5 Develop Active Foresight
Radically adaptable teams are capable of planning for the future, even when the future is unknowable. And they do this by developing a foresight muscle that proactively detects early signals of change and responds swiftly to them.
Starting in December 2019, Rick Ambrose was getting signals that the Covid-19 outbreak in China might pose a greater threat of spreading to North America than government officials were letting on. As the head of Denver-based Lockheed Martin Space, Rick felt he couldn’t risk leaving the future to fate. With twenty-two thousand employees in his care, not to mention the company’s essential role in national security and space exploration, there was simply too much at stake. His team builds and launches satellites, manages human space flight, develops strategic defense systems, and explores the solar system with interplanetary spacecraft. When your job requires you to have impeccable clean-room standards for developing space systems that don’t contaminate outer space with earthborn organisms, you pay a lot of attention to small microbes that may randomly pop up out of nowhere and snowball into a global pandemic.
Rick had both a formal and an informal detection process, which gave him critical insights on the pervasive uncertainty of the moment and potential scenarios for the future. Everything his team did between late January 2020 and mid-March 2020, when nationwide lockdowns began, exemplified the process of how to detect forthcoming problems, and create preparedness—not only to mitigate threats but also to capture opportunities, which all crises invariably present.
Formally, Rick received a daily internal summary of all the world’s news that is relevant to Lockheed Martin, including any mentions of the company in traditional media or social media. This daily briefing is akin to the presidential daily briefing that the American president receives every morning from the national security team about potential daily major threats around the world. Rick’s daily briefing monitors regulatory developments, policy changes, competitive movements, and other potential threats. But it didn’t include infectious disease news.
To fill this gap, Rick started actively seeking information about the novel coronavirus, reading reports from around the world and sampling what was happening internationally before the health situation spiked in the United States. He followed an Icelandic travel blog, which detailed how Iceland started testing and screening for Covid-positive patients in late January, a full month before the first Icelandic patient was even diagnosed! And he began speaking regularly with Lockheed Martin colleagues located abroad in Asia and Europe. Working in different business units, they served as listening posts as they faced the pandemic before it arrived in America. One of his counterparts ran a parallel space business unit in Korea, and Rick spoke with her constantly to understand how coronavirus-related lockdowns were impacting her business.
On the final Saturday of January 2020, while the official US government line was that there was little to worry about, Rick sprang into action, deciding he had to prepare his company for the kind of stay-at-home order decreed earlier that week in Wuhan, China—ground zero for the new coronavirus pandemic. He called Mark Stewart, his head of operations, and told him, “I need you to pay 150 percent attention to this now.”
The two reviewed their ongoing and upcoming projects, including a major exercise that was scheduled for October, when his team would rendezvous a satellite with an asteroid. It was a run-through test that would require almost fifty Lockheed Martin personnel to spend a day squeezed into a command center designed for about twenty people. Could the exercise proceed on schedule with all those employees working remotely? Would the National Aeronautics and Space Administration (NASA), the client, even approve of such a drastic change in procedure?
Later that same day, Mark wanted to understand what the greatest pressure on his staff would be in the event of a pandemic, so he reached out and visited a friend who runs operations at a local hospital. His friend told him that the hospital was preparing for the worst and Mark was advised to do the same. On his way out of the hospital, his friend gave Mark a box containing a surgical gown, an N95 mask, and a portable respirator and said, “Make as many of these as you can.”
Mark gathered his team, and they quickly compiled an action plan. Engineering teams got to work figuring out how they could design and affordably produce personal protective equipment. Both Mark and Rick figured that if they could pursue deep space work and land a satellite on an asteroid millions of miles away from earth, their team could certainly work effectively remotely from home for a few weeks. So they also put in an order for two thousand computer monitors that employees could take home with them in the event of a quarantine. And within a week, Lockheed Martin Space used its decades of expertise as a leading industrial manufacturer with experience in next-generation materials to start manufacturing disposable hospital gowns, face masks, and face shields.
Over the following six weeks, Rick and Mark activated their leadership team to pandemic-proof Lockheed Martin Space to the highest standard possible. “We had monitored what was happening globally,” Rick said, “and we knew the situation could be dire in America, so we took immediate action.” On March 11, when the World Health Organization declared a global pandemic, Rick’s team was fully prepared and ready for this new work-from-home reality.
At the time, there was hopeful speculation that the crisis would pass in a few months, but Rick’s intelligence told him otherwise. “I knew we needed to hunker down for the long haul,” he recalled. “My goal was to figure out how to come out stronger than any of our competitors at the end of the pandemic and continue serving our clients and the nation.” With all of American industry reeling, Rick foresaw that only the best-prepared players could adapt to the hardships ahead and turn this crisis into an opportunity. He had huge business goals for 2020, and he couldn’t let a pandemic get in the way.
Using these signals and assessments, Rick and his team put their foresight to work and committed company resources to tackle threats that were foreseeable but not at all certain. They took calculated risks to prepare for a pandemic because they correctly assessed that being unprepared might have unacceptable consequences and that being prepared presented powerful competitive advantages. And thanks to the foresight and bias for action of the Lockheed Martin Space team, the satellite and asteroid rendezvous slated for October 2020 took place as scheduled, along with ten satellite launches that year, all of which reached orbit successfully and on time. The division thrived during what was a horrible year for industry generally and became positioned for future success.
