When my leadership learning group decided a few months ago at my request to escape the grip of pandemic immediacy in our discussion, the topic was where organizations will be next summer. It seemed an easy theme: By then there would likely be a vaccine for the coronavirus, and things would be returning toward normality. But all it revealed was that none of us knew what next summer will be like. Too far away. Too many factors.
Margaret Heffernan, a former CEO charged with determining the future for the organizations she led, would argue that’s not accidental. The future is unknowable. Indeed, accepting that fact is where action begins.
In a technocratic age, however, that seems unsatisfactorily gloomy. We are supposed to be sophisticated, with data and models that can help us get a good sense of the future. Yet in her book Uncharted Ms. Heffernan shows how over the years our models for knowing the future – “prediction addiction,” she calls it – have routinely let us down. “The very best forecasters are wrong a lot,” Philip Tetlock, the University of Pennsylvania professor who has studied their accuracy, told her. And that was before the pollsters tried to predict the recent U.S. election.
Addressing the future comes to play in corporate decision-making, particularly strategy and launching new products. Ms. Heffernan touts scenario planning – you may not be able to predict the future but can certainly develop various scenarios about what could happen, and prepare for how they may play out. Risk analyst Nassim Nicholas Taleb in his 2007 bestseller The Black Swan similarly advised we can’t predict these highly improbably, high-impact events so should concentrate instead on preparing for them.
Ms. Heffernan also urges you to think like writers, filmmakers and other artists. They observe, sort through themes, grapple with details, and live productively with ambiguity. They also think for themselves. Was there a better forecaster – or at least, scenario developer – than Margaret Atwood when she delved through her clippings while producing The Handmaid’s Tale in 1985?
But the best method is probably experimenting your way into the future – testing your idea and product to determine whether it will work, or in what circumstances or with what alterations it can be successful. “You just don’t know, won’t know, until you try. And try again,” Ms. Heffernan writes.
Stefan Thomke, a professor at Harvard Business School, urges you to organize for experimentation. But do so without expecting to effortlessly sail into a flawless future. “Experimentation does not automatically assure riches,” he writes in Experimentation Works. “In fact, the failure rate of experimentation can be 90 per cent or higher – whether they are conducted by a single scientist, a world famous laboratory, a marketing department, or business strategists.”
Experiments are common in the digital world but they existed before the internet. Test markets have been used for restaurants, food products, and automobiles. It’s not foolproof; ask Coca-Cola about its sure thing, new formula in 1985. “Although the process of experimentation seems straightforward, it is surprisingly hard in practice, owing to myriad organizational, management and technical challenges. Moreover, most tests of new business initiatives are too informal,” Prof. Thomke warns.
Here are some questions he suggests you ask:
Does the experiment have a testable hypothesis?: You need to know exactly what you want to learn and measure. In 2013, when Kohl’s was trying to reduce operating costs, executives were split on a proposal to open stores an hour later Monday through Saturday, some fearing the savings would be offset by a plunge in sales. A test with 100 stores showed no meaningful sales decline.
Have stakeholders made a commitment to abide by the results?: An experiment produces data that can be cherry-picked by opposing sides. “There must be a process that ensures test results aren’t ignored, even when they contradict the assumptions or intuition of top executives,” he says.
Is the experiment doable?: Business is complex and often murky. He takes the example of a hypothetical chain with 10,000 convenience stores named QuickMart averaging $1-million in sales and 2,000 named FastMart faring better with $1.1-million in sales. Should all the stores be changed in name to FastMart? You could easily change the name on a sample of stores to see what happens with revenues but so many factors affect sales you might end up deluding yourself.
Consultant Steven K Gold, studying entrepreneurs, found them prone to experiments. Given a long list of possible experiments, entrepreneurs put them into one of four categories: do it now, do it later, find a partner, or forget about it. They also de-risk the experimental alternative, identifying the most likely causes for failure and preparing for that possibility.
Prof. Thomke stresses that not all management decisions can be resolved by experiments. Deciding to acquire another company or enter a new market segment are best left to judgment, observation and analysis, faulty as those may be. But experiments can help you better determine the future in many instances and are certainly not used as often as they might be, perhaps because we prefer to pretend we know the future than admit we don’t.
Cannonballs
- Columbia Business School professor Rita Gunther McGrath suggests steering your organization is like flying a child’s kite. You can’t force the kite to fly. You can yell at it, threaten it, or promise it goodies. If you don’t build your kite in a balanced, well-structured way and don’t launch it into the right conditions, it will just sit there rather than soar.
- Thirty-six per cent of CEOs say the No. 1 source of conflict is interpersonal struggles. Not far behind, cited by 31 per cent in the Predictive Index survey, was determining which strategies and goals to pursue.
- Recent research shows that overconfidence in an organization is contagious. The researchers, who include York University psychology professor Joey Cheng, warn that an overconfident leader can be like the first domino to fall, influencing their own direct reports, who then infect peers.
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Harvey Schachter