Designing for Uncertainty
The last month has brought with it a new level of uncertainty about the future. Old assumptions no longer hold true as organizations scramble to make sense of their current situation and wonder what lies around the corner. In many ways, the “normal” that exists on the other side of COVID-19 and the economic downturn will look radically different than today’s normal.
And while we can, with a good degree of certainty, predict that the world will look different, we don’t yet know in what ways it will change. Even so, there are a few indicators that show us what we might expect:
- The economy will function in new ways (call this a depression, recession, recovery, or massive deficits).
- The way organizations are structured and operate will change to reflect those new ways of functioning.
- The things/ideals people value/elevate will change because of the pandemic and economy.
- The mindsets that drive customers to engage (and spend) with brands will shift.
These indicators can lead to seismic shifts that will force your organization to radically change in order to stay relevant. My friends at Praxis, a social entrepreneurship accelerator program, predict that once COVID-19 subsides and the economy finds its footing, that 80% of organizations will find that their current playbook doesn’t work anymore. This includes their product offering, model, and team structure.
This means that the bulk of organizations are currently executing on strategies that may not work post-COVID-19. And, even if nothing changes for an organization, they are plotting a course into the future with large degrees of uncertainty. In either scenario, organizations are designing in the midst of crisis and chaos, while navigating towards an unknown.
So, how does an existing organization manage to see through the fog of uncertainty while also planning for an unknown future?
There are four key activities every organization should be doing right now:
Conserve: keep only what you need in order to survive.
Adapt: explore ways to sustain your organization in the current situation.
Innovate: design new products, services, and offerings for existing and new customers.
Shift: change internal cultures, brand perceptions, and a narrative to reflect the new reality.
I am going to explore each in this post with the bulk of the emphasis on Innovate since this is the hardest to work towards during times of crisis and uncertainty and where our work at FiveStone centers.
Keep only what you need in order to survive.
Most experts believe that a post-COVID-19 world includes some form of recession. But, because of the unknown nature of how long the pandemic will last, or how long the recession might last, or how the recovery will unfold, there is some uncertainty on how exactly to react.
Organizations need to conserve in the short-term to ensure their long-term future. This is mainly what we see happening now as organizations cut spending, reduce their team, abandon physical spaces, etc.
Explore ways to sustain your organization in the current situation.
Once the necessary conservation measures are in place, organizations start to adapt to the current reality. They look for ways to generate revenue by conducting business in new ways. This might look like forced adaptation (e.g., cities are closed, so everyone is now officing from home) or reactionary adaptation (e.g., quickly pivoting on your strategy so that it temporarily works, like a dine-in restaurant moving to delivery-only).
Some organizations, like those in the travel and hospitality business, will have a harder time adapting. Even so, they are still looking for ways to sustain their business through pre-selling their services for future use, subsidies, etc.
Designing new products, services, and offerings for existing and new customers.
The innovation process is one that all organizations should engage with at all times, not just when they are forced to change. If this is not one of your organizational strengths prior to this cultural moment, now is the time to start. The challenge we all face is that innovating during times of crisis and uncertainty is particularly challenging.
I will lay out four steps organizations can take during crisis moments and that hedge against uncertainty.
Step One: Evaluate your situation and risk tolerance
The first thing is to evaluate how vulnerable you think your organization is to the unknown future and how much you need to change to remain sustainable. If our starting assumption is that most organizations will need to change, then the risk assessment needs to examine the risks of not changing anything, making minimal changes, and making major changes. Regardless of what your actual risk tolerance is, you will need some level of risk acceptance in order to manage through crisis and uncertainty.
Setting your risk tolerance allows you to identify the ways in which you will explore the new future. The design agency, IDEO, talks about growth in terms of managing, evolving, extending, or creating areas of growth. This can be a good tool to help set your risk tolerance and frame the conversation for innovation.
Do you want to only make a few adjustments (manage)? Make larger changes to your existing model and strategy in order to attract new customers (evolve)? Create something new for your existing customers (extend)? Or, do you want to reimagine your entire offering (create)?
For a simple example, let’s look at a restaurant that serves a small neighborhood. They are currently open only for dinner and dine-in seating.
Manage: Update pricing to include specials of the day.
Evolve: Open for lunch to draw in the business crowd.
Extend: Offer delivery services to the neighborhood.
Create: Rent a “ghost kitchen” in a new part of town and offer delivery-only options.
