Purpose and Value of Corporate Foresight

To add to our ongoing discussion if and how corporate foresight adds value to a firm I want to share a very interesting article from Kees van der Heijden, the driver behind  Shell’s scenario analysis program and George Burt, who has a long track record on researching the impact of scenario planning.

In 2008 they wrote an article in which they explore the impact of corporate foresight (or futures research, following their terminology) using Vicker’s Appreciative System as a frame of reference. Vicker proposed strategic decision making undergoes three phases:

  • reality judgment, which is based on sense-making of the situation in which the decision needs to be taken
  • value judgment,  which uses the reality judgment to deduce the potential impact of the situation and of future change on the value of a firm.
  • instrumental judgment, which builds on analysis one and two to answer the questions about appropriate actions that a firm can and should take.

The quality of execution of the three analysis phases will determine the appropriateness of  actions and thus the quality of the decision-making process.

In the words of van der Heijden and Burt the result of the three process phases can also be seen as an “original invention“, i.e. the creation of a strategy that will create a competitive advantage. Particularly in the third phase the decisions makers are bound by their perception of what is or is not possible for their organization. Here the authors expect the scenario analysis (as an example of a corporate foresight method) to contribute in extending the room in which options can be found and agreed upon.

The article is based on a longitudinal case studies in which a firm in the whiskey business employed the scenario analysis to enhance their strategic decision making. Through the cases study they show that the scenario analysis has enhanced the process by:

  • extend the scope of observation of the environment (in the reality judgment phase)
  • challenged dominant and common mental models on what the company’s success was built on (in the value judgment phase)
  • the management team collectively agreed to a strategic action that most-likely would have been outside the option scope if the scenario analysis would not have broadened the perspective (in the instrumental judgment phase)

In the discussion van der Heijden and Burt use an decision-making interaction model to illustrate how the leadership, the corporate foresight facilitators, and the organization at large interact to identify options and take decisions.

With applying Vicker’s model to futures studies in firms (or corporate foresight) they provide a guiding framework for assessing the value of corporate foresight. They also show that the framework is  helpful to identify the purpose of the corporate foresight activity as it is intended by the management team. That in turn can be the basis for customizing the corporate foresight activity to fit which is often aimed by the management team to enhance one of the three phases

Full reference of the article: Burt, G. and van der Heijden, K. (2008) Towards a framework to understand purpose in Futures Studies: The role of Vickers’ Appreciative System. Technological Forecasting and Social Change, 75, 1109-1127.

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