Decision Making in Uncertainty? This 25-Year-Old Tool Actually Works

Decision Making in Uncertainty? This 25-Year-Old Tool Actually Works

Just as we got used to VUCA (volatile, uncertain, complex, ambiguous) futurists now claim “the world is BANI now.”  BANI (brittle, anxious, nonlinear, incomprehensible) is much worse than VUCA and reflects “the fractured, unpredictable state of the modern world.”

Not to get too Gen X on the futurists who coined and are spreading this term but…shut up.

Is the world fractured and unpredictable? Yes.

Does it feel brittle? Are we more anxious than ever? Are things changing at exponential speed, requiring nonlinear responses? Does the world feel incomprehensible? Yes, to all.

Naming a problem is the first step in solving it. The second step is falling in love with the problem so that we become laser focused on solving it. BANI does the first but fails at the second. It wallows in the problem without proposing a path forward. And as the sign says, “Ain’t nobody got time for this.”

 

(Re)Introducing the Cynefin Framework

The Cynefin framework recognizes that leadership and problem-solving must be contextual to be effective. Using the Welsh word for “habitat,” the framework is a tool to understand and name the context of a situation and identify the approaches best suited for managing or solving the situation.

It’s grounded in the idea that every context – situation, challenge, problem, opportunity – exists somewhere on a spectrum between Ordered and Unordered. At the Ordered end of the spectrum, cause and affect are obvious and immediate and the path forward is based on objective, immutable facts. Unordered contexts, however, have no obvious or immediate relationship between cause and effect and moving forward requires people to recognize patterns as they emerge.

Both VUCA and BANI point out the obvious – we’re spending more time on the Unordered end of the spectrum than ever. Unlike the acronyms, Cynefin helps leaders decide and act.

5 Contexts. 5 Ways Forward

The Cynefin framework identifies five contexts, each with its own best practices for making decisions and progress.

On the Ordered end of the spectrum:

  • Simple contexts are characterized by stability and obvious and undisputed right answers. Here, patterns repeat, and events are consistent. This is where leaders rely on best practices to inform decisions and delegation, and direct communication to move their teams forward.
  • Complicated contexts have many possible right answers and the relationship between cause and effect isn’t known but can be discovered. Here, leaders need to rely on diverse expertise and be particularly attuned to conflicting advice and novel ideas to avoid making decisions based on outdated experience.

On the Unordered end of the spectrum:

  • Complex contexts are filled with unknown unknowns, many competing ideas, and unpredictable cause and effects. The most effective leadership approach in this context is one that is deeply uncomfortable for most leaders but familiar to innovators – letting patterns emerge. Using small-scale experiments and high levels of collaboration, diversity, and dissent, leaders can accelerate pattern-recognition and place smart bets.
  • Chaos are contexts fraught with tension. There are no right answers or clear cause and effect. There are too many decisions to make and not enough time. Here, leaders often freeze or make big bold decisions. Neither is wise. Instead, leaders need to think like emergency responders and rapidly response to re-establish order where possible to bring the situation into a Complex state, rather than trying to solve everything at once.

The final context is Disorder. Here leaders argue, multiple perspectives fight for dominance, and the organization is divided into fractions. Resolution requires breaking the context down into smaller parts that fit one of the four previous contexts and addressing them accordingly.

The Only Way Out is Through

Our VUCA/BANI world isn’t going to get any simpler or easier. And fighting it, freezing, or fleeing isn’t going to solve anything. Organizations need leaders with the courage to move forward and the wisdom and flexibility to do so in a way that is contextually appropriate. Cynefin is their map.

We’ve Got Uncertainty & Risk All Wrong (and It’s Killing Our Business)

We’ve Got Uncertainty & Risk All Wrong (and It’s Killing Our Business)

In September 2011, the English language officially died.  That was the month that the Oxford English Dictionary, long regarded as the accepted authority on the English language published an update in which “literally” also meant figuratively. By 2016, every other major dictionary had followed suit.

The justification was simple: “literally” has been used to mean “figuratively” since 1769. Citing examples from Louisa May Alcott’s Little Women, Charles Dickens’ David Copperfield, Charlotte Bronte’s Jane Eyre, and F. Scott Fitzgerald’s The Great Gatsby, they claimed they were simply reflecting the evolution of a living language.

What utter twaddle.

Without a common understanding of a word’s meaning, we create our own definitions which lead to secret expectations, and eventually chaos.

