Future Savvy: Quality in Foresight

Picture: londonfashionweek.co.uk

London Fashion Week, the UK’s slice of the $300-billion global fashion industry, starts today with flash of couture, whirring of camera and, no doubt, glug of Veuve-Cliquot. All the sass and celebrity pizzaz, and the actual catwalk schedule, can be found at londonfashionweek.co.uk

So… it’s teen giraffes tottering around in outrageous stuff, the watered down version of which will be pumped through the supply chain until it appears at your local department store in six-to-nine months. Same as it ever was, right?

In fact, not really. One of the gathering trends of the current era, across many industries, is the empowerment of consumers as ‘taste-makers,’ circumventing designers and specialist advisers. This is currently putting fashion executives through the wringer as “who decides” what is good, what is made and marketed, is being wrested from the fashion elite and from fashion intermediaries (glossy magazines like Vogue and Elle) by the “woman-in-the-street.”

The industry’s longstanding top-down orientation — where “we” told “you” what next year’s ‘look’ will be — is cracking as consumers who can easily access, share, and discuss every fashion preference, including their own, now get ‘networked affirmation’ rather than affirmation from the top.

Internet and mobile communications, and social networking technologies are behind this, of course. Access to style and fashion advice now comes anywhere, anytime. The stuffy catwalk shows are not open to the public (ah, the whiff of elitism still breathes for now,) but as a recent story in the LA Times points out: “Images can be seen online minutes after a designer shows them… The Internet makes it possible not only to read about fashion but to participate in it. The use of sites that enable users to create their own fashion-spreads, share photos of themselves in different outfits and elicit wardrobe advice from their peers is skyrocketing.”

The news for elite arbiters of taste in every industry in the 21st Century: it’s game-over. You will have to participate with your customers in their socially-networked formation of perceptions and opinions, a process you will be able to sometimes lead, but more often have to follow.

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In all the predictions of the future that I have ever read or heard, and all the scenarios I have been exposed to, it’s almost unheard of to see one that says “the squeezed middle class keeps their eye on a good deal, as they always have.”

I’m thinking about this as I see the Guardian today featuring a story about how “Poundland” has doubled it’s profits. Poundland is a copy-cat of the venerable US institution, the “dollar store,” where everything cost the same price, in this case £1.

Pic: Andrew Fox, The Guardian, August 4, 2009

The merchandising of these stores is not unsubtle. There are definite too-good-to-be-true loss leaders, but these more than offset by the many items that cost pennies wholesale. Fair enough. And recently reported doubling of profits is because more people are buying at these stores (downshifting) due to recessionarly squeeze and/or because of the current “sense of thrift” in the zeitgeist which makes pennywatching more “the done thing.”

But neither merchandising, nor consumer psychology is our primary concern here. From a foresight point of view, the point is that forecasts of 2010 that were around around a decade or two ago didn’t quite get around to saying anything about Poundstretcher leading a healthy economic life. It’s as unsexy as anything, compared to “peak oil” or advancing “singularity,” or nano-babble, and so on into the glorious future – or its polar alternative: crash & burn, soup kitchens, urban warlords rampaging, and so on.

But here we are coming to the end of the decade and a basic retailing gimmick for the squeezed middle-class consumer is well trafficked and very much part of the future. Yes, it’s success correlates with tougher times, but economic cycles will be with us repeatedly through the rest of the century and beyond.

This doesn’t mean there won’t be breakthroughs in technology or in consumer behavior. In fact, looking at the picture, one surely would not have got a pound for any amount of plain bottled water in a retail environment 20 years ago. Things do change. They just change slowly, or unevenly, against the gritty reality of savvy agregate choices made by a wary (global and growing) middle class.

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Peter Bernstein, the author of “Against the Gods: The Remarkable Story of Risk,” died recently at the age of 90. In memoriam McKinsey Quarterly reposted this recent Bernstein interview. I put it up here because it’s a timely and timeless lesson in thinking about uncertainty and threats, and avoiding simplistic (quantitative) approaches to managing them – one of core themes of “Future Savvy.” Bernstein offers and endorsement of real options and explains why sophisticated Long Term Capital Management (LTCM) mathematical models to control risk created “a math dependency” that was blind to, among other things, unexpected systemic feedback to its own emergence:

One of the first things Bernstein says is that risk implies that we don’t know what will happen, which could be good things happening too. Risk management, as it is currently understood, gets executives to look at what could go wrong in the uncertain future of the enterprise. (Somehow threats are easier than opportunties to get departmental budget for.) The standard approach is to break risks down into commonly understood threat categories: a typical analysis would illuminated risks posed by technology failure, communications failure, security failure, natural disasters, accidents, or market/reputation risk, liability risk, financial/credit risk, and so on. This negative-outcome identification is typically followed by strategies to monitor, minimize, or control the risk event or its impact.