Likely, when you evaluated how to conserve and adapt you focused on innovation that falls into the manage quadrant. As an example, you quickly cut underperforming products and services, scaled-up offerings that were relevant, and perhaps thought of new ways to use existing products to help your existing customers. This is great for organizations with a low risk tolerance and short-horizons for change.
However, most organizations will want to start thinking about longer-term changes. This means that your innovation work will need to fall in the evolve, extend, and create quadrants. Of course, this takes a higher tolerance for risk. But so does not thinking big enough.
Step Two: Inventory your assets
Over time, every organization has accumulated a set of assets. These are the starting blocks and tools you can use to build the future. These assets include things such as financial and social capital, infrastructure, intellectual property, business pipelines, trusted partners, existing contracts, physical space, and team.
These assets help you conserve and adapt to the current situation. But, not all assets will translate to the new future. They may end up being tools that worked only in your old playbook.
In this step, you are simply taking an inventory count. Not evaluating the value of those assets in the future, you will do that later in Step Four.
Step Three: Acknowledge your assumptions
Just like your organization has accumulated a set of assets, you have also built much of what you do from a set of stated or unstated assumptions. These assumptions drive how you think and operate.
These assumptions might sound like “people want to gather in large groups,” or “my product is in a category all by itself,” or “we will always need an office,” or “people use our service because they trust us.”
Use the following categories and list 2–3 key assumptions in each:
- Assumptions about your unique value proposition(s)
- Assumptions about your competitors
- Assumptions about your audience needs
- Assumptions about your distribution channels
- Assumptions about your operational expenses
To help, start with your asset list and ask yourself why you have that asset. What assumption drove you to, for example, move your supply chain overseas? Or, why did you sign a seven-year lease on an office space? Or, why did you build a strong sales team of consultants?
Step Four: Sketch your range of futures
In uncertainty, part of the job of innovation is to imagine a set of possible futures that could impact your organization. By imagining multiple futures (no more than 4–5 discreet options) you eliminate a binary view of decision making while also removing the temptation to wait until you have enough information in front of you to start planning.
An example of a few futures sets that an organization might build would be:
- A new set of laws change how our industry is regulated
- Supply chains regularly closed for long periods of time
- Changes in consumer mindsets make our existing product no longer relevant
- Digital platforms change the way we conduct business
Within each future set ask:
- What is prompting the imagined future to exist?
- What are the biggest areas of uncertainty?
- What opportunities might exist for you?
- What barriers are there?
Challenge your assumptions
As you think through the futures, you can challenge your existing assumptions and evaluate how well you think each might hold up in each imagined future. Something like “people use our service because they trust us and so we built a strong team of sales consultants” may very well hold up. But, if you are in the business of live events, will an assumption that people will still want to gather in large groups hold up in your sketched future?
The point isn’t to definitively say “yes” or “no” to each assumption, that’s impossible. Instead, challenge the assumption. A few challenger questions:
- Was our organization built on this assumption?
- How important is this assumption to our current strategy?
- If we were to start our organization today, would we build off this assumption?
- Once the moment of crisis is over, will we still hold this assumption?
With that said, some assumptions you are holding will need a tighter grip. These are the core assumptions that shape your vision, mission, and values. (Be careful not to confuse your mission and your strategy.) These core assumptions should stay and will help shape your view of the future and your strategy within it.
Innovate during crisis
As you start to answer the questions that frame your future sets, you will want to start a process by which you can evaluate new ideas and strategies that will work within each future set. A typical innovation process (such as Stanford’s d.school process) will work great. Work through some form of this process for each of your 4–5 future sets.
Typical innovation methods operate within some structure of known parameters. During a crisis, however, many of those parameters are no longer well defined. This makes the process more challenging. Hold the process loosely and adjust to accommodate the reality of your situation, keeping a few things in mind.
First, when talking to potential customers during a moment of crisis, you will want to keep in mind that they are also facing uncertainty. This means that whatever you observe is clouded by their own set of fears. So, particularly during crisis, fieldwork and analysis must be carefully designed and executed to move past the heightened feelings of uncertainty.
This may also mean that you present prototypes that work well in the current state but that you can easily imagine working in your future state. For example, prototyping something in a digital space that could also work in a physical environment. Or, a pricing model that works in multiple future sets, including if nothing changes.
