Issue 5

Foresight, scenarios and planningJuly 2011

APS Human Capital Matters: Foresight, scenarios and planningJuly 2011, Issue 5

Editor’s note to readersWelcome to the fifth edition of Human Capital Matters. This month we focus on studies that seek to provide us with an insight into the future.

Before heading into unchartered waters we should take on board Peter Drucker’s caution that the task of predicting the future is like ‘trying to drive down a country road at night with no lights while looking out the back window’. Given the vast number of reports offering definitive insights into the future that are produced annually, it seems we remain undaunted by the challenge.

Futures forecasting (or long-range planning as it is sometimes, and perhaps more accurately, known) is a diverse field that is crowded with practitioners, theories and techniques. The outcomes of mapping future trends and determining the risks we face range from the elaborate through to the nondescript. Ultimately, however, the goal of forecasting should be to help leaders and managers make informed decisions about future business direction. Consequently, the aim of forecasting is not to predict every little detail about the future but rather to anticipate the direction of as many of the big trends as possible.

The techniques of long-range planning provide an opportunity to consider the desirable variations and outcomes for the business as well as the transformational alternatives that would lead to a fundamental shift in business activity and organisation. At its best, foresight, scenarios and long-range planning techniques lead us to question whether in our business planning we are making the dangerous assumption that tomorrow will be much like today.

There are many agencies across the APS that engage in some form of environmental scanning or long-range planning. These range from the large scale multi-dimensional business planning activities through to ‘back of the envelope’ exercises. Regardless of the approach, the objective of long-range planning should be to encourage critical thinking about long-term business developments, create wider participation in and ownership of the future of the business, and provide leaders and managers with options that allow them to position the organisation to continue to deliver value.

Currently, the APSC is engaged in conducting an environmental scan of the drivers of human capital in the APS. The objective is to provide an analysis of current and emerging environmental trends but also to draw together the substantial demographic and attitudinal information that is available within the APS. In June, the APSC conducted four pilot workshops with a total of 80 participants from a broad range of APS agencies. The development and analysis work is continuing and there will be opportunities for broader engagement and involvement in the coming months. Ultimately, the human capital environmental scan will be a valuable planning input for all agencies that will be regularly updated.

The articles summarised in this issue of Human Capital Matters are some of those that the APSC has examined in developing the human capital environmental scan. In this selection we have attempted to provide a variety of perspectives on dealing with the challenges involved in foresight, scenarios and long-range planning.

The Australian Davos Connection and KPMG have produced a report that is designed to assist leaders of all sectors in identifying the risks Australia is likely to face in the coming decades. The publication analyses national risks and opportunities and how they intersect.

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The Australian Industry Group and Deloitte Australia report on a survey of skills needs for 2010 and the immediate future.

In a recent and topical report, Bob Birrell and his co-authors provide a critique of the contrasting views surrounding Australia’s immigration program, in which they focus on the linkages between it and the resources boom, sustainability and quality of life in Australia’s capital cities, and economic growth.

A collection of academic authors in the UK examine the history and practice of ‘scenario planning’ since its inception over thirty years ago. They focus on the application of the technique in relation to business planning.

Stephen Hajkowicz and James Moody present the results of a CSIRO global foresight project which identified major challenges that the world’s nation-states, including the Australian polity, could face in the short-, medium- and long-terms.

A collaboration between Ipsos and KPMG describes the outcomes of a structured research initiative involving Australian business and the wider community that sought out people’s views of the country’s future. On the basis that when asked about ‘the future’ responses are often shaped greatly by what is happening at the present time, the authors provided participants with two markedly different alternative scenarios of Australia in 2020 in an attempt to generate more accurate and detailed answers.

Richard Slaughter analyses the findings of the first ‘State of Play in the Futures Field’ (SoPiFF) project, an international research initiative commissioned by the Seattle-based Futures Foundation to identify how such work can improve identification of long-term global needs.