What lessons can you take from Rick Ambrose at Lockheed Martin Space and use to develop your own foresight skills? The key to his foresight success was his systematically looking for and detecting early warning signs—signals that could snowball and disrupt his business—and responding proactively to turn a crisis into an opportunity. Lockheed Martin Space succeeded because Rick’s team had the foresight to plan for the novel coronavirus by (1) proactively detecting what was happening under the radar around the world, (2) assessing potential implications to their business, and (3) developing possible courses of actions under different plausible futures.
The late great management guru Peter Drucker said that much of the future is obvious, that all you need to do is “look out the window and see what’s visible but not yet seen.”1 The pandemic was just that—a well-understood threat for which virtually no one was prepared. Its arrival revealed years of lazy thinking and shortsightedness about a subject of vital and growing importance to everyone—the future. The pandemic exposed the enormous danger of ignoring future risks and opportunities that are already visible to us but still not yet seen. This chapter offers you a systematic four-step process for how to “see” around corners and lead your team with radical adaptability to win, regardless of what shocks the future may bring, whether technological, geopolitical, economic, or biological.
The purpose of foresight is to identify what you need to do today in order to succeed tomorrow. In the words of Stanford futurist Paul Saffo, “The goal of forecasting is not to predict the future, but to tell you what you need to know to take meaningful action in the present.”2 Nobody knows what the future will hold exactly—the future is multiple and not linear. But through foresight, we can increase our team’s adaptability muscle, plan for possible future states, and act proactively to thrive.
The discipline of foresight has been around a long time, and elements of foresight or similar practices have been part of strategic planning in one form or another. But the truth is, most companies don’t incorporate foresight tools into their everyday practice and workflow. And as a result, many missed the threat posed by the pandemic, even though it was right in front of them all along. But some teams thrived in the pandemic because, like Lockheed Martin Space and others we’ll meet later in this chapter, they had foresight as part of their core competency. Even among the most established companies, the consistent practice of foresight is rare. Survey research says that only about 25 percent of all Fortune 500 companies have some form of foresight practice or expertise in their executive ranks.3
To be sure, a comprehensive foresight practice takes time, dedication, and resources. It needs to be spearheaded by senior leaders throughout the organization, and most executives don’t allocate time to this. When times are good, foresight gets pushed to the back burner. But you can’t let that happen in a future full of volatility and uncertainty! Foresight is critical to radical adaptability. It helps you see around corners to predict potential shifts and gives your team the courage to be as brave as ten-year-old Tilly Smith to plan for potential business tsunamis. Without foresight, your team will struggle to compete in this new world of work. This chapter will teach you how to build foresight as a key competency throughout your organization so that everyone on your team can crowdsource risk intelligence and plan for the future.
In our research, we found very few companies that were truly prepared for a global pandemic. Most were caught flat-footed and spent months gamely playing catch-up with a catastrophe that had been foretold for almost two decades. Back in 2007, the Harvard Business Review ran a special section called “Preparing for a Pandemic,” predicting that the global spread of a highly contagious virus “would become the single greatest threat to business continuity and could remain so for up to 18 months.”4 In 2015, Bill Gates gave a TED talk seen by millions; he warned that “if anything kills over ten million people in the next few decades, it’s most likely to be a highly infectious virus rather than a war. Not missiles, but microbes.”5
A thorough foresight practice involves answering three important questions: (1) What is the portfolio of risks and opportunities that we face? (2) What implications do they have for our business, both downside and upside? (3) How should we plan and create internal readiness to mitigate external threats and capture opportunities in response?
Consider an example everyone is familiar with—the weather. We don’t know with 100 percent accuracy what the weather will be in four weeks’ time. Yes, we have many years of seasonal data and a general understanding, but not certitude. We have a better awareness of next week’s weather and even better knowledge of tomorrow’s. This knowledge is based on large data sets about what has happened in the past and our consistent scanning of the atmosphere to see how the weather is likely to change in the coming days.
So if you know it’s likely to rain tomorrow, what do you do in response? You would most likely postpone washing your car today, you would make sure all your windows are closed before you go to sleep tonight, and you might even change your social plans for tomorrow. We can forecast the risk of rain because we have empirical data and complex models. But the more distant future is different: it isn’t predictable, because we don’t have analytical models to understand the full range of outcomes for things we can’t yet see. This is where developing plausible future scenarios comes in handy. It helps you see things that aren’t yet visible.
In foresight, we see the future in a similar way to how weather forecasters predict the path of hurricanes—through the lens of a cone of plausibility. The center line of the cone, where the hurricane is now, is the most likely path forward and is the baseline future. The outer areas of the cone are plausible places the hurricane may travel to, but with less likelihood. These are called plausible futures. As the hurricane gets closer to land, the cone narrows and gives observers a better appreciation of what’s likely to happen and how to respond.
In a world where the churn of change keeps bringing the future forward at an ever-faster pace, radically adaptable leadership requires us to integrate the practice of foresight into our daily operations so we can give our organizations the flexibility to thrive no matter what weather the future brings. We need to proactively reframe how we see the future so that we not only detect and assess possible changes on the horizon but also prepare for them. It’s a process that makes our teams smarter, stronger, more resilient, and more radically adaptable.
Planning the future is hard, but it’s a teachable skill. It’s equal parts art, science, and judgment, and our goal is to help you develop this leadership competence to compete and win in a new world of work. Leo Tilman, a thought leader on foresight and a faculty member at GFTW, said that radically adaptable leaders must pursue a “concerted fight for risk intelligence”—namely, anything that can disrupt your business, from regulatory policy and external market and environmental changes to new technologies and new competitors. Far from passively listening to the overwhelming noise of information, this “fight for risk intelligence” is most effective when it involves the entire organization in an ongoing, systematic, and properly resourced foresight process.6 We recognize that not all companies have the same resources to devote to a comprehensive foresight practice, but every leader, at every level of the organization, can incorporate three foresight tools into everyday practice to help their teams see around corners.
