A new world warfare

I don’t often write about dangers as I am by nature, optimistic.  However this recent video article by Fast Company about Stuxnet is too compelling to ignore.  http://bit.ly/mMPZUg

In the article Cliff Kuang describes how the Stuxnet virus works and concludes:

There’s a powerful, under-reported takeaway here: The Stuxnet virus, having already done its job, now enjoys a scary afterlife. Its code is available online for anyone to look at and play with — and keep in mind, this is a virus capable of shutting down entire power grids. Could hackers re-engineer the virus to other ends, posing far greater threats to the international economy?

In 100 years, historians will probably look back at Stuxnet’s emergence as the Trinity Test for a new age of warfare — a harbinger of danger in an uncertain era.

It would seem that this virus has taken infection to a much higher level of sophistication.  It’s unclear as to whether we are ready for it.

Behavior disruption implications

So, how long before we see viruses:

• that transfer monies from one account to another
• that open up bank records or even vaults
• that gain access to ATM machines
• that capture internet credit card information
• that take down internet services like iTunes or Amazon.com
• that access government secret files
• on our favorite apps as sleepers to capture credit information on our mobile devices.

Should any of this happen, even in a small way, e-business would suffer tremendously.

It’s not a happy signal.

Given the risk level and underlying uncertainty of where’s it’s headed uncertainty it is a signal I believe we all should monitor for further developments .

Does anyone know who is tracking this phenomenon?

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Introduction

No-one is destined to be a me-too player. We can be game changers.

The second in a series of posts about how businesses can own their future.

In part one of this series I introduced the idea of the future being chunky.  That much of the future is knowable.  The paradox is that the part of the future that is knowable, is knowable by all.  So there’s no real advantage.

This next post explores how to reach into the unknowable future and pull something into the present that you can exploit before others in your marketplace.  I call that Sensing and Adapting.

Sensing and Adapting

Last April I posted here about how a solar powered lens would disrupt our business lives.  In the post, 10 predictions were made for how it might be used to disrupt existing markets.  You may well ask “if it was published in Fast Company magazine why doesn’t this piece of the future reside in the Knowable Now?”  (Knowable Now was defined defined in the first post of this series with the Apple iPad as an example of a technology that was knowable.)

To explain the difference let’s compare the iPad as a potential disruptive technology with the Solar powered contact lens.

Sensing

You’d have to be living in a cave not to be aware of the launch of the iPad in January 2010.  Big marketing campaign prior to the launch as only Apple can run.  Steven Jobs performing on stage followed by massive press coverage since then.

A simple question to ask ourselves is. . . How many people in our company did NOT know about the iPad? Was there even one?

Which means that everyone sensed the iPad.  They knew about it, and to a greater or lessor extent evaluated it.

Consequently:

• We have no inherent advantage over our competitors
• it will be exceedingly difficult to game change using the iPad
• and sustain that difference.

It’s too knowable.

Compare that to the Solar powered contact lens by Professor Babak Parviz at the University of Washington.  It was published in 2009 in a journal and picked up later by Fast Company.  No fanfare.  No glitz.

So how many people in our company DID know about the Solar powered contact lens? Was there even one?

Which means that no one sensed this nascent technology.  It is not broadly known.  Even now.

However, if our company had sensed this technology then we could have an inherent advantage over our competitors.  It’s possible.

Adapting

When it comes to using the iPad for competitive advantage, the path and processes are well understood and published. Technical specifications and developers kits are readily available.  Even the fee structure is published.  Everything we need to build apps for the iPad is right there, for us. . . . and everyone else.  It’s doable now.  It’s knowable now.

Which means, while we may not know how we would, or could use the iPad to enhance our offering that’s not important.  The day we start the project we’re simply in a race against our competitors.

The Solar powered lens is a different story.  It has not been commercialized.  As of September 2009 there was not even a fully functioning prototype.  Given that, we can only talk about the possible applications to a business, not the certainty of them.

So, working with the professor to develop a working prototype that our company could use would give us a leap ahead of competition.  In addition we’d create barriers to entry.  Working with something in the early stages means we run across technical, legal and other issues that need to be resolved.  The resolution of those issues, that only we know, become the barrier to entry for competitors.  That creates the potential for game changing offerings with sustainability.

