Update 16/04/09: I changed one important word in the title. I, initially & wrongly, called it The Value of Knowing What You Don’t Know. A logic flaw now done away with.
Calling someone a know-it-all clearly has a negative connotation. And yet, when it comes to business, in many organizations it’s clearly an advantage to be perceived as a person who knows it all. Or at least everything about his or her particular domain.
Think about how many business books and coaches advice you to always portray a high degree of certainty. A self-confident demeanor is seen as one of the keys to success. And, as a matter of fact, it actually is. As human beings we are all prone to falling for convincing performances — on Broadway as well as in meetings — since we have a natural tendency to strive for security.
Yet, these psychological tendencies make us vulnerable to fallacies.
In our increasingly complex world certainty in general as well as decision-making with high degrees of certainty became nice theoretical constructs but little more. They are simply not achievable in practice. For instance, take a look at the challenge which digitization (or any technology that is rapidly changing a given industry) presents to many companies. It’s more likely than not that anybody who claims he knows for sure what your business has to do in order to capitalize on the newest digital development is either straight out lying or simply — and, luckily, from my experience more likely— overestimating his own knowledge.
Why is that a problem? In simple systems, we can generally assume a high predictability of future events (e.g. you have a 1 in 6 chance to predict the next number on a die roll). Yet the more complex a system gets (that is, the number of variables and/or their potential values which you have to factor into your predictions increases ) the less likely you are to get your predictions right. Welcome to the real world! So, if you are a ‘decision-maker’, this simply means: You are quite likely to get it wrong a lot of times.
This in itself isn’t a problem. It happens to all of us. However, it turns into a problem as soon as you become overconfident in your own knowledge and, thus, decisions. In business — as maybe in most areas of life — challenging yourself and the status-quo of your business constantly is key to longevity. As the world outside changes, you either change with it or you will become expendable. Adapt or die, as they call it.
In other words: When making decisions, there is real value in knowing that you don’t know everything because it
a) keeps you from wrongly forming a self-image of being impeccable and
b) in doing so helps to create a dynamic where you regularly scrutinize yourself.
This is, by the way, true on both a personal and organizational level.
As troubling as uncertainty may appear to some, it is a fact of life. Even though some people hope to change this (it would be such a shame though if they succeeded! After all, isn’t the uncertain what keeps life interesting?!), we have to deal with it for the time being. And this is what it comes down to: How do you handle uncertainty? How do you talk about it? Do you have practices in place that allow you and your co-workers to address uncertainty without panicking?
I will briefly share a few ideas — some of which we use in our company as well as in client projects — and point you into the direction of some interesting ideas others came up with:
- Accepting blind spots
As is the case with so many things. the topic of uncertainty also starts with your culture. Is your organization largely driven by security? Do you need (or, if you are the CEO, ask for) reports from three to ten consultancies before any (somewhat) major decision is being made? When I talked about organizations that incentivize you to portray yourself as ‘omniscient’, did you think: “That’s us!”? Let me make an educated guess: If you answer those with ‘yes’, you have a rather uncertainty-averse culture in place.
If you want to start addressing the issue of uncertainty, establishing an organizational mindset that accepts blind spots is essential. The people in your organization need to understand that those can often not be avoided — or at least it would be very expensive and inefficient in many domains — yet mustn’t be swept under the rug but openly dealt with.
2. Talking about uncertainty
How do you influence culture? Communication is key. We often use phrases like ‘do we assume this or is it a fact’ or ‘this is our best bet, yet a bet nonetheless’. As CEO, I personally make sure to use language that tackles what is unknown to me. This allows my colleagues to do so as well. Also, besides this meta-communication, we explicitly talk about our philosophy regarding the issue during onboarding as well as regularly in meetings.
We also use this approach when dealing with clients. We don’t pretend to know things that we don’t know (of course, I can only advise you to do this if you actually know a lot ;)). This might strike you as awkward — after all we are a consultancy — but I found that it delivers better results in the long run. We are firm believers in our expertise and approaches. But things exist in this world which we don’t know and we address those openly whenever they touch one of our projects. Especially in a young, super-interdisciplinary field like ours, nobody with any sense of reality expects you to know everything.
I think this approach works so well because in behaving that way, trust in your knowledge is even bigger the times you actually state something with certainty. Also, our customers experience less nasty surprises. Things usually go wrong, as is the case in most projects, but at least we didn’t tell them that it couldn’t happen. To me, this is just good business practice but from what clients tell me, it’s not necessarily common.
(Also, I wonder if this might be a German thing. After all, we are the ‘country of engineers’ and probably more likely to the false assumption that everything can be calculated.)
3. Real empiricism instead of bogus predictions
By no means I want you to be under the impression that I’m opposed to measuring and empiricism. The opposite is true. However, much effort, energy and money is wasted on inaccurate forecasts. Then, decisions are being made based on those, simply because they exist and thus represent a fallback for the decision-maker. It would probably be smarter to simply throw that money off your roof.
What I advocate instead is real empiricism which — in many cases —means to measure after-the-fact. Roll-out your pilot initiative but define the real, critical KPIs beforehand, measure them strictly and decide how to progress based on the results. Instead, what I witness a lot is the opposite. Many resources are being put into forecasts. Yet, once an initiative is launched, it is often avoided to look too closely at their performance. Which makes sense, when your organization views suboptimal outcomes as failure. Which leads me directly to the next point.
4. Dealing constructively with failure
I recently read the following statement: “Being a good business person is about making more right decisions than you do wrong”. Sounds right to you? Well, the logic behind the it is actually flawed. Why? Because the quote doesn’t factor in the decisions’ respective payoffs/costs. You can be very successful based on only one good decision with a huge payoff even though all your other decisions were rather bad — but only resulted in small loses each.
Therefore, making mistakes is not only to be tolerated, it is to be seen as vital because it is
a) the direct result of things happening and new stuff being tried and
b) almost necessarily part of the journey to discovering the next big thing
Okay, that’s some nice theory, but how do you incorporate it into your daily business? Well, there are several things you can do, for instance:
- Create a fail camp format in your company
- As a leader, talk openly about your own mistakes
- Make mistake-sharing part of your regular meeting routines.
5. Agile project management methods
Agile project management became increasingly popular within the last few years. Much has been said about it and there are many great resources available online to get into it. All I want to do here is point out that at it’s core agile is about dealing with uncertainty. Instead of assuming that everything can be correctly planned from the get-go, as waterfall planning and other methods do, it acknowledges the existence of randomness and unpredictability.
Some further links:
6 Strategies For Dealing With Uncertainty In Business
A few years ago, my son graduated college and asked me to back him financially so he could launch a business.What…
Closely related to the topic above is the issue of antifragility. Take a look at these two pieces — the former a summary of Nassim Taleb’s equally titled book, the other my piece on antifragile organizations
Nassim Nicholas Taleb on Accepting Uncertainty, Embracing Volatility - Knowledge@Wharton
The defining characteristic of future change, according to Nassim Nicholas Taleb, is that it is impossible -- and…
The Antifragile Organization
In this essay I explore what Nassim Taleb’s thinking about systems, randomness and fragility vs. antifragility means…
And, last but not least, some more input on dealing with uncertainty on a personal level: