5 Levels of Disruption

In a number of recent talks and working sessions with clients we've been dancing with the issue of "disruption."  As others regularly note, both the term and notion of disruption is pretty hot and hype these past few years, and we ourselves have often referenced the work of Clayton Christian in addition to other work on technological disruption and innovation.  Partly because the term is defined differently by different writers, and partly because clients have different scales and scopes to their businesses, we do sometimes need to be both more explicit as well as more structured in our thinking (and discussions) with clients about where, how, and why change might potentially "disrupt" their business.

Figure 1: a typology of disruptions

It is in this light that we will sometimes use the following framework (figure 1) with folks to help clarify and explore both potential disruption as well as lower, more typical types of changes. Note that we normally use this in discussing disruptions to a client's business and not to broader changes in the environment or society.

At the top of the inverted triangle we have what, frankly, futurists live for: large scale techno-economic paradigm shifts that ripple through society and redefine how we do things.  These are of course rare, though they have tended to occur once every 50 or 60 years for the last 250 years. While usually not top-of-mind for your typical business decision-maker, when these occur, they affect everyone.  [If we had to make a statement about the next big shift, which is likely building steam as we write, then we would expect it to be the Age of Microbes and Machines]

Next down from those society-wide disruptions we tend to look at disruptions that drive an organization to stop and reconsider its basic reason for being.  These are understandably rare, but they do happen, and in our experience they tend to be related to an impending and dramatic change in things like core regulations that would change the structure of a market.  Again, they don't happen very often, but the question itself, "Do we need to revisit the organization's basic purpose?" is often useful just for setting the bar, as it were.

Disruptions to the business model would be one down from mission.  Here things tend to get more interesting, partly because of the amount of genuine change occurring in the world, and partly as a consequence of the notion, prevalent today, that "business models" are constantly changing.  Here again we have tended not to see a genuine need to fundamentally reconfigure a business model that often, but the question legitimately surfaces more often than higher order change.  Here of course we encounter a variety of discussions concerning technological disruption, regulatory change, unexpected competition, etc..  And certainly at this level both the source of disruptions and their impacts blur across into the next level...

...which is where we talk about potential disruption to strategy.  Planning is, frankly speaking, more art than science, and any discussion about strategy or strategic plans necessarily pivots on basic definitions.  These definitions will in no small part determine whether or not an organization traces a disruption to business model or strategy.  For our own work, and in the absence of an entrenched and differing definition within the organization, we tend to work with strategy as an abstraction, starting with a core definition of strategy as:

A concept or theory for how, in a given context and employing a given set of resources and competencies, you expect to achieve your goals.

It has been our experience that many small and some medium sized firms do not actually operate on what we would identify as formal strategies, though most are certainly focused on some set of achievements or some general direction, and many have enormous lists of initiatives and projects. Regardless of whether or not they do, however, there is a lot more action at this level when it comes to exploring potential disruptions.  And as alluded above, at this level we see a lot of conversations about technological disruption, new competition, and things like regulation and business environment.

Finally, we have the most typical changes, those that force new directions in products or services. The sources of "disruption" at this level can be broad, and because product/service portfolios can be organized in a variety of ways and oriented towards a variety of different markets, organizations will often identify a number of drivers that are fairly local or simply localized but that still require serious responses through product/service innovation.

And while there may be nothing terribly innovative about this framework (the framing is quite intuitive, after all), we do find that it can greatly help un-muddle certain strategic conversations.  This can particularly be the case when a client is facing a context of high complexity, in which they have multiple concerns across multiple domains or scales.  Separating out the different pressures, and exploring how they might be interacting across levels, can be a very useful exercise amidst a broader conversation.

As with just about all of our work and frameworks, this one is an evolution-in-process (in fact, we've been discussing whether or not to flip the pyramid to reflect the number or breadth of the sources of potential disruptions, vs the way it is now, which emphasizes the scope of impact of the specific source of disruption under review...).

Your Futures Context is Always Longer than Your Planning Horizon

Leaders frequently ask us why they should do foresight work (or strategy, for that matter) if, as "everyone" says, company planning horizons have shrunk to just 1 - 3 years.  Why, they ask, should people spend time looking beyond 3 years?

The answer is: context.  In order to develop either a strategy or a set of activities (or both) for the next year or next 3 years an organization has to account for the context in which it will be operating.  And that context is necessarily broader and longer than the work scoped out in any plan.  That context always includes what might be lurking further down the road and what might approach from the "sides."