The first step is detecting early warning signals that indicate change. A signal is something that can impact your business, similar to how radar picks up incoming airplane signals. The second step involves assessing the likely impact of these signals on your organization. And the third step is proactively responding to the most plausible future scenarios.7
Detect Threats and Opportunities
When the executive team members at Lockheed Martin Space scanned the environment to detect the risks posed by Covid-19, they had two questions in mind: (1) What is our decision-making horizon? (2) What critical assumptions are we making about our business and the nature of its environment?
Establishing a time horizon for detecting signals is critical, as you would make different preparations if the hurricane were three weeks away rather than one day away. And so we need to establish the time frame of expected change to train our eyes to see and our ears to hear the right early signals. Start by picking a horizon that is relevant to your organization. We recommend two time frames: one short term, within a year, and one longer term, within five years. But once we start thinking about very long-term horizons, uncertainty increases, so we must treat any long-term projections with a grain of salt.
The second question is also paramount—what assumptions are you making about your business and its operating environment? This will help you consider alternative factors and scenarios that may truly impact your business but that you may not be paying attention to yet. What assumptions about your revenue sources, business model, culture, and human capital do you take for granted? What would happen if they proved dramatically off base? Would you be prepared to decisively change your tactics and strategies if your assumptions were incorrect? Leo Tilman suggests asking yourself, “Are we focusing our attention on the right targets? Are we scanning the horizon broadly and vigilantly enough?”
For instance, revenues in the professional sports industry are largely dependent on the assumption that games attract thousands of ticket buyers. That was a reliable assumption for decades, until March 11, 2020, when the National Basketball Association suspended the rest of its season and when all professional sports shut down shortly thereafter. And yet, only one professional sports organization in the world—England’s Wimbledon tennis tournament—had the foresight to carry pandemic insurance. In fact, Wimbledon had been covered by pandemic insurance for the previous seventeen years.8 Its governing board had long ago detected the devastating threat that a pandemic would pose to its finances. The board assessed the threat as an unacceptable risk and took measures to mitigate that risk—all while improving its brand equity and reputation in the process.
Reflecting on your company’s basic assumptions can bring to light areas of both vulnerability and opportunity. Probing the underlying assumptions of your industry is a proven pathway to innovation, groundbreaking strategies, and marketplace distinction. One great way to test your assumptions is to state the opposite assumption of what you hold to be true, and look for early warning signals that may confirm or reject this opposite assumption. Another approach to test assumptions is to look for something everyone knows to be true—or rather, thinks they know to be true—and offer a service that removes the validity of that assumption.
The online shoe retailer Zappos built an enormous fan base by defying the common assumption that shoes are difficult to sell online because customers prefer to try shoes on before buying them. Founder Nick Swinmurn figured out that if Zappos could offer unlimited returns with no questions asked, shoppers would flock to the site’s vast selection of sizes, brands, and styles. Most investors assumed that offering unlimited product returns was not a sustainable policy, but one big investor saw past that assumption—the late great Tony Hsieh, who would eventually become the company’s CEO. By discarding what had been a common assumption about online shoe sales, Zappos’s foresight gave it a first-mover advantage that has proved impossible to overcome ever since.9
Most major industry disruptions can often be viewed this way, as failures of foresight by incumbent companies unable or unwilling to recognize their own critical assumptions—and by the victories of the disruptors to question and capitalize on the wrong assumptions by others. Uber and its smartphone app undermined the taxi industry’s assumption that customers seeking rides would always need to call into a central dispatcher. PayPal flourished because the banks and credit card companies assumed they were already fulfilling customer needs for privacy and convenience in a world of rapidly growing e-commerce. Airbnb has become the dominant force in hospitality, where executives always assumed that bed-and-breakfasts could never grow beyond a tiny niche market in their industry.
The same dynamic shows up time and again. In every industry, big and small, you’ll find a lack of foresight and rigid assumptions among established players who are losing market share to bold, nimble, tech-savvy challengers. How can you push your team to not make the same mistake? How can you avoid letting your company be a sitting duck? Which side of that equation do you want to be on? The stakes could hardly be higher to win in this new world of work.
Detection is a team sport
Detecting, gathering, and evaluating risk intelligence is a team effort because no one person can keep a close watch on all the macro forces that will shape your future operating environment. “Risk intelligence should be considered an existential new kind of organizational competence,” Leo Tilman said. “When everyone can think holistically about risk and uncertainty, and when they can speak to each other and share ideas about risk in rigorous common terms, it helps the organization make better decisions in alleviating threats and exploiting opportunities.” Leo advocates engaging the entire organization “out to its very edges” in the detection and assessment of relevant information about the major forces shaping the future.
By integrating foresight so thoroughly into your operations, you can help raise everyone’s awareness that disruptive change may be right around the corner and that it’s part of everyone’s job to proactively and creatively look around those corners. Leading a radically adaptable organization requires every leader at every level to participate in an active, ongoing discussion about what the future may hold and what the organization can, should, and must do about it this year, this month, this week, and this day.
To incorporate foresight tools sustainably into your strategy, you need to train everyone on your team to scan and detect the various signals of change. Some companies establish dedicated foresight task forces, and while this is a worthy approach, task forces often feel transitory and have end dates. Instead, we advocate that learning the basics of foresight should be part of everyone’s job so that foresight reinforces your team’s radical adaptability muscle.
