By Dr. David S. Weiss and Peter
The annual general meeting was almost over and then the dreaded question was asked: “Considering the fact that the industry previously experienced mysterious viruses such as SARS and H1N1, the world has been thinking about a serious pandemic affecting global citizens for over a decade. Why were we unprepared when this COVID-19 outbreak hit? Where was the pandemic readiness plan?”
The convenor astutely passed the baton to the president who gave the prepared response: “How the world responded to this unprecedented global pandemic leaves plenty of opportunities for lessons learned and for developing best practices. Like many organizations and industries around the world, we will absolutely do our lessons learned, commit to it and improve as a result of that.”
The president gave a mea culpa, an acknowledgement of having done wrong. But were they wrong? Could they and the world have done better?
Many leaders refer to the COVID-19 pandemic as a “black swan” event – a term used often by the military and business strategists – to describe the occurrence of a seemingly unpredictable event that imparts severe consequences. The theory holds that for an event to be considered a black swan, it must meet three conditions: it appears by complete surprise, it exerts a major impact and, in hindsight, it can be “explained” or appears “obvious.” Perhaps the president in our opening story realized that the very idea of a “surprise” inherently assumes that if you know, or should have known, something exists, it cannot be a black swan event, even if the probabilities of it occurring are deemed infinitesimally small.
This effort may seem to be overwhelming in a world that is becoming increasingly more volatile, uncertain, complex and ambiguous (or VUCA, an acronym popularized by the US Army War College following the end of the Cold War). But one of the lessons learned from this COVID-19 pandemic is that mere cursory consideration, or even outright avoidance, are not viable strategic choices. So, what should leaders have done to prepare and what should they do now?
The call to senior leaders and boards is to be proactive in the face of an uncertain future. Most senior leaders and boards analyze what is “likely to be” based on existing and historical trajectories. However, in an uncertain world, that is not enough. They also need to give attention to what “could be” – which reflects what we know about today that we can reasonably project into the future (e.g. technology, artificial intelligence, etc.). In addition, they need to give equal attention to what “might be” – which anticipates future knowledge that neither defies laws of physics nor our imagination. Such detailed and deliberate analysis provides a customized pathway for leaders to respond rapidly to whatever eventuality occurs.
FORECASTING: ENVIRO, EXTERNAL AND INTERNAL SCANS
We view the process of proactively engaging with an uncertain future as the forecasting-readiness process. The process has three levels:
Level 1: Enviro Scan: Identify “Above-Organization” Dynamics and Patterns
Leaders need to peer systematically beyond the four walls of their organizational ecosystem to understand the world beyond their organization (the “above-organization” dynamics and patterns). They need to identify what potential forces could be exerted on the organization and their strength, speed and gravitational pull as they relate to their organization. For example, let’s say your organization’s services are unrelated to those that companies like Amazon provides. However, to be aware of what could occur in the future, an investigation of how your clients are behaving when they interact with such companies as Amazon, Google, Ticketmaster, Waze, etc. could uncover important information. It could enable you to determine whether your organization is ready to respond to your clients’ future demands for an experience those companies provide. Consider how other organizations meet the needs of clients you choose not to service or are unable to service. These clients may be experiencing a very different and customized kind of service from other vendors. If your current clients learn about the customized service others are receiving, they may make demands on your organization that you have not considered. Senior leaders need to expose these scenarios and assess the degree to which they should engage with those eventualities.
Senior leaders need to continually develop their understanding of how to navigate the choppy waters of ambiguity and volatility. Through this enviro scan, an understanding of the world beyond your organization begins to take root, which will shape how you can engage proactively with an uncertain future.
Level 2: External Scan: Know Your Target Markets and Clients/Stakeholders Within Them
A second-level scan of the external environment is gained through an understanding of the organization’s target markets and clients/stakeholders within them. Innovation science teaches us that to truly deliver novel, relevant solutions, one must thoroughly examine the fundamental problem(s) to be solved. The best way to accomplish this is by applying human-centric methodologies that aim to “step-into-the-shoes” of possible target audiences. From there, the objective is to build a well-rounded, “empathic understanding” of that audience. This understanding will help you guide value creation that is in alignment with the functional and emotional needs you will be systematically uncovering. This amounts to detailed and very deliberate work that tells organizations why it might deserve the right to serve a certain target client/market, what type of client value propositions it must deliver, and how it needs to align its resources and processes to accomplish this task.
Armed with improved understanding of the enviro scan and the external scan, leaders gain clarity about the world around the organization and a sharpened perspective on its place within it.