If an organization is working on a 1-year plan, then the context for that plan is closer to 3 years.  If it is working on a 3-year plan, then the context is more like 5 - 7 years.  And in each case the range or breadth of issues that reasonably falls within the context for the plan increases as the horizon increases.

Why should we look at things this way?

1. Things Take Time: Looking farther out is important even in an age when so much seems to change so quickly, if for no other reason than most things that will become important to your business still take time to develop.  Whether it is a new technology, an emerging public policy idea, or the growing dissatisfaction of consumers, most things do not simply emerge spontaneously out of thin air, and their development can often be identified early and tracked.  Do not mistake media (blogosphere) hype or triggering events with the longer cycles of maturation.
2. Accounting for Uncertainty: The farther out we look the greater the range of potential issues that will impact your business and, perhaps more important for the current issue, the greater the uncertainty in precisely when something will "pop."  Thus, the longer the time frame for our planned activities, the more "deviation" from our projections we need to consider.  So, if we forecast that something will be mainstream in say, 5 years, then we have to consider that it might actually happen in 4 or take as long as 7 (or more).
3. Good Strategic Thinking: It is not simply what you are going to do or focus on within the next 1 or 3 years that is important, but also how does that position you for what comes next?  Even when your plan is to address things that are critical over a short time horizon, those decisions will position your company for the next set of things that will be developing towards maturity over your 1 or 3 year planning horizon.  Making those near term decisions (typically the "urgent") with an eye to the next set of things (likely the "important") is fundamentally part of good strategic thinking. 

What is a good rule of thumb for identifying your planning horizons?

• If your plan covers the next year, then your horizon should be the next 3 years
• If your plan covers the next 3 years, then your horizon should be 7 years
• If you plan covers the next 5 years, then your horizon should be the next 10

Futures thought of the day

My futures and foresight thought for the day (yesterday) was simply this:

Intuition and imagination are necessary but insufficient elements of good foresight work.

Great quote about predicting the future

I just finished the book China Airborne: The Test of China's Future, by James Fallows, which is by far the most interesting book about China that I have yet read.  Fallows' narrative is entertaining and engaging, and yet he is able to use the development of a modern commercial airline industry as a very effective proxy for framing and (trying) to grasp the scale of both potentials and challenges in China.

At the very end he has a great line about the challenge in predicting China's future that I just loved:

But I know how much is in flux, and how much is at stake.  It is not an evasion of analysis but a recognition of China's complexity, and the world's, to say that a wide range of outcomes is possible, and that it is worth watching very carefully signals like those I have mentioned to recalibrate our estimates.

That's simply an awesome and elegant quote that I think captures the tentativeness and openness more or us should adopt in our thinking about the futures of complex life.

S-curves, uncertainty, and investment

Figure 1: basic VFS s-curve

Yesterday I had a great conversation with some folks from out of town and at some point our foresight work came up.  In discussing with them some of the industries in which their clients operate, I drew some diagrams to help illustrate some of the foresight-related points that I was trying to make.





Beginning with some s-curve diagrams like Figure 1, I started mapping out where our foresight work leads up to, and overlaps with, things like venture capital and investing in start-up companies.  We talked a bit about where (on the curve) you are likely to find different people focusing, and for what reasons.  Obviously futurists are trained to deal with the stretch that encompasses the Foresight and Innovation zones, even though many clients are asking for help with things that are already into the Reactive zone and the New Normal.

Figure 2: cone of uncertainty

We talked a bit more about the emergence of new technologies and the patterns of exploration and experimentation of business models and new ventures that almost inevitably takes place (the Innovation zone), which led to some talk about uncertainty and the narrowing of possibilities as time progresses.  Here we would normally think about the classic "cone of uncertainty," pictured in Figure 2.  The basic idea in most futures work, as it is in weather forecasting (where they also use cones of uncertainty in forecasting), is that the further into the future one gets the more uncertainty increases.  And I think most people intuitively grasp this, so it's not usually a difficult concept.