At the vast majority of companies, it was no one’s job to monitor the risk of a deadly global pandemic or a potential geopolitical conflict. For this reason, it might be beneficial to add external advisers or other thought partners to your team to help you address the unknown unknowns. Developing a foresight capability provides your team with a chance to cultivate intelligence gathering and detecting capabilities in areas where you previously had little or no exposure and will help your entire team to see the company’s business activities in terms of their exposure to future change.
Step by STEEP
How do you begin to scan and detect change? Five macro forces will shape the operating environment of every organization: sociological, technological, economic, environmental, and political (STEEP). STEEP analyses can help you gain insight into how an uncertain future may evolve and can help you identify assumptions about the macro environment of your business.
- Sociological: Mainly refers to demographic and other societal changes that might affect consumer demand in your industry. It’s why toy manufacturers are mindful of changes in birth rates and why carmakers are concerned that record-high percentages of teenagers aren’t bothering to get driver’s licenses in the age of car sharing and ride hailing.
- Technological: Includes all the developments in disruptive technologies, including robotics, information technologies, energy generation, and materials science. The slightest shift in any of these technologies could open new, unforeseen opportunities or create new, unexpected threats within your industry.
- Economic: Refers to the business cycle’s ebb and flow; shifts in interest rates, the stock market, and the labor market; and trends in consumer confidence indicators.
- Environmental: Includes not only short-term elements that may impact your business or supply chains (like hurricanes or outbreaks of contagion) but also long-term climate change and prospects for future access to natural resources.
- Political: Includes trends in government regulations, taxation rates, import tariffs, labor laws, treaties, international alliances, and overall stability in domestic politics and politics in nations wherever your company has offices, customers, and critical suppliers.
Depending on your business and industry, some of the STEEP factors may be more relevant than others, and that’s OK. It’s not a strict formula that you have to probe all five factors; it’s more of a guide for potential variables.
In your existing team, divide everyone into five equal subgroups, and assign them to one of the five STEEP categories. Some team members may already have responsibilities related to emerging developments in a few of these categories—a lobbyist who looks out for government affairs, the chief information officer who keeps up with technology, and so on. So pay special attention to maximizing diversity of thought and experience within each of the STEEP subgroups so that each subgroup gets the benefit of different ideas, different functional roles, and different perspectives within your team and organization.
You might ask, how do we teach our team members to detect signals? We recommend starting by looking at history as a guide to better understand the future. And consider asking your subgroups to develop answers to some of these questions: What previous significant events in the recent history of whichever STEEP factor the subgroup is considering created a sudden transition from one era to another? How did that change impact your business or industry? What were the variables in that change? In light of your best understanding, what is the current trend for this factor? Do you think these variables will change linearly in the near term? Or are the changes in the variables cyclical, seasonal, generational, exponential, or orthogonal?
To aid your team’s STEEP subgroups, we recommend building a virtual network of experts who can help with your team’s thinking every month. Doing so entails following the most prominent strategists, risk experts, and futurists with domain expertise in the various STEEP categories. For example, Marc Goodman, founder of the Future Crimes Institute and a former futurist in residence with the FBI, is very knowledgeable on threats from cybercrime and the perils of “surveillance capitalism.” Nicolas Berggruen and his Berggruen Institute offer imaginative insights about the nexus between business and democracy. Nouriel Roubini, a professor of economics at New York University, predicted the housing crash of the Great Recession and has thoughtful ideas on how the future of finance may evolve. Ramez Naam is someone to watch if your business’s future is tied to energy production. For years he has been tracking the steady decline in solar energy costs and estimates that oil and natural gas power plants will be uncompetitive with solar installations by 2030. And Leo Tilman and his firm are leaders in fostering risk intelligence and strategic agility at leading companies and investors across numerous industries. These are just a few suggestions, as there are countless other great domain experts to follow in each of the STEEP categories, including in your own industry. So don’t forget to ask yourself, “Who in our industry is well known for looking to the future?”
Your team’s STEEP subgroups should be researching the experts in their areas, following them on social media, and going even deeper by attending their conferences or thought leadership events, if possible. If you’re fortunate enough to interact with these experts in person, ask them explicitly how they think the future of their domain might impact your business or industry directly. Are there academic research centers that study your STEEP category? If so, find the relevant fellows or academics who work there, contact them, and develop an ongoing relationship so you can learn about their work, their research, and their forthcoming publications. Your job as a leader is to challenge your team to identify early signals through the STEEP subgroups, and the best way they can do this is to read widely and research new pathways by talking to experts, including those outside the mainstream. The edges of any domain are where you’ll be likely to find the most avant-garde thinking in your STEEP category—and likely indicators of future change. These wildcards at the edge may currently reside below general public awareness, but they may also be highly influential in niche communities, and their existence may portend possible futures.
For example, back in 2009, the US Department of Homeland Security issued a warning to law enforcement about a growing threat of domestic terror from military veterans returning home and joining white nationalist groups. That controversial report was, like the pandemic predictions, visible but largely unnoticed. However, if you knew where to look, it was clear that the growing ranks of white supremacy memes and organizing activities were growing online, for example, on internet message boards like 4chan.com in the mid-2010s. Fast-forward to 2020–2021, and these activities finally reached public awareness, like the tip of an iceberg finally cresting above sea level.
The point is that early adopters of provocative viewpoints (in each of the STEEP domains and even in your industry) are a good indicator of potential change. If you pay attention to what they represent before they hit public consciousness, you might be able to exploit a competitive advantage or be first to avoid a serious level of risk.
