What is strategic foresight in the power industry?
1. Strategic foresight is a framework through which we understand and examine future possibilities in the electric power sector based on the current trends and developments in technology, policy, geopolitics, economics, productions, supply chains and consumption behaviors. It is not a prediction of the future, nor a forecast from historical data. At best it is a projection of the future situation based on current trends
2. It consists of imagining and constructing multiple future worlds in how the electricity sector could evolve, i.e., how electricity would be generated, transmitted, and consumed; given the various forces of change from adoption of digital technology, sustainability targets, and customer preferences. It is not about constructing one view of the future but multiple future states.
3. Future worlds may range from highly centralized to decentralized generation. It may also range in the degree of electrification of the other sectors such as, transportation, heating and cooling, and industrials, and how that might affect the electric power sector
4. The future has a particular timeframe. The indicators today have less relevance as the time distance to the future increases. For example, net zero carbon emissions future for 2050 will have more susceptible to a variety of weak signals of today than the net zero world of 2030
5. Future worlds provide the grounding for companies to understand the implications of future possibilities – and help in identifying where they are exposed, potential challenges that might unfold, and where they are positioned to exploit their advantages. It is not about liking one future over the other. None of the future worlds is the right future. It is about if such a world emerges, what does it mean for the company today.
6. Foresight is useful in developing or testing strategy, but it is not strategy. Strategy is about choices that power companies will have to make today – and consist of three main decisions – what is the aim and the direction to take, what are the opportunities that are available or can be created, and what are the capabilities to invest. There is no bending, altering, or adjusting the foresight. It is a set of projected views.
7. Strategic foresight scans for trends, signals and indicators that are not just within the power sector but also those at the edge and outside the power sector. This means a broad understanding on what is happening in energy, technology, retail, banking, transportation, chemicals, industrials, construction, etc. are observed and analyzed; and how that might impact the sector. The drivers in power sector today – from energy storage, digitization to customer experience - are influenced heavily by forces from outside the sector.
8. Foresight does not dismiss, but examines carefully the forces of change that are considered outlandish, surprising, insignificant at the moment. This allows to monitor linkages of early signs and the conditions in which they might become relevant. Solar PV and energy storage were on the fringe with unacceptable economics for many decades until within less than a decade they have become economically viable and in turn, disrupted the power industry.
9. Foresight examines non-traditional topics that are outside the traditional purview. The rise of social inequity, diversity, and inclusion as a Board/CXO level agenda today is one example which was considered outside the domain of a traditional power company even 5 years back.
10. Foresight uses several tools - scenario planning is an example. But the tools are not the same as how it is used in tradition business planning. In foresight, scenario planning is not about a set of static views of the future, but it is dynamic. It is not about finding the right future scenario and planning for it as in the case of traditional business planning. Foresight focuses on the linkages of the various drivers of the scenario and developing an understanding of what happens when those linkages and dependencies change.
11. Strategic foresight can be quite useful in developing and testing strategic plans in an uncertain environment – but it is not a plan by itself. Foresight does not change with the plan. Good plans help companies prepare and position for the future possibilities.
12. Good strategists can be good in developing strategic foresight but that is not necessary. Strategic foresight requires a broad understanding of the forces from other sectors and walks of life and how they map to the electric power sector. It is the ability to imagine a coherent and logical view of the future based on current state. It requires systems thinking. This is not the same as strategist who can diagnose the current state of the organization and can take decisions on what to do, how to allocate capital and resources, plan and execute the actions that will put the plan to work. Strategists require skills in driving alignment, direct resources, deploy and mobilize at the right problem at the right time.
© 2021 by Greenelectrons Consulting, LLC.