Doing all this is great, BUT it is just a narrow part of enterprise and industry foresight. Why? First, industry foresight or futures studies for business is focused as much on the opportunities change offers as on threats. Second, foresight tools (when correctly applied) set themselves the task of enlarging perspectives or mental maps so that we can see more things, or more possibilities than the generally expected set (whether good or bad). Set against this, risk management is little more than the catalog of known threats. The unknown or poorly understood threat, or unseen opportunity missed (and grabbed by others) is likely to be more damaging to the enterprise.

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Normally I make a point of not reposting anything put up elsewhere, but this small list of foresight lessons deserves broader attention than just Electronics Weekly. According to EW blogger David Manners, Tsuyoshi Kawanishi, former CEO of Toshiba Semiconductors in his book Chip Management quotes 10 wisdoms of forecasting, see below.

They have a bit of the fashionable “SunTzu Art of War” feel to them, and some of the quotes may be apocryphal. But no matter. What’s really interesting in this very savvy list is how customer-focused the lessons are. As said in Future Savvy, and one can’t say it too many times, what customers (users, the public) want and the cost-benefit tradeoffs they will make is a MUCH more reliable guide to the future than any techno-fantasy.

The wisdoms also reflect a foresight industry insider truism and paradox: you seldom get to the future by asking the customer directly (e.g. in a focus group) what they would like to have. You have to leap for the customer (and use focus groups only to refine new offerings.)

The list:

“1. St Augustine said that it is a blessing from God that we can’t predict the future. If we predict prosperity, we will become complacent. If we predict evil, we will lose the ability to discriminate.

2 Sharp President Haruo Tsuji: ‘You cannot find out what the consumer wants only by doing market research. You need to pull the ideas out of your brain. Manufacturers of the future should not simply respond to market demands, they must create market demands.’

3. Konosuke Matsushita said: ‘Don’t try to fit your business to a forecast. Fit it to the needs of your customers.’

4. Toshiba President Sugiichio Watari: ‘Money doesn’t come falling into the headquarters of Toshiba. If you want money you need to go to the customers.’

5. President Yoshio Tateishi of Omron: ‘Learn from your customers. If you learn from internal resources you will become self-satisfied. If you learn from your competitors you will fall far behind.’

6. Professor Yoshiya Teramoto of Meiji Gakuin University: ‘When companies start a big market research project, it is one sign of the ‘big company’ disease.’

7. Tsuyoshi Kawanishi: ‘The way to predict the weather is to look at the sky. And, every once in a while, you can make your prediction by simply thinking.’

8. President Haruo Tsuji of Sharp says: ‘Don’t be a spider, be a honey bee.’

9. Takeshi Kaneda, a management critic, says: ‘After elaborate research to find out what the consumer wants, Ford produced the Edsel. It was a complete failure. Ford mistook what the customer wanted for what they would really buy. They ignored their insight and relied on consensus. Japanese tend to emphasize harmony and consensus. But insight and decisiveness can be more important.’

10. Someone says: ‘Figures do not lie. But liars often use figures.’”

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There’s been a storm in the past few days over Amazon.com excluding “adult” books from its sales rankings. Among the almost 60,000 books affected was not just Erotica. Feminist books, Gay & Lesbian titles, and books in Health, Mind & Body, and Reproductive & Sexual Medicine also disappeared from the rankings

Amazon the new Wal-Mart? pic:Huffington Post

According to yesterday’s LA Times Amazon says the whole thing was a cataloging error. But when author Mark Probst had previously contacted Amazon for an explanation, he got this: “In consideration of our entire customer base, we exclude “adult” material from appearing in some searches and best seller lists.”

