What Is Backcasting And Why It Matters In Business

Businesses use backcasting to plan for a desired future by determining the steps required to achieve that future. Backcasting is the opposite of forecasting, where a business sets future goals and works toward them by maintaining the status quo.

Understanding backcasting

Inevitably, backcasting will prompt every business executive to ask themselves one question:

”Where do I want this business to go, and how does it get there?”

Here, it’s important to reiterate that backcasting does not involve predicting the future. Rather, the approach endeavors to figure out how a desirable future can be attained. At the company level, backcasting encourages stakeholders to think creatively and imagine all possible scenarios.

Indeed, it was creative thinking that resulted in Henry Ford inventing the mass-produced motor car. Ford was compelled to act because horses – the primary means of transport at the time – were producing large amounts of manure in cities all over the world. 

Businesses in the horse transport industry might have suggested lighter carriages or faster horses. However, Ford envisaged a future without horses where people would move around by private motorized transport. History will show that horse transport ceased soon thereafter, but the important point is that Ford created a future goal and worked backwards to figure out how he might achieve it.

A typical framework for the backcasting process

There is no designated framework for implementing the backcasting process, but it is often associated with the ABCD method. Originally developed as a tool for businesses to move toward sustainability, it has now been adapted for general use.

The ABCD framework has 4 components:

  • Assessment. What industry-specific trends might impact an organization? Is there technology still in the prototype phase which might go into full production? In the assessment component, businesses must assess their role in the industry and develop ambitious goals and visions.
  • Baseline assessment. This details how well a business is currently equipped to meet its vision. Does it have proprietary technology? Does it have a pipeline of future projects? What about a sound and sustainable business model? It’s important to gain clarity on these questions because they will drive future innovation.
  • Creative solutions. Now that a future strategy has been defined, it’s time to brainstorm ideas to make the future a reality. Many successful ideas for innovation come from employees and not from the board level. However, if the required expertise does not exist within the business then a joint venture or recruitment drive should be considered.
  • Devise a plan. There are certain steps that any business can take for immediate impact, but these are mostly short term. Long-term projects or major changes of direction within a company need similarly long-term goals. In industries with a high rate of technological development, lean product development with constant iteration and adaptation is a worthy strategy.

Key takeaways

  • Backcasting involves working backward from a desired future to determine the steps needed to get there.
  • Backcasting helps businesses stay relevant in a rapidly changing world by encouraging creative thinking and innovation.
  • Backcasting is based on the ABCD component framework. This gives businesses a holistic view of their operations and the industry as a whole before they develop a plan detailing future growth.

Connected Analysis Frameworks

Cynefin Framework

The Cynefin Framework gives context to decision making and problem-solving by providing context and guiding an appropriate response. The five domains of the Cynefin Framework comprise obvious, complicated, complex, chaotic domains and disorder if a domain has not been determined at all.

SWOT Analysis

A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.

Personal SWOT Analysis

The SWOT analysis is commonly used as a strategic planning tool in business. However, it is also well suited for personal use in addressing a specific goal or problem. A personal SWOT analysis helps individuals identify their strengths, weaknesses, opportunities, and threats.

Pareto Analysis

The Pareto Analysis is a statistical analysis used in business decision making that identifies a certain number of input factors that have the greatest impact on income. It is based on the similarly named Pareto Principle, which states that 80% of the effect of something can be attributed to just 20% of the drivers.

Failure Mode And Effects Analysis

A failure mode and effects analysis (FMEA) is a structured approach to identifying design failures in a product or process. Developed in the 1950s, the failure mode and effects analysis is one the earliest methodologies of its kind. It enables organizations to anticipate a range of potential failures during the design stage.

Blindspot Analysis

A Blindspot Analysis is a means of unearthing incorrect or outdated assumptions that can harm decision making in an organization. The term “blindspot analysis” was first coined by American economist Michael Porter. Porter argued that in business, outdated ideas or strategies had the potential to stifle modern ideas and prevent them from succeeding. Furthermore, decisions a business thought were made with care caused projects to fail because major factors had not been duly considered.

Comparable Company Analysis

A comparable company analysis is a process that enables the identification of similar organizations to be used as a comparison to understand the business and financial performance of the target company. To find comparables you can look at two key profiles: the business and financial profile. From the comparable company analysis it is possible to understand the competitive landscape of the target organization.

Cost-Benefit Analysis

A cost-benefit analysis is a process a business can use to analyze decisions according to the costs associated with making that decision. For a cost analysis to be effective it’s important to articulate the project in the simplest terms possible, identify the costs, determine the benefits of project implementation, assess the alternatives.

Agile Business Analysis

Agile Business Analysis (AgileBA) is certification in the form of guidance and training for business analysts seeking to work in agile environments. To support this shift, AgileBA also helps the business analyst relate Agile projects to a wider organizational mission or strategy. To ensure that analysts have the necessary skills and expertise, AgileBA certification was developed.

SOAR Analysis

A SOAR analysis is a technique that helps businesses at a strategic planning level to: Focus on what they are doing right. Determine which skills could be enhanced. Understand the desires and motivations of their stakeholders.

STEEPLE Analysis

The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.

Pestel Analysis

The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.

DESTEP Analysis

A DESTEP analysis is a framework used by businesses to understand their external environment and the issues which may impact them. The DESTEP analysis is an extension of the popular PEST analysis created by Harvard Business School professor Francis J. Aguilar. The DESTEP analysis groups external factors into six categories: demographic, economic, socio-cultural, technological, ecological, and political.

Paired Comparison Analysis

A paired comparison analysis is used to rate or rank options where evaluation criteria are subjective by nature. The analysis is particularly useful when there is a lack of clear priorities or objective data to base decisions on. A paired comparison analysis evaluates a range of options by comparing them against each other.

Related Strategy Concepts: Go-To-Market StrategyMarketing StrategyBusiness ModelsTech Business ModelsJobs-To-Be DoneDesign ThinkingLean Startup CanvasValue ChainValue Proposition CanvasBalanced ScorecardBusiness Model CanvasSWOT AnalysisGrowth HackingBundlingUnbundlingBootstrappingVenture CapitalPorter’s Five ForcesPorter’s Generic StrategiesPorter’s Five ForcesPESTEL AnalysisSWOTPorter’s Diamond ModelAnsoffTechnology Adoption CurveTOWSSOARBalanced ScorecardOKRAgile MethodologyValue PropositionVTDF FrameworkBCG MatrixGE McKinsey MatrixKotter’s 8-Step Change Model.

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