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Corporate foresight

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Corporate foresight is an ability that includes any structural or cultural element that enables the company to detect discontinuous change early, interpret the consequences for the company, and formulate effective responses to ensure the long-term survival and success of the company.[1]

Motivation

  • The high mortality of companies that are faced by external change. For example, a study by Arie de Geus of Royal Dutch Shell came to the result that the life expectancy of a Fortune 500 company is below 50 years, because most companies are unable to adapt their organization to changes in their environment.[2]
  • The continuous need for companies to explore and develop new business fields, when their current business fields become unprofitable. For this reason companies need to develop specific abilities that allow them to identify new promising business fields and the ability to develop them.[3][4]

To overcome three major challenges

There are three major challenges that make it so difficult for organizations to respond to external change:[1]

  • A high rate of change that can be seen in (1) shortening of product life-cycles, (2) increased technological change, (3) increased speed of innovation, and (4) increased speed of the diffusion of innovations
  • Large organizations' inherent "ignorance" that results from (1) a time frame that is too short for corporate strategic-planning cycles to produce a timely response, (2) corporate sensors that fail to detect changes in the periphery of the organizations, (3) an overflow of information that prevents top management to assess the potential impact, (4) the information does not reach the appropriate management level to decide on responses, and (5) information is systematically filtered by middle management that aims to protect their business unit.
  • Inertia which is a result from: (1) the complexity of internal structures, (2) the complexity of external structures, such as global supply and value chains, (3) a lack of willingness to cannibalize current business fields, and extensive focus on current technologies that lead to cognitive inertia that inhibits organizations to perceive emerging technological breakthroughs.

Need

In addition to the need to overcome the barriers to future orientation a need to build corporate foresight abilities might also come from:

  • a certain nature of the corporate strategy, for example aiming to be "aggressively growth oriented"
  • a high complexity of the environment
  • a particularly volatile environment

To operationalize the need for "peripheral vision", a concept closely linked to corporate foresight George S. Day and Paul J. H. Schoemaker developed a questionnaire with 24 questions.[5]

Implementation

The five dimensions of the ability

Based on case study research in 20 multinational companies René Rohrbeck proposes a "Maturity Model for the Future Orientation of a Firm". Its five dimensions are:

  • information usage describes the information which is collected
  • method sophistication describes methods used to interpret the information
  • people & networks describes characteristics of individual employees and networks used by the organization to acquire and disseminate information on change
  • organization describes how information is gathered, interpreted and used in the organization
  • culture describes the extent to which the corporate culture is supportive to the organizational future orientation

To operationalize his model Rohrbeck used 20 elements which have four maturity levels each. These maturity levels are defined and described qualitatively, i.e. by short descriptions that are either true or not true for a given organization.[1]

Innovation management

Through an empirical investigation Rohrbeck identified three roles that corporate foresight can play to enhance the innovation management of a firm:[6]

  • In the Initiator role Corporate Foresight supports the identification of new customer needs and emerging technologies. In addition it might also support the monitoring of competitors. To identify emerging technologies methods such as Technology Scouting can be used. Its particular appeal is the use of expert networks, that can also be used to later source the technologies.[7]
  • In the Strategist role Corporate Foresight supports the identification of emerging business fields and supports the internal renewal and re-positioning efforts of the firm.
  • In the Opponent role Corporate Foresight uses the insights from the environmental scanning to challenge ongoing R&D projects. The aim is to ensure that innovation initiatives are continuously benchmarked against emerging technologies and confronted with current customer needs.

The study also showed that only a small number of firms have implemented the third role. In the majority of firms the aims of an innovation development project that have been defined are not challenged after the initial decision has been taken. This carries the risk that changing environmental conditions threaten the success of the innovation in development.[6]

See also

References

  1. ^ a b c Rohrbeck, Rene (2010) Corporate Foresight: Towards a Maturity Model for the Future Orientation of a Firm, Springer Series: Contributions to Management Science, Heidelberg and New York, ISBN 978-3-7908-2625-8
  2. ^ De Geus, Arie (1997) The living company, Harvard Business School Press, Boston, Mass, ISBN 978-1-57851-820-3
  3. ^ Andriopoulos, C., & Lewis, M. W. 2009. Exploitation-Exploration Tensions and Organizational Ambidexterity: Managing Paradoxes of Innovation. Organization Science, 20(4): 696-717.
  4. ^ O'Reilly, C. A., Harreld, J. B., & Tushman, M. L. 2009. Organizational Ambidexterity: IBM and Emerging Business Opportunities. California Management Review, 51: 75-99.
  5. ^ Day, G. S., & Schoemaker, P. J. H. 2005. Scanning the periphery. Harvard Business Review, 83(11): 135-148.
  6. ^ a b Rohrbeck, R. and H.G. Gemünden (2011) Corporate Foresight: Its Three Roles in Enhancing the Innovation Capacity of a Firm Technological Forecasting and Social Change, 78(2), 231-243.
  7. ^ Rohrbeck, R. (2010) Harnessing a Network of Experts for Competitive Advantage: Technology Scouting in the ICT Industry, R&D Management, Vol. 40, No. 2, pp. 169–180
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