We know a lot about the future. We can’t predict it precisely but we can often see the general contours of what’s coming. With a little imagination, we can prepare for it. We just need a structure to hang our imagination on.
As an example, let’s take organizations that are undergoing rapid and/or stressful change. We know a lot about such organizations. We know, for instance, that:
I could go on but you get the picture. We also know that organizational change happens in three phases. At least, that’s what the theorists tell us. Here are four different models of the change process (here, here, here, and here). They use different descriptors but all four describe three distinct phases of change. Note that the middle phase is a trough – that’s where the going gets tough.
The trick to preparing for the future is to start imagining it before we get to the trough. Change managers refer to the trough with words like frustration, depression, resistance, and chaos. It’s not a good time for imagining.
So we start the imagination process in Phase 1. We’re still cool, calm, and collected. We can think more or less clearly – especially if we’ve studied critical thinking. We can think about the future dispassionately and plan how we want to behave.
We sit down in groups and discuss the issues we can anticipate in Phases 2 and 3. We know, for instance, that we’re likely to hear contradictory messages. How do we want to behave when we do? What can we do now to outline “best behaviors” for the stress created by contradictory messages? What can we do to ensure that we actually implement the best behaviors? What else might happen in the trough? How do we want to behave when it happens? We talk, discuss, debate, imagine, and agree.
We then write down what we’ve agreed to. In effect, we’re writing a memo from our current selves to our future selves. From our cool, calm, dispassionate selves to our stressed and anxious future selves. We make clearheaded decisions in Phase 1. When we get to Phase 2, we can refer back to our own wisdom to help govern our actions
I call this process Structured Imagination™. What we know about the future gives us the structure. We use the structure to focus our imaginations. We imagine what will happen and how we’ll behave when it does. This prepares us for the hurly burly of change and also vaccinates us against many of the ill effects of the trough.
Structured Imagination is not a perfect process – the future may still throw us a curve every now and then. However, I’ve used the process with multiple clients and they say that they face the future with greater confidence and clarity. That’s pretty good. If you’d like me to do a Structured Imagination workshop with your organization, just drop me a line.
When I teach critical thinking, I don’t focus much attention on the environment that we’re thinking in. We learn how to identify assumptions, assess evidence, understand our biases, and reach rational conclusions. The assumption in all this (and it’s a big one) is that these critical thinking processes will work in any environment.
But will they? What if you’re working in a VUCA environment? VUCA is a trendy acronym that originated in military planning circles. How do we teach our military leaders to make good decisions in environments that are Volatile, Uncertain, Complex, and Ambiguous? In a VUCA world, the environment in which we make decisions comes to the fore and may overshadow our thinking processes.
Indeed, in a VUCA world, one might conclude that planning, strategy, logic, and critical thinking are useless. As Nathan Bennett points out, even experienced business leaders are tempted to conclude that, “Hey! It’s a crazy world out there! What’s the use of planning?” (See also here).
Interpreting VUCA as one thing can indeed be overwhelming. But VUCA isn’t one thing – it’s four things. The first step in dealing with VUCA is to analyze which elements are most salient. Then we can adjust our strategy accordingly.
Let’s look at each of the four elements of VUCA:
Volatile – things are changing quickly. We need to understand the dynamics, speed, and direction of change. Just because the environment is volatile, however, doesn’t mean that it’s unpredictable. Disruptive innovations, for instance, create volatility but not uncertainty. If we understand the dynamics of disruption, we can make remarkably good predictions.
Uncertain – the environment is unpredictable; surprises happen all too often. Note that uncertainty doesn’t necessarily imply volatility. For instance, our society is certainly changing but the pace is rather slow. What’s uncertain is the direction of change.
Complex – there are a lot of moving parts and it’s not quite clear how they’re connected or how they interact with each other. It’s impossible to tell what will happen if I flip this switch or pull that lever. We regularly see this in political and economic debates. Will lowering taxes lead to greater growth and, therefore, higher tax revenues? Well … it’s complicated. Note that complexity is not the same as uncertainty or volatility.
