Complexity is uncertainty. Not because you (subjectively) don’t know the answer but because the answer (objectively) hasn’t emerged yet.
When faced by complexity should we stop trying and wait for whatever happens to surprise us? I’d argue no, because we can work with the inherent potential of uncertainty to discover options for re-invention and innovation. Genuine progress comes from embracing complexity.
Cynefin is a sense-making framework guiding leadership decision-making in conditions of uncertainty. It helps define the type of situations leaders face and directs the most contextually-relevant approaches to addressing them. One of the key decisions is whether the answer to your problem is unknown because you haven’t found the right expert, or whether there is no answer because it hasn’t been discovered, yet. The later represents a huge opportunity.
Faced by the unknown - what next with the economy, how to improve our working culture, what will customers want next - leaders can be tempted to see the challenges as knowable; assuming someone can deal with them. Unsurprisingly an expert can usually be found (at great cost), but at best they’ll be a waste of money; at worst they’ll exacerbate the situation by trying to impose an inauthentic certainty and wasting the opportunity for fresh discovery.
The trick for leaders is knowing whether you’re merely facing a ’known unknown’ (something you know you don’t know, but know someone who does) or an ‘unknown unknown’, which require unconventional approaches. A simple rule of thumb to distinguish between the two is whether competing hypotheses exist about what is going on here and what’s causing it - rather than just how best to solve it. If it’s the former then it’s complex and no guru will solve it.
Unfortunately, deeply tangled situations are exactly the ones leaders seek to avoid at all costs. Many prefer to be decisive and wrong (this is the expert, he’ll solve it!) rather than indecisive and right (the answer is unknown, we need to experiment and see what we can learn).
However, leaders can choose to pro-actively embrace complexity supported by a sound scientific basis - using nature’s very own system of evolution that seeks variation and evidence-base selection (the alternative is creationism!). The second very short video on this page is the best introduction out there to the different approaches leaders can adopt and is well worth two and a half minutes of your life.
Tomorrow’s blog will provide examples of how embracing complexity in this way has been put into practice with exceptional benefit.
The biggest short-cut in the business world - part of MBA/consultancy dogma - is the myth of best practice. But while we sometimes accept we can’t always have the best do we understand that we should often reject it even if we can?
It’s logical for leaders to want the best in everything because that’s how you get ahead. Florentino Pérez certainly thought so when he became the new President of Real Madrid - the home of the reigning European football champions - in 2000. The modern era of the Galácticos had begun. Real Madrid would sign the the very best footballers, with the very best global profiles, for the very best money. What could possibly go wrong?
Despite initial success, the Galácticos best practice policy started to unwind. Complacency started to creep in: why do we need defenders when we have the best attackers in the world? why is a manager so important when we’ve got the Galácticos? Pérez eventually resigned in 2006 after the ‘best players in the world’ failed to win anything in consecutive years.
Many organisations repeat the ‘Pérez-fallacy’ on a regular basis today. Not only do they seek the top talent (the subject of tomorrow’s blog) but are seduced by the belief that following the best practice recipe means they can all go home early, confident that bonuses will be earned this year. It’s a seductive, but deeply-flawed plan.
Best practice - the myth of the one right answer - has all sorts of pitfalls:
Most destructive of all though is best practice can blind leaders to the good practice deeply embedded in the organisation today, which it’s probably depending on more than it knows. Given the same resources and support it too could become a new gold standard - but your own, specific to your context, now and ahead of the curve.
Real Madrid needed to make room for all the ‘best’ players they were buying. Soon there was no room for others so they were let go. One of those was a lightly-regarded player (by some) called Claude Makélélé. Pérez announced on his departure ”we will not miss Makélélé. His technique is average, he lacks the speed and skill to take the ball past opponents, and 90% of his distribution either goes backwards or sideways.” Claude wan’t a Galáctico.
Pérez’s Real Madrid didn’t win anything after Makélélé left. Correlation is not causation, but Makélélé’s importance was not lost on everyone at the time, “why put another layer of gold paint on the Bentley when you are losing the entire engine?” remarked one of the Galácticos. It was the beginning of the end for Los Galácticos’ but became the start of a new dawn for Chelsea, the English Premier league that signed him. His importance to one of the most successful sides of the era was not overlooked again. To this day, the position is still known in English football as ‘the Makélélé role.’ Claude had become the gold standard.
Good practice becomes contextually, temporally, relevant best practice if allowed to flourish. The imposition of external (often illegitimate) best practice can limit it. We may already know that we can’t always have the best, but can we learn to not even seek it out?
When a visiting professor told my cohort we’d wasted two years studying an MBA [previous post] he was good enough to try and leave something to fill the vacuum. The leader’s framework for decision-making headline message is “wise executives tailor their approach to fit the complexity of the circumstances they face.” Yet the Cynefin Framework™ provides much more than this.