Finally, task your team’s STEEP subgroups to present a five-minute update on any relevant signals in their domain at your team’s existing monthly meeting, so that your team can detect signals and decide on and plan the future. To prepare for this very brief update, ask your team to communicate asynchronously through online communication channels (e.g., Slack or WhatsApp), and use collaborative problem-solving (CPS) to informally discuss signals, threats, and opportunities they foresee in their STEEP category. Ask them to consider this question: does something that has happened in the macro environment have ambiguous meaning for our business? It could be a new product in your industry, a new law, or a report on labor supply. Encourage your team members to explore it further in the subgroup through informal communication channels so they can dive deeper into the potential signal, clear up potential ambiguity, and be ready to present to your broader team every month.
This STEEP detection exercise helps create a clearer picture of what Leo Tilman calls your organization’s portfolio of risks. In the next step, which we’ll describe below, your team will collaboratively assess the importance of these signals on the firm and then decide on appropriate risk mitigation and offensive strategies, which Leo calls the upside of risk.
Assess and Prioritize Signals
The Fusion Resilience Center at Morgan Stanley is a massive machine-learning-assisted operation that helps detect and assess threats to the investment bank and its customers from cyberattacks, fraud, terrorism, natural disasters, geopolitical unrest, and even infectious diseases and pandemics. Established in 2017 in response to rising cybercrime activity, the center initially focused on safeguarding the bank by detecting threats in real time, assessing their importance, and prioritizing a response. Every day, the center would pore through reams of data and feed it through proprietary analytics to filter the noise from the signals, displaying the results on a massive visualization wall with hundreds of monitors, similar to a very large risk radar screen or a sci-fi supercomputer on the set of a futuristic spy-thriller movie. By the end of 2019, the center’s work had expanded to detecting any threats that could disrupt the bank’s business, and it became the Fusion Resilience Center.
The Center was headed by West Point graduate Jen Easterly, a retired military intelligence officer who spent three tours of duty helping to take down terror networks in Iraq and Afghanistan. Prior to joining Morgan Stanley, she served for three years as a special assistant to the president at the National Security Council. (She has since returned to government, confirmed by the US Senate in July 2021 as director of the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency.)
When China locked down the central Chinese city of Wuhan on January 23, 2020, Jen and her team started preparing for the pandemic to arrive in America. Morgan Stanley has a China operation and headquarters in Hong Kong, and the Fusion Resilience Center began to receive worrying data coming out of Asia. Less than two weeks later, the center had built a model predicting worst-case scenarios if the pandemic in China were to go global, using data from public health authorities, universities like Johns Hopkins, and other sources. By following trends in Asia and Europe and synthesizing numerous inputs, the center continuously assessed the pandemic’s threat level and advised the bank’s leadership day-by-day about how it should respond.
For all its massive technical sophistication, the Fusion Resilience Center still relies on human decision-making in assessing threats and prioritizing responses. Each threat is categorized algorithmically and presented to staff, who then make human-in-the-loop decisions on threat validity. The human team’s job is to look at all the data and assess which threats necessitate immediate action, which suggest further investigation, and which are false positives that could be ignored. While the detection phase is largely automated through data inputs and algorithms help flag risk, only human staff can make collective recommendations on what the bank should do next and where to deploy actual resources and financial assets.
To get the risk assessment and action plan recommendations correct, Jen created an approach to systematically crowdsource intelligence and feed that data into the Fusion Center’s algorithms. She invited a network of problem solvers that she had established both inside her team and broadly throughout the bank to interpret the Fusion Center’s algorithmic assessments, prioritize risks and make recommendations to the bank’s leadership.
By mid-March, when virus infection rates began to spike in New York City, the Fusion Resilience Center’s forecasts predicted that employees would probably need to work from home during a public health emergency, and the bank’s leadership had already made a critical decision to distribute secure technology to every employee in the United States. So when President Trump declared a national emergency on March 13 and banned all non-Americans from entering the United States from Europe, pandemonium broke out in corporate America. But Morgan Stanley was ready for this new era of the future of work and didn’t miss a beat. Over the next nine months, Morgan Stanley had a breakout financial year. The Fusion Center’s focus on detecting early warning signals and correctly assessing risk and opportunity played a central role in the firm’s stellar performance.
An assessment matrix
Your organization probably doesn’t have complex algorithms to flag risk or a matrix-like data visualization room like the Fusion Resilience Center to show your entire portfolio of risks or, in Leo Tilman’s words, your enterprise risk radar. But you can use similar methodology to assess the downside risk and upside opportunity of change signals through your existing teams.
The chief output of your team’s STEEP subgroups is to develop and maintain a continuous and sustainable risk radar for your organization, which, as we explained earlier, should be done at your monthly team meetings. Just like a weather radar, your risk radar displays both the near-term and far-term change signals and monitors their impact on your organization, even if they are not being actively managed. These signals may be plainly visible to outsiders but may not yet be evident in your everyday operations.
And as with weather radar, you can use risk radar to estimate both the likelihood and the impact of potential threats. When a hurricane is visible a thousand miles away on weather radar, forecasters estimate a range of possibilities for its future strength and location. Risk radar works in a similar way. It visualizes the company’s entire portfolio of risks and uncertainties, and when this information is accessible to everyone on the team on a digital whiteboard, it enhances everyone’s understanding of what concerns are most important in the company’s future. “This focuses the fight for risk intelligence and planning throughout the firm,” Leo explained.
