ASSESS FUNDAMENTAL SHIFTS THAT COULD IMPACT BUSINESS-AS-USUAL


Fundamental shifts are those external forces that have the potential of shaking the core assumptions of an organization. These forces are referred to as megatrends, discontinuities, tsunamis, or drivers of change depending on the practitioner. Regardless of what they are called, they have the potential to surprise an organization–unless the analyst can help it anticipate and prepare.

A fundamental shift differs from other trends in that it tends to be pervasive to an industry, an existing business model, and an organizational culture. It has the potential to alter the way the world works. Its impacts are rarely white or black, all-positive or all-negative.

Key steps

To identify fundamental shifts, start with the basics. Basic changes surrounding the organization come from a number of sectors, such as the social, technological, environmental, economic, or political (STEEP) arenas. Start by identifying the significant changes underway in these key areas.

Next, create your criteria for a fundamental shift and prioritize the trends according to them. The criteria might be, for example:
• potential for disrupting the existing industry
• potential for diverting part of the revenue stream to competitors
• potential for altering the organizational ecosystem, or how the players interact

Then, study the collision points among trends, as well as potential paradoxes which could trigger explosive shifts in the business model or purpose. Too often, trends are treated as if they exist in isolation, when in fact they exist in an ecosystem of other trends fighting to survive.

Finally, once the fundamental-shift candidates (for example, miniaturization, digitization, globalization, sustainability, convergence, work/life balance, aging) have been identified, assess their meaning for the business-as-usual models and approaches.

Once an analyst has identified a potential fundamental shift, its impacts need to be explored. The initial analysis typically leads to identifying some opportunities and threats to the organization’s business model and purpose. Later analysis leads to a deeper understanding of impacts across many areas of the business.

Ideally this assessment should be part of the strategic foresight process, linked to ongoing strategic decision-making. It should be professionally facilitated by those with expertise in facilitation and foresight. Analysts may be able to do it themselves, or team up with internal or external experts. The key is to provide an approach and tools that fit the context of assessment and the organizational culture. It requires understanding how thinking proactively about the future can best be done according to the organization’s readiness and foresight process status.

A potential caveat: be wary of the organization wanting to use only criteria that fit its business-as-usual model. If this occurs the assessment will reinforce the organization’s existing assumptions about its business, miss potential opportunities, and be vulnerable to potential threats.

Benefits

The time allotted to assessing fundamental shifts will be repaid multifold once the organization starts accounting for these shifts in its business decisions. This work is at the core of the strategic agenda, so analysts must involve and communicate with senior management. Listening to a thirty-minute presentation is not the same as an internalized understanding gained by directly engaging with the material.

Example

An excellent example of assessing fundamental shifts was Nokia’s proactive shift from paper and pulp, rubber boots, PCs, and TVs to a focus on telecommunications and mobile communications. (Steinbock 2001.) Nokia was established in 1865 as a wood-pulp mill and later expanded into rubber products. After World War II, Nokia acquired Finnish Cable Works, a producer of telephone and telegraph cables, which led gradually to a deep immersion in telecommunications. Today, none of its paper, pulp, or rubber origins are visible in the company.

Through its nimble response to changing markets, Nokia showed that assessing fundamental shifts is important both to choosing new strategic directions and to understanding the best timing for them. Some shifts might be placed into the “maybe in ten years bucket,” while others should be dealt with immediately.

Further reading

Collins, J.C. and Porras, J.I. (1997). Built to Last: Successful Habits of Visionary Companies. New York: HarperBusiness.
Marsh, N., McAllum, M., and Purcell, D. (2002). Strategic Foresight: The Power of Standing in the Future. Melbourne: Crown Content.
Nokia: History. Wikipedia. Viewed August 2005, http://en.wikipedia.org/wiki/Nokia.
Schwartz, P. (1991). The Art of the Long View. New York: Currency Doubleday.
Steinbock, D. (2001). The Nokia Revolution: Success Factors of an Extraordinary Company. New York: AMACOM.

This vignette [1 of 6 I wrote] first appeared in “Thinking About the Future: Guidelines for Strategic Foresight”, edited by Andy Hines and Peter Bishop, published in 2006

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