The World Economic Forum’s fifth annual report into global risk management identifies five major international risk areas and proposes seven ways of improving risk planning by governments and business. Among its tools for doing so are the 2010 Global Risks Expert Perception Survey, which canvassed the views of several international experts on their views of risk interdependencies and relationships.

About Human Capital MattersHuman Capital Matters seeks to provide APS leaders and practitioners with easy access to the issues of contemporary importance in public and private sector human capital and organisational capability. It has been designed to provide interested readers with a monthly guide to the national and international ideas that are shaping human capital thinking and practice.

Comments and suggestions welcomeThank you to those who took the time to provide feedback on earlier editions of Human Capital Matters. Comments, suggestions or questions regarding this publication are always welcome and should be addressed to: humancapitalmatters@apsc.gov.au.

Australian Davos Connection, in collaboration with KPMG, ‘Australia Report 2010: Risks and Opportunities’, 2010, (Report). The report is intended to assist leaders of all sectors in identifying the risks Australia is likely to face in the coming decades. The publication analyses national risks and opportunities and how they intersect. It is designed to shape public policy, inform business decisions, and enhance consideration of risk management in the national agenda. The report is based on both quantitative and qualitative analysis.

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The study commenced with a risk articulation exercise based on discussions with risk management professionals, economists and actuaries. On the basis of these discussions, the authors defined five principal risk categories—economic, political, environmental, societal and technological—and 47 key risk areas. This process was followed by a survey of leaders in the public, private, academic and third sectors which canvassed their views about the key risk areas. These are set out on pp. 22–24 of the report (in this context, the two diagrams on pp. 3 and 4 dealing with the ‘Risk Landscape’ and ‘Risk Linkages’ (or ‘Risk Connectivity’) provide a useful thumbnail summary of the report’s findings).

The survey outcomes were then used to support a number of discussion groups and workshops charged with critically evaluating the risk landscape and identifying opportunities. The authors emphasise the volatility of global and Australian risk patterns and stress that today’s risk landscape is likely to be ‘unrecognisable’ ten years from now. Accordingly, they propose to update this report annually in order to keep pace with developments.

The Australian Davos Connection (renamed the ADC Forum in 2010) is a not-for-profit organisation founded in 1996 by the Australian members of the World Economic Forum (WEF) to assist the latter in implementing its governance, economic and social objectives. KPMG is one of the world’s leading professional services networks. Its member organisations employ more than 135,000 people across some 140 countries.

Australian Industry Group and Deloitte Australia, ‘National CEO Survey: Skills Shortages—A High Risk Business’, July 2010, (Report). The report, an example of a significant specific-focus scenario planning exercise, presents the results of the Australian Industry Group (AiGroup) survey of skills needs for 2010 and the immediate future; it also sets out the views of industry about how readily these skills needs could be satisfied. It has been prepared as part of the AiGroup’s national CEO Survey Series undertaken with Deloitte Australia. Over 400 companies across the manufacturing, building and services sectors participated in the survey which was conducted in May 2010.

The survey found that skills shortages are currently an issue of concern to business and are likely to remain so. As a result, nearly 50% of businesses surveyed are placing a high priority on managing such shortages, with 43.3% of respondents indicating a belief that they are likely to be doing so in five years’ time. Businesses are eager for governments to take a greater role in addressing skills shortfalls—72.6% of those surveyed thought it ‘extremely’ or ‘highly’ important for government to be more active in this area now, and 75.2% think this will remain the case in the long-term. A key element in this is a conviction by business that there is a significant underinvestment in skills development which is linked to the high rate of labour mobility. The survey revealed that businesses see a need for all levels of government to address this problem through better targeted skills initiatives, given that skills development is a shared Commonwealth, State and Territory responsibility. The report also discusses the importance of recruitment and retention strategies in dealing with skills challenges and how this and other skills measures can be implemented effectively within the context of fluctuating Australian and global economic circumstances.

The report’s authors emphasise that government policy is central to creating an environment conducive to public and private sector collaboration aimed at addressing the skills deficiencies of today and tomorrow. Such policies and measures also encompass education initiatives, taxation regimes, talent management programs, and research and development policies which can individually and collectively contribute to better skills management and provision. These are also significant factors to be taken into account in foresight exercises such as this one.