And not just interpersonally. It can affect entire economies.

 

Maybe the state of the US economy is just a misunderstanding

 

Uncertainty.

We’re hearing and saying that word a lot lately. Whether it’s in reference to tariffs, interest rates, immigration, or customer spending, it’s hard to go a single day without “uncertainty” popping up somewhere in your life.

But are we really talking about “uncertainty?”

 

Uncertainty and Risk are not the same.

 

The notion of risk and uncertainty was first formally introduced into economics in 1921 when Frank Knight, one of the founders of the Chicago school of economics, published his dissertation Risk, Uncertainty and Profit.  In the 114 since, economists and academics continued to enhance, refine, and debate his definitions and their implications.

Out here in the real world, most businesspeople use them as synonyms meaning “bad things to be avoided at all costs.”

But they’re not synonyms. They have distinct meanings, different paths to resolution, and dramatically different outcomes.

Risk can be measured and/or calculated.

Uncertainty cannot be measured or calculated

The impact of tariffs, interest rates, changes in visa availability, and customer spending can all be modeled and quantified.

So it’s NOT uncertainty that’s “paralyzing” employers.  It’s risk!

Not so fast my friend.

Not all Uncertainties are the same

 

According to Knight, Uncertainty drives profit because it connects “with the exercise of judgment or the formation of those opinions as to the future course of events, which…actually guide most of our conduct.”

So while we can model, calculate, and measure tariffs, interest rates, and other market dynamics, the probability of each outcome is unknown.  Thus, our response requires judgment.

Sometimes.

Because not all uncertainties are the same.

The Unknown (also known as “uncertainty based on ignorance”) exists when there is a “lack of information which would be necessary to make decisions with certain outcomes.”

The Unknowable (“uncertainty based on ambiguity”) exists when “an ongoing stream [of information]  supports several different meanings at the same time.”

Put simply, if getting more data makes the answer obvious, we’re facing the Unknown and waiting, learning, or modeling different outcomes can move us closer to resolution. If more data isn’t helpful because it will continue to point to different, equally plausible, solutions, you’re facing the Unknowable.

 

So what (and why did you drag us through your literally/figuratively rant)?

If you want to get unstuck – whether it’s a project, a proposal, a team, or an entire business, you first need to be clear about what you’re facing.

If it’s a Risk, model it, measure it, make a decision, move forward.

If it’s an uncertainty, what kind is it?

If it’s Unknown, decide when to decide, ask questions, gather data, then, when the time comes, decide and move forward

If it’s Unknowable, decide how to decide then put your big kid pants on, have the honest and tough conversations, negotiate, make a decision, and move on.

I mean that literally.

Why Creative Confidence Beats Market Signals (And How Johnny Cash Used It to Resurrect His Career)

Why Creative Confidence Beats Market Signals (And How Johnny Cash Used It to Resurrect His Career)

The best business advice can destroy your business. Especially when you follow it perfectly.

Just ask Johnny Cash.

After bursting onto the scene in the mid-1950s with “Folsom Prison Blues”, Cash enjoyed twenty years of tremendous success.   By the 1970s, his authentic, minimalist approach had fallen out of favor.

Eager to sell records, he pivoted to songs backed by lush string arrangements, then to “country pop” to attract mainstream audiences and feed the relentless appetite of 900 radio stations programming country pop full-time.

By late 1992, Johnny Cash’s career was roadkill. Country radio had stopped playing his records, and Columbia Records, his home for 25 years, had shown him the door. At 60, he was marooned in faded casinos, playing to crowds preferring slot machines to songs.

Then he took the stage at Madison Square Garden for Bob Dylan’s 30th anniversary concert.

In the audience sat Rick Rubin, co-founder of Def Jam Recordings and uber producer behind Public Enemy, Run-DMC, and Slayer, amongst others. He watched in awe as Cash performed, seeing not a relic but raw power diluted by smart decisions.

 

The Stare-Down that Saved a Career

Four months later, Rubin attended Cash’s concert at The Rhythm Café in Santa Anna, California. According to Cash’s son, “When they sat down at the table, they said: ‘Hello.’ But then my dad and Rick just sat there and stared at each other for about two minutes without saying anything, as if they were sizing each other up.”

Eventually, Cash broke the silence, “What’re you gonna do with me that nobody else has done to sell records for me?”

What happened next resurrected his career.

