Mapping Strategy

Predicting and Dealing With the Sun and Space Environment

Because scientific understanding of solar phenomena is far from comprehensive, the wide range of predictions and methods used to inform this visually delightful graphic isn't all that surprising.

I wonder though, whether a prediction market on the same topic would come up looking prescient... or foolish? This attempt from 2007 looks like the answer to the question, "What if they declared a prediction market and nobody came?" Maybe I missed something, but I don't think so.

The almost unprecedented state of solar phenomena at the moment, the increasing dependency of the world on various kinds of satellites and the wide range of predictions would suggest it might be worth giving prediction markets another try. (I can find no other prediction markets on this, either active or defunct.)

Interestingly, this hefty pdf document, from 1996, pegged the market for space environment predictions at $100M and expected it to double in size by 1999 (see p. 29, aka 189 according to the document footers). Anyone have any idea how big it is now? Even 1% of that would be fine.  :)

This scary piece on the same subject  might lead some to wisely consider scenario thinking for business continuity and resilience as useful complments. Sometimes the unprecedented simply... happens, at which point the question quickly turns from prediction to how to cope and thrive in the messy, uncharted aftermath.

'Planning' in Fog at High Speed

I've had a chance, the last few days (which, here in Boston are getting longer, if not any warmer) to work down a pile of reading I've meant to do for some time. Midway through that two-month stack, I found this ('Managing in the Fog'), from the February 26th, 2009 issue of The Economist. Dateline -- the fog-prone city of San Francisco:

...2009 budgets... have already been consigned to the shredder, as the economic crisis has blown away the assumptions on which they were based.

Faced with exceptionally volatile business conditions, senior executives are finding it harder than ever to gauge how their companies are likely to fare in the months ahead...

With even short-term horizons as obscure as the San Francisco skyline during a summer fog, companies are finding their standard budgeting and forecasting of little use. The usual trick of plugging figures from operating units into spreadsheets appeals to number-crunchers, but can often generate misleading targets, especially when conditions change fast. [link and emphasis added]

I used the metaphor of fog this time last year. It's useful, to a point.

...the first guy hits a fog bank and can't see squat. He taps his brakes. The second guy sees red lights and fog coming up fast and taps his brakes just a little bit harder, and so on. In just a few seconds, hundreds of cars end up in a tangled heap and people die.

The issue is not the fog itself. Sitting inside watching it with a warm cup of tea connotes a sense of calm introspection amidst muffled sounds and soft light. Rather, the issue is moving through it, i.e., a mismatch between conditions, terrain and speed.

As I've told each of my teenage daughters: speed-limit signs, lateness, adrenaline and energetic music are poor indicators of what will work to get them from point A to point B as fast as possible in a snowstorm at night.

The risk of serious mishap must play a part in gauging what "as fast as possible" means (as the teenage son of a friend learned on St. Patrick's Day when a drunk driver hit him -- thankfully all are OK, it seems). Speed must be matched to what is actually going on, not to some idealized, wishful, outdated view of what should be.

So am I wagging a fatherly finger at managers, advising them to curtail expectations, slow down and wait for the fog to lift? Not necessarily. Here's the big thought to chew on:

Instead of turning up the headlights of forecasting (counter-intuitively deadly in fog), the most important adaptation executives and strategic planners can make to such conditions is to increase collective responsiveness.

How does one do that under conditions analogous to heavy fog when landing the plane or pulling over aren't viable options? And what does that metaphor mean in practice? Several things.

First, decide what kinds of things make sense to look out for in the fog. (E.g., iceberg? mountain? brake lights? deer? It depends on the vehicle, the terrain and the map.)

Second, identify the specific tenets of management's conventional wisdom (often different from official assumptions) and ventilate them with truly distinct, 'orthogonal' views of potential futures.

Third, examine specific hypothetical examples as archetypes, not fixating on truly catastrophic 'act of God' events at the expense of ones that can be influenced. A rough analogy here would be to pop-up shooting ranges for law enforcement officers with an emphasis on rapid recognition and the ability to appropriately slot such 'surprises' into specific response categories.

