This is the start of a series of FSG strategic foresight blogs on what we call cross-impact analysis. More than a single, discrete methodology, it’s a way of thinking about the future that looks beyond the trends that in the present moment appear all-defining and permanent. In this initial entry FSG senior advisor (and founding principal) Charles Thomas discusses the origins and value of a specific cross-impact tool.
One of the analytical tools introduced by FSG’s predecessor organization The Futures Group (TFG) in the late 1970s was Trend Cross-Impact Analysis (TIA). In the early days of futures work, much forecasting was dependent on extrapolating past and current trends that could be expressed numerically.
Ted Gordon, FSG’s founder and an aerospace engineer by training, saw the shortcomings of trend extrapolation. To Ted, these two assumptions were problematic:
- That conditions underlying trends would continue into the future indefinitely and
- That no new (and unforeseen) events in the future would affect the trend extrapolation.
Ted’s solution to these dilemmas was to incorporate a modified version of Monte Carlo simulation into future research. He was familiar with Monte Carlo analysis from his engineering work, in which probabilities of system failures could be calculated by running thousands of simulations.
How TIA Works in Strategic Foresight
In the first iteration of TIA, a trend – say an energy price curve – would be extrapolated using regression, time series or econometric models. Then a panel of experts would be asked to identify exogenous factors – for example, world economic conditions, political turmoil in producer countries, other supply issues – that might affect energy prices. Eventually, panel members would estimate degree of impact, whether the impact was positive or negative, when it would start, and then time to maximum effect. The Monte Carlo was run again with the new impacts inserted into the run and thus generate new estimates and probabilities.
TIA was a revolutionary improvement on trend extrapolation. The trends rarely, if ever, showed the same results as the simple extrapolative run. Ted Gordon and other TFG principals were wise enough not to call this a forecast of the future. Instead, they used TIA to jump start conversations with clients about how the future may be different and what kinds of factors should be tracked.
Eventually, the whole process was improved so that the TIAs of energy prices could be run with other TIAs (such as subsidies for drilling, or instability in the Middle East) and a far more complex image of future uncertainties emerged. However, Trend Cross-Impacts emerged at TFG as much more than just one more method to sell to clients – it formed one of the cornerstones of the TFG approach to studying the future. It was not just that trend extrapolation is a poor technique, but rather that one must find ways to study how various trends and exogenous factors interact in an array of cross-impacts to define the future.
Contributions to Scenario Planning
FSG’s entire approach to scenario planning – using what’s called a “characteristics matrix” to qualitatively imagine and stipulate cross-impacts of future trends and events, leading up to coherent scenario worlds – is based on TIA philosophy.
Trend Cross-Impact Analysis reminds us (without getting into mystical butterfly effects) that no trend is a power unto itself. That all trends and events work in concert shaping the future and that those cross-impacts can be described and understood. It is why we believe that managing future uncertainty is actually possible while attempting to predict the “strategic” future is a fool’s errand.
Thanks to FSG associate Robert Avila for his contributions to this piece.
Great essay and interesting TIA flashback. These days one naturally wonders if expert AI “agents” would have a useful and productive role to play in identifying and estimating trend impacts.
Thank you for this, Tom. Your account of the roots of TIA—and their application to scenario planning—are fascinating.
I find that one consequence of training myself to think about cross impacts is that it immediately exposes the weakness of almost any reference to “the future.” That weakness is the reflex of considering a given subject as if it existed in a world all its own, beyond the reach of other factors. This is especially true of successful businesses that grow used to thinking about the elements of their traditional operating environment and can’t imagine anything else.
When I think about any industry that has undergone abrupt change what leaps out again and again is the transformative impact of something no one saw coming. A good example is the tobacco industry, which ignored changing social attitudes toward smoking until it couldn’t any longer. What had been a commonplace—and glamorous—habit among adults rapidly became associated with negative stereotypes. And cigarette makers couldn’t do anything about it.
Thanks for this one, Tom.
I really appreciate this series. It pokes me to be more thoughtful and incisive about the uncertainties in the world around us.