Aside: Everyone is trying to figure out what Twitter is good for, or how it will be used, and it has become clear that one application is to quickly aggregate mass protest, evidenced in the anti-Amazon outrage, see Twitter “Amazonfail.”

Author Maya Reynolds has been connecting the dots in the future of publishing, watching Amazon move via acquisitions such as Abe Books, Audible, BookFinder, BookSurge, Brilliance Audio, FillZ, GoJaba, Library Thing, Mobipocket and Shelfari.

She is among various industry watchers who claim, with fair evidence, that Amazon is following a “Wal-Mart” strategy – the well-documented essence of which is to gain enough retailer power to be able to pressure suppliers (telling them what to make or what to charge, or exacting special discounts) to achieve better retail prices and get more retailer power, in a reinforcing spiral which, inter alia, squeezes all the healthy mom-’n-pop-shop diversity and other balances of power out of the industry.

In a post of July 08 she paints the full dystopia scenario:
“1. First, the smaller presses, POD presses and e-publishers will disappear as Amazon’s margins squeeze them out of business. Amazon will help the process along by offering better terms to authors if they will use BookSurge’s POD press and Kindle’s e-book to publish. Even if authors don’t embrace Amazon initially, as their publishers go out of business, they will be forced to do so.
“2. Brick-and-mortar stores have two constraints which Amazon does not: (1) limited shelf space and (2) a limited geographic range. Bookstores carry books “on spec,” filling their shelves with stock they hope readers will seek. Amazon, on the other hand, has unlimited virtual shelf space and unlimited geographic reach. Amazon does not have to warehouse stock. They can wait until a book is actually ordered and the money is in hand before using a digital file and BookSurge to print the book. Because they cannot match the deep discounts Amazon offers, bricks-and-mortar bookstores–already under siege–will be squeezed out of existence.
“3. Like Wal-Mart, Amazon will continue to apply pressure on publishers to give more favorable terms. Wal-Mart’s suppliers used cheaper materials and out-sourced to cheaper overseas labor. As the publishing houses’ profit margins are squeezed, their cost-cutting efforts will take three directions: (1) Focus even more attention on signing best-selling authors whose work is guaranteed to sell; (2) Begin to pressure their mid-list authors to accept lower advances and lower royalty percentages; and (3) Sign fewer and fewer new authors because of the uncertainty and the expense of growing a new writer.

Where will they go?

“4. Mid-list authors and new authors, unable to either find a publisher or unwilling to accept the low royalties, will seek to self-publish. Where will they go? Since, by that time, most of the self-publishing houses will have gone out of business, they will go to Amazon’s BookSurge or to Amazon’s e-book division, Kindle. Amazon will welcome them.
“5. The next death on the food chain will be the publishers and agents themselves. First the mid-level publishers will die. Well-known agents and the larger houses will be protected for a period of time by their best-selling authors who are loyal to them. However, as those cash cows die off, so will the agents and larger houses. A new paradigm will emerge: Amazon as both publisher and retailer.
“6. Eventually Amazon will have so much power, they will be able to decide WHAT is worthy of being published. Welcome to the future of publishing.”

Is this the future of publishing? The logic of unregulated industry power suggests it is. But Future Savvy says response – regulation – is also likely. As with Microsoft and many before them, when Amazon gets too powerful, anti-trust regulators should be in business. But only if their hand is pushed. Articulate and persuasive dystopias such as Reynolds’ are the single most powerful mechanism by which the word is spread (spread it! forward it, tweet it!) so that enough consumers get to see and believe threatening future outcomes early enough, and pressure regulators to act.

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The International Herald Tribune (New York Times Global Edition / Reuters Business) last week ran an interesting foresight story headlined ‘Crisis complicates forecasting by luxury brands,’ reporting from the International Herald Tribune’s eighth conference on luxury in New Delhi. The gist was that although most of the famous brands continue to do well despite the recession, luxury sector executives are very uncertain about the future.

Christian Blanckaert, Executive Vice President at Hermès International was quoted as saying: “We have absolutely no visibility into 2009!”

On the one hand, fair enough. This economic downturn is steeper than previous down cycles, and the basic viability of the financial sector has been tested. Access to credit is normally easier in a recession, but in this one it is not. All of which makes luxury spending harder to predict.

