backcasting

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 Business Concepts

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market-analysis
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agile-business-analysis
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Business valuations involve a formal analysis of the key operational aspects of a business. A business valuation is an analysis used to determine the economic value of a business or company unit. It’s important to note that valuations are one part science and one part art. Analysts use professional judgment to consider the financial performance of a business with respect to local, national, or global economic conditions. They will also consider the total value of assets and liabilities, in addition to patented or proprietary technology.
competitor-analysis
It’s possible to identify the key players that overlap with a company’s business model with a competitor analysis. This overlapping can be analyzed in terms of key customers, technologies, distribution, and financial models. When all those elements are analyzed, it is possible to map all the facets of competition for a tech business model to understand better where a business stands in the marketplace and its possible future developments.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"