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The Australian Industry Group (Ai Group) is a peak industry association which, with its affiliates, represents the interests of more than 60,000 businesses. Deloitte Australia is a consultancy and management advisory firm with branches across the country.

B. Birrell, E. Healy, K. Betts, & F. T. Smith, ‘Immigration and the Resources Boom Mark 2’, July 2011, (Report), see also ‘Press Statement’ (18 July 2011).The authors have produced a critique of the contrasting views surrounding Australia’s immigration program, in which they focus on the linkages between it and the resources boom, sustainability and quality of life in Australia’s capital cities, and economic growth. They outline the principal arguments of those who advocate an increase in current overseas immigration rates in order to meet Australia’s short- and long-term skills needs; and they also outline the arguments for adhering to (or not substantially increasing) the current intake, primarily in the interests of sustaining quality of life within our large urban environments.

Discussion of this complex area of public policy is made more problematic by the difficulties involved in modelling and forecasting; were Australia’s population to increase to 36 million or more by 2050, severe sustainability issues may come into play. However, as many industry groups assert, unless net overseas migration is kept at 180,000 or higher per annum, there will not be enough skilled workers to meet employer requirements and sustain economic growth.

The report, by the Centre for Population and Urban Research (CPUR) at Monash University, seeks to challenge many of the assumptions underpinning arguments for continued high levels of immigration. Its four main findings/conclusions (which are summarised in the one-page Press Statement hyperlinked above) are:

‘Alarmist’ claims about the negative effects on workforce growth of reduced immigration rates are ‘false’.

Australia needs a numerically smaller, but better-targeted immigration program. The solution to the resource industry’s need for workers during the start-up construction

phase of the resources boom is temporary employees. The resources boom Mark 2 will lead to the contraction of some metropolitan-based

industries, such as manufacturing, chiefly because of the appreciation of the Australian dollar: in this context, it makes little sense to pursue a high immigration policy which promotes rapid capital city population growth. The report seeks to illustrate this using a case study of Melbourne—if the current population enhancement strategy for promoting economic growth continues, the fiscal dividend the Commonwealth will reap from the resources boom will be squandered on ‘city building’. The authors assert that this money would be better spent on training the domestic workforce and investing in knowledge-intensive industries.

Dr Bob Birrell is a Reader in Sociology at Monash University; Dr Ernest Healy is a Research Fellow with Monash University’s Centre for Population and Urban Research; Katharine Betts is Associate Professor of Sociology at Swinburne University; and Emeritus Professor Fred T. Smith is a Professorial Fellow with the Centre for Population and Urban Research at Monash University.

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R. Bradfield, G. Wright, G. Burt, G. Cairns & K. Van Der Heijden, ‘The Origins and Evolution of Scenario Techniques in Long Range Business Planning’ ‘Futures’, Vol. 37, 24 May 2005, (Article). The article examines the history and practice of ‘scenario planning’ since its inception over thirty years ago, both generally and specifically (in the realm of business planning). The authors note the complexity of assumptions and techniques surrounding the subject, and conclude that this is almost certainly likely to continue. They note Martelli’s pessimistic 2001 analysis of this ‘methodological chaos’; nevertheless, they believe it is possible to resolve the confusion over definitions and methods. Accordingly, the article attempts this by tracing the evolution of scenario planning; classifying its methodologies into three main schools; and assessing the comparative strengths and weaknesses of these approaches.

The authors note the reasons behind the recent revival of scenario planning as a strategic planning tool (ICT being a central factor), examine its growth (mainly in the USA and Western Europe), and discuss the significance of seminal texts such as The Year 2000: A Framework for Speculation on the Next Thirty-Three Years by Herman Kahn and Anthony J. Wiener (1967). The report’s analysis of approaches to the subject draws on a three-part 1987 categorisation by by W. R. Huss and E. J. Honton: ‘Intuitive Logics’, ‘Trend-Impact Analysis’, and ‘Cross-Impact Analysis’.