One of the great mistakes leaders make is trying to impose certainty on uncertain situations. The result is even more uncertainty that catapults them down a slippery slope.
For example, around this time of year many organisations are setting out with a new strategy and budget. These will be built on assumptions of a future that is largely (and increasingly) unpredictable: oil prices, exchange rates, inflation, macro-economic growth, the assumption of no black swans, etc. All will look certain on the spreadsheet, nothing will be certain off it.
This is because most leaders simply don’t know any better. They see the short-comings but accept they have to plug the numbers in to complete the process. The same goes for corporate strategy; it just won’t do to stand up in front of the entire organisation and say ‘well, we’ve got no idea what’s going to happen next, but we’ve got to do something so we’re crossing our fingers, holding our thumbs, touching everything made of wood on the way to work and if something comes up hopefully we’ll be able to make something of it. In the meantime, keep doing whatever you can’.
This would be more honest (though arguably not very sound politically) but it also opens up the possibility of becoming a more resilient business. For even the most unpredictable environments have have huge areas of predictability (and vice versa) and both require leadership approaches aligned to the type of challenges faced - the central message of the Cynefin Framework.
Some things are so predicable that everyone knows what to do so accountability can be delegated accordingly. Any variation from expectations will quickly become apparent and can easily be addressed. More complicated challenges are still knowable (with the right level of expertise) but require more analysis to find an optimal solution.
Yet it’s the unpredictable that gets you in the end. When facing complex challenges - something you or those in your network haven’t faced before - there will be differing, even contradictory hypotheses about what to do next. What you need is a bit of humility: tread carefully, canvas different perspectives from within and outside of your usual networks, if an idea seems sensible then experiment - making sure you can exit if it doesn’t work out. Most of all be prudent and don’t declare ‘this is the answer’ before you’ve had a chance to test it.
In an unpredictable environment leaders must be able to distinguish the known/knowable from unknown/unknowable. Continue to manage the former in the conventional ways and tread carefully with the latter. This way, you can speak with certainty about that which you can be certain, while keeping your options open for everything else.
Leaders have a unique challenge in the 21st century. The ecosystems (the countries, markets and industries) their organisations operate in are increasingly volatile, uncertain, complex and ambiguous. And missing critical signals amongst the increased noise risks exacerbating existing fault lines in their organisation. What should leaders do?
Subject matter experts solve complicated issues at functional levels. But complex questions (e.g. top line growth, corporate culture, change or risk management) cut across specialised silos. Complexity therefore is always escalated up; making managing complexity the key strategic challenge for executives in the 21st century.
Yet complexity remains widely misunderstood; described as something ‘very complicated’ or confused with chaos theory. Complexity science itself ascribes distinct characteristics (non-linearity, emergence, unpredictability) that render traditional 'solutions' (e.g. best practice, ideal leadership styles) entirely context dependent.
To face a complex issue means to deal with a ‘brownfield’ context - never a ‘greenfield’. Complexity is located in the system (e.g. the organisation, market, population) and always has a history, yet is constantly evolving. And as we engage with it, it changes - often in unpredictable ways. This is why answers in a complex system often appear only in hindsight - though this doesn't lead to foresight (e.g. it seems obvious now that sub-prime mortgages were a bad idea, but likewise, today's Quantitative Easing is variously described as the only thing saving the global economy or creating an even bigger future crash. Only time will tell).
In a complex world context is king.
Idealised futures are an illusion - as are strategies based on certainties designed to get you there. The collapse of Michael Porter’s Monitor Group in 2012 showed that while rigorous strategic analysis can help explain how excess profits were created in the past, it's a poor predictor of how to generate them in the future. Even the best formal strategising can trap leaders into believing the future will be an extension of the past. But if the future fails to conform to expectations we are left naked and fragile, exposed to the elements.
Like King Canut ordering back the tide, we discover powerful natural forces defy command and control.
Yet, the natural world itself - of which man is a part - has adapted wonderfully to exploit complexity. Evolution works through a process of increasing variation (of options), basing selection on what works now, and replication (or starvation) of options based on hard evidence of suitability. Can leaders learn something from nature about adopting a rigorous external focus, increasing awareness of options through rapid trial and error, and creating mechanisms to amplify or dampen options in order to thrive?
Effective horizon scanning uncovers emerging signals that signal where and what to act on before its too costly or too late. Technology is a great enabler in this, if one caveat is kept in mind: technology without human interpretation is meaningless. Google may find anything you ask, but can’t tell you what to ask for. Uncoupled from humans technology merely increases the noise surrounding the signals. Data is dumb - to become meaningful information human knowledge must be applied.