During the conversation I started lining up these different concepts, again to illustrate some points in the conversation about how our foresight work typically relates to other business activities.  In doing so, I had to reverse the cone of uncertainty to accurately capture the progression of things and the direction of change in our levels of uncertainty.  What resulted, reproduced in Figure 3, was a layering of three basic charts:

• A reversed cone of uncertainty identifying where core foresight work really operates in relation to the gradual reduction of new possibilities (e.g. new tech, startups, and emerging industries), on top of,
• The s-curve chart I earlier detailed to talk (initially) about "thought leadership" and consulting work, layered over,
• The classic s-curve of issues/tech development that is so common to foresight work

Figure 3: all 3 charts, aligned

A couple of things were of particular interest to me as I connected these charts.

A.  There is something about that dark, dashed lined in the reversed cone on the top.  What I mean is, I think there is something about crossing that line that typically represents a move from a more wide-open futures mind-set (shuffling possibilities, struggling for a useful framing of the many uncertain possibilities) to a more focused concern with driving change and/or beginning to lay real bets (take options, as some would say).  To the left of that line, I think organizations are more likely to be in a scanning/discussion/scenario forecasting type of mode.  To the right, as things begin their slow work of shaking out, individuals feel more confident to begin positioning themselves or use the emerging outlines as a real guide for action.

B. At the risk of delving a little too much into some inside baseball, I think different schools of futures, and certainly different traditions of anticipating change, are more comfortable, or perhaps are better able to have their art flourish, along different stretches of that cone.  I suspect many of the folks trained in the "Manoa" schools are most comfortable and most artistic to the left of that line, while still having a facility as they begin to cross the line.  I think those trained at Houston might gain a bit more momentum in their art as they hit that line.  And I think, if it bears out, it's probably to do with the philosophic and methodological emphases that the two schools have traditionally had.

And again, I personally think that most good foresight practices work better when we move beyond, say, a three year time horizon.  I think that once we are into the Reactive zone real subject matter experts will, generally, have a better sense of the shape of the near-term future, and importantly the nuances of standards, competition, and emerging regulation, than will good futurists (who are not also genuine subject matter expects in that topic).

Figure 4: reversed cone of uncertainty

Back to thinking about the future

One of our folks recently shared around an HBR.org article entitled,"Four Keys to Thinking About the Future."  Needless to say, we were all a bit underwhelmed by the advice in the article.

1. Enhance your power of observation
2. Appreciate the value of being (a little) asocial
3. Study history
4. Learn to deal with ambiguity

I think we were just a tad disappointed to find this (digitally) printed under the HBR banner, since it felt vague and light enough to feel futures-self-helpy.  We also pulled up the recent post I wrote on "5 things you can do to think like a futurist" (admittedly with just a little trepidation, wanting to make sure that what I had wrote initially as a very light and quick post didn't turn out to be exactly what the HBR.org post was). Fortunately, it wasn't.

To recap, 5 things you can do:

• Scan
• Diversify your sources
• See the world systemically
• Swing both ways
• Be humble

But, since we are in the midst of prepping all of the updated foresight training modules for 2014, it's probably as good a time as ever to put a little thought into how we would replace the "4 keys" from the HBR.org article with a more sophisticated and rigorous set of guidelines for thinking about the futures.

Measuring the effectiveness of foresight

Lately I've been thinking about how to measure whether or not foresight work has been effective for an organizational client.  Not that this is a new topic by any stretch of the imagination, but it struck me the other day that, well, of course you can try to measure the impact of your foresight work.

A starter list of metrics might include:

• Did you (the organization) develop a new product or service or enter a market (that is profitable), which you otherwise would not have, based on some finding or outcome from the foresight work?
• Did you create a new market as a result of the foresight work?
• Did you end a product or service or leave/avoid a market that you otherwise would not have, as a result of the work?
• Did you avoid, or were you unusually prepared for, an event or development as a result of the work?
• Did you establish something aspirational (vision or goals) as a result of the work, which continues to inspire and orient the organization?
• Did you establish an ongoing foresight activity (like scanning) as a result of the work that continues to inform organizational decision-making?

We'll keep working on this list, but it's a reasonable place to start.

Working on the Future

The older I get the less I feel the need to define for everyone else and the more I become comfortable with just defining for myself.  For some time I have been thinking about the things that distinguish professionals who call themselves “futurists.”

Futures studies is one of those unknown academic fields.  Indeed, even within the field there are those who argue that it is not, perhaps, a true field yet.  In any case, the label given to students emerging from futures studies is unfortunate: futurist.  Like “democracy,” “democratization,” and “strategy” this is a term that is terribly overused and misused, adopted by a very wide cast of consulting/speaking/thinking characters out there in the wild world.