The report also includes a discussion of the ‘La Prospective’ methodology as a contrast to the Anglophone character of these three approaches. Table 1 on pp. 807–808 of the article features a useful description of the salient characteristics of the main approaches. The authors conclude that an understanding of the key elements of a proposed scenario exercise—in terms of these categories and their purpose, strengths and weaknesses—is essential in maximising the usefulness of such work and minimising the confusion which has long bedevilled this activity.

Mr Bradfield and Dr Burt teach in the University of Strathclyde Business School; Professor George Wright is Director of Durham Business School; Professor George Cairns, formerly of the Durham Business School, is now Head of the RMIT University School of Management; and Emeritus Professor Kees Van Der Heijden retired as Professor of General and Strategic Management at Strathclyde University’s Business School in 2001.

S. Hajkowicz & J. Moody, ‘Our Future World: An Analysis of Global Trends, Shocks and Scenarios’, March 2010, (Report).The report presents the results of a CSIRO global foresight project which identified major challenges that the world’s nation-states, including the Australian polity, could face in the short-, medium- and long-terms. They are defined and described in terms of five global megatrends and eight substantial global risk areas (‘megashocks’). The authors see megatrends as being based on ‘the aggregation and synthesis of multiple trends’; a trend is defined as ‘an important pattern of economic, social or environmental activity that will change the way people live and the science and technology products they demand’ (p. 2).

The megatrends set out in the report have been devised by analysing more than 100 trends contributed by over 40 scientists and business development staff across the CSIRO to its Futures SharePoint website. On 17 August 2009, the trends listed on this website were reviewed and discussed at a workshop held in Sydney which was attended by over 30 leading CSIRO scientists and business development staff. At the workshop attendees identified 19 megatrends, and grouped, synthesised and reviewed them to produce the five interlinked megatrends. Drawing on the risk identification and assessment work of the World Economic Forum (see World Economic

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Forum, ‘Global Risks 2010’ below), the CSIRO Development Group running this exercise also identified eight major risk areas of particular importance to the future of Australia.

The five megatrends are: More from Less; iWorld; A Personal Touch; On the Move; and Divergent Demographics. The eight major risk areas are: Asset Price Collapse; A Slowing Chinese Economy; Oil and Gas Price Spikes; Extreme Climate Change-Related Weather Developments; Pandemic; Biodiversity Loss; Terrorism; and Nanotechnology Risks. This exercise is designed to inform a broad range of strategic science planning activities within the CSIRO and, after consultation with interested experts and stakeholders, to shape Australian government, industry and community decision-making.

The authors led a CSIRO Development Group responsible for devising an agenda for the organisation’s global foresight work.

Ipsos & KPMG, ‘Future Focus’, 2010, (Report).The study describes the outcomes of a structured research initiative involving Australian business and the wider community that sought out people’s views of the country’s future. On the basis that when asked about ‘the future’ responses are often shaped greatly by what is happening at the present time, the authors provided participants with two markedly different alternative scenarios of Australia in 2020 in an attempt to generate more accurate and detailed answers. The two conceptions were ‘Global Australia’ and ‘Measured Australia’.

The survey sample comprised a total of 12 interviews by both Ipsos and KPMG with the CEOs of some of Australia’s leading companies as well as interviews with 13 consumer groups (each represented by some five to seven people). The general finding was that opinions vary considerably about Australia’s future, although there is a strong and shared desire for a better understanding of what lies ahead for the country. ‘Global Australia’, which would involve a greater Australian commitment to, and engagement in, the global affairs, appealed strongly to senior corporate sector leaders. However, community groups and individuals were more comfortable with the idea of a ‘Measured Australia’, which would see Australians focus more on addressing the challenges the nation faces at home. Yet many business leaders and citizens found both scenarios to be limiting and wondered if a third way were possible.

