Moving forward when there is no visibility
Robert M. Tomasko
[This article was published in the Spring 2002 Inaugural Issue of M World, The Journal of the American Management Association.]
This is a tough time to be a stock analyst. Accustomed to getting detailed and optimistic projections when they inquire about a company's prospects, many Wall Street forecasters are now repeatedly stonewalled by the leaders of the nation's largest businesses. CEOs and their investment relations staffs, usually primed to paint a glowing picture of abundant future opportunities, seem reluctant to offer even clues about how well their firms might fare. Few seem willing to project performance a year ahead; many bemoan they have no visibility about what even the next quarter offers.
"No visibility" has become an oft-repeated mantra for many 21st century corporations. Some attribute the wall of uncertainty to the dot-com meltdown, others blame recession, a weakened global economy and the unending downsizing epidemic. Ripples from high-profile corporate bankruptcies and post-September 11th business disruptions are also among the common culprits. Pick your poison, but the result is the same: fear and doubt have squeezed aspiration and opportunity off many corporate radar screens. Weak business prospects translate into poor career options, so we all feel a bit ajar.
Things may not settle down
Unease about the direction of future events can lead to all sorts of counterproductive behaviors. It's hard to get out of bed in the morning. We put off decisions. We feel periodic waves of paralysis. We try to hold our breath - hoping this to will pass and all will return to something like it used to be.
In a meeting in St. Louis soon just after he was appointed chief executive of Monsanto, Robert Shapiro tried hard to get across the point that this chemical maker's days of tranquil growth were over. He feared that, in the wake of a major company-wide restructuring, many managers were now waiting for things to settle down so they could get back to business as usual. This attitude, Shapiro lamented, was completely off the mark. There was no reason to expect that the old, calmer times would ever return. Instead, Monsanto needed a mindset that could accommodate ongoing change and regular reorganization.
What Shapiro realized was that the model of change many managers were taught in business school did not hold up any more in this and other turbulent industries. This once-useful formulation said that companies and the people working in them went through three steps when dealing with change. First, they "unfroze" their old ways of acting; then went through some sort of transition process; and finally ended up in a new, steady state. This is nice, neat and simple, but no longer very relevant to the world we find ourselves in - one that never really settles down into a phase three. Our expectations need to be geared to ongoing metamorphosis, not steady-state homeostasis.
Reduce uncertainty or ride with it?
This is a lot easier to say than do. Most businesses, faced with ambiguity and uncertainty, launch an all out campaign to eliminate it. High powered analytic tools - intensive market research, discounted cash flow analyses, assigning statistical probabilities to competitors moves - are marshaled. Outside advisors are brought in. Conferences are attended. Focus groups are run. Massive amounts of data is collected and numbers crunched. But, despite these efforts, the fog frequently thickens. Desperation builds.
Your chances of thriving in inherently unpredictable environments are greatly diminished if you approach planning and decision making with the deterministic discipline appropriate for times of past tranquility. There are real dangers thinking too analytically in times like these. Techniques and models are great for probing deeper into what we know. We all like a measure of certainty in our lives. Discovering patterns is enjoyable and comforting. But this is a comfort that can quickly prove false in turbulent times when all we can know for certain is what has already happened.
When the only certainty seems to be impermanence, the only way to move ahead is through improvisation. Insightful improvisers know absolute control is an illusion. It fights the nature of a future that is wide open to multiple outcomes
The rules are different, but moving forward when the signals are dim is not a matter of substituting gut instinct and emotion for analytic rigor. Rigor is still needed, but it needs to be a kind more flexible than what we may have been accustomed to.
Run like mad
Bert Roberts led MCI through its greatest period of growth - and some of its most severe challenges. During his tenure as CEO everything in the long distance phone business was up in the air. New aggressive competitors, with deep pockets, were planning to enter the market. Smaller firms were already skimming off his most profitable customers, and MCI's chief suppliers planned to become its future rivals. Technology threats - cable, wireless and internet - abounded, and regulators were vague about what markets to open to whom.
If you asked Roberts to describe his strategy, he'd discard all pretense at MBA-jargon and truthfully say: "We run like mad, and then we change direction."
Time to think differently
Analytic thinking can help create options, but it doesn't provide direction. Microsoft Windows asks us "Where do we want to go today?" When the answer is "I just don't know," the wisdom of the Apple Macintosh ad campaign "Think different" becomes more apparent.