Fourth, rehearse key events, scenarios and potential responses together. A management team can no more outsource scenario thinking than my daughters can outsource Drivers' Ed or a World Cup soccer team can train alone and expect to win.

Easy? No. Formulaic? Not at all. In fact, the process is highly creative. Effective? In the current environment, conventional 'steady-state' planning alternatives are actively misleading (i.e., more of the same will only get you in trouble faster). Turn up the headlights and you'll be blinded. Slow to a crawl and you'll be passed or hit.

Threats in the Age of Obama

I'm excited to report that our new book, 'Threats in the Age of Obama' is now available for purchase -- from Amazon, as well as directly from our publisher, Nimble Books (same price; take your pick). Here's the cover:

I contributed a chapter entitled "Preparing One's Mind to See" expanding on this post last fall by about an order of magnitude (writing for publication is far more exacting than blogging!) Here's the brief blurb on Amazon:

If you are on a mission to change the way government works, particularly in the national security arena, this is one place where some independent and intellectually diverse thinking is to be found. In these essays, we offer our view of some of the more pressing threats the Obama administration will have to deal with in these early days of the 21st century.

The title should not be taken as implying that this is a political book or that its insights are for the short term. Just the opposite. My esteemed co-authors make up a fascinating and insightful bunch of long-term thinkers who come at this from a wide array of perspectives.

Whatever you may have thought the next decade may bring before reading this, I guarantee you will be challenged to think about it differently, more holistically and in more depth afterward.

My co-authors are: Dan tdaxp, Christopher Albon, Matt Armstrong, Matthew Burton, Molly Cernicek, Christopher Corpora, Shane Deichman, Adam Elkus, Matt Devost, Bob Gourley, Tom Karako, Carolyn Leddy, Samuel Liles, Adrian Martin, Gunnar Peterson, Cheryl Rofer, Mark Safranski, Steve Schippert, Tim Stevens, and Shlok Vaidya. And last, but really first, editor, contributor and chief cat-herder, Michael Tanji.

But before you get distracted reading everyone's bio or blog... BUY THE BOOK!    :)

Side note: It's been quite a thrill just to get this far. The team is spread across eight different time zones. Most of us know one another's writings but only some of us have ever spoken live,  much less met face-to-face. Welcome to the future of publishing.

Thinking the Unthinkable... Before It's Thinkable

In an article entitled, "Citi Weighs Its Options, Including Firm's Sale", on the front page of today's Wall Street Journal, this line stood out [emphasis added]:

Citigroup officials have decided they need to reckon with a range of scenarios that were unthinkable only weeks ago.

It neatly captures the essence of why it is vital for scenario thinking to be cultivated as a natural part of an organization's analytical culture, and to become an accepted aspect of ongoing corporate dialogue, and why the term 'scenario' is often maligned and misused.

Two simple ideas: 1) It's hard to think as clearly or creatively when an 18-wheeler is bearing down on you as when it's not, and 2) calling something unthinkable is... unthoughtful.  I'll deal with the first point here and second point more extensively in another post.

Studies of cops under stress bear out the fact that fear and adrenaline reduce or even shut down one's ability to access key higher brain functions, including one's peripheral vision and other sensory input. They don't do much for collaboration or listening skills either. A group's thinking may appear to get more expansive under such circumstances; that's typically an illusion.

Ideas long held close to the vest (because others would have thought them crazy) are suddenly poured out on the table in a torrent of collective logorrhea. By definition they are not pro-active, nor have they had time to ripen. It's an environment conducive to the green and rotten ideas becoming indiscriminately co-mingled with the good and timely ones.

Some might be tempted to reply with Boswell's reporting of Samuel Johnson's famous quip, "Depend upon it, Sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully." (September 19, 1777, p. 351, Volume III of 'The Life of Samuel Johnson"; often misquoted as 'being hanged in the morning'.) It's a quote I love and have used often.