Those coming out of futures studies are concerned with understanding change, with anticipating change, and with helping people to shape change.  But because the field is currently so… unregulated, and in fact may never become strictly regulated, the variety of methods, preferences, and degree of training among those claiming the title of futurist give rise to an extremely wide array of practices and objectives.

As a trusted colleague frequently points out, there is a considerable body of literature now built up around futures studies, so often grad students or newcomers end up reinventing things that they simply hadn’t been aware of beforehand.  While I risk doing the same thing, I have been occasionally returning to the exercise of trying to sort and distinguish between the various professionals who tend to work specifically and explicitly on the “the future.”  This is a schema based on my current thinking.

Let’s sort individuals according to two spectra: the purpose of their work and the underlying approach of their work.  Purpose can be thought of as the intent or objective of the practitioner.  Approach refers roughly to the sources of information and the ways of knowing upon which they build their work.  Using both spectra as axes we create a typical 2x2 matrix.

Figure 1: the basic 2x2 matrix

Purpose runs from anticipating change on one end to shaping change on the other.  The extreme left of anticipating change would be sincere attempts at prediction; more tentative or careful forecasts would fall to the right of that.  Crossing over the Y axis, efforts at shaping change would run from light efforts to shake people out of their assumptions all the way to grand attempts at social change.

The Y axis of approach runs from methods that rely entirely on participant knowledge and responses on the bottom end to the upper end with work that is entirely dependent on quantitative data (and likely disdains most intuition not based on “facts”).

Using these two axes we can play with plotting a variety of methods that are commonly used by “futurists”.  This is just a sample, to be sure; if we were to plot methods common to, say, urban planners, the quadrants would probably fill differently.  And this is just a quick generalization.

Figure 2: common methods plotted

Now, to follow classic business management practice, let’s give the quadrants labels and identities.  We’ll call the Data-Driven/Anticipate Change quadrant the Analyst quadrant.  The Analyst’s domain is about explicit models and information, and it’s about needing to understand.  Below that is the Intuitive/Anticipate Change quadrant, which is the domain of the Sage.  Merriam-Webster.com defines sage as “wise through reflection and experience,” and that aptly describes the methods and motivation within this domain.  To the right we have the Intuitive/Shape Change quadrant which we label as the domain of the Provocateur.  The Provocateur’s work is to shake people out of their assumptions and their complacency.  Finally, we have the Data-Driven/Shape Change quadrant, which is the domain of the Planner.  By definition, Planners want things to happen, and they lean towards information and structure to accomplish that.

For added fun, we can perhaps start to overlay archetypes, and specifically the brand-related use of archetypes developed by Mark and Pearson in The Hero and the Outlaw.  The Analyst domain is probably where the Ruler archetype feels most comfortable.  The Sage archetype would fit the Sage domain.  We might place the Magician in the Planner domain and the Outlaw and the Jester might both fit into the Provocateur domain.

Figure 3: the four quadrants

Knowing many actual trained futurists as I do, and having met a great many people who otherwise call themselves “futurist” or whose work focuses on the future, I think individual professionals have preferences or biases that tend to draw them into one quadrant more than others.  I myself was trained very much from the Provocateur’s domain, yet naturally gravitate towards the Sage quadrant (but higher in the quadrant and closer to the Analyst domain), while consciously wanting to explore the Analyst domain more.

Of course, what becomes obvious once you start staring at this matrix is that a really good futures or foresight process will glide across more than one quadrant.  While some engagements are wholly within a single domain (say, a futures-driven creativity/ideation workshop resting comfortably in the Provocateur domain), many probably do, and all probably should, move across multiple domains.

A process could begin in the Analyst domain say with some Emerging Issues Analysis, dip over into the Provocateur space for some Manoa scenario process, and then conclude in the Planner quadrant some Participatory Action Research (example 1).  Alternatively, it could start in the Sage mode with some Forecasting by Analogy, move to the Analyst mode for validation and additional perspectives from Learning Curves (and maybe some technology adoption curves), then end in the Provocateur mode with participants oriented for creating new products/services through morphological analysis (example 2).

Figure 4: processes across the matrix

In fact, you could probably develop this further to make it an easy-to-use process develop framework.  Aligning your project with client needs (archetypes) and making sure to include strengths from each of the quadrants would seem to always be beneficial.  This would just be a framework to help someone do that.

Well, this is not exactly where I had planned to end up when I started this post, but this is an interesting place to pause for now.