No doubt the most unlikely prediction of all would have been that Hermès, Burberry, LVMH, Moët Hennessy, Louis Vuitton, and PPR (Gucci , Yves Saint Laurent) have all recently reported better-than-expected results.

Nevertheless luxury industry leaders have declined to provide investors and analysts with any official outlook. What’s curious, from an industry foresight point of view, is how executives such as Blanckaert thought they really had more “visibility” into any previous year, or that they will somehow gain it again when the financial crisis is over. They will not. The world will continue to surprise them and us. What they will gain, certainly, is a greater likelihood that the standard business-as-usual future assumptions they make will not be upset by reality.

Meanwhile, judging by the conference, the luxury goods industry has a very decent grip on current social and moral trends, and clear insight into the bigger picture of change in its industry over the next five to ten years. As they know from before, what happens in a recession is that luxury goes out of fashion. Conspicuous consumption wanes, or retreats further behind secluded walls. This is a basic pendulum swing that tracks the economy (witness how the early 1990s recession stimulated a return to “values” era after the “me, me, me” 1980s.)

Sustainable luxury

So we are again in a swing to modesty. But we also know that each swing of the pendulum also carries with it the specific issues of its time. Current key issues for consumers in this segment are sustainability, global warming, business ethics, and globalization (or fear thereof).

Therefore the luxury brands will be looking for ways of making, transporting, and displaying goods in an energy-efficient and socially conscious way, including a renewed emphasis on local artisans and traditional craftsmanship that speaks sustainability in both natural and human resources. This will be the basis of the “sustainable luxury,” positioning that the famous houses will define and compete in. Fabulous and renewable  – now there’s something you can charge top dollar for.

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It’s all in a day’s irony when Guinness releases its 250-year view of the future on the day that the UK Chief Medical Officer pleads for a minimum price for alcohol (and Gordon Brown, for now, says no, but don’t bet on that holding for long.)

Guinness' view of the pub of 2259. Image credit: Chris Bainbridge

The Guinness Pub-of-the-Future is a St. Patrick’s day (March 17) promotion. Nothing wrong with a little bit of fantasy foresight. But what they come up is so “20th-century-futurism” it’s hilarious. Among various reports on the project – for example in the Telegraph – the following features are foreseen:

- robotic doorman, greets you by name
- cash obsolete; orders via RFID; payments deducted automatically
- your product tailored to you on the spot
- touch-sensitive tables, send your order straight to the bar
- socializing via virtual / hologram technology
- a running tally of the number of units consumed.

Yawn. Even on it’s own terms (minimal constraints of realism) this is a totally derivative piece of foresight. These “innovations” are the staples of an infotech view of the future, and they have all been thought and spoken of countless times. Also many of the elements and services cited are already here, or not more than a decade away. What we have is the current pub assumptions + digital steriods, while the year 2259 will be, truly, another world.

The limits to growth
But all this leads us to more interesting industry foresight problem. Will there be pubs in even a generation, never mind 250 years? What the Telegraph dryly observes at the bottom of its report is that 39 pubs are closing every week Why? A number of driving forces are coming together:

First is strict drink-driving limits, which makes “the local” literally local or nothing. Second, pubs in the UK have traditionally been a refuge from housing that was poor and/or underheated. Unprecedented waves of affluence (credit-crunch notwithstanding) have led to widespread housing “do-ups.” It’s now a valid option for most people to spend their leisure time at home and entertain at home.

Then there’s the where’s-my-friend trend. You’re likely to go down the pub if your friends are there, but not if they are where most people’s friends are: on Facebook.

The social-legislative clock
Fourth, no matter how you dress it up, pubs are retail outlets. So, like all retail they are under the cosh in a Wal-mart / Tesco world. The price gap between store and pub has become too great for most consumers to cross with good conscience.

Which brings us to the current price-floor legislation bid. Alcohol is a huge social cost in terms of health care and violence. Drink costs the NHS £3bn a year, and the total price of alcohol to the taxpayer is estimated at five times that. Eventually these costs will become unjustifiable so, like smoking before it, the social-legislative clock is ticking for booze. As the 2-martini lunch has become the 2-seltzer lunch, the trend to social stigmatization is clear, and legislators will follow (not with Prohibition, but with a much more subtle community-endorsed squeeze).

