ScoutingTechnology scouting can be regarded as a method of Technology forecasting or in the broader context also an element of corporate foresight. At the same time Technology Scouting also contributes to Technology Management by identifying emerging technologies, channel technology related information...