Next, it will be tempting to look at trend lines emerging during the crisis and ideate around those. For example, in COVID-19 while people are staying at home, there is a huge demand for tools that connect people virtually. Will those trends stick after the crisis? One way to evaluate this is to determine if this trendline existed pre-crisis. If so, then maybe that trend will continue. If not, then perhaps it is just a blip so tread lightly.
Work towards the future
As you finish your innovation process, map valid ideas back to your future state and start outlining what new assets you might need and what assumptions will hold up.
If the shift to move to the new future is large enough, you may choose to start building a strategy for it now. The point is to act quickly once more of the future comes into focus or to have such a strong starting point that you can actually shift the market into your future set.
Based on what you learned during the innovation process, edit and add to the answers you outlined at the beginning of step four and while adding a few more:
- What signals in the market indicate a future set is more likely?
- What are the points that trigger your organization to respond?
- Which of my current assumptions hold up and which don’t?
- Which of my assets are helpful and which will I no longer need?
- What new assets will you need to build?
Once you work through all four steps, for each future you should be able to organize your thoughts into a structure that looks like this:
- Name of future
- Hypotheses that leads to this future
- Areas of uncertainty
- Areas of opportunity
- High-level strategic intent for operating in that future
- Triggers that make this future more and/or less likely
- Target customer in this future
- Products, offerings, services that our organization can offer
- Barriers to operating in this future
A global non-profit and a new future
FiveStone works with a global non-profit that has been executing against the same basic strategy for the last 40 years. Their strategy involves a team of speakers (asset) that conduct small and large-scale in-person events (assumption) to deliver content (asset). Over the past 24 months, we have been leading some light innovation work with them to help move them to a digital offering (evolve/extend). Any other strategic shift that did not use their current assets, or work with their current assumptions, was off the table.
On a recent call discussing COVID-19 and the weeks ahead for them, we talked through their risk tolerance, assets, and assumptions. In doing so, the organization was able to self-realize a few things:
- Their tolerance for risk is much higher now than it was just a few weeks ago because they realize that their core assumption (gathering people) is going to change.
- Their primary asset (the individual speaker) is still valuable.
- Until COVID-19, they had only explored a single future where their current primary asset could still work.
With a global pandemic and an economic crisis the innovation team now has internal permission and buy-in to explore additional, multiple futures.
This doesn’t necessarily mean that they abandon their strong assets. But, in their case, it does mean that their driving assumption may no longer hold true. Even though their mission stays the same, the assumption that drives their strategy changes.
So, the big question for them now is, what futures can we see that need new assumptions and will our assets work if that future plays out?
Change internal cultures, brand perceptions, and a narrative to reflect the new reality.
At some point, the time will come to march forward into your new future. This will require making shifts that bring your organization and customers into your new reality.
This needed shift will vary based on what comes out of the previous steps. But, typically it looks like internal change management, developing a new set of metrics, building the right team, and updating external communications (e.g., narrative, branding, marketing, etc.).
Massive opportunity exists for those organizations that start the shift now, versus waiting for normalcy to return. Ask yourself, how you might shift culture and brand perceptions during these moments of uncertainty. This may highlight aspects of your vision that aspire, encourage, and offer hope to your audience.
I have taken three phone calls this week where organizations were forced to face COVID-19 head-on because it directly impacted their strategy (now and in the future).
Organization One had already been making strategic shifts that allowed them to quickly pivot their strategy within days. Organization Two had already been making some slight shifts towards rethinking their strategy. And, even though they were not prepared for the disruption, they were able to fast-track their existing innovation projects and are much further ahead than their competition. Organization Three, unfortunately, did not value innovation prior to this and was forced to cut losses and move on. However, as they are moving on, they are using the frameworks above to better prepare them for the future.
Of course, no one can predict the future. But, some are better prepared. If the other side of COVID-19 looks the same as before it started then, good news, you have gone through the valuable exercise of stress-testing your strategy and learning something valuable along the way. If it is different, then you will be much further ahead and could emerge as a leader in your space.
Contact us to talk about revisiting your core strategy and designing a future set that gives your organization greater resiliency and positions you to take advantage of new opportunities.
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This article by Praxis warns of a 12–18 month “ice age” and encourages every organization to think like a start-up. This served as the starting point for writing this post and an attempt to build on their thinking.
For more about creating a strategy during uncertainty, check out this McKinsey article which shaped the thinking of this post.