Yet the frame for that quote involves a man already devoid of attractive options (other than prayer, perhaps). He's done. The only mystery is what kind of scene he will make as he leaves the picture and what lessons others will draw from it. The value of having thought steadily, wisely and creatively about a broad array of alternatives years in advance of one's crime, trial, conviction and sentencing doesn't even enter the picture.

Laser-like tactical concentration under extreme stress is very different from the calm, disciplined thoughtfulness and habituated creative behaviors (either corporate or individual) that can help steer clear of circumstances that might lead to one staring death in the face. They make so-called 'unthinkable' futures far less surprising and lead to better responses.

Better choice: create an environment in which 'unthinkable' futures and strategic options for addressing them are systematically thought-out by groups of key managers and executives and carefully positioned in relation to one another (and to the present state) within a detailed, event-based hypothetical cartography. Such scenario maps make it far easier to avoid being surprised by the kinds of dire circumstances Citi and others face today -- or that Johnson spoke about 231 years ago.

How does one reduce the chances of an 18-wheeler bearing down with little room to maneuver? Use a map to figure out where the sidewalks are. Don't walk on exit ramps after dark with your back to traffic. Don't make a desperate, instinctive lunge for the bushes and call the choice of thorns or poison ivy 'scenarios'.

Context Check: Rapid Shifts and Bunny Trails

Author Patrick Lencioni, writing in today's WSJ ('How Not to Run Meetings') observes that leaders running meetings often,

...shift the topic of conversation from extremely tactical issues like closing a sale, to a long-term topic like how to position the company for new competition, to more intermediate topics like how much to invest in research and development over the next eighteen months. The thing is, even the most intelligent human beings cannot make the contextual shifts that are necessary to have all of these conversations in the same setting. And they certainly can't do so in a way that ensures that everyone in the room is on the same page. [emphasis added]

Webster's defines context as follows:

[the] weaving together of words... [for] coherence... the parts of a discourse that surround a word or passage and can throw light on its meaning... the interrelated conditions in which something exists or occurs (environment, setting)

In other words (in the context of a business meeting), context is about all the stuff that's not directly in front of the participants in the moment, but which informs and colors their seeing, hearing and interpretation of what happens in it. It's the 'stuff' that's in the heads of the meeting participants that either helps or hinders them in getting to an accurate understanding of what is being said and processing that information in a way that helps them make 'good' decisions, (or at least better ones -- than last month; than the competition, etc.) .

Context operates at both the individual and group level. At the individual level, it consists of everything I've heard, read, seen or surmised about what's going on, ranging all the way from assumptions about the direction of the economy and data on the growth of my industry all the way down to how I interpret the word 'risky' when used by the new VP of Sales for Asia-Pacific on September 20th, 2008 versus what that word means indicates coming from our veteran Director of Manufacturing for the plant in Brazil on October 20th, 2008.

At the group level, context consists of all the experiences, assumptions and knowledge which group or meeting participants hold in common and which they are aware that they hold in common and agree that they hold in common (e.g., "remember the layoffs last week?"; "remember when the EVP of Operations told that off-color joke on the big conference call"; "I don't need to tell you how Q3 is going...").

Where context gets tricky is when it involves what a group or team,

1. don't hold in common (but which some may think that they do),
2. hold largely in common (but don't necessarily realize it),
3. didn't even imagine could be part of context (but which nonetheless color their ability to see and inform what other data and what futures they believe are plausible).

Given that vast scope, it's no wonder that the word 'context' has gotten a rap for being nebulous and less-than useful! Where it can become far more useful (and rather quickly and painlessly) in moving towards better meetings is when at least two things are true:

1) when the creation of collective context is focused on specific, measurable, potentially impactful future events (i.e., done in the process of a real, live productive discussion about the future), and

2) when the language for expressing context is made concrete (e.g., how many of us believe this future event is highly likely to happen? how many that it's highly unlikely? how many don't know? how many think it's somewhere in between 'highly likely' and 'highly unlikely'?)

