September 22, 2010 by wca Staff


Innovation is the key to business success but is always associated with risks. However, risk aversion can be just as damaging to future success as taking unnecessary risks. Consequently, coherent and holistic business risk management has to be a core component of any business strategy. The pace of scientific discovery, understanding and innovation today is unprecedented. Horizon scanning is a process by which organisations can keep abreast of these developments in order to maximise their potential and mitigate their negative impacts.

Evidence-based Horizon Scanning

Horizon scanning is now widespread in the UK, across business, government departments and agencies (King and Thomas 2007)[1]. In some cases Horizon Scanning has failed to live up to its initial promise and is seen as bureaucratic, resource intensive, remote and unproductive. However, correctly applied, Horizon Scanning can ensure that the right questions are asked at the right time. It can significantly add value to the business by contributing to correctly prioritised research, evidence-based policy, efficient operations and robust planning.

Continuous “Evidence-based” horizon scanning identifies and tracks developments across the breadth of science and technology (e.g. journals, news and opinion articles, blogs, conference proceedings and patent applications), searching for “weak signals” of disruptive innovation, the so-called Black Swans of Black Swan Theory (Taleb 2007)[2], as well as patiently accumulating a weight of evidence to substantiate indicators of more gradual change. This is a “bottom-up” approach, driven by the evidence collected and the opposite of “top-down” examples of horizon scanning that focus on particular topic areas. wca's consultants are practitioners of Evidence-Based Horizon Scanning of Science, Technology, Policy and Regulatory Issues affecting the environment.

Evidence-based horizon scanning is a form of forecasting. Rescher (1998)[3] summarises two main elements of a good forecast – good questions and good answers.

  1. Good forecasting questions should be important, interesting, resolvable and difficult. In other words, a question should be about a tractable, non-trivial phenomenon, where much could be gained or lost depending on the answer (Crane 2001)[4].
  2. Good forecasting answers should be correct, accurate, relevant and detailed. In other words, an answer should provide a specific, preferably quantitative answer to the question (e.g., when and where, Crane 2001).

Evidence-Based Horizon Scanning falls frequently into the category of “trend projection” with the main aim being to detect a trend at an early stage in its development. The weight of evidence collected is intended to identify and prioritise important trends. Equally it can “test” current trends that are being extrapolated for potential disruptive elements.

The wca approach

wca adopts a three stage interactive approach to the analysis of emerging issues. Stage one is to contrast a client’s business with emerging issues in environmental science, technology, policy and regulation in order to identify the key challenges the client is likely to face during the next 10-20 years. Following discussion with the client, Stage two is to identify the opportunities associated with each challenge, both in terms of options available to mitigate the perceived challenge, or to identify novel areas of business. These are again subject to discussion and agreement with the client. In Stage three, we work with the client to apply Multi Criteria Decision Analysis (MCDA) to identify those challenges and opportunities that should take priority in order to maximise short and medium term business benefit and minimise negative business impact.

The following example shows how the process operates using a generic UK Water Company as a case study.

STAGE 1 CHALLENGE ANALYSIS

The first step is to contrast the business operations of the company with the multitude of different environmental challenges that exist today, taking into account their direction of travel (i.e. is the challenge increasing or decreasing in strength). Table 1 shows the result of this type of analysis.

STAGE 2 OPPORTUNITY IDENTIFICATION

Following discussion of the challenges with the client the next stage is to identify potential opportunities arising from the challenges. These might be areas where challenges could be reduced or eliminated by proactive actions or where a business opportunity might be exploited. This work is undertaken in two steps: after an initial evaluation of the opportunities (Table 2) further detailed work is undertaken on potentially interesting candidates (see (Table 3). It is not unusual for a very wide range of possible opportunities to emerge at this stage in the analysis and the final stage in the analysis is to prioritise these opportunities (and threats)

STAGE 3 OPPORTUNITY PRIORITISATION

Deciding on priorities frequently involves the assessment of multiple and disparate factors some of which can be monetised and some of which cannot. This complexity can often lead to stagnation and indecision. However, the assessment of priorities can now be facilitated using Multi Criteria Decision Analysis (MCDA) tools. wca, working with the client can use MCDA techniques to explore the various opportunities available using a range of uncertainty factors. This can produce a priority list of those projects which are likely to be the most successful and have the best rate of return.

Acknowledgement

This work was carried out by two wca staff members Peter Simpson and David Taylor

References

[1] King, DA, Thomas SM. 2007. Taking science out of the box – foresight recast. Science 316:1701–1702.

[2] Taleb NN. 2007.The Black Swan: The Impact of the Highly Improbable 2007. Random House, New York

[3] Rescher N. 1998. Predicting the Future: An Introduction to the Theory of Forecasting. State University of New York Press, Albany, NY.

[4] Crane M. 2001. Limits to forecasting in environmental toxicology and chemistry. In: Rainbow PS, Hopkin SP, Crane M (eds.) Forecasting the Environmental Fate and Effects of Chemicals. Wiley, Chichester, UK pp 7-24.