June 01, 2016

Don’t fight the future, whatever it turns out to be

By Kevin McDermott, Founder of Collective Intelligence and FSG Associate, and Charles Thomas, FSG Managing Principal

Even before 19th Century ended the clipper ships that dominated international freight were fighting the future.  And the future was steam. Clipper-ship lines responded with sail, lots of sail, culminating in the spectacularly weird Thomas W. Lawson. More sail kept clippers afloat several decades longer, but by the early 1900s they were gone from any meaningful role in the international economy.

It is cruel to acknowledge that the highest barrier to managing strategic change is often the very success of today’s business model.  The reason is that the model was engineered to control the operating environment the organization thinks it has, not the one that is about to arrive.

Sociologists use the term "crescive change" to describe profound alteration to the world that is invisible because the change is happening little by little in every moment.  In retrospect such change appears spontaneous.  Consider the rapid adoption of the Internet as a consumer technology in the 1990s, which quickly seemed like a death threat to brick-and-mortar retailers (not to mention developers of shopping malls, who must be feeling like clipper-ship executives these days).

Big threats and big opportunities derive not from the things an organization ought to control but from the things it will never control.

Smart is not enough. At the nadir of the 2008 financial crisis Angelo Mozilo, CEO of the giant Nationwide mortgage bank, observed to his investment banker, "Everyone looks to history to interpret the present and predict the future.  This is unlike anything I thought even three months ago."*   Weeks later Nationwide collapsed.

In hindsight we all agree the financial crisis should not have surprised anybody.  But it did.  The immediate response in big-think management circles was a vogue for the words “flexibility” and “adaptability”—words not useful for defining strategic lodestars and at best reactive.  At worst they presume an ability to shape external forces that cannot be shaped.

In modern organizations executives get promoted for completing assigned tasks.  They are trained to measure performance by the degree of control they exert over specific parameters.  That’s why most strategy projects tend to be data driven.

Believing we can come up with numerical proxies creates the comfort of a false precision.  We recall, for instance, one client who asked for “notional” numbers to help think about scenarios we were building.  Within 20 minutes the idea of “notional” was out the window.  These were now facts about the future.

There is no data about the future.  In most planning activities there are only assumptions derived from the familiar.

Strategic and tactical. Thinking strategically about the future isn’t just about being smart.  It’s about being focused and multifarious at once, strategic and tactical simultaneously.

There are organizations that have trained themselves to do this habitually—GE is one, IBM another.  Their approach to strategic exploration is to think about what might happen in the wide world that is beyond their control.  That gets them thinking about new demands from customers.  What would success look like then?  And what might make them fail?

Most organizations struggle to think this way.  Senior leadership is often uninterested in huge departures from their current strategic view, especially if the current strategic view seems to work just fine.

Ego can be involved, of course.  Even more likely is that senior leadership just can’t imagine the non-existence of their organization.  Everything about professional managers strains toward a faith that external events can be controlled.  They’ve been educated in the suppression of surprise, and compensated to the degree that they appear to succeed in that.  When surprise happens, as it always will, the response is too often to diminish or misinterpret its significance.

In the press of managing a business, organizations need structured approaches for peering over the horizon.  We don’t mean fortune telling.  We mean an expansive, wide-awake openness to new perspectives on mutable operating environments.

Alternative futures. Leaders ought to be confident enough in their own authority to encourage open conversation about ambiguity.  This implies the free expression of discomfiting ideas, within the organization and outside of it.

Military officers, working inside strict hierarchies and most of them educated as engineers, do this really well, precisely because the lines of authority are clear.  For armed forces, contending with the future that comes, not the one they wish had come, is a matter of life and death.

In the military it is common to employ an approach to scenario planning called “alternative futures.”  It’s the approach we favor.  Alternative futures are competing stories about what the world beyond an operating environment will look like ten years out or even further.  The competing worlds are plausible but unfamiliar at the same time. They are designed to be prickly and difficult to navigate.  They prepare an organization to contend with surprise by giving it unfamiliar problems to solve.

The point of alternative futures is not to pick the future you think most likely; whichever pick you make will be wrong in important ways.  The point is to derive unanticipated insights that are credible across multiple futures.  That allows the organization to see its priorities whole, not as a collection of options.

The alternative-futures approach is definitely not intended to build a case for where the world is going.  The farther out in time one goes with such a prediction the more likely one is to be seriously mistaken.  In some contexts that can be literally fatal.

In the case of the clipper ship Thomas W. Lawson, for example, it was driven onto hidden rocks by wild winds in 1907.  All hands drowned but for the captain and his engineer.  Tell you anything?

*“Angelo’s Ashes,” Connie Bruck.  The New Yorker, June 29, 2009, pp.46-55.

Thoughts?