For most organizations, if you ask your team to review signals on the risk radar and report on new developments through their STEEP subgroups, you’ll be able to easily prioritize the environmental changes related to each of your risk factors. At your monthly team meeting, you should ask your team two questions: First, what is the likelihood of this signal? And second, what is the impact of this signal on our business? Retired GE vice chair (and current Nike board member) Beth Comstock eloquently sums up the importance of these questions: “What answers to these questions do we need to have before we can remove this signal from our worry list?” At your monthly team meeting, ask your team to plot each detected signal on a simple two-by-two assessment matrix based on perceived business threat (figure 5-1). Majority vote rules in these exercises, so whichever quadrant of the matrix gets the most votes for a signal, classify that signal in that quadrant. You’ll see that the top right quadrant (number 2) classifies signals as having a combination of high likelihood and high impact. For any signal in this quadrant, you’ll want to immediately begin a scenario response plan, which we’ll later describe further. For the other quadrants, you can either monitor them before developing a scenario plan or put the signal on the back burner if both the likelihood and the impact of a signal are low. The goal is to use CPS to crowdsource the team’s assessment of the various signals so that you know which ones to focus on now versus later.
FIGURE 5-1
Risk radar
This is certainly a condensed exercise in risk assessment but one that every team can deploy sustainably in its day-to-day workflow and one that every leader must master to make each team radically adaptable for the future. For some multivariable signals, you may find it useful to bring in external thought partners or advisers to your monthly team meetings. Or you might even consider partnering with an outside risk intelligence firm like Tilman & Company to undertake a comprehensive exercise. But this DIY foresight exercise is one that you can rinse and repeat with any signal from your detection phase; you can use it to develop an internal assessment of risks that can then inform your planning and response.
The importance of iteration
Remember that your risk radar is only as good as your team’s ability to identify new data and analyze it on a regular and timely basis. Detection is not a once-and-done proposition. The future always changes in reaction to what’s happening now. Detection and scanning is a constant exercise. So you have to keep your foresight model continuously updated as a living document; it’s not enough to do it once a year and forget about it. We believe it’s critical that you schedule a foresight update in your monthly team meeting—even if it is limited to a half hour—to discuss external threats and opportunities. And so the STEEP exercise is designed to provide your team with a tool to easily and constantly do that. Through this detection and assessment exercise, your team can identify vital intelligence about emerging trends and use CPS to prioritize actions and decide how to proceed, practices we’ll discuss in the final step of foresight. This builds your team’s capacity for radical adaptability and will help you compete and win in the new world of work.
Respond and Plan Possible Scenarios
On March 8, 2020, Santa Clara County, in the San Francisco Bay Area, declared the nation’s first countywide stay-at-home order to combat the coronavirus pandemic and closed all nonessential businesses. Jonathan Becher, president of the parent organization that owns the San Jose Sharks hockey team, convened his leadership team to discuss what it would do now that the hockey season had been suspended and ticket revenue would be zero for the foreseeable future.
Facing the most extreme uncertainty of his professional career, Jonathan resorted to his early training in systems engineering. He figured that if he broke down the uncertainties facing the hockey team into their underlying elements, then each assumption could be tested by building out scenarios for possible futures and that the exercise just might point him to some options not previously considered. He tasked his team members with developing detailed action plans for the most likely future scenarios, so that if one or another future scenario came to fruition, they wouldn’t be caught flat-footed. They could focus on executing the already-in-place scenario action plan.
Becher and his team considered a wide spectrum of plausible scenarios—some hopeful, some manageable, some catastrophic. What if no fans are allowed inside the stadium for all of 2020? What would happen if only the corporate suites are occupied? What if fans are allowed, but the franchise has to test everyone for the coronavirus before they enter the arena?
Jonathan’s team identified thirty scenarios that could plausibly play out in 2020, and the group generated a one-page document describing each of them. In late spring, the leadership team ranked the top five most likely scenarios through CPS and fleshed them out into longer five-page operating documents. Eventually, the most likely scenario was developed into a forty-plus-page action plan, which guided Jonathan and his team through the rest of the year and into 2021, when the Sharks were set to play an entire season with no fans in attendance. Despite the utility of scenario planning, the exercise wasn’t foolproof. One scenario they did not consider was that Santa Clara County wouldn’t let them enter their own building and practice on the rink, even without any fans in the building. So for the first two months of the 2021 season, the team had to relocate to Arizona, where such restrictions weren’t in place. They never considered that the San Jose Sharks would have to play home games in Arizona!
Scenarios are defined as plausible stories that create a bias for deliberate action. In the assessment step during your monthly team meeting, any signal that was voted to be in quadrant 2—representing high impact and high likelihood—needs to undergo a scenario planning exercise so that your organization can prepare proactively for what the future may bring. Each scenario describes an alternative version of the future, using a different assumption, even though all the scenarios refer to the same underlying information. Once again, each scenario challenges you to explore even the most basic assumptions surrounding your business.
Scenario-building is a proven way to test your organization’s readiness to react to threats that are real and have a high probability of putting your organization under severe stress. In companies with massive long-term investments in fixed assets, like the oil and gas industry, scenarios are essential to developing plans for responding to various categories of crises beyond your control, for example, volatile prices, oil spills, tanker crashes, offshore platform disasters, international sanctions, or military actions.
Foresight practitioners commonly consider four trajectories for change when designing scenarios. At the University of Houston’s foresight program, one of the preeminent foresight training programs in the world, Andy Hines built on the work of University of Hawaii futurist Jim Dator and identified four archetypes of change as guidelines for writing very distinct scenarios:
- Baseline: The gradual, linear, incremental change scenario. It’s what happened yesterday and what you expect to happen tomorrow. This is often the kind of scenario planning we do in annual planning exercises in every organization because it’s predictable.