Rubin didn’t promise record sales.  He promised something more valuable: creative control and a return to Cash’s roots.

Ten years later, Cash had a Grammy, his first gold record in thirty years, and CMA Single of the Year for his cover of Nine Inch Nails’ “Hurt,” and millions in record sales.

When Smart Decisions Become Fatal

Executives do exactly what Cash did.  You respond to market signals. You pivot your offering when customer preferences shift and invest in emerging technologies.

All logical. All defensible to your board. All potentially fatal.

Because you risk losing what made you unique and valuable. Just as Cash lost his minimalist authenticity and became a casualty of his effort to stay relevant, your business risks losing sight of its purpose and unique value proposition.

 

Three Beliefs at the Core of a Comeback

So how do you avoid Cash’s initial mistake while replicating his comeback? The difference lies in three beliefs that determine whether you’ll have the creative courage to double down on what makes you valuable instead of diluting it.

  1. Creative confidence: The belief we can think and act creatively in this moment.
  2. Perceived value of creativity: Our perceived value of thinking and acting in new ways.
  3. Creative risk-taking: The willingness to take the risks necessary for active change.

Cash wanted to sell records, and he:

  1. Believed that he was capable of creativity and change.
  2. Saw the financial and reputational value of change
  3. Was willing to partner with a producer who refused to guarantee record sales but promised creative control and a return to his roots.

 

Your Answers Determine Your Outcome

Like Cash, what you, your team, and your organization believe determines how you respond to change:

  1. Do I/we believe we can creatively solve this specific challenge we’re facing right now?
  2. Is finding a genuinely new approach to this situation worth the effort versus sticking with proven methods?
  3. Am I/we willing to accept the risks of pursuing a creative solution to our current challenge?”

Where there are “no’s,” there is resistance, even refusal, to change.  Acknowledge it.  Address it.  Do the hard work of turning the No into a Yes because it’s the only way change will happen.

 

The Comeback Question

Cash proved that authentic change—not frantic pivoting—resurrects careers and disrupts industries. His partnership with Rubin succeeded because he answered “yes” to all three creative beliefs when it mattered most. Where are your “no’s” blocking your comeback?

Three Executive Decisions that Make or Break Strategic Foresight

Three Executive Decisions that Make or Break Strategic Foresight

You stand on the brink of an exciting new adventure.  Turmoil and uncertainty have convinced you that future success requires more than the short-term strategic and business planning tools you’ve used.  You’ve cut through the hype surrounding Strategic Foresight and studied success.  You are ready to lead your company into its bold future.

So, where do you start?

Most executives get caught up in all the things that need to happen and are distracted by all the tools, jargon, and pretty pictures that get thrown at them.  But you are smarter than that.  You know that there are three things you must do at the beginning to ensure ultimate success.

Give Foresight Executive Authority and Access

Foresight without responsibility is intellectual daydreaming.

While the practice of research and scenario design can be delegated to planning offices, the responsibility for debating, deciding, and using Strategic Foresight must rest with P&L owners.

Amy Webb’s research at NYU shows that when a C-Suite executive with the authority to force strategic reviews oversaw foresight activities, the results were more likely to be acted on and integrated into strategic and operational plans.  Shell serves as a specific example of this, as its foresight team reported directly to the executive committee, so that when scenarios explored dramatic oil price volatility, Shell executives personally reviewed strategic portfolios and authorized immediate capability building.

Start by asking:

  1. Who can force strategic reviews outside of the traditional planning process?
  2. What triggers a review of Strategic Foresight scenarios?
  3. How do we hold people accountable for acting on insights?

 

Demand Inputs That Challenge Your Assumptions

If your Strategic Foresight conversations don’t make you uncomfortable, you’re doing them wrong.

Webb’s research also shows that successful foresight systematically explores fundamental changes that could render the existing business obsolete.

Shell’s scenarios went beyond assumptions about oil price stability to explore supply disruptions, geopolitical shifts, and demand transformation. Disney’s foresight set aside traditional assumptions about media consumption and explored how technology could completely reshape content creation, distribution, and consumption.

Start by asking these questions:

  1. Is the team going beyond trend analysis and exploring technology, regulations, social changes, and economic developments that could restructure entire markets?
  2. Who are we talking to in other industries? What unusual, unexpected, and maybe crazy sources are we using to inform our scenarios?
  3. Does at least one scenario feel possible and terrifying?