Bert Roberts at MCI certainly did, but he has never articulated his methodology. He shouldn't be faulted, though. If you read many CEO memoirs most will seem more like after-the-fact rationalizations than real-time recollections. In hindsight, we all like to attribute our successes to clever strategy, not opportunistic cunning and dumb luck. If we want to better understand the nature of successful improvisation, it can help to leave the world of Corporate America and travel north to the frozen land of Labrador.
This region of northern Canada is home to the Naskapi. These Native North Americans are born improvisers. Like many of their counterparts in business, they are hunters. They really have little choice; their land is not especially fertile, and they move around too much to be disciplined crop tenders. So they are faced, almost daily, with a key survival decision: where to go next to hunt for game? Which direction should the hunting party take when frequent blinding snow storms reduce visibility to almost nil?
The Naskapi set their course with a well-established methodology. They obtain some dried caribou bones, remains from a previous successful hunt, and build a fire. Then they hold the bones over the flames until cracks appear. These cracks are then "read" by the tribe's designated strategic planner. He interprets the cracks to indicate the direction the hunters should take to find game.
May sound silly, but it works. Though not every hunting trip is successful, enough are that the tribe is reasonably well fed.
Acting when everything is uncertain
Karl Weick, a social psychologist and astute observe of life in organizations, has analyzed the Naskapi planning process. He finds a number of useful features that are applicable beyond Labrador and caribou hunting:
· No person or group is blamed if game is not found. The gods are considered at fault, and team cohesion is maintained. Keeping the team together is a key to survival in a hostile environment.
· The location chosen has no relation to places where game was found to be plentiful in the past. This is good; otherwise, the most likely place the tribe would return to hunt would be where they had best luck before. This may seem like an obvious strategy, but it is also very counterproductive. Revisiting past successes is something we all tend to do in times of stress. But it's usually a way to guarantee future failure-the animals there would soon become depleted.
· The Naskapi's actions did not follow any set patterns. Irregularity is extremely useful-whether chasing game or battling tough competition. Regular patterns will, over time, serve to sensitize the prey to the hunter's habits (just as antibiotics eventually induce bacteria to breed resistant strains, rendering once-miracle drugs impotent). Caribou aren't as dumb as they look. Game animals, like their hunters, also want to survive, and they will just move to a more distant feeding ground.
Avoid predictability when the rest of the world is unpredictable
What this tribe has done, Weick observes, is to intentionally complicate human behavior. It would have been much more straightforward for the group to vote on the direction to hunt, or listen to the hunter with the best aim or greatest number of past kills, but in this situation, just as in the constantly changing competitive positions held by many business improvisers, there are real advantages to avoiding predictable or fixed patterns of activity. The Naskapi have solved many of the dilemmas facing those of us who need to take action when everything is ambiguous. To paraphrase Karl Weick:
1. Mistakes have few consequences (the hunt can always begin again tomorrow).
2. Decisions can be made when facts are otherwise insufficient.
3. A choice can be made among look-alike alternatives.
4. Competitors are confused; employees are not-they know how the course of action was arrived at.
5. Thinking out of the box is built into this method.
6. Decisions can be made swiftly, without a lot of debate (why argue about something with no knowable answer, anyway?)
7. It is easy to change a streak of bad luck.
8. This is a low-overhead technique, requiring minimal data collection and record keeping.
9. Bias is eliminated; all possible choices are weighed equally.
10. It's fun.
Your approach to uncertainty may not start with caribou bones, but criteria like these can offer some useful benchmarks. Don't replace your planning department with a table of random numbers, but plan in a way that surprises and throws the competition off-balance. When everything is up for grabs in the marketplace, a company is not likely to be worse off behaving unexpectedly than attempting to follow a lock step plan.
Uncertainty favors first-movers
Keep in mind the same uncertainty plaguing you is also making life difficult for your rivals. Hope that they are tying themselves in knots by over analyzing their situation. This is the perfect time for you to make a forward move. There is a good chance it will be lost in the fog and your competition will fail to appropriately retaliate. And if you seem confident enough about the direction you are taking, you'll be making a start toward creating a new industry structure or standard that others need react to. Every time you have made a move that others respond to, you have created some order out of chaos.
While many in the hotel business seemed shackled by uncertainty in the wake of the post-September 11th business free-fall, Stephen Bollenbach at Hilton decided it was a perfect time to spend $40 million to rapidly remodel and renovate his properties across the country. This is something that is a lot easier to do when room occupancy is low and lobbies quiet. He's also spending an additional $25 million on new construction, all with the goal of emerging as a market share leader when recovery comes.
