Designing a Business Strategy – Between Foresight and Signaling

A business strategy typically addresses a mid-term time horizon of three to five years. Businesses should also explore what lies before and beyond this timeframe. To complement their strategy (mid-term), organizations need foresight (long-term) and signaling (short-term). Signaling addresses the immediate future, and foresight explores what’s beyond the planning horizon of the current business strategy.

Identifying the Big Bets

Foresight is about understanding macro trends and their implications and producing insight that informs a strategy. Foresight involves understanding longer-term developments beyond your business or industry, 10 to even 15 years into the future. Understanding these developments and translating them into a business strategy can create unprecedented value, put competitors under pressure, and shape the future of entire industries and markets. 

A starting point to develop foresight is compiling reports containing information on demographics, technology, economic development, consumer trends, and interviews with experts and researchers, a mix of qualitative and quantitative data. These more generic reports are typically available for purchase. Industry or segment-specific foresight often needs to be developed by businesses on their own. Organizations can create scenarios by combining and structuring internal and external data and running simulations. These scenarios receive a probability tag and inform a business’s long-term strategic trajectory. They become the bigger bets.

Thinking in Scenarios

For example, let’s say you are a sportswear company. Foresight will help you shape your brand and product strategy beyond your current strategic planning cycle. You aim to understand the influence of megatrends such as urbanization and health. You also investigate technological developments like AI or blockchain. You throw population growth and other generic data into the mix and derive scenarios. These aren’t necessarily about how the world will develop but are specific to examining relevant fields. The sportswear example includes how people will do and consume sports, virtually and physically. Another field would be sustainability, interpreting what consumers will accept regarding materials or a product’s environmental footprint. 

Through exploring scenarios and deriving specific information, you identify concrete projects. These projects help you dive deeper into the matter, gather additional insight, and learn as an organization. Projects also serve as reality checks, whether you might be onto something bigger. You define a pilot and aim to accelerate a certain trend that is beneficial for you. As a result, you might consider adjusting your market positioning and the longer-term strategic trajectory of your organization. 

No More FOMOing

Until now, you might have been in the business of selling yoga wear, predominantly to women, in a retail environment. Based on foresight, you decide to pivot from a clothing company to a player in the longevity industry. You help customers embrace a healthier lifestyle. You supply them with personalized training plans and diets based on extensive AI-backed data analyses. You might even suggest specific medical checkups. The nature of your customer relationship transitions from ad hoc transactions, like money for yoga pants, into long-term partnerships.

Foresight helps you focus and identify the best options to pursue out of myriad possibilities. Through foresight, you silence the ever-nagging fear of missing out. It helps you remove everything you identify as irrelevant, to avoid wasting resources on topics that don’t matter. 

Without using foresight to inform your strategy, you might have decided to grow your business by entering additional geographic markets, adding a yoga line for men, and diversifying your sales channels from retail to mobile sales. There’s nothing wrong with that. However, it wouldn’t have allowed you to revolutionize your business and tap into the full potential of your customer relationships. 

Signaling is About Risk Mitigation

Strategic planning is medium-term, whereas foresight is about the longer-term future. Both are strategy-related and predict scenarios with varying time horizons and intentions. Signaling is very different: it detects imminent threats to mitigate resulting risks. 

As an early warning system, signaling informs your response to a crisis that affects business continuity. Some businesses mine data and use algorithms or other technological infrastructure to understand their risk landscape, based on factors they know are disruptive to their operations.

We can look at the US investment bank Morgan Stanley’s Fusion Resilience Center as an example of effective signaling. The firm maintains a program for business continuity management. In early 2020, before the world realized the magnitude of the COVID-19 pandemic, the Fusion Resilience Center signaled a potential threat and triggered corresponding crisis management. When businesses worldwide were scrambling with mandates to work from home, Morgan Stanley’s staff hit the ground running. In late March, over 90% of the firm was working productively and effectively from home, securing business continuity, and minimizing operational fallout. 

Other signaling-based actions include looking for alternative suppliers when armed conflicts and trade wars threaten supply chains. It may also involve adjusting marketing and PR activities because of public outrage against brands or raising prices early instead of waiting too long when higher-than-usual inflation is looming. Businesses should use signaling, strategic planning, and foresight to thrive short-, mid-, and long-term. 

Successful businesses leverage the power of all three of these opportunities: they use signaling to recognize potential short term threats, design a mid term business strategy to provide direction and clarity about priorities for resource allocation and decision making, and derive big bets from foresight-infirmed long term scenarios.

Written by Alex Brueckmann. The above article is adapted from his latest book, The Strategy Legacy – How to Future-Proof a Business and Leave your Mark.

Have you read?
Here Are 29 Inspirational Women CEOs Making An Impact, 2023.
Richest countries in the world by GDP per capita in 2023.
The Exclusive $100 Billion Club (And How They Made Their Fortune).
Africa’s Billionaires 2023: Who Are the Richest People in Africa?
The 10 Female CEOs in FTSE 100 companies in the United Kingdom, 2023.