Humans should be at the front and back end of technologically-aided decision-making - defining the issues to explore and discovering its real meaning. Technology therefore must be designed to fit the human - the way we are now, rather than the way we'd like us to be. It must augment our natural sense-making abilities, which have supported human evolution through millennia (a best practice case?).
Critical knowledge flows through organisations in human networks. Navigating these flows effectively can reveal the origins and dynamics of change. And as humans share such knowledge naturally, extrinsic rewards aren’t required to tap this. Humans naturally create and share knowledge in the form of narratives - ‘micro-stories’ - that are both universal (every culture has them) and democratic (no barriers exist to sharing). These are the 'water cooler’ stories that spread insights and enable other people to make sense of the world around them so they can act better in it. Harnessing these narratives is critical to making sense of and navigating complexity.
Critical knowledge can be leveraged at little extra cost.
Leaders must create the conditions for contextually-appropriate knowledge to emerge. Managing for serendipity (‘pleasant surprises’) means seeking fresh insights, rapidly field-testing coherent ideas and replicating success. But as genuine breakthroughs don’t come from established thinking patterns. Leaders must learn how to break through the hard-wired autonomic brain we rely on - which seeks first-fit, rather than best-fit, solutions - and instead become receptive to novel ideas. Strategic leadership is less about engineering future visions than it is about increasing awareness of the critical factors in our ecosystem, 'identifying the biggest challenges in them and devising coherent approaches to overcoming them'. Real strategy is about seeking the truth of the current position.
Navigating and exploiting complexity means leaders must take multiple perspectives to discover genuine insights. Going beyond objective numbers to understand the why. Rapidly testing coherent ideas as ‘safe-to-fail’ experiments. and feeding success, whilst starving failure of resources. No-one can ‘cut through’ or ‘simplify’ complexity - nor should we want to. Complexity contains rich opportunities in a changing world. Leaders employing naturalistic approaches can exploit complexity profitably.
SenseMaker® - an innovative technology first deployed by the Singapore government to detect weak signal terrorist threats - taps into mass organisational knowledge flows and helps join up disparate information from silos to form actionable knowledge. It presents whole network perspectives leaders can rapidly see and understand, helping unlock the organisation’s present evolutionary potential.
For more information about how to make sense of, navigate and exploit complexity for organisational success contact firstname.lastname@example.org
The turnaround in US military fortunes in Iraq in 2006 was attributed to the replacement of bad leaders (Donald Rumsfeld and General Casey) with good ones (Robert Gates and General Petraeus). But Rumsfeld had left an important legacy with his (inadvertent?) popularisation of the language of complexity. “There are” he explained at an early press briefing “known knowns; things we know we know. There are known unknowns; things we know we don’t know. But there are also unknown unknowns; things we don’t know we don’t know.’ Unfortunately, one of Rumsfeld's (many) mistakes was believing top down leadership was the right answer in all these domains.
'Known knowns’ describe obvious domains that are clear to everyone (if you go to war people will die). ‘Known unknowns’ describe complicated domains that only few, usually experts, know (how many might die). While ‘unknown unknowns’ describe what actually occurred - chaos - a place of total randomness. Yet, the man who finally brought effective leadership to a dire situation - General Petraeus - did so by harnessing complexity - the ‘unknown knowns’. In complex domains we may not know the right answer (for it's constantly changing) or know anyone who does (as answers are widely distributed, with many different people holding small pieces of the bigger puzzle) but we know answers exist, so we must adopt a different mindset to harness and exploit them.
The General, heralded Stateside as the hero of the counter-insurgency, sought answers “further down the ranks, and outside the armed forces entirely, searching for people who had already solved parts of the problem that the US forces were facing.” He understood that faced with a seemingly intractable problem (as the insurgency seemed in 2006) very different perspectives must be sought. Petraeus moved away from expert opinion, which anticipates what might happen, to favour instead listening to the experiences of those closest to the action. This increased awareness of what was happening (replacing uncertainty with certainty) which helped reveal why it was happening and how might an effective response look in context.
Experts can rapidly provide a degree of confidence for leaders faced with difficult challenges. By collecting masses of data and applying big brains to analyse and synthesise neatly the expert can reduce risk. But as data is always past data their analysis will be fraught with assumptions extrapolated to determine an unknowable future that will willingly or otherwise confirm their hypothesis - on which their expert status depends. Experts impose what they know and, while their advice can be useful for ‘complicated’ questions, in ‘complex’ domains their advice can mislead - especially if its authority renders other voices mute. Therefore, as Professor Armstrong of the Wharton School pointed out, when attempting to forecast the future ‘expertise beyond a minimal level is of little value’ so never ‘hire the best expert you can — or even close to the best. Hire the cheapest.’
Title quote attributed to (then) Colonel H.R. McMaster, whose story and some of the other ideas for this blog entry are taken from the excellent 'Adapt: Why success always starts with failure' by Tim Harford
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