The KPMG senior management obsession with predictive technology appears to be finally satiated. Last week's announcement of an alliance with the Formula 1 team, McClaren, is intended to help the big 4 firm evolve from its current “retrospective and subjective” business model to become “forward looking and predictive.” Which is great news - if it wasn’t such nonsense!
The desire to know in advance of chaotic shocks that could rock the firm or its market place is understandable. Yet having more data, even of the turbo-charged variety, seems less a breakthrough in predictive capabilities and more an attempt by a large organisation to differentiate its commoditised offering in an increasingly fragmented market place. “Multi-dimensional” data - the influence of weather, pit stops and wheel changes - may be able to predict the performance of a complicated machine, like an F1 car, in a known environment (a limited term event operating to clearly defined rules). But KPMG - and the clients its advising - are complex entities operating in deeply uncertain ecosystems where the rules change at random and prediction is not impossible but can be dangerous if its believed.
Complex entities, like organisations or markets, are made up of thousands of people engaging in an almost infinite number of interactions that are impossible to calculate. Furthermore, these interactions are non-linear - meaning small causes have large effects (e.g. US sub-prime mortgages and the global economy). Though events often seem obvious in hindsight (e.g. sub-prime mortgages look a bad idea now) this doesn’t lead to foresight as a complex ecosystem is constantly emerging and new patterns make past pattens obsolete. This is why generals don’t win wars by re-fighting the last one.
The futility of relying on past data for future planning was perhaps best exposed when Alan Greenspan gave testimony to Congress in October 2008. He expressed “shocked disbelief” at the global crisis unfolding because for “40 years” there had been “considerable evidence things were going exceptionally well.” The 2012 collapse of Monitor Group, the elite strategy firm of Michael Porter - the ‘father of modern strategic analysis’ - also demonstrated how rigorous analysis may explain success in hindsight but still fail to predict it.
A complex world, by definition, is unpredictable and more data doesn’t alter this reality. KPMG therefore faces a real danger of unintended consequences in adopting ‘sexy’ technology: complacency (believing the models to be right), retardation (why think for ourselves now) and ultimately worse decisions (as the outputs will only be as good as the inputs chosen and are supposedly more experienced partners going to learn how to do that or push it down the chain?). The result of a turbo-charged stream of data may be to merely obscure the key signals KPMG and its clients need under even more noise.
If KPMG truly wishes to distinguish its offerings there are better ways than embarking on (another) long, seductive foray into technology they don’t understand. Within the organisation’s engine room sits (probably 87% idly) its most sophisticated capabilities: auditors who’ve completed thousands of audits and can recognise emerging patterns of system failures and potential improvement paths. “How do you report those insights to decision-makers in the organisation” one such auditor was asked in an interview. “We don’t” was the answer. “Why not?” they were asked. “Because my manager has told me to keep my damn mouth shut” was the reply.
So, before you buy the latest snake oil to solve your organisational problems consider what underused capabilities you already have that you can bring to bear on your strategic challenges. For any increase in the amount of data being collected must be coupled with the human capability and desire to seek insights and create action. Predictive technologies alone won’t turn a complex world, prone to eruptions of chaos, into an ordered one. But while it may not be possible to make an unpredictable world predictable - it is feasible to make your organisation better adapt to this reality through harnessing the natural sense-making talents of your people.
Russia is in the grip of a brain-drain. The smartest, wealthiest and most entrepreneurial are leaving. Russia has surged up the World Bank’s ease of ‘Doing Business’ rankings but decisions are made on substance, not style. Russia is certainly at the centre of an international political whirlwind sabotaging business confidence, but its chief problems are entirely self-inflicted.
Since emerging from the Soviet Union’s chaotic implosion into the free market Russian business culture has been plagued by a destructive double-headed eagle. The first ravenous beast has been short-termism. Making a killing and exiting before the famine sets back in might be understandable following the events of 1991, 1998, 2001 and 2008 but its no less corrosive for it. It seems there are few who see themselves in Russia long-term and it shows in their business decision making.
The second pestilence is defensive decision-making. Initiative may have been punished in Soviet times but modern Russian business is as equally unforgiving of failure. Business people will buy old and inferior as long as everyone else has bought it, for ‘no-one ever got fired for buying IBM’ is being taken to Kafka-esque level in Russia. Innovation may have been the country's buzzword since the crisis but faced with the novel business buyers (even senior ones) need to know others have risked it first - for not making a mistake is the front of the mind response. This destroys innovative capacity, meaning Russian business is always playing catch up.
Clearly, new paths through the quagmire of Russia’s current macro and micro uncertainty need to be found - for the current situation will be Russia's new normal for the foreseeable future. Business must adapt and respond and silver bullets don’t exist. The latest ‘guru’ is just peddling the same old snake oil in a different bottle. Yet the business response this year has been to batten down the hatches: no budgets, no room for mistakes, no future beyond the immediate.
Unless the flow of the departing becomes an reversible torrent Russian business must become serious about innovation. This does not mean building a Russian iPhone or an electric car, but is about unleashing the knowledge workers. It's time to let a million ideas flourish today and amplify the viable ones rather than sticking a plaster on a gaping wound and hoping it’ll be better in the morning.
The biggest challenge to doing this is re-setting business culture in Russia (expats as well as locals). Senior management can and must create space for people to learn from - not fear the consequences of - failure. Designing a safe-to-fail experimental process is simple and will protect the organisation from inevitable failure that occurs when people push the boundary of what’s possible but also kick start a genuine search for the new breakthroughs that can revolutionise a company or an industry.
In a culture and time when some ‘jam today’ to stave off immediate hunger is acutely felt, it's a potentially fatal paradox that organisations are not activating their biggest sunken resource - the knowledge of one of the most highly-educated and resourceful workforces in the world. Whilst successfully activating this brings the promise of unexpected rewards, continued negligence of it will only accelerate the brain drain and death spiral of Russian businesses and erode the country's ability to bounce back in future.
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