Thriving in Radical Uncertainty
Listen, Reflect and Harmonise
Radical uncertainty requires a new approach to strategy and future planning, one that is tuned both to the larger environment and to the internal reality of the organisation and then seeks to harmonise the two as they both continue to change.
John Kay defined radical uncertainty as something that cannot be modelled using the traditional tools of probability. This is because we not only do not know what the outcome will be, but we do not even know the factors that will determine the outcome. This is because we not only do not know what the outcome will be, but we do not even know the factors that will determine the outcome. He points out that we may not even know what the problem is and, consequently, our solution to the problem may be completely off.
The Covid-19 pandemic is an amplifier of the radical uncertainty that has been building for some time now. Even before the virus hit, we were facing a host of challenges across all aspects of our lives that are interacting with each other in ways we don’t even see yet. Now all that uncertainty has been turned up to 100. Signals of what is happening come and go in an instant. Each one often conflicting with the previous one. Trends appear, mutate and disappear with dizzying speed. For the most part we don’t even have a way to frame what is happening because we are too caught up in the confusion and fear of the moment.
Even in radical uncertainty, companies need to have a strategy and be able to deliver on it. How is that possible if, as Kay said, we don’t even know what kinds of things will happen in order to model them?
While we may not know what to model, we do have a framework for understanding how radical uncertainty appears and is resolved. Everyone talks about paradigm shifts but what really matters now is understanding that radical uncertainty is connected to paradigm shifts — you cannot separate one from the other. The model of paradigms, as popularised in the English-speaking world by Thomas Kuhn, offers a way of contextualising radical uncertainty as a paradigm shift. If what we are experiencing at this moment is a paradigm shift, then there is an approach that can help companies develop effective strategies and refine them as the situation changes.
Some of what follows may seem similar to other strategic approaches, the difference is the narrative that underpins the approach. Generally, we “do strategy” assuming that the past is a guide to the future and that we are operating in a relatively stable environment. This approach, however, assumes that there are varying degrees of radical uncertainty and that this shift in uncertainty is the result of two processes interacting in a complex way: the collapse of a paradigm (going toward maximum uncertainty) and the emergence of a new paradigm (going toward maximum certainty). This approach is built around three, interrelated themes:
● Listen
● Reflect
● Harmonise
Listen
The radical uncertainty of a paradigm shift is a subtle thing built on the constant interplay of the collapse of one paradigm and the emergence of another. In order to find a strategic position, companies need to develop a sensitivity to the environment in which they operate. By researching and analysing the wider world, we can begin to identify where we are in the paradigm process.
If we are closer to the beginning of the collapse, the uncertainty is increasing. This was the situation in the music business at the turn of the century. The digitisation of music, the emergence of the Internet and the increasing tension between music audiences and those who owned the rights to the music all created uncertainty. New technologies and platforms (Napster, Shazam, Gnutella etc.) came and went. The copyright wars raged and new business models were developing at a dizzying pace. In that period, despite the rhetoric, no one knew what the future would look like. During this period, change was happening, but it was too chaotic and uncertain to predict anything other than the old music industry model was going to change radically. It would no longer be about selling scarce physical objects, such as records and CDs.
At a certain point, there are signs of certainty. New models, technologies and products appear and begin to hold on. The iPod and iTunes was one sign of this in the music industry. There are signs of a new paradigm appearing as customer demand becomes clearer, technologies stabilise and the competitive landscape starts to consolidate. This is the emergence of a new paradigm and, with that, an increase in certainty.
This admittedly thumbnail sketch of the music industry over the last 25 years illustrates the need to listen to the environment, not only the company’s immediate market sector, but further afield. As paradigms collapse, barriers break down and suddenly music labels are competing with technology firms, such as Apple and YouTube/Google. The listening also means knowing what to listen for and not be taken by the heat of the moment.
Reflect
In order to be able to use the insight that is gained from listening, companies need to have the ability to absorb the information and to be able to use it. This requires a level of adaptability within the business, allowing it to pivot as needed. In order to be able to do this, companies need to be aware of their own inner capacities, resistances and abilities. In addition, there are specific characteristics that leaders and businesses need to have that enable them to respond to the collapse of the old ways of thinking and doing. These characteristics are related to the ability to see the situation as an “outsider”, someone who is outside the company and the industry and can look at things with different eyes. The analysis here looks at how the company handles mavericks, stepping outside the box and experimentation.
The activity of the reflect phase is very similar to traditional business analysis, looking at the company’s processes, technologies, capacities and financials.The difference, like in the listening phase, is in the focus of the analysis. Because paradigm shifts are dynamic and there are varying levels of uncertainty, the assessment is looking for flexibility and novelty, on one hand. On the other, it is looking for signs of rigidity and brittleness, for example, in supply chains or processes. All this gives the company an insight into how they are positioned to respond and, ultimately, to thrive in the paradigm shift.
Reflecting is an honest, neutral assessment of the business. There is no judgement in what is discovered. The processes, resources and practices the company has may have led it to its current success. In any event, they are the response to the environment that was. Now it is about finding what will work today, and then what will work tomorrow, which will be different from today. As a result, the company needs to look at how ready it is to give up old processes, roles, customers, products and models. Also, are there people with the right skills and attitudes for this time in place, particularly in leadership?
Harmonise
Harmonising is about creating an inner environment that is able to respond to the paradigm shift’s changing levels of uncertainty. Practically, it is the action plan focused on closing the gap between what was discovered in the Listen and Reflect exercises. The Harmonise phase consists of a series of sharply targeted projects. Each project should be short, up to 100 days long, and address a specific change or improvement that can help align the business to either be more adaptive in general or to pivot to be in line with the specific moment in the paradigm shift. The outcomes of these projects are then fed back into the Listen and Reflect exercises, refining the analysis and understanding. From this, new Harmonise projects can be identified.
As would be expected, the activities here entail a level of risk and uncertainty in themselves. This is inevitable and needs to be expected. In some ways, these projects are closer to the classic start-up situation, with its emphasis on nimbleness and experimentation as opposed to a traditional program or project that can rely on a level of predictability to reduce risk. For example, bringing in outsider views can be destructive instead of disruptive. Fear can, as I have written before, stop any change in its tracks if not managed carefully. Ultimately, the business has to have a certain level of faith in itself, in its creativity, commitment and competence. While there may not be any way to predict the outcome of a paradigm shift, with the right internal organisation and external sensitivity, it is possible to adapt and thrive in even the most radically uncertain times.