Ambiguous – the signs are not clear and it’s easy to misinterpret what’s actually happening. We may confuse cause and effect. For instance, people who own their own homes are less likely to commit crimes. So, a government might institute a program to help people buy their own homes with a goal of reducing the crime rate. But what if we’ve confused cause with effect? What if people who don’t commit crimes are more likely to own their own homes rather than vice-versa? Cause and effect are often ambiguous. It’s useful to study them closely.
Taking VUCA as a single, integrated phenomenon can lead to a sense of futility and hopelessness. If the world is entirely random and chaotic, what can we mere mortals do? The trick is to decompose VUCA into its component parts. Analyze each component and then start plotting a strategy. (More on this in future posts).
VUCA environments call for a good dose of fluid intelligence to complement the crystallized intelligence in your organization. They also require a strong dose of critical thinking. Indeed, the more VUCA your environment, the more critical becomes critical thinking.
Why is milk always at the back of the grocery store? Because of the precursor of Big Data. Let’s call it Little Data.
Retailers have always studied their customers’ behavior. An astute observer is just as valuable as mountains of data. In the era of Little Data, grocers noticed that shoppers usually waited until they needed several items before going to the store. Milk was different, however. If a household were out of milk, a family member would go to the store for the express purpose of buying milk – and only milk.
Once grocers noticed this, they moved the milk to the back of the store. Shoppers who came in only for milk might notice several other things they needed (or wanted) on the trip through the store. Rather than buying one item, they might buy half a dozen. By relocating the milk, the grocer could sell more.
What happened next is instructive. Once one grocer figured out the pattern and moved the milk to the back, all other grocers followed suit. I’ve verified this in at least a dozen countries. The milk is always at the back. No grocer can establish a competitive advantage by putting the milk at the back of the store.
What does this have to do with strategy? I’ve always subscribed to Michael Porter’s insights on the difference between operational effectiveness and strategy. In his classic article, What Is Strategy?, Porter defines operational effectiveness as doing the same things as competitors but doing them better. Strategy, on the other hand, means, “… preserving what is distinctive about a company. It means performing different activities from rivals or performing similar activities in different ways.”
In the era of Little Data, we could figure out simple things like how consumers buy milk. Now, in the era of Big Data, we can identify much more subtle patterns in much greater detail. However, the underlying dynamic doesn’t change. Once one company figures out a new pattern, every one of its competitors can also implement it. As Porter points out, “…the problem with operational effectiveness is that best practices are easily emulated. … competition produces absolute improvement in operational effectiveness, but relative improvement for no one.”
Big Data, then, is about operational effectiveness, not strategy. Yet when I read about Big Data in management journals, I sense that it’s being treated as strategic weapon. It’s not. Companies may have to invest in Big Data to keep up with the Joneses but it’s never going to be a fundamental differentiator or a strategic advantage. It’s time for Big Companies to wise up about Big Data.
There’s a widespread meme in American culture that guys are not good at making commitments. While that may be true in romance, it seems that the opposite — premature commitment — is a much bigger problem in business.
That’s the opinion I’ve formed from reading Paul Nutt’s book, Why Decisions Fail. Nutt analyzes 15 debacles which he defines as “… costly decisions that went very wrong and became public…” Indeed, some of the debacles — the Ford Pinto, Nestlé infant formula, Shell Oil’s Brent Spar disposal — not only went public but created firestorms of indignation.
While each debacle had its own special set of circumstances, each also had one common feature: premature commitment. Decision makers were looking for ideas, found one that seemed to work, latched on to it, pursued it, and ignored other equally valid alternatives. Nutt doesn’t use the terminology, but in critical thinking circles this is known as satisficing or temporizing.
Here are two examples from Nutt’s book:
Ohio State University and Big Science — OSU wanted to improve its offerings (and its reputation) in Big Science. At the same time, professors in the university’s astronomy department were campaigning for a new observatory. The university’s administrators latched on to the observatory idea and pursued it, to the exclusion of other ideas. It turns out that Ohio is not a great place to build an observatory. On the other hand, Arizona is. As the idea developed, it became an OSU project to build an observatory in Arizona. Not surprisingly, the Ohio legislature asked why Ohio taxes were being spent in Arizona. It went downhill from there.