- New equilibrium: Where we experience a new era because the domain is confronted with a major evolutionary challenge to how it’s been operating and is forced to adapt and compromise to save itself, all while the basic structure of the system remains intact.
- Collapse: The worst-case scenario for your projected future. What if everything goes wrong and the system falls into dysfunction? The established way of doing things no longer works.
- Transformation: Where the domain has totally changed because of a big shift in technology, policy, or the economy. It’s the hopeful opposite of the collapse scenario yet just as impactful. The rules of the game are scrapped, and new ones written.
For every signal that your team identifies as both high likelihood and high impact (quadrant 2 of the assessment matrix), the next step is to ask the relevant STEEP subgroup in your team to identify how that signal might impact key assumptions in your business. Specifically, ask this subgroup to identify what the future of your business would look like if these signals came true along the lines of the four archetypes: baseline, new equilibrium, collapse, and transformation. Turn each of these scenarios into a one-page action plan for what your organization would do if this scenario were to come true. And then ask your team’s subgroups to present the scenarios at your quarterly team meeting, where you have more time to dedicate to foresight and planning than you do in just the thirty or forty minutes allotted at your monthly team meeting. Ask your subgroups to explore several questions: How do these scenarios affect your assessment of your organization’s future? Do these scenarios create new pathways for exploration? Do they dispel assumptions? As a final step, give each scenario a simple, memorable name so they’re more easily remembered and everyone on the team can easily understand what that signal and scenario plan mean. For example, one of the San Jose Sharks’ scenarios for 2020 was called “No Fans in 2020,” and everyone on the team knew exactly what that scenario represented. You won’t know if any of these signals will actually come to fruition, but if they do, you will have developed a proactive action plan of what to do and how to respond.
For the San Jose Sharks, the result of its scenario plan was a rapid escalation in the organization’s digital strategies. As a former top executive at SAP, Jonathan was a veteran of Silicon Valley and was accustomed to thinking in terms of transformational futures. He had been imploring his team to “think beyond the rink,” but the reality of daily operations (the organization hosts more than 180 events per year) meant there was never time to plan to change. Through scenario planning, the whole organization found a way to operationalize making changes.
One of the team’s scenarios had foreseen how badly the Sharks’ loyal ticket holders would miss the live games and thirst for some way to stay engaged while at home. For many fans, attending games and concerts at the San Jose Sharks’ stadium are anchor moments in their lives. They may not remember the actual event, but the pageantry and ritual of attending a live event is seared in fans’ minds, which translates into a lifetime of loyalty. Without anchor moments to support their fan base, how would the Sharks support their long-term business model?
An ambitious plan evolved by streaming simulated Sharks’ games on the popular video game and social media platform Twitch. The Sharks carried out bold experiments like allowing real-life fans to dress up virtually and simulate being one of the players in the simulated game. Fans would upload their photos, their height, whether they shot from the left or from the right, and even got their names digitally printed on a custom virtual jersey. To make the simulated games more engaging, the Sharks went even further and asked their real-life play-by-play announcer to announce the games over Twitch. They even extended their real-life corporate sponsorships into their virtual season.
In an early simulation, one of the fans was digitally injured. The injury meant the end of the simulated game for this fan, and he was sorely disappointed—that is, until he saw himself being carried off the virtual ice by one of his favorite team players. Shortly thereafter, and in real life, the general manager of the Sharks called the actual fan and wished him a speedy recovery from the virtual injury. Shocked beyond belief about the real phone call after a simulated game, the fan posted on his social media channels, “Today I was a San Jose Shark, taking the place of my favorite player. I can die a happy man. Definitely a highlight of 2020, and one I will not soon forget.” After only a few simulated games on Twitch, the Sharks had topped six million digital impressions. Not bad for an organization that didn’t even have a digital engagement channel just weeks earlier.
Scenario planning also has a positive effect on executive team culture. Former Shell executive Ted Newland, who was a scenario team leader in the 1980s, said after his retirement, “In hindsight, the greatest value of scenarios is that they created a culture where you could ask anyone a question, and the answer would need to be contextual. Answering ‘Because I’m the boss’ or ‘Because the business case is positive’ was out-of-bounds.”10 Scenario planning not only encourages future thinking in your team members but also encourages them to be more open-minded about the present.
Because scenario planning can be time- and resource-intensive, many companies save the practice for times of crisis, an approach that is bound to have only a limited impact and be simply reactive. Nevertheless, scenarios are very effective in proactively building team capacity for organizational change. Through scenario planning, team members expand their imaginations beyond the everyday and learn to see possibilities and capabilities for the organization that they would otherwise have no way of seeing. In effect, they learn to predict possible futures and strengthen the team’s radical adaptability to succeed no matter what may come.
Foster a Culture of Continuous Learning
We started this chapter by describing how the discipline of foresight involves thinking about the future and identifying what you need to do today to succeed tomorrow. Through the practice of detection, assessment, and scenario planning, we can increase our team’s radical adaptability and train our organizational muscle to learn, unlearn, relearn, and repeat. All these practices are critical to competing in a new world of work rife with uncertainty and variability. That’s what foresight does—it teaches your leaders to expand your organizational mindset for what’s possible, it makes you and your colleagues smarter and better informed about the future, and it compels you to proactively win the fight for risk intelligence as if your organization’s life depends on it.
