Future Thinking, Megatrends, and Innovation

Washington Irving's legendary character, Rip van Winkle, gains relevance today talking about a very current topic. After ingesting a concoction in the forest and then losing consciousness, the protagonist of this tale wakes up 20 years later from what he believed was one night’s sleep to find a very different and changed world. Although the story does not make mention of technological changes due to the slowness with which they occurred at that time (17th - 18th centuries), if we woke up today after 20 years of sleep, we would surely be surprised by the transformations in business, industry, and society.

Imagine that you fell asleep in 2023 and woke up in 2043. What would your world be like when you woke up? Your industry? Your business? What technologies would be in everyday use? What would society and our youth be like? What would we use for transportation, to communicate, entertain or educate? All these questions are part of future thinking methodologies.

When we use future thinking in our strategic analysis, we seek to move away from short-term thinking. We encourage exploring different scenarios, from the most catastrophic to the most optimistic. Futurists describe the future by asking whether it is possible (could happen), plausible (it would be nice if it happened), probable (how likely it is to happen), and preferred (I want it to happen). To think about the future, different sources of information are used, just like in science fiction movies or stories. Interestingly, it is also said that the future has already arrived, only that it is poorly distributed geographically.

One technique used to initiate foresight processes is the three horizons model. Foresight is the ability to plan for the future. When we incorporate it into a strategy, it changes the way we do strategic planning: we seek to influence the future with today’s decision making. The three horizons model differs from traditional strategic planning methodology – which uses exercises to detect strengths, weaknesses, threats, and opportunities, mission, vision, and values. This model, suggested by McKinsey, is a strategic framework for thinking about the future of a company, innovating, and managing its growth in a coordinated manner. The horizons (H) are divided into three:

• H1: We deliver products and services in the short term (what is currently done)
• H2: We look for new products or services to grow (incremental)
• H3: We explore products and services to sell in the long term.

On which horizon does your team focus?

Some futurists have added a fourth horizon to the model:

• H4: We think about the disruptive, the visionary, and the impossible.

This is like when Elon Musk dreams of colonizing Mars or when the Wright brothers dreamed of flying: they are ridiculous, crazy and daring ideas. But while we laugh at them, these ideas can change the world and set your company apart from others.

If we add the analysis of megatrends to the horizons model, our strategic prospective is complemented and strengthened. A megatrend is a major movement, pattern, or trend emerging in the macroenvironment, an emerging force that has a significant impact on the products that consumers will want to buy in the future. We can classify such shifts into social and technological megatrends. The social ones are changes in widespread behavior and the technological ones are scientific advances and new discoveries. Both are fascinating and useful for our prospective analysis.

For example, a social megatrend related to behavioral change is the new family structure. Today, we observe that young people do not want to get married, or do not want to have children, or have very few children compared to the past. This widespread behavioral change gives them a greater capacity to save and  consume products or services that they could not consume with other family commitments. We also see that they have pets and their investment in their care is higher than in the past. This megatrend generates business opportunities and innovations in such industries as investment and savings systems, products and services for pets, etc.

An example of a technological megatrend is the use of the blockchain. According to OPENAI, blockchain is a distributed ledger technology used to maintain a secure shared database. Each block in the chain contains a series of transactions, and each of these transactions is linked to the previous ones using a hash. This makes it very difficult to modify or alter the data since any change to one block would affect all subsequent blocks. Blockchain technology is primarily used in cryptocurrency, but its use in other applications, such as asset management and digital identity, is also being explored. Blockchain generates business opportunities, both to improve internal processes and to change the way we interact with our customers.

Other social and technological megatrends can also be mentioned, such as technological health, the metaverse, artificial intelligence, everyday virtuality, personalized marketing, quantum computing, prescriptive analytics, and smart cities, among many others. These and other megatrends are explored at Deloitte in their famous Tech Trends Report.

But, why bother with future thinking, strategic foresight, considering megatrends and using the horizons model? It is simply a matter of business survival. Having innovation systems and using future thinking can prevent us from falling victim to a new industry disruption or, better yet, make us the disruptors of our industry. It is imperative to incorporate these innovation processes into the day-to-day activities of companies; we should not stay at H1, but go beyond H2!

The author is Director of EGADE Business School’s Department of Entrepreneurship and Innovation.

Article originally published in Alto Nivel.