EuroDisney — Disney had opened very successful theme parks in Anaheim, Orlando, and Tokyo and sought to replicate their success in Europe. Though they considered some 200 sites, they quickly narrowed the list to the Paris area. Disney executives let it be known that it had always been “Walt’s dream” to build near Paris. Disney pursued the dream rather than closely studying the local situation. For instance, they had generated hotel revenues in their other parks. Why wouldn’t they do the same in Paris? Well… because Paris already had lots of hotel rooms and an excellent public transportation system. So, visitors saw EuroDisney as a day trip, not an overnight destination. Disney officials might have taken fair warning from an early press conference in Paris featuring their CEO, Michael Eisner. He was pelted with French cheese.
In both these cases — and all the other cases cited by Nutt — executives rushed to judgment. As Nutt points out, they then compounded their error by misusing their resources. Instead of using resources to identify and evaluate alternatives, they invested their money and energy in studies designed to justify the alternative they had already selected.
So, what to do? When approaching a major decision, don’t satsifice. Don’t take the first idea that comes along, no matter how attractive it is. Rather, take a step back. (I often do this literally — it does affect your thinking). Ask the bigger question — What’s the best way to improve Big Science at OSU? — rather than the narrower question — What’s the best way to build a telescope?
The first time we went to Cirque de Soleil, we took Elliot and a bunch of his 12-year-old buddies. After all, circuses are for kids, right? As it turned out, Suellen and I enjoyed the show just as much — maybe more — than the kids did. I didn’t expect that.
Cirque de Soleil is an excellent example of a mashup innovation. Traditional circuses were for kids. I remember going to Ringling Brothers with my folks. I was dazzled by Uno — the man who could do a handstand on one finger. My parents were troupers but I don’t think they were dazzled. They took me because … well, circuses are for kids.
On the other hand, Broadway musicals are from grownups. They have a bit of a story to follow, they have some conflict, perhaps some mushy stuff, and a resolution. Most of all they have singing. This is where young kids start squirming. I mean, really … how many seven-year-olds want to know that when you’re a Jet, you’re Jet all the way?
The genius of Cirque de Soleil is that it mashes up the traditional circus — get the kids — with Broadway musicals — bring the grownups, too. There’s enough of a story to appeal to Mom and Dad and enough cool (and weird) stuff to appeal to seven-year-olds. It’s family entertainment for modern city dwellers.
While Cirque is a great mashup story, it may be more than that. According to W. Chan Kim and Renee Mauborgne, it’s also a great example of a Blue Ocean Strategy. For Kim and Mauborgne, there are red oceans and blue oceans. A red ocean is full of the blood of competitive strife — it’s red in tooth and claw. The red ocean represents a market of a given size. It’s not going to get any bigger so the only way for one company to grow is to make another company shrink. Strategy is all about defeating the competition rather than winning the customer. As Kim and Mauborgne point out, the market for traditional circuses was very much a red ocean.
A blue ocean, on the other hand, allows you to jump beyond the competition. You create something new and, in doing so, you create a new market where your traditional competitors are irrelevant. The authors offer some great examples of blue ocean strategies and some intriguing and very instructive tips for how to develop one. For Kim and Mauborgne, the genius of Cirque de Soleil is that they have leapt out of the red ocean and into a blue ocean where they rule the waves. Indeed, they’re the only ship in sight.
I’ll report on more blue ocean examples in future posts. At the same time, however, I have a nagging feeling that a blue ocean is not that different from the classic marketing strategy of creating a new category. Once upon a time, for instance, sedans were practical but not much fun to drive. (For my British readers, what Americans call a sedan, you call a saloon). On the other hand, sports cars were fun to drive but not very practical. Then BMW mashed up the two categories and created a sports sedan — practical yet fun to drive. Was the BMW sports sedan a new category or a blue ocean? I’ll report more on that in the future. No matter what you call it, however, mashups are a great way to get there.