It could start with a simple phone call to the professor to enquire about development and partnership opportunities.

Summary

Not all data we sense about the future are equal.  Some of it is eminently knowable and resides in our Knowable Now.  Some of it is shrouded in uncertainty and lies in our Possible Future.

How we deal with these different future states determines in large part our ability to differentiate, and whether we ever have the chance to game change.

Working exclusively in the knowable now means we can certainly better our offerings.  However it comes at the price of a high probability that any advantage we gain is short lived.  We are in a constant never-ending race.

But, working as well in the possible future means we have the possibility of a game changing offering with barriers to entry behind us.

Questions to consider

Here are some questions to consider about the leadership behaviors in your company.

1. Beyond, industry journals and regular mainstream media what is your organization sensing in aggregate?
2. Do you know the answer to question one?
3. Do you have an organizational sensing strategy?
4. Supposing people in your organization read about a technology that could  possibly disrupt the market, would they recognize it for what it is?  In other words, could they interpret it correctly?
5. Is there someone in the organization to whom they could send it to who could correctly interpret it?  Do they know who that is?
6. Is it part of that person’s responsibility to explore the possibilities this nascent technology might represent?
7. Does the leadership team include in their strategic portfolio resources to explore the possible as well as the knowable?

Shouldn’t the possible future be in your lexicon and plans?  Future posts will explore the region of the future past the Possible Future.

The good news is that there are organizations that offer sensing.  So it’s easy to get started.

Here are a some good ones.

• Institute for the Future
• Fast Company
• Trend Watching
• Ted

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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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Risk is a function of the severity of an adverse event times the probability of the event occurring. A lightening strike is often deadly (very severe). Luckily they happen infrequently. However, a third component influences risk. That is the degree to which a risk itself is knowable.

Lightening strikes are easy to know. We can measure the voltage of typical lightening strikes, and they don’t vary much between strikes (all have high amperage). And because we can understand the risk (i.e. the risk severity and occurrence frequency does not vary much) we can develop standard mitigation responses and then follow-up. Lie down when lightening occurs, don’t hold metal objects, stay in your car where the rubber wheels insulate you, are all mitigation responses.

The steps to mitigate risks in this environment are straightforward.

1. Aware of risk
2. Assess risk
3. Scope the mitigation response
4. Implement mitigation
5. Monitor

But what do you do when the risks themselves are highly variable? When there is a great deal of uncertainty about the risk itself. When the risk itself is unknowable.

For example, Apple launched the iPod in 2003 featuring a device that stored and played songs in MP3 format, where they gave away the software to manage it for free, and were planning to sell the songs for $1 through their Apple Store. They did this in a market dominated by large players who owned the rights to popular songs, where their biggest competitor for selling songs was illegal downloading for free, with a technology that had not yet broken through into the mass market.

Here’s a partial list of highly severe adverse events they faced.

1. Could they convince the owners of the songs to sell them rights to distribute the songs?
2. Would anyone buy the songs given they could download them for free?
3. Would anyone buy the iPod?

Any one of these risks coming to pass would cause a catastrophic failure.

That’s what makes this venture so risky. It’s entirely unique. Nothing about what we know about launching new products can help us predict whether this particular venture will succeed or not.

It’s the uncertainty of the risk itself which multiples the risk and makes it so terrifyingly large. It’s the reason why you can buy insurance against lightening strikes on your building, but you can’t buy insurance for the failure of a product launch. The former is knowable, the latter is not.

The key then for managing in this environment is how you deal with the uncertainties. In projects of this type don’t focus on managing timelines.  Instead, focus on managing the uncertaintites around the risks.

Tips

1. Conduct rapid prototyping to learn your way through the uncertainty.  This means you need to keep your idea and business model flexible.  As you learn your way through the uncertainties you will change your business model as you go.
2. Prioritize your uncertainties.  Which ones are at the root of the problem?  Solve the root uncertainties first. Is it access to songs or people buying?  Does one influence the other?

We’ll return to this topic in later posts.

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