Both could work - how do you make your leadership choice?

My good friend Francois Gall tipped me off to a really great letter to shareholders from Amazon. There's a lot in it to think about: the link they see between their customer-driven focus and their unending quest to improve, their frank recognition that to make progress you have to accept you'll make mistakes, the consistency of their direction over time. But, the thing that struck me the most was that they admit there are at least two approaches to maximising business success.  One (customer focus) which they've chosen and one (competitor focus) which they haven't. If the data and analysis tells you there's one best option, there's really no choice.  In my experience, business  isn't often like that.  Usually, there are at least two sensible options (sometimes more) and all the analysis in the world can't show you which is best.  When there are multiple directions that could lead to the results you want, then it's down to a real choice - and that's where leadership starts.  When both could work, how do you make your leadership choice?

Are fishermen always liars?

We all know about the stories fishermen tell of the one that got away. I'm wondering if fishermen aren't liars in a different sense. To catch a fish, they offer something: a worm, a fake bug, something. But, it's not what it appears to be. It's a hook disguised as something tasty (at least to a fish). In essence, it's a lie. It only works because the fish can't tell the difference. It's not a fair exchange, it's basically theft.

Maybe that's ok if you're lying to is a fish. But what about lying to people? How many businesses only work because they know more than their customers, because their customers can't tell the difference? However many, the truth is they aren't creating any real value, they're just lying, cheating, and stealing.

Distant or deep?

At a Green & Tonic event this week, in discussion with Pater Madden of Forum for the Future, which is a non-profit organisation working globally with business and government to create a sustainable future. We got onto the topic of working with business leaders to help them make strategic decisions about what they want for their business. One technique we both use is to ask them to think about a time comfortably in the future  and what they would like to see then.  The benefit of this is that it allows them to step away from the constraints and pressures of today, to become clearer about who they are and the values they have, and to see what they need to do differently to be true to themselves. As you might imagine, this gets into areas that go well beyond "increasing shareholder value".

The thought that struck me is that the real point of the exercise isn't to look at a time that's distant, but to look at today in a different and deep way.  And, I think most strategy work - particularly in today's unpredictable, fast-paced world - needs to be more about taking a deep look at where (and who) we are and what that means for what we should do now, rather than spending too much time peering into a future that most likely won't ever happen.

Sort of right

I keep my watch about 5 minutes fast. I do it mostly to remind me that I'm committed to being on time. And, I mentally adjust for the 5 minutes, so I have a rough sense of what time it really is. Here's what struck me this morning: my watch is never right. But, it's sort of right, and good enough for my purposes. By way of contrast, I could have a watch that was - at times - exactly right: if the hands never moved. Of course, that would be useless for anything.

I think a lot of strategy processes are aiming for "really right", but end up with a false sense of confidence. The sort of analysis that underpins much strategic work is sometimes right, but it's hard to know from the analysis when it's not. Too often, the result is decisions that don't reflect the degree to which is the underlying analysis might be wrong. I'd rather have a watch I know is roughly right, than one I think is exactly right, but only now and then.

What to do when you just don't know

Exec teams and Boards spend a lot of time focused on risk and risk management.  Rightly so in today's world.  But, there's something else - different from risk, but often confused with it - that senior executives and Board members should be equally, if not more, concerned about. It's radical uncertainty. John Kay, in a recent column in the FT (The other multiplier effect, or Keynes's view of probability - http://on.ft.com/OslEcY) touched on this topic:

Keynes believed that the financial and business environment was characterised by “radical uncertainty”. The only reasonable response to the question “what will interest rates be in 20 years’ time?” is “we simply do not know”.

I suspect that admitting "I don't know, we don't know, it can't be known" is difficult for many business leaders - particular on any topic related to their business.  There's a lot that could be said about why that is, and the sometimes negative consequences.  But, there's a different angle I'd like to explore.  If you accept that your business is facing some degree of radical uncertainty, how does that change the way you ought to think about strategy?

A lot of strategic thinking is based on the assumption that you can forecast the future (or at least assign realistic probabilities to a known range of outcomes in the future) and then pick the actions most likely to give you what you want.  But, "radical uncertainty" means you can't even know the full list of possible outcomes, much less how likely each one is. No matter how well you do your analysis, there are just going to be some key decisions where that way of thinking doesn't work .

Of course, it's not all fog and darkness either.  Businesses have more data, more analytical tools, more knowledge available to them than ever before.  And, our ability to model complex business ecosystems and see previously unexpected interactions and outcomes has also improved. But, most of these tools work best for "how" sorts of things: How many new customers are we going to get if we spend £x? How long will it take develop the next version of our product? Plus, they are based on extrapolation from the past, which means that they only work as long as the future looks a lot like the past.  Don't assume that's going to be the case.

So, what does this mean for strategic thinking - particularly at the top team level?  At minimum, since you almost certainly face some degree of "radical uncertainty", it's worth discussing as a Board how that very fact might need to modify your decision making process. Even better, consider this question: "If we can't know for certain what will result from our actions, are there still things we would want to do or be - for themselves, not for what they bring?"

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