In the scenario workshops we run for clients, getting folks to indicate their perceived likelihood of key future hypothetical events (usually live and in person but not necessarily so) is an important building block in making a group's context explicit and thus being able to discuss and modify it.

That's a much longer post. In the meantime, go read Lencioni.

Preparing One's Mind to See

I venture back into blogging after a long hiatus which was, thankfully, busy, productive and stimulating. Why? This piece, by Richard Fernandez over at the Belmont Club, referencing this anonymously authored August 7th Economist article (by a 'risk manager at a large global bank'), entitled 'Confessions of a Risk Manager'.

Fernandez writes [emphasis added]:

It is actually possible not so see something that is really there... We can’t see patterns that our brains have filtered out... But although the risk hunters saw no danger as they stared into the seemingly benign financial jungle, in retrospect, there were certain signs — whose significance was not realized then — that should have sounded the alarm about the crisis that is now upon us...

The signs were there, but they couldn’t interpret them, even when strange and unusual things were happening. Part of the problem with grasping the significance of the anomalies was that the risk hunters were prisoners of their analytic models. What cues they picked up were interpreted in the context of their mental frameworks. They “saw” through the prism of their models. And their models did not account for the existence of the monster that was now closing in on them...

The scenario work I've done with clients for years is rooted in precisely the precept Fernandez begins with: that the mental models or frameworks that people build up over a lifetime, a career and/or a role strongly color what they believe is possible and therefore the kinds of potential problems and opportunities they are willing to consider. I mean literally color. Fernandez' analogies to invisible spectra are apt. It's not that the spectra aren't there. It's just that I'm not equipped to see ultraviolet, infrared or to hear a dog whistle.

I should note that, while the Economist article is about 'seeing' risk, the concept applies equally well to innovation. More on that in future posts. It's where I've been spending most of my time and energy recently.

Mental models are seldom examined. You and I may talk about our views on particular future events, but it takes a lot of time and effort (plus a common 'language' for discussing it) to talk in terms of entire models. And mental models that are not  examined and described -- at any level -- tend to lead to decisions that don't fit reality. (Think blindfolded child attempting to hit the party pinata and hitting grandma instead).

Mental models are also fractal. My own colors the decisions I make, but I also go about my day constrained, to a greater or lesser degree by the mental models of the groups to which I belong (family, company, church, country, etc.)

I'm reluctant to conclude that individuals' mental models are always able to change faster than those of groups. (We all know some stubborn stick-in-the-mud; perhaps he's the one staring at us in the mirror). Anecdotally, however, I know of more individuals who have had a 'Damascus-road' 180-degree 'a-ha!', 'boy I've been stupid, haven't I?' moment in some part of their lives than I do larger groups or companies that have done the same. (When that does happen, e.g., Bill Gates' famous 'Internet' memo ten or so years ago, it tends to be just a powerful individual who changed his mind, not evidence of the group turning quickly together.)

Finally, mental models not challenged systematically and fundamentally on a pro-active basis (e.g., with scenarios) tend to change only defensively and slowly (in response to hard, external truths; often at great cost). That's painful. As Fernandez writes:

I wonder to what extent the policy reaction to the current financial crisis is still colored by the limitations of received wisdom — the financial models — and the need to keep the music playing. The interventionary mechanisms of the last few weeks are designed to fix problems as we understand them. If you’re convinced we understand things now. At any rate we are firing into the last known position of the monster. Nothing can withstand that firepower. The crowds are being told not to worry because the monster will soon be dead. True, there are few doubting souls who are worried that the creature may actually be feeding off our weapons, but their fears are dismissed as nonsense. The important thing, we are told, is to keep things going, which was just the advice the traders gave the risk managers.

It is remarkable how the advent of the current financial crisis structurally resembles the intelligence failures leading up to 9/11: the same misinterpretation of warning signs, the same blindness to threats now evident in retrospect. The same belief in a rapid resolution and a belief that the normal would soon be back.