 

Integrate Foresight into Existing Planning Processes

Strategic Foresight that doesn’t connect to resource allocation decisions is expensive research.

Your planning processes must connect Strategic Foresight’s long-term scenarios to Strategic Planning’s 3–5-year plans and to your annual budget and resource decisions. No separate foresight exercises. No parallel planning tracks. The cascade from 20-year scenarios to this year’s investments must be explicit and ruthless.

When Shell’s scenarios explored dramatic oil price volatility over decades, Shell didn’t file them away and wait for them to come true.  They immediately reviewed their strategic portfolio and developed a 3–5-year plan to build capabilities for multiple oil futures. This was then translated into immediate capital allocation changes.

Disney’s foresight about changing media consumption in the next 20 years informed strategic planning for Disney+ and, ultimately, its operational launch.

Start by asking these questions:

  1. How is Strategic Foresight linked to our strategic and business planning processes?
  2. How do scenarios flow from 20-year insights through 5-year strategy to this year’s budget decisions?
  3. How is the integration of Strategic Foresight into annual business planning measured and rewarded?

 

Three Steps. One Outcome.

Strategic foresight efforts succeed when they have the executive authority, provocative inputs, and integrated processes to drive resource allocation decisions. Taking these three steps at the very start sets you, your team, and your organization up for success.  But they’re still not a guarantee.

Ready to avoid the predictable pitfalls? Next week, we’ll consider why strategic foresight fails and how to prevent your efforts from joining them.

Two Strategic Foresight Success Stories.  One Secret to Success

Two Strategic Foresight Success Stories. One Secret to Success

Convinced that Strategic Foresight shows you a path through uncertainty?  Great!  Just don’t rush off, hire futurists, run some workshops, and start churning out glossy reports.

Activity is not achievement.

Learning from those who have achieved, however, is an excellent first activity.  Following are the stories of two very different companies from different industries and eras that pursued Strategic Foresight differently yet succeeded because they tied foresight to the P&L.

 

Shell: From Laggard to Leader, One Decision at a Time

It’s hard to imagine Shell wasn’t always dominant, but back in the 1960s, it struggled to compete.  Tired of being blindsided by competitors and external events, they sought an edge.

It took multiple attempts and more than 10 years to find it.

In 1959, Shell set up their Group Planning department, but its reliance on simple extrapolations of past trends to predict the future only perpetuated the status quo.

In 1965, Shell introduced the Unified Planning Machinery, a computerized forecasting tool to predict cash flow based on current results and forecasted changes in oil consumption.  But this approach was abandoned because executives feared “that it would suppress discussion rather than encourage debate on differing perspectives.”

Then, in 1967, in a small 18th-floor office in London, a new approach to ongoing planning began.  Unlike past attempts, the goal was not to predict the future.  It was to “modify the mental model of decision-makers faced with an uncertain future.

Within a few years, their success was obvious.  Shell executives stopped treating scenarios as interesting intellectual exercises and started using them to stress-test actual capital allocation decisions.

This doesn’t mean they wholeheartedly embraced or even believed the scenarios. In fact, when scenarios suggested that oil prices could spike dramatically, most executives thought it was far-fetched. Yet Shell leadership used those scenarios to restructure their entire portfolio around different types of oil and to develop new capabilities.

The result? When the 1973 oil crisis hit and oil prices quadrupled from $2.90 to $11.65 per barrel, Shell was the only major oil company ready. While competitors scrambled and lost billions, Shell turned the crisis into “big profits.”

 

Disney: From Missed Growth Goals to Unprecedented Growth

In 2012, Walt Disney International’s (WDI) aggressive growth targets collided with a challenging global labor market, and traditional HR approaches weren’t cutting it.

Andy Bird, Chairman of Walt Disney International, emphasized the criticality of the situation when he said, “The actions we make today are going to make an impact 10 to 20 years down the road.”

So, faced with an unprecedented challenge, the team pursued an unprecedented solution: they built a Strategic Foresight capability.

WDI trained over 500 leaders across 45 countries, representing five percent of its workforce, in Strategic Foresight.  More importantly, Disney integrated strategic foresight directly into their strategic planning and performance management processes, ensuring insights drove business decisions rather than gathering dust in reports.

For example, foresight teams identified that traditional media consumption was fracturing (remember, this was 2012) and that consumers wanted more control over when and how they consumed content.  This insight directly shaped Disney+’s development.