Like the good politician he is, Gordon Brown won’t let his party get ahead of the trend. But the trend is clear and it bodes ill for pubs.

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It’s an auspicious time for those of us long convinced that design and future studies are fields with significant overlap whose coordination is helpful in addressing both social and commercial problems and/or future opportunities.

Conference: March 19-21

Tim Brown of IDEO, the the industrial design firm, recently published a Harvard Business Review piece Design Thinking – investigating designer-methods in business innovation. At Davos last month there was a “Global Agenda Council/ Design,” featuring Newsweek’s Bruce Nussbaum and built-environment design firm ARUP’s head of foresight, Chris Leubkeman. (The general agenda may be found here.) Next month, the Association of Professional Futurists are having a “Futures by Design”  conference in association with The Art Center College of Design in Pasadena, CA.

And so on. I’m going to be blogging more about this. But for now I wanted to put out a note-to-self I wrote on the issue about five years ago, trying to briefly define how the fields relate to each other, and what the crossover is. Here goes:

The tools of design and planning dovetail closely with those of industry foresight. The overlap and interaction between these two disciplines is not commonly understood, and so the methods and process insights from design professions that could augment the range of strategic foresight tools is often ignored.

1. Beyond aesthetics
Sunday supplements and glossy magazines often use “design” to mean style and fashion. While aesthetics is important, good design means much more than how products appear. It is about creating better processes, interactions and solutions for human benefit. This often involves experimenting with new technologies, envisaging possibilities under conditions of uncertainty and complexity, exploring and comparing alternatives, and determining the best and most durable solution for the long term.

2. Future focus
Whether planning a building, or redesigning a product, or innovating a process, the designer is called on to anticipate a solution that caters to future needs ­ often responding to futures issues, for example environmental-sustainability pressures and changing social values. In other words, design methods, like futures tools in general, form the bridge between current products, systems and practices and what it will be required and desired in the future.

In achieving this future focus, designers, like good “futurists,” must use techniques of imagination, creativity and intuition to generate and evaluate future outcomes. Like futures professionals, designers are called on to practice original thinking, imagine the world differently and see possibilities that others don’t. They are required to take risks, negotiate change and challenge the status quo under conditions of ambiguity and uncertainty. And like good foresight work, design succeeds only if it finds the right tradeoffs between technology possibilities, economic realities, and social needs.

3. Rendering
More than merely anticipating the future, designers and planners are practical agents of visual imagination, creating the blueprints for the objects and experiences of tomorrow. From product creation to urban renewal, designers and planners have tools and experience translating abstract future concepts and ideals into visible or tangible form ­- “making the invisible visible.” Through this rendering function they are primary agents in articulating the future, and therefore in helping us see and negotiate (or refuse) the transition.

4. Systemic innovation
Design is about systems and practices as much as products: better-designed systems improve utility, cut costs, and improve resource use. Designers play a key role in the organizational innovation process as a whole, including the development of integrated product and services, or inventing new types of value chains, alliances, and collaborations.

In sum, much of what foresight professionals are trying to do every day is already being done by design professions. Their methods and process insights should be integrated into the foresight field as a whole.

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Review: The Age of Heretics, (2nd Edition), Art Kleiner, Jossey-Bass, 2008

One of the conundrums of foresight work is that it demands a macro-perspective, but real change requires focus. In order to get the breadth of view across society and technology to think adequately about the future, the futures analyst is forced to forgo much of the detail, while implementers are thinking: “this 40,000 ft view is very illuminating, but how do I land the plane?” What changes do I make, in my organization, in my industry, on Monday morning, and how do I not get fired for making them?

Kleiner’s updated The Age of Heretics, (2nd edition, Jossey-Bass, 2008) is the modern history of people who find themselves – or put themselves – on the focus side of foresight: who work practically on the ground inside corporate institutions to achieve change, which means by definition challenging the methods and perspectives of their institution. It is not the story of foresight at the lofty level of ideas, but the altogether grittier and more interesting story of how macro-change consciousness meets real institutions, real organizational dynamics, real industry pressures, and real career considerations, in the history of US corporations since 1945.

Kleiner, the editor-in-chief of Booz Allen’s Strategy+Business, is no stranger to the foresight field. He is the ghost-writer behind an eye-popping portion of the futures canon, including The Art of the Long View; The Fifth Discipline, and its Fieldbook; and The Living Company, and so on, (source: http://www.well.com/~art/) so it’s no surprise that the fabric of his text is lush in its familiarity with the players and ideas in the field.