In other words, we all sense that things have changed fundamentally (in financial markets and geopolitics) but we probably won't be able to develop our new mental models (at least collectively, agreeing on which ones are 'real') for many years -- not without a lot of deliberate thought-work, that is. Nor will we be able to perceive ongoing change properly (assessing both direction and magnitude) or develop said models in a way that enables us to act with precision, resolve and clarity. For years. That's a bit scary. It's also humbling (at least it should be).

Here's another thought that I should probably 'unpack' more fully in another post. Mental models are reflected in, but less often challenged by analytical tools. Oh sure, insights can most definitely be had with them, but I'm talking about much bigger constructs.  Sophisticated computer models, for the most part, tend to only amplify the force and reach of our brains. They do not, as a general rule, make them better able to 'think different' (ly) and develop new mental models for seeing the world -- for assessing the big risks in truly complex adaptive systems or for finding innovations.

Butterflies for Dummies

Check out this succinct review in last Sunday's Boston Globe of an important but oft-misunderstood concept critical to any forecasting or planning endeavor [emphasis and link added]:

The butterfly effect is a deceptively simple insight extracted from a complex modern field. As a low-profile assistant professor in MIT's department of meteorology in 1961, [the late Edward] Lorenz created an early computer program to simulate weather. One day he changed one of a dozen numbers representing atmospheric conditions, from .506127 to .506. That tiny alteration utterly transformed his long-term forecast, a point Lorenz amplified in his 1972 paper, "Predictability: Does the Flap of a Butterfly's Wings in Brazil Set Off a Tornado in Texas?"

In the paper, Lorenz claimed the large effects of tiny atmospheric events pose both a practical problem, by limiting long-term weather forecasts, and a philosophical one, by preventing us from isolating specific causes of later conditions... It is extremely hard to calculate such things with certainty... Realistically, we can't know. "It's impossible for humans to measure everything infinitely accurately," says Robert Devaney, a mathematics professor at Boston University. "And if you're off at all, the behavior of the solution could be completely off." When small imprecisions matter greatly, the world is radically unpredictable.

Moreover, Lorenz also discovered stricter limits on our knowledge, proving that even models of physical systems with a few precisely known variables, like a heated gas swirling in a box, can produce endlessly unpredictable and non-repeating effects.

"Lorenz went beyond the butterfly," says Kerry Emanuel, a professor in the department of earth, atmospheric, and planetary sciences at MIT. "To say that certain systems are not predictable, no matter how precise you make the initial conditions, is a profound statement." Instead of a vision of science in which any prediction is possible, as long as we have enough information, Lorenz's work suggested that our ability to analyze and predict the workings of the world is inherently limited.

What few articles on this subject touch upon, but I find endlessly fascinating, is how this undeniable, well-grounded scientific insight interacts with human nature -- specifically our ingrained need/desire to feel knowledgeable and in control. (I use the term 'we' in both the individual and corporate sense here.)

It has been my experience that few individuals and very few (if any) organizations ever err on the side of humility in this regard. Perceptual failures are seldom in the direction of assuming less than is actually predictable. More often, the response is something like this:

yes I know about the butterfly effect, chaos theory and all that... but it's kinda academic... and you don't know my boss... you see, I/he/she/they/we need to predict XYZ anyway...
because my/our future depends on it... so just give us a number... give us your best guess about the probability... please?

People fall back on a prediction/probability paradigm either because it's what they know (or have the planning tool-set to address) or because, even knowing that approach is flawed, they find it more comfortable... and comforting (or politically expedient in a particular organizational culture) to pretend that what is fundamentally uncertain is perhaps predictable after all. The chance of rain is 62.5%...

Thinking Exotically

With air travel on my mind after a West Coast trip last weekend, the following strikes me as positive, (and not just because I'm a marathon runner who tends to pack light). Rather, it's the kind of thinking we do routinely when we help clients develop scenarios. E.g., what if industry 'A' adopted the business model of industry 'B'? Emphasis added:

Imagine two scales at the airline ticket counter, one for your bags and one for you. The price of a ticket depends upon the weight of both.

