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How does uncertainty and risk affect you?

We have often heard people say “Well, that was predictable” and it’s usually not said in a positive way. The word “predictable” is often used in a disparaging way, implying a lack of creativity or an unwillingness to change. 

But, while the word may have negative overtones, having predictability, or at least reducing uncertainty, can be a good thing, particularly in business or product development. It would be good to know that “Action A”, will lead to “Result B,” but in our increasingly complex, innovative world, certainty and predictability can be scarce resources. However, we need to try, as W. Edwards Deming said:

“Management is prediction!”

Why we need predictability

We are all creatures of habit, by which I mean that we are drawn to the things with which we are most familiar and which we can rely on. For example, many people choose to have the same thing for breakfast everyday, which is merely a symptom of an intrinsic behavior which provides a sense of comfort and security. It is an innate conservatism that makes us value predictability over uncertainty. 

Extending the idea to organizations opens a can of worms when one man’s predictability leads to another’s insecurity.  For many years, organizations faced with the new realities of globalization have tried to address them with the slash and burn management techniques of the 19th and 20th century. This actually works for those that do the slashing and burning, but it rarely works for anyone else and is not a good long term strategy because it doesn’t address the underlying issue of how to deal with uncertainty. In other words, how to make the unpredictable, as predictable as possible and to have sound values and principles that guide our action when we need to react swiftly in uncharted territory.  

It is our contention that a more subtle and thoughtful approach to leadership is required which works to understand the intrinsic nature of uncertainty through an inclusive (less hierarchical) approach that increases predictability at both micro and macro levels. Furthermore, learning to understand uncertainty helps us deal with situations where one single number does not exist, but perhaps we can say something meaningful about the range of possibilities.  

We do not have a crystal ball

There are no failsafe ways of predicting the future, but there are things we can do to better understand the complexities we face and adjust the way we work to minimize the impact of uncertainty. 

Quite often, the biggest challenge is to accurately assess the tasks in front of us. At first glance, something may appear as one thing, but as we dig into it, layers of complexity are revealed that we had not recognized and therefore had not taken into consideration. We may think that something is complicated i.e. understandable with some effort, when in fact it is complex with hidden unknowns that may either require novel solutions that only can be discovered through experimentation, or may even be totally impractical. 

The importance of being oriented

I have deliberately distinguished between the words complicated and complex which in casual parlance may seem to be more or less interchangeable, but for our purposes have distinct meanings. For this we are indebted to the work of Dave Snowden, whose “Cynefin” framework helps us understand the cognitive differences of the situations we encounter, including our world of work. It lets us place our work in one of  four main domains (Clear, Complicated, Complex and Chaos) each with associated definitions and guidance for how to operate within each domain.  

For now I want to focus on complex work, which is broadly defined as that for which there is incomplete or fragmented knowledge and of course is the type of work which is the least predictable – apart from pure Chaos. Complex work is often about developing new products or technologies or reaching out to new customer groups for which there are no existing blueprints, thus requiring forays into the unknown before solutions can be created. Logically, if something has not been done before it is impossible to know how long it will take, how much it will cost and how much of the original idea is actually achievable. 

There may be high degrees of uncertainty and risk and a very low degree of predictability and we could just throw our arms up in the air and say c’est la vie, but with Snowden’s model and the work done by the team at Agile Lean House to create frameworks and patterns for working in the complex domain, there are excellent ways reduce risk and uncertainty and shine a strong light on creating real value for the customer. The umbrella name for this approach is “Agile Lean Leadership” or “ALL”.

The first steps

  1. Establish that you are at least partially in the complex domain. 
  2. Build a small cross-disciplined team with the skills to evaluate the issue from diverse angles.
  3. Break down the issue into the smaller pieces
  4. Use Tools to estimate each piece in a range from best estimate to worst case. Estimate for each of the following: Time, Cost, Uncertainty (Risk) and Value (to the customer and the supplier) 
  5. Consider all four factors and then Prioritize each item to create the maximum value and with the least risk. 
  6. Get feedback from the customer to validate priorities and ensure they understand the risk factors.  
  7. But try also to keep tabs on the quality of your own estimation in order to build up expertise in assessing items that exhibit similar characteristics but that are not completely the same. This kind of estimation relies on empirically building up skills.

How does this improve predictability?

  1. By acknowledging that an issue is complex and by extension, that it has risk and uncertainty, we reset our expectations and prepare for and communicate a range of possible outcomes.
  2. We should always be cautious about relying on “experts”, but in novel situations there are no experts. And in fact studies have shown that when dealing with complex situations, cross-discipline teams are better at devising solutions because they are able to view the problem from various perspectives, while the expert view is framed by what they know rather than what they don’t know.
  3. Breaking an issue into small chunks makes it more manageable, easier to identify “done” criteria for each piece and it allows the team to develop a forward momentum because things are getting done and progress is being made. Simple statistical math also demonstrates that uncertainty is actually reduced when breaking down into smaller chunks of work.
  4. Everyone hates estimating, particularly when they are faced with complexity and unknowns. But when cross-discipline teams estimate small chunks of work in ranges of possibilities, the results are invariably closer to reality while demonstrating the risk factors.  It’s like driving in dense fog; you need to go slowly, take great care and get frequent feedback from as many directions as possible.  
  5. By adding an estimation of Value, contributed to by the customer, everything comes into focus because we see what is important and we can balance value with risk and resources required.
  6. Finally, wherever possible customer feedback should be sought frequently. Short feedback loops in volatile and ever-changing environments is key to real value creation. When working in iterations or sprints, reviews that involve the customer invariably help keep projects focused on value with a high degree of predictability of meeting expectations. 

We are here to help

Agile Lean House comprises an international network of Agile Lean Leadership trainers, coaches and consultants that engage with organizations to help them get more value and greater predictability out of their efforts. Our customers are large and small and cover the gamut of business sectors including finance, bio-medical, transport, defense, retail and more. 

We have developed a sophisticated array of analog and digital tools, including our cloud-based workflow and productivity tool, Agemba, which helps solve the vital strategic problems of meeting your goals and satisfying your customers’ needs. 

We help organizations address complex realities by using frameworks that lead to better long-term decisions. We focus on value creation by solving the problems that allow the right products to be created the right way. 

In the coming months, we plan to launch more tools aimed at helping organizations become more resilient and sustainable. 

To get more information please visit us at agileleanhouse.com, or send us an email at: info@agileleanhouse.com

You can also find us on LinkedIn: AgileLeanHouse A/S | LinkedIn

And on MeetUp: https://www.meetup.com/agile-lean-leadership/

Paul Norton and Kurt Nielsen

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