STAGE 2) IMAGINE TOMORROW - TREND MATRIX
“Finding patterns is easy in any kind of data-rich environment; that’s what mediocre gamblers do. The key is in determining whether the patterns represent noise or signal.”
Nate Silver, American Statistician
Identifying possible trends and events in the future is only part of the challenge. In order to decide which trends we need to respond to in our strategy, we have to be able to identify the important signal from the noise.
Questions to answer
- Will this trend accelerate or will it fade? What drivers are underlying it?
- These trends are pulling in different directions - which will win?
- What are the key uncertainties in our industries?
- Are there any external events that would have a dramatic impact on our industry?
Example Framework: Trend Matrix
This tool adapts a standard risk management matrix to separate two discrete aspects of future events and trends - what would be the impact on our business if they happened, and how likely they are to happen.
Some trends are almost certainties. For example, aging populations in the US, China, Japan and Western Europe are now locked in for the next 50 years. Some are less certain - Global warming is certain, but there is uncertainty about how fast. Others are even more unclear - will semiconductor companies be able to commercialise sub 7nano-meter technology?
After we have identified the major trends of our business from our 360° scan, assess them independently on these two dimensions. Then we can prioritise them on the trend matrix, so we can structure a response to them:
- Base Case. We can wrap everything in the top right of the matrix into a Base Case. We can share this across the organisation as the consensus “most likely” view of the future. It will form the foundation of our future strategy - any moves that we come up with have to be successful in this base case future. We can identify “no regrets” actions that will pay off in any industry future
- Big Bets. However, we can’t get an advantage from insights into the Base Case future - these trends are so obvious, most competitors will see them. To get an advantage we have to adopt a more predatory approach to future trends, identifying a trend with potentially high impact while it is still uncertain and investing sufficient resources to own it
- Long shots. In addition, we will identify a number of possible trends and events that are are potentially high impact, but such low probability that they do not warrant investment today. It is important to capture these so that we can develop insurance and contingency plans. If we identify their trigger events and metrics, we can monitor them in our business intelligence system
- Base Case
- Poker not Roulette Betting on the future
- “Big Bets”: Deep Dive