It’s all about uncertainty

In a world of increasing commoditization we are forced to consider ever more ambitious and outside-the-norm ideas.  With that comes greater ambiguity and risk.

In an earlier post we discussed types of  risk.  It’s time to return to that topic and discuss ways we can reduce risk when implementing change in projects which contain heightened ambiguity.

The knowability of risk

The conversation in the previous post asserted that not all risks are equal.  Some risks we know a lot about.  For example, a cola manufacturer producing another flavoured drink pretty much knows the risks involved in launching the new product.

Risks such as:

• expected market demand,
• packaging alternatives,
• amount of required marketing spend,
• distribution strategy,
• etc.

have been solved in the past so they know the kinds of questions they need to answer and how to best find those answers.

Having done it many times they have developed standardized procedures for asking and answering these questions – standard roles and procedures that speed them to optimal results.   In cases such as these, the risks are largely knowable.

Knowable Risks

What we will explore now are situations where the risks associated with change are unknowable.  For example, imagine the same cola manufacturer now wants to allow consumers to help suggest and select new cola flavours through a web 2.0 application like this one.  The company has never done anything like this before.  It’s a new experience for them.  Consequently, they have little knowledge to draw upon to accurately identify and assess the risks and rewards.  No procedures exists.  No standard list of important questions to answer has been developed and vetted overtime.  They don’t know what they don’t know.  The risks themselves are uncertain.

Uncertain Risks

Organizational reaction to new ideas

Many organizations when faced with an outside-the-norm idea reject it.  They do so for any number of reasons.  In our experience the reasons boil down to a risk-reward calculation and the certainty, or in this case uncertainty, attached to it.

1. They have no experience to draw upon so they have a hard time assessing the benefits.  While they can clearly imagine the benefits, (customer selected products increase probability of launch success) their lack of experience makes them uncomfortable that the imagined benefits can be realized.  By comparison to other projects, they are uncertain about the benefits.
2. We are predisposed to focus most heavily on the risks of a new situation rather than the rewards.  Our evolutionary history (defenseless apes in the Savannah) selected for high risk-sensitivity.  When confronted with a new situation you’d better proceed cautiously.  That’s as true in the boardroom jungle as it is in the Savannah.

So, it’s entirely understandable that outside-the-norm ideas are regularly dismissed.  So that begs the question, in today’s world of increasing commoditization when the need to innovate is great, how do we start and run projects that deal with highly ambiguous situations?

Tips for dealing with ambiguous projects

Here are some starter tips for running projects that contain high ambiguity.

1. Manage uncertainty – not time-lines.  Start by recognizing that these kind of projects are different than the norm.  It’s much more about mapping the uncertainties and learning about them than it is about managing time-lines and milestones.  When you don’t know what you don’t know, well articulated and detailed project plans are not going to help (too many critical assumptions factored in).  Creating a reasonable starting point of what you know and don’t know, and then running low cost experiments to learn about the uncertainties (what you don’t know) is how to get started.
2. Embrace diversity.  Learning accelerates when people with diverse opinions and experiences are brought to play.  In the example above, the company could and should include existing consumers as part of their team.  They will provide insights about what they, as consumers, would want to experience.  Diversity keeps you from spending too much time going down false trails.
3. Go fast and slow at the same time.  When running experiments to uncover the answers to critical uncertainties get out there as fast as you can.  A good rule of thumb is 60 days.  Test roughed-out ideas with real people very fast.  Counteract that with the expectation that overall, the project will likely run slow.  It can take many months and iterations before the real answers surface.  Hence the need to test rapidly.
4. Review learning.  Finally, keep the momentum high by running regular (weekly) learning reviews. Sharing the learning on a regular basis keeps team members focused and makes each individual’s contribution that much more robust.

Questions business owners and executive team leaders can ask

Here are some question you can ask of yourself and your team.

1. How comfortable are we in discussing ideas that fall outside the norm of our experience?  How quick are we to judge?  Is our judgement focused too heavily on the risks?
2. How well do we as a  team or company deal with ambiguous ideas?  Do we devote sufficient time in exploring the uncertainties that arise from it?
3. What is our capacity to develop and execute low cost experiments?  Do we have procedures in place?
4. When dealing with uncertainty how well do we embrace diversity?
5. How well do our habits in selecting team help us in creating a wide range of potential solutions?
6. How well do we balance between aggressive targets for completion with sufficient allowance for learning and prototyping?
7. How well do we create and maintain momentum?   What is our capacity for tracking and sustaining project implementation?
8. How well do our reviews focus on learning?  Are we too focused on time-lines at the expense of managing risks through learning?

We’ll expand on this topic of implementing ambiguous projects in future posts.

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