First Mate: “Columbus, what’s that solid blue piece of paper?”
Columbus: “That’s my map!”
And The Crew Sings: “We are lost, we are lost, we are lost…”
The Columbus in this sketch from my days in college radio goes on to say that none should worry, “for we’ll draw the land bits in as we find them.”
When you live in the Uncertainty Paradox you are a Business Uncertainty Explorer.
Much of what we do to manage business uncertainty involves collecting and sifting data about consumers, competitors, trends, politics, technology – the list goes on and on. You can look at each bit of data as incremental detail that needs placing on your planning Map. Each ‘sighting’ (LAND HO!) adds to our understanding of the economic and marketplace landscape. Comments in the introductory Uncertainty Paradox post from several, including Brad, J.D. and LaVonn, reminded me of how difficult it can be, not only to collect data, but also to meaningfully interpret it.
Are you ready to sail when your Map is solid Blue? (Blue Skies smilin’ at me, nothin’ but Blue Skies do I see… come on everybody, hum.)
The concept of ‘No Regrets Moves’ Bill Welter introduced in his first Paradox post might help us set sail. It forces an analysis of the decision process as much as the decision. Can you make the wrong ‘No Regrets Move’? Yup. But I think ‘no regrets’ is defined by making the best move you can with the current information at hand while including a set of internal features that permits course correction as you learn more. Therefore, wrong moves are corrected rapidly and seen as learning events, not regrettable mistakes. Freeing, yes? Ready to set sail?
‘No Regrets Moves’ leverages nicely Kay Plantes push for building strategic flexibility to allow your business model to adapt to changing conditions. If you can’t predict exactly what the economic environment will bring then you have to be ready to react to the winds, storms and beautiful days as they come. Brings to mind how tossed so many of us are by the impact of Free on business models. Hang on, rough seas ahead.
The brass ring is to formulate models that can predict behavior. As more data is available these models become more and more complex. No matter how you manage information you are using a filtering system on the data in front of you, even if it is as simply-complex as gut feel. One could argue that Gödel’s Incompleteness Theorem is as true for any predictive model as it is of mathematics in general. (Ouch, I can hear the mathematicians’ cringe, give me a second to explain and then fire away.) The connection here is models are built on assumptions that make the model work, but the assumptions may not be provable or disprovable through operation of the model.
In other words: Your model doesn’t know what it doesn’t know, and you better remember that. (A blue map is perfectly happy being blue and feels no discomfort when your ship flounders on an unseen sandbank.)
How could we be misinterpreting incoming data?
- Arbitron ratings are shifting from a diary approach to an electronic tracking method. Radio stations had learned programing tactics to boost diary numbers that don’t work very well with the new method. Given the strain on the industry, was the way to get good diary numbers (maximizing advertising revenue) the best strategy to get real listeners?
- Mathematical modeling has it’s limits. The Gaussian copula function by David X.Li which claimed to model complex risk was adopted by most of the financial industry. It delivered a magic number that defined all the convoluted relationships and mysterious correlations involved in the complex transactions being created. It allowed for deals so complex that million dollar decisions were made based on faith in that formula. Miss-placed faith evidently.
- Psychographic data can help you brainstorm and target and it can also can turn your idea of customers into such a stereotype that opportunities are missed. I’ve seen products designed for the young go gangbusters with seniors, causing much confusion among the hipsters who thought they knew better. Well done research is very powerful, but understanding its weaknesses is critical to avoiding hubris.
I love this description of difficulties measuring risk in financial markets from a January 2009 Joe Nocera article in the New York Times:
“[Risk consultant Mark] Groz has his own way of illustrating the problem: he showed me a slide he made of a [risk] curve with the letters “T.B.D.” at the extreme ends of the curve. I thought the letters stood for “To Be Determined,” but that wasn’t what Groz meant. “T.B.D. stands for ‘There Be Dragons,’ ” he told me.”
The Feedback Loop — A Tool For Setting Sail, Avoiding Sea Dragons, and Correcting Course
What can stand as the business equivalent of sextant, star and compass? One of my primary tools is the Feedback Loop, which provides a consistent process of propose, implement, evaluate, and refine/revise/retire. It’s terribly simple, but that is usually for the better.
- Propose - Set direction and evaluation methodology. I wish to sail here, it should take me six weeks. I will find Land. What makes this promising six months from now, for what reasons would it be killed? I think Bill would say, “Sit Down And Think.”
- Implement – Rapid prototyping, inexpensive testing, no CYA research. Buy Supplies, load the boat, set sail. Find affordable tools to monitor and test assumptions. Implementation steps need to provide as much ‘real world’ evaluation power as possible. (Avoid Focus Group Confirmations.)
- Evaluate – Depending on the risk of further investment this step takes on various forms. Where are we on the map. Any green bits yet? Giant squid port side. The larger the investment the more serious the effort to disprove the momentum viewpoint must be. A hypothesis that is only tested in ways to prove it is right leaves you in the dark about ways it is wrong. Again from Bill – CHALLENGE.
- Refine/Revise/Retire- Every cycle should provide learning that is incorporated into the next Loop. Have someone involved who is a contrarian, devils advocate. Captain, we must change course. This step forces you to add the flexibility Kay wants to see in your business model and strategy.
This pretty much applies the scientific method to business planning (and personal life, if your so disposed – the tool scales well from the individual to the largest of projects) and is a critical element to be included in any knowledge based organization. It’s common sense, but honestly, can you remember the last time you applied something like this systematically and consistently? By establishing a Feedback Loop you reinforce the ability to make ‘No Regrets Moves’ because flexibility and course correction is built into the process. This doesn’t reduce the necessity to get decisions right, but it amplifies the ability to make decisions more timely.
The Feedback Loop also helps empower reaction to new marketing data at the lowest levels. If you are reacting at ground level, by the time a trend is a trend you already have created a solution that has gone through trial and error and can be rolled out fast. So even if it feels like your map is nothing but blue, the Feedback Loop puts in place the system you need to identify shoals, call out landmarks, track and change direction and most importantly, identify dragons.
In previous comments Terry said: “I guess the real paradox is being prepared and having a plan, but remaining open to inspiration.” So, I’m hoping the Feedback Loop can help keep your plan open to inspiration.
Are you using any tools that seem to work in a black-box sort of way to predict what the future holds?
Does the Feedback Loop sound useful to you? Have you used similar processes?
I wanted to thank everyone for your comments on the introduction to this series. My thinking is always being spurred forward with your challenges, additions, and corrections and is very much appreciated.
The Uncertainty Paradox Three business bloggers search for leadership, strategy and customer relationship insights and certainties in a world full of escalating uncertainties.
- Bill Welter’s Adaptive Strategies blog
- Kay Plantes Business Model Innovations Blog
- Fred Schlegel (You’re already here!)
Join the continuing conversation at each of our blogs as we explore the implications of the uncertainty paradox.