That may not be so far-fetched.

"You listen to the airline CEOs, and nothing is beyond their imagination," said David Castelveter, a spokesman for the Air Transport Association, a Washington, D.C.-based trade group. "They have already begun to think exotically..."

With fuel costs almost tripling since 2000, now accounting for as much as 40 percent of operating expenses at some carriers, according to the ATA, airlines are cutting costs and raising revenue in ways that once were unthinkable...

Singapore Airlines... is "trying to eliminate unnecessary quantities of extra water" to save weight, Chief Executive Officer Chew Choon Seng said in an interview...

Robert Mann, head of R.W. Mann & Co., an aviation consultant based in Port Washington, New York [said,] "If you look at the air-freight business, that's the way they've always done it... We're getting treated like air freight when we travel by airlines, anyway."

This signals that an industry long characterized by minimal innovation starting to think beyond convention (but... we've always done it that way!) The shock is external and pressing in this case (fuel costs). It needn't be so. Better to do this kind of thinking every day.

Best-practice use of scenarios involves doing this systematically, comprehensively and, over time, making it an ingrained habit of strategic thinking among management. (How could we change the rules to our advantage?) Having several contingent strategies already fully 'baked' when a crisis hits can move one ahead of more flat-footed competition who must do all that thinking while under existential, immediate pressure.

Next up: refunds for in-flight diuretics.    ;-)

From Risk to Uncertainty

I don't agree with everything in this piece by Thomas Homer-Dixon that appeared last week in the Toronto Globe and Mail, but this quote is an absolute gem (emphasis added):

Our global financial system has become so staggeringly complex and opaque that we’ve moved from a world of risk to a world of uncertainty. In a world of risk, we can judge dangers and opportunities by using the best evidence at hand to estimate the probability of a particular outcome. But in a world of uncertainty, we can’t estimate probabilities, because we don’t have any clear basis for making such a judgment. In fact, we might not even know what the possible outcomes are. Surprises keep coming out of the blue, because we’re fundamentally ignorant of our own ignorance. We’re surrounded by unknown unknowns.

It's something I've said for a long time:

It's tempting to think that all things are predictable given enough information, enough minds, enough time and enough computing power. It's just not true. (Which is not to say that some things are not predictable... and with incredible precision... a phenomenon that leads to overestimating the scope of problems and questions that lend themselves to such methods.)

Telling which is which is the trick...

I would go even further to say that really smart people who, by life experience know that some things are fundamentally unpredictable still draw an unvoiced sense of emotional comfort in their business life from the idea that some wise expert somewhere has been to the future (for all intents and purposes) and if we could just find him or her things would be OK... and/or that a really sophisticated computer model or prediction market (the 'collective mind') can provide crystal ball-level insights.

Sometimes yes. Often, no.

I liken Mr. Homer-Dixon's observations to those tragically massive car pile-ups that happen a few times of year in fog-prone areas like the Central Valley of California. Everyone is driving along at a reasonable speed, with reasonable spacing between vehicles. People are sipping coffee, tuning radios, maybe talking on cell phones. Slightly distracted, but mostly responsible. All is normal.

Then the first guy hits a fog bank and can't see squat. He taps his brakes. The second guy sees red lights and fog coming up fast and taps his brakes just a little bit harder, and so on. In just a few seconds, hundreds of cars end up in a tangled heap and people die. All because the guy in front was convinced by every one of his senses and not without justification based on experience that the visibility on the next 100 yards of road would be the same as on the last 100 yards of road.

How Not to Map the Future

Not recommended in a corporate environment...
...or any other, for that matter    :)
[emphasis added]

Each future mapping system (tarot, astrology, tea leaf reading, I Ching, dowsing, palmistry, rune casting, etc.) has its own unique tools... Runes, Pendulums, Crystal Balls, Tarot Cards, Spirit Boards, Planetary Ephemeris, Psychic Cups