As advertising pages disappeared from many magazines, aggressive marketers like Sara Lee hiked their ad budgets by 25%. This increases their relative visibility with consumers while lower media rates provide more bang for the buck. Dell, the PC industry's leader in low cost production, responded to softening demand by price cuts and market share gains, while its competition downsizes (Gateway) or seeks a merger partner (Compaq and Hewlett-Packard).
Companies like these have more than an iron stomach and Naskapi-like willingness to roll-the-dice. They also have a plan. They know it's still possible to set goals, and steer toward them, even though the times do not favor traditional, analysis-based planning. They set the right kind of goals for uncertain times:
· Goals sufficiently broad to allow a lot of room for flexibility and opportunistic maneuvering.
· Goals far enough away in time so that it makes sense to develop more than one option for achieving them.
· Goals that are worthy ends in themselves, ones with inherent excitement-value rather than just stepping-stones on the way to some vague destination.
A no-fault corporate culture
Occasional randomness has another virtue: it helps a business forget what made it currently successful. Managers tend to remember only what is producing results today Using recent memories is a good way to be efficient, but a poor approach to coping with uncertainty and the need for constant change. It is easy to stumble when you have become over-adapted to your situation.
The Naskapi course-setting process does more than mimic the chaos of the environment. It sets the stage for learning to happen. Forward movement, even if randomly set, generates new information, giving you clues about what works and what doesn't. Taking advantage of them, though, requires setting aside the common "get-it-right-the-first-time-or-else" value hard-wired in many corporate cultures.
The Naskapi's "corporate culture" is a no-fault one. While mistakes do happen-no game may be found in the direction chosen by the hunters on a particular day-they avoid the time-consuming, energy-draining process of searching for scapegoats and targets of blame. They just pick up the pieces the next day and try again, which is the essence of good improvisation.
Improvisers acting along these lines have many balls in the air at once. Rather than rushing to implement any single solution, they mimic the experimenter and launch multiple attacks on each problem. Parallel paths are the best way to avoid the paralysis that frequently accompanies single, bet-your-business strategies. This is what Microsoft did at a critical stage of its development when it had to be open to the leadings and promptings of a market that itself didn't know where it was going.
In 1988 Microsoft was not the certain winner in the desk top operating system wars. Smaller then than most of its competitors, its flagship product DOS had been the industry standard for six years in the PC market, but it was clunky and showing its age. It's replacement product, Windows, was already in its second release and a near still-birth attracting more pundit criticism than loyal users.
Facing-off with Microsoft in the marketplace was a much loved, more elegant alternative - the Apple Macintosh operating system. AT&T, Hewlett-Packard and Sun Microsystems were touting a new graphical version of their robust Unix software. And IBM had just released OS/2, a product compatible with DOS, as strong as Unix and as easy to use as a Macintosh.
How did Microsoft respond? With a little of everything. A new, improved DOS was put on the market along with the latest version of Windows. Microsoft actually co-developed OS/2, so it would share its market success along with IBM. In case Apple's Macintosh triumphed, Microsoft invested heavily in updated versions of Excell, PowerPoint and Word that would run only on it. And, to keep its flanks protected, Microsoft even partnered with a small software maker to create a version of Unix that was PC-compatible.
The business press had a field day criticizing the company from Seattle. "Microsoft was adrift, Gates has no strategy" shouted the articles. Rumors abounded of infighting among rival teams of his programmers. Gates, of course, was far from strategy-less. He had a clear plan of action in the face of massive uncertainty. He, as McKinsey consultant Eric Beinhocker noted, bet on every horse. Gates wanted Windows to pull ahead in the race, but he knew that past trends were not predictors of future results in the then still-amorphous PC market (otherwise we'd all be using Macintoshes today). So he flanked his favored product with an array of side bets. Even if Windows lost, Microsoft wouldn't.
Improvisers are good at creating variations, and are wary of ultimate solutions. They realize that just because one approach succeeds today, there is no guarantee it will prevail in tomorrow's changed market. Or next week's.
Don't fight uncertainty - it's a win-less war. Use downtime to sharpen your sword. Seed your team with corporate mutants as well as clones embodying what worked well once. Stay-away from hard-to-reverse-decisions, but don't shy from action. Think through alternatives. Set a goal. Be surprised - not thrown - as developments unfold. Add some surprises to the marketplace yourself. Move out along several paths toward the goal. Keep learning from the dead-ends. Even if you don't get as far along as you'd like, you'll be way ahead of all those who have hunkered down.
© Robert M. Tomasko 2002
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