The common thread he follows – through figures like Herman Kahn, Willis Harman, Amory Lovins, Oliver Markley, and so on, is that of the heretic, the maverick against the machine. Intriguingly, along the way, Kleiner gives us a worm’s-eye view of the genesis of many new management ideas, from “lean production” to the “balanced scorecard” to “scenario planning’ – showing how they emerge from and have been engendered by the forces of institutions in productive conflict with their heretics.

The political history of truth, and its future

Philosopher Michel Foucault catapulted our understanding of institutions as a political field, using insights from the history of prisons, hospitals, and asylums to show the relationship between power and knowledge in the evolution of institutional forms. But he never dealt with the modern business corporation. It may be overstating it, but not by much, to say that Kleiner updates Foucault for corporate America. The themes he carries: the role of the deviant, transgression, the evolution of truth, and discursive struggles between insiders and outsiders, are highly resonant. In his previous book, Who Really Matters (Doubleday, 2003) Kleiner developed other parts of this same perspective: showing how every organization’s identity and choices can be understood as driven by the interests of its core group – its powerful insiders.

The Age of Heretics is an engrossing history of change-agents in companies in strategic and organizational transformation. But it’s not just a history. In the future – while the names of the players, and their issues, and the institutions themselves will change, the productive articulation between the heretic and the institution will remain the format of change in big groups. So the lessons of the book are well taken and very highly recommended.

[This review, authored by Adam Gordon, first appeared in The Association of Professional Futurist's Compass Magazine]

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Microsoft - Computer Electronics Show 2009

Product prototype communication is a close cousin of scenario building. Typically the company creates their product or service in action, in the future, being used by happy customers, their “preferred future” scenario. Prototype communication doesn’t typically build in alternative scenarios, the litmus test of strategy-based scenario work. It’s more a kite-flying exercise, designed to put out a future-oriented message to stakeholders and the public, garner broad feedback, and (if you’re powerful like Microsoft) put up “this-is-the-future-of-the-industry” markers.

Nevertheless, with the caveat that they are one among many plausible outcomes, product showcase scenarios can be an eye-opening guide to what’s actually possible and what the future will be like.

A newly released Microsoft “Future of Computing” video, showcased at CES 2009 in Las Vegas in the past few days, is an example. The 10-minute piece, presented by Janet Galore, Program Manger: Strategic Prototyping, takes us through a scenario of interactive education in the future (when, exactly, is not said but the implication is it’s not too far off) showing how participants would find, use, and share information across devices and across platforms.

What we see is a tablet PC that can communicate seamlessly with other electronics and interact with Web info on the fly. Okay nothing new there. What’s interesting is how it’s all held together by surface computing, a smart desk with a screen, which allows information to be viewed in the process of collaboration, sharing, and filing.  In some futurist fantasies it is thought that communication is ideally invisible (my phone e-handshakes your phone without me doing anything, etc.) But actually humans mostly seem to prefer to see what’s happening, and to have the choice to interact with what is happening while it’s happening – not least so they know what machines have done and don’t have to pull their hair out before they find their precious work buried four subdirectories into the Temp folder… sheesh. But I digress.

The scenario focuses on organizing and sharing multiple inputs, therein making a pretty clear statement about the future: what will be really valuable is not access to information anywhere, anytime (an assumed, table-stakes factor), but a way to share and collaborate with the information in an productive way. It refreshingly assumes that whiz-bang graphics – they are there too – are the easy stuff, but that collaboration and teamwork are the hard things to get right, and the truly valuable service given the chaos of billions of voices and trillions of data objects that pertain in any human-work future.

The other real strength of the prototype and related scenario is its close attention to natural (or, at least, strongly socialized, conventional, classic) human ways of doing things, which are slow to change, and therefore will change slowly. The smart desk is something one can really see oneself sitting around, because this is what we already do. Also this future of computing envisages no stylus, no mouse, no magic wand to master. Rather, we move digital stuff around the desk with our hands. We point to it and we shift it. That is, digital capability accommodates and interlaces with Stone Age human and organizational patterns. That’s why this view of the future is persuasive.

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