The ROI of Foresight: Why is it worth the investment?

The investment in foresight is a difficult one to justify.

Leaders are responsible for making decisions that impact the company's short-term and long-term financial success. It is hard for them to assign resources and devote time to activities over an extended period of time, with intangible assets, without any clear outcome. The underlying reason is easy; it is difficult to justify the abstractness and intangibility of any activity exploring the futures qualitatively, as it mostly happens with foresight and scenario planning.

However, those who invest in the future will reap the benefits of having strong adaptability skills and resilience to emerging change. Foresight is not about divination methods, luck, or magic; it is a procedural methodology to make sense of unfolding futures better. So, why it is worth it for leadership to invest in foresight activities?

First, let's talk about the return on investment mainly at organizations, but it can also apply to governmental and personal issues. ROI is, simply put, the ratio of the benefits over the cost, and it is usually measured in terms of financial profits. Still, it could potentially include sales growth, brand awareness, educational impact, and people engagement. Although tightly related to corporate and for-profit organizations, these terms could easily translate to governments and not-for-profit institutions.

Return on investment is a critical topic in management because it is the primary determinant of any success. People invest in something to achieve some result. Merrian-Webster dictionary defines it as to commit (money) in order to earn a financial return; to make use of for future benefits or advantages; to involve or engage especially emotionally.

We can easily perceive that the returns on investments are close to achieving results, mostly financial or beneficial. Thus, to relate it with foresight, we have to look at how companies make decisions and use resources to achieve results.

The typical mindset in companies usually includes forecasting trends or uncertainties that can affect their revenues, activities, or mission in the long-term and how will they adapt budgeting if there is a shift in demand, behaviour, or regulation that affects growth. These are still very predictable drifts affecting strategic planning and could easier to anticipate by using forecasting methods. It is the basis of any MBA or Executive Education program, dealing with anticipating disruptions of growth but assuming it will mainly relate to excellent or lousy forecasting to inform strategic decision making.

As with any anticipatory system, foresight speaks about qualitative and intangible issues, opinions, and options that are difficult to forecast given a high degree of diversity. It differs from the practicality of quantitative forecasting methods, and it is often misunderstood and misleading for senior leadership.

So, let's talk about the key 4 points on why foresight is worth the investment:

1. Strategy, forecasting, and foresighting are intertwined methods for anticipatory thinking, not exclusive and not alternatives but complementary.
2. Planning for the long-term requires strategic decision-making within the current context and the exploration of alternative possibilities beyond actual knowledge and possibilities.
3. Foresight creates a better understanding of unknown possibilities, expanding both in the present and the future, and helps develop shared imaginaries on the futures' intangible nature.
4. Foresight helps to prepare for disruptions and risks, enabling leadership to manage vulnerability, sustainability, and resiliency for the organization.

Although there is a lot of education and dissemination of knowledge to do at the leadership and board levels, it is easy to oversimplify that forecasting is based on known parameters that are being projected by linear extrapolation of past data, having a probability of predicting how certain events will unfold; on the other hand, foresighting requires a non-linear perspective where possibilities may become a reality through different actions taken. Forecasting is common and well understood, while foresight is new and speculative by nature.

To conclude, let's try to relate the significant foresight outcomes to those initial ROI measures listed above and better understand the intangible returns on investment. Foresighting activities will firstly help future-proof profits, revenues, and growth by better understanding and evaluating disruptions before they happen; secondly, it helps to raise brand awareness by taking a leading voice in narrating the future of a specific sector of industry; thirdly, it contributes to creating internal knowledge about unfolding possibilities, both in the present and the future, making teams more proactive and resilient; and lastly, it engages a more significant number of global voices, opinions, and alternatives that create a more inclusive and diverse vision for the company, potentially increasing people engagement with the outcomes.

However, there is a long way to go before completely understanding and explaining the foresight endeavours' ROI. We could potentially link it to more grounded and tangible disciplines like innovation or research and development to simplify the message, but will that do better or worse for the field of foresight and futures studies?