The results speak volumes. While traditional media companies struggled with streaming disruption, Disney+ reached 100 million subscribers in just 16 months.

 

Two Paths.  One Result.

Shell and Disney integrated Strategic Foresight differently – the former as a tool to make high-stakes individual decisions, the latter as an organizational capability to affect daily decisions and culture.

What they have in common is that they made tomorrow’s possibilities accountable to today’s decisions. They did this not by treating strategic foresight as prediction, but as preparation for competitive advantage.

Ready to turn these insights into action? Next week, we’ll dive into the tools in the Strategic Foresight toolbox and how you and your team can use them to develop strategic foresight that drives informed decisions.

Strategic Foresight Won’t Save Your Company (But Ignoring It Will Kill It)

Strategic Foresight Won’t Save Your Company (But Ignoring It Will Kill It)

Are you spooked by the uncertainty and volatility that defines not just our businesses but our everyday lives?  Have you hunkered down, stayed the course, and hoped that this too shall pass? Are you starting to worry that this approach can’t go on forever but unsure of what to do next?  CONGRATULATIONS, consultants have heard your cries and are rolling  out a shiny new framework promising to solve everything: Strategic Foresight.

Strategic foresight is the latest silver bullet for navigating our chaotic, unpredictable world.

Remember in 2016 when Agility was going to save us all? Good times.

As much as I love rolling my eyes at the latest magic framework, I have to be honest – Strategic Foresight can live up to the hype. If you do it right.

 

What Strategic Foresight Actually Is (Spoiler: Not a Silver Bullet)

A LOT is being published about Strategic Foresight (I received 7 newsletters on the topic last week) and everyone has their own spin.  So let’s cut through the hype and get back to basics

What it is:  Strategic foresight is the systematic exploration of multiple possible futures to anticipate opportunities and risks, enabling informed decisions today to capture advantages tomorrow.

There’s a lot there so let’s break it down:

  • Systematic exploration: This isn’t guessing, predicting, or opining. This is a rigorous and structured approach
  • Multiple possible futures: Examines multiple scenarios because we can’t possibly forecast or predict the one future that will occur
  • Enabling informed decisions today: This isn’t an academic exercise you revisit once a year. It informs and guides decisions and actions this year.
  • Capture advantages tomorrow: Positions you to respond to change with confidence and beat your competition to the punch

 

How it fits: Strategic Foresight doesn’t replace what you’re doing.  It informs and drives it.

Approach Timeline Focus
Strategic Foresight 5-20+ years Explore possible futures
Strategic Planning 3-5 years Create competitive advantage
Business Planning Annual cycles Execute specific actions

 

The sequence matters: Foresight Strategic Planning Business Planning.

This sequence also explains why Strategic Foresight is so hot right now.  Systemic change used to take years, even decades, to unfold.  As a result, you could look out 3-5 years, anticipate what would be next, and you would probably be right.

Now, systemic change can happen overnight and be undone by noon the next day.  Whatever you think will happen will probably be wrong and in ways you can’t anticipate, let alone plan for and execute against.

Strategic Foresight’s rigorous, multi-input approach gives us the illusion of control in a world that seems to be spinning out of it.

 

How to Avoid the Illusion and Get the Results.

Personally, I love the illusion of control BUT as a business practice, I don’t recommend it.

Strategic Foresight’s benefits will stay an illustion if you don’t:

  1. Develop in-house strategic foresight capabilities. Amy Webb’s research at NYU shows that companies using rigorous foresight methodologies consistently outperform those stuck in reactive mode. Shell’s legendary scenario planning helped them navigate oil crises while competitors flailed. Disney’s Natural Foresight® Framework keeps them ahead of entertainment trends that blindside others.
  2. Integrate foresight into your annual strategic planning cycle:  Strategic foresight is a front-end effort that makes your 3-5 year strategy more robust.  If you treat it like a separate exercise where you hire futurists, and run some workshops, and check the Strategic Foresight box, you won’t see any benefits or results.

 

What’s Next?

Strategic foresight isn’t a silver bullet, but it can be a path through uncertainty  to advantage and growth.

The difference between success and failure comes down to execution. Do you treat it as prediction or preparation? Do you integrate it with existing planning or silo it in innovation labs?

Ready to separate the hype from the hard results? Our next post shows you what two industry leaders learned about turning foresight into competitive advantage and how you can use those lessons to your benefit