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.

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-business-model — 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.