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Think:Act Magazine “The Unknown”
Margaret Heffernan on acting in times of uncertainty
The cover story offers a preview of the upcoming issue.
Why data alone isn't enough to be prepared in business
by Janet Anderson
Photos by Lorenzo Dalberto
Forecasting as we know it may be reaching its end. Business thinker Margaret Heffernan speaks to Think:Act about how preparedness can outpace prediction in today's increasingly complex world.
In times of great uncertainty our relationship with the future becomes strained. The usual ways we use to navigate tomorrow no longer work. Still in the middle of a pandemic which few were prepared for, we're just starting to grapple with the changes it has wrought and figure out what the new normal will look like – whenever we get there. How can businesses make good decisions at a time like this? In her book Uncharted – How to Map the Future Together, leading business thinker and author Margaret Heffernan offers a way forward. Drawing on examples from science, health care, the arts and politics, she says businesses should not put their faith in technology or forecasting alone, but should rather accept uncertainty and complexity and use their full human potential to explore and build the future together.
Why is the environment of heightened uncertainty created by Covid-19 difficult for business leaders?
Many businesspeople have grown up in a world of so-called scientific management – forecast, plan, execute, measure. Under this model, the aim of business leaders is to achieve maximum efficiency. But efficiency only delivers benefits to the degree that what you're doing is predictable. That doesn't work in an environment of great uncertainty. If you're very efficient, you don't have spare capacity. Then, when something like a pandemic comes along, you can't handle it.
What are the key characteristics of the current environment aside from uncertainty?
Margaret Heffernan is a former serial entrepreneur and CEO. The author of six acclaimed books on leadership, her exploration of the very human mindsets that can lead organizations and management astray is informed by her experience leading businesses in the highly competitive markets of the early internet as well as her background working in program production at the BBC. She is currently a professor of practice at the University of Bath.
The environment most businesses face today is complex, not just complicated. People think complex is just super complicated, but they're very different beasts. Complicated systems tend to be linear, with clear cause and effect, and predictable patterns. These can be managed for efficiency.
Think of when you fly. You check in, check your bag, board the plane, have an in-flight meal. All those processes tend to be provided by different companies and making it profitable for each of them is complicated, but it is pretty much the same every day, so making it efficient is an appropriate goal. But once I board the plane, I'm in a complex environment. We can't completely predict what's going to happen – whether there's a bird strike or a random weather event.
That's why planes are designed to be robust. They have more engines and operating systems than they need so that if there's a flaw in one, the whole thing doesn't fall out of the air. They are designed not just to be resilient – which means they can recover from an accident – but to be robust, which is to say they can keep going through an unpredictable event. For a business, it is essential to understand which of its systems are complicated and should be managed for efficiency, and which are both complex and so mission-critical that they should be managed for robustness.
Forecasting is a central plank of business planning. Why is that not the best way forward now?
One of the problems with the way that we think about the future is that we define it by the present, and that constrains our thinking. Look at retail. Since the advent of e-commerce traditional retail has been in a bloodbath. As retailers see revenues dropping, they put more items on sale, cut costs and compete as viciously as ever with their immediate rivals. All this has done is perpetuate the decline. Instead of starting from the present and extrapolating forward, the sector needs to confront the brutal reality of the market that they're in and find other ways of reaching and serving customers.
It's wise not to start from the present, with all the tools that got [you] there, but to think more divergently and more creatively. One way to do this is backcasting – imagine a future triumph, then work out how it might happen and what needs to happen today to create that future.
Businesses today are rich in data. How can they use this resource to navigate the future?
Data is central, but useless without imagination and creativity. Just because you can collect data about everything that your business touches, does not mean you understand your business or your customers any better. We have been sold this myth that humans are just collections of data and that if we analyze all the data, we'll be able to make decisions. Relying on data produces chronic indecision as there's always something missing. There's no such thing as a complete data set – and what gets left out may be the thing that's most important. A better way to understand where you are is to talk to people. It sounds very obvious, but it doesn't happen enough. Customer conferences and employee hackathons are useful tools [and] can yield a lot of reward because you're getting much more diverse input and real-world lived experience about where you are and where you could be going. These exercises also help make sense of the data.
How do you make sense of all this input?
In complex systems, data won't help. There are so many possible causes and effects that until you try it out in real life, you don't really know what's going to happen. This often involves accepting risk. With an experiment, you poke the system to see what happens if you do things one way instead of another. Even if it looks like your idea will fail, you still learn something new about the system you're in. In the Netherlands, for example, they had a neighborhood nursing system that allocated work through algorithms based on KPIs and targets. No one was happy with it. Then a nurse called Jos de Blok suggested letting the nurses themselves decide what needed doing for their patients. The experiment succeeded – patients got better in half the time and costs were reduced by a third. De Blok has founded a company based on the idea, called Buurtzorg . The key is that they acknowledged the humanity in the work and focused on the outcome. The data alone would not have fixed the problem.
How do you decide what sort of experiment to run?
It's about identifying different possible futures. We know that we don't know what the future will be like, but we think it could be this or that. The question is, if scenario A turns out to be the case, what would we wish we'd have been doing right now? We ask the same question for scenario B. We develop a menu of options. Some will be too risky for an unlikely outcome. Some may turn out to be a good basis on which to experiment. Scenario planning is a fantastic exercise to prime leaders to look more broadly and discursively at what could happen to their organization and to come to terms with uncertainty. It also helps you pick up on weak signals from things that could have a major impact.
What skills and tools do you need to carry this out?
Many senior people struggle because they are too imbued with the current system. Younger people are better at it, as are people who play a lot of computer games. In many ways, every game is a scenario planning exercise – let's see what happens if I turn left ... oh no, I get shot. Okay, back up: Let's see what happens if I turn right. It's about not being afraid of what your imagination might show you. The process involves collecting huge amounts of data and insights. Then you work in teams to craft scenarios. What do we think really matters?
Then you ask, if this were where we were to find ourselves, what would we want to do? The oil company Shell famously did this in the early 1970s – they asked what would happen if oil prices fell. At the time, nobody thought this could ever happen. But they saw circumstances in which it could happen and said, if it did, what would we want to do and what would we wish we had been doing now? When oil prices did fall in 1973, Shell was ready and weathered the change easily. With scenario planning you might be able to make outside forces work to your advantage. It requires thinking imaginatively, and that is harder than people expect.
How do these approaches help us meet the big challenges we face?
People talk about "the new normal," but I think many just want to go back to an old normal and are likely to be disappointed. We're going to emerge from the pandemic into an economic crisis which we don't [yet] fully understand, an inequality crisis which we can see but don't know how to tackle and a climate crisis which we are already in. However, I think we have come to understand the interdependence between business and society and [the need for] a healthy connection between what an organization does, what it takes from society and what it puts back in. For example, in order to have a useful workforce there need to be educated people in the population with safe places to live, a safe means of getting to and from work and access to solid information. Companies should recognize that they benefit from all these things. This wider view is pushing toward a better integration between organizations and the societies that they serve.
Which companies are succeeding at mastering the current challenges?
I couldn't point to one that has done it perfectly because everybody's still trying to figure this out. But I think the need to deal with hugely complex issues has made people realize that participation is key to decision-making – people who bring lived experience, because the essence of good decision-making is not just the decision itself, but how it is reached. Take citizen assemblies. Even the people who don't like the outcome can accept it because they see the decision-making process has been fair. It isn't carried out by a few ideologically driven individuals; it's transparent, open and informed. We are facing some tough decisions, so there has never been a time when we've needed that more.