In order to reach this goal, the authors insist that an ‘enormous’ task lies ahead for government and business in equipping Australians to be more adventurous; they speculate that a possible barrier continues to be overly conservative political and managerial leadership styles. At the very least, they conclude, Australia needs its sectors to collaborate more effectively in producing a structured framework for considering its future.

Ipsos is a leading survey-based marketing research firm. KPMG is a prominent consultancy and management company with a large involvement in survey and analysis work. Rebecca Huntley is the Director of The Ipsos Mackay Report, Australia’s longest-running qualitative social trends study. Bernard Salt is a KPMG partner.

R. Slaughter, ‘The State of Play in the Futures Field: A Metascanning Overview’, ‘Foresight’, Vol. 11, No. 5, 2009, pp. 6–20, (Article).The article describes the aims and findings of the first iteration of the international research project known as the ‘State of Play in the Futures Field’ (SoPiFF). It is a research initiative commissioned by the Seattle-based Futures Foundation. SoPiFF was developed in order to gain a greater understanding of the Futures field, and more importantly, to identify how it can better

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serve long-term global needs, especially in the realm of sustainability. Its first iteration occurred in 2007–08, the principal outputs so far being a series of written documents and a purpose-built website.

SoPiFF proceeded in four stages. During Phases 1 and 2 researchers collected Futures material from around the world and ran a structured scanning process on it. Over 200 separate scanning ‘hits’ on a variety of sources were identified (e.g. published works, personal contacts). The metascanning framework used in the project made possible an analytical approach to classifying Futures activity through the use of a set of incisive breadth and depth criteria. This scanning method was developed at the then Australian Foresight Institute. The third phase of the project consisted of analysis of results to produce a series of overviews of Futures work, at the regional level and in response to the key questions of the initiative. The final phase involved the preparation and submission of a final report.

The first SoPiFF metascanning project produced a number of noteworthy findings about the nature of Futures activity. One concerned the widespread lack of interest in, and capacity to address, the interior worlds of people in foresight and scanning exercises. The authors see this as an aspect of Futures work in need of special attention. They argue that Futures practitioners need to be better trained in taking account of the realm of human emotions when devising and evaluating their scanning; accordingly, they call for a new model for R&D for the field as well as a new framework for training and inducting new Futures practitioners.

Richard Slaughter is a Director of Foresight International (FI), a Brisbane-based futures forecasting/planning company.

World Economic Forum (in collaboration with Citi, Marsh & McLennan Companies (MMC), Swiss Re, the Wharton School Risk Center, and Zurich Financial Services), ‘Global Risks 2010: A Global Risk Network Report’, January 2010.This (annual) report was first published in 2006. Its origins lie in the work of the Global Risk Network (GRN), which was established in 2004 in response to a growing desire among World Economic Forum (WEF) members to better understand how global risks were interconnected, and the likely implications of these relationships over a ten-year time period. Through a process of research and consultation, the GRN defined the criteria for global risks and identified an initial set of risks, which has been expanded since the first such report appeared.

The report took on greater significance following the Global Financial Crisis, which highlighted the enormous potential systemic implications of risk management and the interconnected nature of global economies. Increasingly, in a fluctuating global economic environment, the objectives of the report—to build awareness of these factors and to offer a common framework for dialogue in dealing with them—have become more important.

The report identifies five principal areas of global risk: economic, geopolitical, environmental, societal, and technological. It describes them and provides details of ‘Drivers and Developments to Watch’ (pp. 38–45). It also reproduces the latest Risks Interconnection Map (RIM) (Figure 14), which sets out the results of the 2010 Global Risks Expert Perception Survey. The WEF runs the RIM every year to survey international experts in several disciplines on their views of risk interdependencies and relationships. The authors make seven recommendations for improving risk planning, including using frameworks that reflect risk interconnections rather than silo approaches, tracking emerging risks, and educating leaders and the public about real, rather than perceived threats.

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The World Economic Forum (WEF) is an independent global organisation founded in 1971 to promote good governance and improve economic and social outcomes for nations and citizens. It is based in Geneva.

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