Simulation exercises go one step beyond scenario planning and turn hypothetical paper ideas into real “war games” that improve our risk management and enhance our capabilities, processes, and cultures when we need to respond to a sudden shift in the environment. Here’s one example. In 2007, during a time of diplomatic stress between Russia and Estonia, Russian proxies launched a cyberattack against Estonia’s government, banks, media outlets, and IT communication systems.11 At the time, it was the most sophisticated coordinated cyberattack ever. Not long after, Estonia worked with other North Atlantic Treaty Organization (NATO) members to organize Locked Shields, which has since become the largest annual cyber-war-game exercise in the world. The exercise is held every spring, when more than one thousand cybersecurity experts from thirty countries descend on Estonia’s capital, Tallinn, for three days of cyber-war-gaming.
In the Locked Shields exercise, experts from Estonia play the part of the attacking “red team,” while all the other NATO members play the defensive “blue team,” tasked with defending more than four thousand virtual IT systems against twenty-five hundred virtual cyberattacks. The annual exercise helps all participating NATO countries recognize vulnerabilities in their cyber defenses and bolsters leadership competency through simulating complex problem-solving and strategic decision-making during a real cyber war.12
In another simulation exercise in May 2018, the Johns Hopkins Center for Health Security conducted the Clade X exercise in Washington, D.C. In this simulation, members of Congress participated in a game involving a public health crisis with a fictitious respiratory virus. The outcome of the game should be of no surprise in a post-coronavirus world: infections spread rapidly because half the people who had the virus showed no symptoms, and travel bans were ineffective in stopping the spread. Hospitals were overwhelmed, medical supplies ran out, and leaders from state and federal levels kept giving conflicting advice to the public. The exercise was a perfect dry run for the actual coronavirus pandemic less than two years later, except there is little to no evidence that anyone paid attention to the Clade X report before our struggle with a real virus.
Simulations and war games can uncover your organization’s vulnerabilities to specific threats and can reveal problems with decision-making and leadership alignment. Clade X was a successful exercise because it pointed out the deficiencies in the US health-care system. The failure lay in American political leaders’ inability to address those deficiencies, before a real virus appeared two years later and paralyzed the economy.13
Every foresight process prompts leaders in some way to delve more deeply into their decision-making processes and choices, and that, says Wharton professor Adam Grant, is key to becoming a learning organization. “To build a learning culture,” he writes, “we need to create a specific kind of accountability—one that leads people to think again about their decisions.” Grant points out that results-oriented leaders can be so focused on short-term performance that they fail to learn—and this proclivity makes them less adaptable. Leaders in high-performance cultures can be resistant to experimentation because they’re always looking for guarantees of success and because that’s what they are incentivized to do. It’s the opposite in learning organizations. “The goal in a learning culture,” he says, “is to welcome these kinds of experiments, and make “rethinking” so familiar that it becomes routine and people don’t hesitate to pitch new ideas.”14
Unfortunately, foresight has a habit of being a cyclical corporate strategy and risk intelligence exercise. In a crisis, you may have all hands on deck with your team to explore and dig yourself out of the crisis. But when times return to normal, it’s not unheard-of for companies to stop scenario planning, revert to old ways, and get lazy and complacent.
When the pandemic struck in the early spring of 2020, Leo Tilman had just completed a series of war-game simulation exercises as part of a strategic and contingency planning process for a major client in the middle of a large merger. What the client’s executive team members learned about their own company, its processes, and themselves, came in very handy soon afterward, when the pandemic forced everyone to adapt to new contingencies and emergencies.
“We are going to be in an environment of disruption, change, and uncertainty for the rest of our careers, even though the nature of dislocations is going to be different each time,” Leo said. “Now we’re dealing with a pandemic, but next time we’re going to be dealing with a geopolitical crisis or a financial crisis or a disruptive technology. We will continue to deal with disruptions of completely different types, origins, and magnitudes. We need the capacity as an organization to do this over and over again, to navigate disruption and change so that we can adapt.” That’s what foresight helps you do.
Over the previous four chapters, we’ve explored the leadership competencies necessary to make your team radically adaptable through a set of high-return practices, processes, systems, and behaviors, which if mastered and layered on top of each other, create a self-reinforcing loop that gives your team lasting competitive advantage for the future. Now, in the remainder of the book, we turn our attention to how you can apply this new team flow state to make your organization radically adaptable, through your business model, workforce, and purpose. Applied at both the team and the enterprise level, radical adaptability creates an infinite loop of transformation that will help you compete and win in the new world of work. To get there, let’s dive into how you can leverage your new foresight skills to look into the future and design your ideal business model for ten years out.
GUIDING QUESTIONS How to Compete in the New World of Work
Does our team spend sufficient energy thinking about the future on a monthly basis?
Do we use foresight to “look around corners,” or do we just react to day-to-day challenges? The pace of change is accelerating exponentially, and the most successful teams will be those that deploy foresight to identify future opportunities and deflect unexpected risk.
Does our team have a solid understanding of the early-warning signals that can disrupt us and a method for assessing priorities?
Foresight starts with risk detection and assessment. Radically adaptable companies engage in a structured and continuous process to scan the horizon, identify a portfolio of risks across five STEEP vectors, and develop risk radars to guide the team in prioritizing different threats and opportunities.
Does our team have action plans in place for various possible future states?
By developing fast sprint action plans, our team has the advantage of time when risks do suddenly unfold. As an added benefit, scenario planning helps foster a culture of exploration, curiosity, and future thinking for our entire team.