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In today's fast-changing business environment, more than just good management skills are required to be a leader. Also required are vision and a knowledge of the big picture and the ability to see things not as they are, but how they are going to be.
Leadership also requires the courage to take action on imperfect information about the future. As Henry Luce said, "Business, more than any other occupation, is a continual dealing with the future; it is a continual calculation, an instinctive exercise in foresight."
Just remember the situation 10 to 15 years ago. Very few people had even heard of the Internet, decoding the complete human genome was a scientist's pipe dream, and terrorism was something that only people in other countries had to worry about. But now realize the business and social impact these three issues have had on the economic structure of not just the U.S., but on the whole world.
The world is changing so quickly that it has become increasingly difficult to keep up with new developments and to understand their implications. But you can prepare for and capitalize on the forces and trends shaping the world of tomorrow if you have the right tools and if you proactively search for the right information.
As the Chinese proverb says, "The person who does not worry about the future will shortly have worries about the present."
How can leaders think ahead, and what are some of the techniques that can be used?
The following are three examples of commonly used techniques by business leaders for decision making to better plan for the future.
- Trend analysis begins with the systematic collection of data concerning what is actually happening in the world around us.
This includes measurable changes in indicators such as the number of Boomers and the number of elderly people, birth rates, the standard of living by countries, atmospheric pollution levels, family income levels, and such other measurable indicators.
These measurements generally indicate a certain direction or trend, and these allow "crude" forecasts to be made by simply extending the trend line into the future.
- Precursor analysis is based on the observation that many phenomena go through stages.
As an example, humans go through a series of biological stages from conception through gestation to birth, infancy, childhood, adolescence, maturity to geriatric.
Similar patterns can be seen in sociological and technological developments. By knowing the stages of such phenomena, it provides a tool to anticipate future developments.
- Scenario analysis is a tool to think about alternative future developments. A scenario can be created to show a series of possible future events that a business could be expected to progress through in the future.
As a practical example, a business can create one business scenario assuming that revenues are 20 percent higher than current expectations and also create a second scenario that revenues will be 20 percent lower than current expectations.
The business leader now has information to consider what decisions might need to be made to protect the business against the worst case scenario and to be prepared to make decisions to accelerate the best-case scenario.
What are the benefits for a business leader to have this mindset of looking forward, to be operating with a Present-Future mindset versus the more common Past-Present mindset?
Examples of benefits include developing new products and services and generating investment ideas, providing early warnings of changing business environments and identifying emerging opportunities, creating confidence for decision-making by having a solid foundation and awareness about trends, creating a quicker lead time to market versus competition, helping separate truly significant developments from mere fads, providing a balance between "profit now" versus "worry later," and being aware of market forces that are affecting the company's business category.
As the well-read military leader Sun Tzu said in the fourth century B.C., "The reason the enlightened prince and the wise general conquer the enemy ... is foreknowledge."
Reprinted from Capital Region Business Journal, Madison, Wisconsin, November 2006 issue.
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