Level 3: Internal Scan: Know Your Capability to Respond to an Uncertain Future
In our highly complex environments, it can be difficult for leaders to take a step back to conduct a meaningful evaluation of the continued relevance of its assets, structures and processes that are the foundation upon which the organization builds its unique value propositions. Inertia is a powerful force that if left unchallenged can harden belief systems. The common refrain, “It has worked for decades after all, hasn’t it?” reinforces the oft-misguided belief and confidence that using tried-and-tested best practices is key to future success. However, the problems faced by many organizations lie in the reality that the world has changed and that the pace of change is accelerating, not subsiding. Hardened organizational structures, combined with rigid processes and outdated labour and capital inputs, are increasingly struggling to adapt and keep pace with the scale, scope and speed of change.
It is also no longer enough to seek incremental gains derived from refinements or step-by-step advances to the status quo. The organization, its leadership and staff need to be able to pivot and respond quickly to future scenarios. The challenge is made even more difficult when considered against operating realities that require them to simultaneously manage the present. To position for the future, organizations must embrace modernization and transformative changes that go beyond activities of incremental improvement to reach a new seismic level of change. Leaders need to foster a culture that innovates. They need to become “leaders of innovation” who draw out the innovative capacities of teams and individuals. Staff need to be active contributors with an openness and readiness for new expectations and ways of working.
READINESS: SCENARIO ANALYSIS, TRIGGER EVENTS, AND NO REGRETS ACTIONS
In response to the three forecasting levels, senior leaders and boards must create the readiness and resilience to respond to whatever eventuality occurs. The readiness process has three prongs:
Prong 1: Scenario Analysis: Identify Multiple Scenarios from the Interplay of the Enviro, External and Internal Scans
The enviro, external and internal scans need to be reviewed both separately and together to identify multiple scenarios from the interaction of the scans. In the process of this examination, insights and themes about relevant uncertainties begin to emerge. This refined understanding brings clarity to the bigger picture of probabilities, timelines and expected scale, scope and point of impact. Senior leaders then develop detailed plans for the “likely to be” scenario. They also assign cross-functional teams to investigate other uncertainties that “might be” and “could be” future scenarios for the organization. The cross-functional teams are instructed to imagine that their assigned scenario will occur and from there develop high-level readiness plans. If a real life, early warning event occurs that triggers the need for more detailed readiness and mobilization, then the “might be” and “could be” scenario plans are revisited, detailed and activated.
Prong 2: Trigger Events: Events that Change the Probability of Occurrence of an Uncertain Future
Trigger events represent the existence of an occurrence that is of sufficient importance that it influences the probability of uncertain scenarios under study. Given the importance assigned to an event, it needs to be identified and monitored in the belief it changes the overall probability, velocity and impact of an occurrence. Using an example to illustrate, if we consider the current COVID-19 event, we may tag the outbreak in Wuhan or any subsequent “mutation” or “second wave” of the Coronavirus as “trigger events.” These events activate a different response to the uncertain scenario. When trigger events occur, the organization engages in a detailed estimation of direct and indirect impact, where direct impact (in our example) relates to the healthcare system and indirect impact could be economic, political, societal or organizational. The organization then activates the need for more detailed readiness and mobilization plans to ensure a rapid response and demonstrate resiliency as it bounces back from adversity and thrives through the uncertainty.
Prong 3: No Regret Actions: Invest in Areas that Apply to Multiple Future Scenarios
Senior leaders need to study all the uncertain scenarios and identify “no regret” actions that can be re-purposed to suit any situation. No regret actions can be investments and processes that build new capabilities and competencies or enhance existing ones that would apply to all or most of the scenarios. For example, a university with a large international student base was engaged in scenario planning during COVID-19 for the next school term. They identified multiple scenarios based upon two major uncertainties: whether students would be able to come to classes on campus at least for labs or not at all and whether international borders would be open or closed. They created a two-by-two of the two uncertainties (i.e. on campus – borders open; on campus – borders closed; not on campus – borders open; not on campus – borders closed). They concluded that the “likely to be” scenario was “on campus for labs – borders open.” However, the other three scenarios were plausible. They identified several no regret investments that applied to all four scenarios including investing in new platforms for online learning, negotiating with accreditation bodies to ensure they would accept online learning for international students who remained in their country of origin, and redesigning student services to be prepared to support students who studied virtually or on a socially distanced campus. These actions amount to no-regret investments and processes that build new capabilities and competencies or enhance existing ones that can be re-purposed to suit any situation and de-risk the journey ahead.
Should we have been ready? The CEO was correct with her “mea culpa” response and emphasis on engaging in a lessons-learned process. The lessons learned should include the requirement to proactively engage with an uncertain future. At the same time, senior leaders should resist the urge to offer proclamations about the future, as it serves to oversimplify the potential scenarios to one outcome, as opposed to degrees of possibilities. Instead, they should recalibrate vision and strategy, not through expressions of their certainty of the destination but through an emphasis on organizational purpose to be ready to respond to uncertain futures. Organizations, societies and countries need to proactively engage in a forecasting-readiness process custom designed to their situation. This will enable them to be better prepared and to respond rapidly to the next uncertain future that will probably occur in our lifetime.