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:


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.

Backcasting example: Patagonia

One example of where backcasting has been used is in Patagonia’s Common Threads Initiative to change traditional consumption models in the fashion industry.  

Patagonia is an American clothing retailer founded by climbing enthusiast Yvon Chouinard in 1973 who saw initial success by selling reusable climbing pitons and Scottish rugby shirts. Over time Patagonia also became a fashionable brand also for its focus on slow fashion. Indeed, the company sells high-priced clothing items built to last which it will repair for free.

Launched in 2011, the initiative is a sustainability pledge that encourages customers to reduce consumption, repair what they already own, reuse and recycle clothing, and finally, to buy only what they need.

Patagonia used backcasting to envision a desirable future state and then work backward to identify the steps that would enable the company to reach it. Primarily, the company envisioned a future where its customers would value sustainability over consumerism and where the company’s products would have a longer lifespan.

Since this example is related to sustainability, let’s use the ABCD framework to describe how Patagonia achieved its vision.

Assessment (A)

Patagonia has always acknowledged that the fashion industry harms the environment. 

Natural fibers such as wool and cotton can be water-intensive, while the production of synthetic materials like polyester and nylon emits GHGs, contributes to plastic waste in marine environments, and consumes around 1% of all crude oil production.

Baselines assessment (B)

Patagonia’s impact on the environment is not as significant as fast-fashion companies, but the company understood that there was still room for improvement. 

Central to the Common Threads Initiative was the idea that the company’s popular R2 fleece jacket required 135 liters of water to produce – an amount equivalent to the daily needs of 45 people. What’s more, transportation of the jacket from its origin to the company’s Nevada warehouse generated 24 times the jacket’s weight in carbon dioxide emissions. 

Ultimately, despite the jacket being made of 60% recycled polyester, it came with a cost to the environment that was higher than the cost to the consumer. The R2 jacket was thus symptomatic of problems with Patagonia’s business model and indeed its mission to become a sustainable company.

Creative solutions (C)

Patagonia thus decided that it had to change its business model. In the process, it shifted from one that encouraged customers to buy more products to one that promoted repairing and reusing what they already owned. To a lesser extent, the company’s business model also became supported by the Worn Wear second-hand marketplace. 

Patagonia also instituted a repair service to enable customers to extend the lifespan of their items. What’s more, it launched a recycling program where customers could return their used products and the company would either repurpose or recycle them.

Accompanying the reduce, repair, reuse, and recycle message was Patagonia’s famous Don’t Buy This Jacket marketing campaign. Released in conjunction with Black Friday sales, the company explained that it wanted to be in business for the long term and emphasized that consumerism threatened the viability of the Earth and future generations.

The campaign was also creative in the sense that Patagonia urged customers not to buy its products unless they needed them: “We ask you to buy less and reflect before you spend a dime on this jacket or anything else.

Devise a plan (D) 

Patagonia’s backcasting approach involves short-term measures that become long-term values. Consumers encouraged to repair or reuse items develop sustainable habits over time, and in the process, become part of a sustainable society in which the company can continue to thrive. 

All these measures maximize the time Patagonia clothing is functional and minimize its dependence on what it calls “virgin petroleum-based materials”. In fact, in the most recent update, the company noted that 87% of the polyester fabric in all Patagonia clothing was made from recycled materials.

Moving forward, Patagonia’s plan is based on business model innovation and radical transparency. The company’s anti-consumerist stance and somewhat counterintuitive values have also made it a pioneer in the industry.

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

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.

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.

Business Valuation

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.

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.

Monte Carlo Analysis

The Monte Carlo analysis is a quantitative risk management technique. The Monte Carlo analysis was developed by nuclear scientist Stanislaw Ulam in 1940 as work progressed on the atom bomb. The analysis first considers the impact of certain risks on project management such as time or budgetary constraints. Then, a computerized mathematical output gives businesses a range of possible outcomes and their probability of occurrence.

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.

CATWOE Analysis

The CATWOE analysis is a problem-solving strategy that asks businesses to look at an issue from six different perspectives. The CATWOE analysis is an in-depth and holistic approach to problem-solving because it enables businesses to consider all perspectives. This often forces management out of habitual ways of thinking that would otherwise hinder growth and profitability. Most importantly, the CATWOE analysis allows businesses to combine multiple perspectives into a single, unifying solution.

VTDF Framework

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.

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.

Comparable 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.

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.

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.

Business Analysis

Business analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.

Financial Structure

In corporate finance, the financial structure is how corporations finance their assets (usually either through debt or equity). For the sake of reverse engineering businesses, we want to look at three critical elements to determine the model used to sustain its assets: cost structure, profitability, and cash flow generation.

Financial Modeling

Financial modeling involves the analysis of accounting, finance, and business data to predict future financial performance. Financial modeling is often used in valuation, which consists of estimating the value in dollar terms of a company based on several parameters. Some of the most common financial models comprise discounted cash flows, the M&A model, and the CCA model.

Value Investing

Value investing is an investment philosophy that looks at companies’ fundamentals, to discover those companies whose intrinsic value is higher than what the market is currently pricing, in short value investing tries to evaluate a business by starting by its fundamentals.

Buffet Indicator

The Buffet Indicator is a measure of the total value of all publicly-traded stocks in a country divided by that country’s GDP. It’s a measure and ratio to evaluate whether a market is undervalued or overvalued. It’s one of Warren Buffet’s favorite measures as a warning that financial markets might be overvalued and riskier.

Financial Analysis

Financial accounting is a subdiscipline within accounting that helps organizations provide reporting related to three critical areas of a business: its assets and liabilities (balance sheet), its revenues and expenses (income statement), and its cash flows (cash flow statement). Together those areas can be used for internal and external purposes.

Post-Mortem Analysis

Post-mortem analyses review projects from start to finish to determine process improvements and ensure that inefficiencies are not repeated in the future. In the Project Management Book of Knowledge (PMBOK), this process is referred to as “lessons learned”.

Retrospective Analysis

Retrospective analyses are held after a project to determine what worked well and what did not. They are also conducted at the end of an iteration in Agile project management. Agile practitioners call these meetings retrospectives or retros. They are an effective way to check the pulse of a project team, reflect on the work performed to date, and reach a consensus on how to tackle the next sprint cycle.

Root Cause Analysis

In essence, a root cause analysis involves the identification of problem root causes to devise the most effective solutions. Note that the root cause is an underlying factor that sets the problem in motion or causes a particular situation such as non-conformance.

Blindspot Analysis


Break-even Analysis

A break-even analysis is commonly used to determine the point at which a new product or service will become profitable. The analysis is a financial calculation that tells the business how many products it must sell to cover its production costs.  A break-even analysis is a small business accounting process that tells the business what it needs to do to break even or recoup its initial investment. 

Decision Analysis

Stanford University Professor Ronald A. Howard first defined decision analysis as a profession in 1964. Over the ensuing decades, Howard has supervised many doctoral theses on the subject across topics including nuclear waste disposal, investment planning, hurricane seeding, and research strategy. Decision analysis (DA) is a systematic, visual, and quantitative decision-making approach where all aspects of a decision are evaluated before making an optimal choice.

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.

STEEP Analysis

The STEEP analysis is a tool used to map the external factors that impact an organization. STEEP stands for the five key areas on which the analysis focuses: socio-cultural, technological, economic, environmental/ecological, and political. Usually, the STEEP analysis is complementary or alternative to other methods such as SWOT or PESTEL analyses.

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.

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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