Change Surrounds Us
Be it social-political (e.g., India, China, Africa, Southeast Asia [ICASA], Brexit, Syria, North Korea), new competitors (e.g., Tesla, Amazon, Uber, Apple), new technology (e.g., mobile, social marketing, cloud), or any of many more trends, changes are disrupting our status quo in complex ways.
Global, industry, product and competitive trends increasingly point to less stability for most industries. Our traditional management toolkit, the one we have used our entire careers to think about our competitive environments, is based on known patterns- like best practices. However, these traditionally linear, cause-and-effect models are proving mostly ineffective for the dynamic marketplace where new entrants materialize from other sectors, other industries, and all geographies, seemingly overnight.
How do you know what to do? How do you manage in a volatile, uncertain, complex and ambiguous (VUCA) world? When, if at all, should you apply specific management approaches? When and how should we consider dynamic approaches like Agile Management, which has been forged out of the progressively dynamic environment?
We have been injecting agile techniques into our client engagements, long before the agile manifesto, and we are ardent advocates. However, there are parallel models, and the collective wisdom of the business world continues to expand our thought processes. Through a survey of recent publications combined with our experience, we thought we might pull a number of popular concepts and frameworks together to shed some light, and possibly a helpful insight or two, on “how to” lead and manage in a world of increasing uncertainty– a VUCA world.
What is Agile?
The Agile Alliance, an open-source organization supporting “people who explore and apply Agile values, principles, and practices,” defines agile as…
The ability to create and respond to change in order to succeed in an uncertain and turbulent environment.
If you factor-in the “why” many organizations are turning to agile from VersionOne’s “11th Annual State of Agile Report,” we begin to see a little more complete picture.
- Accelerate product delivery- it is faster
- Enhance ability to manage changing priorities- it is better
- Increase productivity- it is cheaper
- Improve project visibility- it is less risky
If you ask why are speed, flexibility, productivity and transparency driving agile’s popularity, we believe you will find increasing VUCA is driving organizations to look for more nimble approaches to management and execution. Many are reaching for the agile toolkit because of the increasingly VUCA environment. They consider getting to “one of the best” solutions more quickly as being more valuable than being later with “the best” answer.
How to Think About Uncertainty
Volatility, uncertainty, complexity and ambiguity (VUCA) is a term originally used to describe the post-cold war environment. Over time it has been gaining traction within the realm of business. And, while there are a number of variations on sense-making frameworks, the most elegant model to help manage VUCA may be the Cynefin framework initially developed at IBM and currently providing a basis for some versions of agile.
How did we arrive at the Cynefin (Welch for habitat, sense of place) framework? If we go back to Secretary Rumsfeld’s known-known and unknown-unknown quotes, we will find a correlation to the Johari window. Johari is based on two dimensions of “known to self” and “known to others.” The Johari window provides a 2 x 2 matrix for known solutions. But, think about different situations. What if you are in the wrong window pane? What if there is no right answer? How do you deal with chaos? How should you be thinking about black swans? The Cynefin framework offers five domains to consider how to think, and act, as a leader, manager, and organization within situations at all levels of uncertainty.
Quickly highlighted in a sidebar of an HBR article “A Leader’s Framework for Decision Making,” the Cynefin framework constructs domains to address increasing levels of VUCA. And, through definition, differentiates between five domains: Simple, Complicated, Complex, Chaos and Disorder (see next section “Cynefin Framework for Analyzing and Managing Uncertainty”). It is the concept and domain of “Disorder”- where management is using the wrong approach- Cynefin provides more rigor than many of the alternative frameworks we have encountered.
Apologies in advance to die-hard Cynefin fans, as we have taken graphical liberties to align the domains of the Cynefin framework with key managerial characteristics, metaphorical bolt-ons from other writers, and our own future-of-management point-of-view in the following.
Cynefin Framework for Analyzing and Managing Uncertainty
Historic management practices are based on Taylorism, stability, calculable risk, and a simple- best practices- environment. But, as Harvard Business School’s Dean Nohria stated, “a stable equilibrium is unnatural” and “uncertainty is incalculable.” The Cynefin framework defines domains and provides approaches to support leadership and management under all levels of uncertainty.
As with most frameworks, depending on the context, the analysis can be applied across the entire enterprise through a portfolio approach. Also, the analysis may be applied to, for example, a single instance: a product line, a division, a topic area, or a specific issue.
How to Lead and Manage Differently in an Increasingly VUCA World
For those in industries and sectors which are stable with known performance frameworks- those in the Cynefin’s simple domain: apply best practices, leverage what has worked before, and continuously improve. For the rest of us facing increasing VUCA, the question is How do we lead, manage and execute differently?
In addition to the management techniques in the table above, the following sections overview several emerging approaches to align leadership, management and organizational activity within Cynefin domains. Just as no two companies are exactly the same, in the same situation, with the same product mix, there is no one-size-fits-all best-approach to uncertainty.
Even though agile techniques can be applied in each of the Cynefin domains, there is no consensus on what constitutes an agile approach. Strategy, culture, leadership, management, and an industry’s Cynefin domain must all be considered when striving to achieve targeted outcomes in uncertain times.
There are, however, characteristics which are common across instances of agile’s application. Some of the most common benefits, techniques and challenges of agile can be found in VersionOne’s “11th Annual State of Agile” report, which are excerpted in the following.
Top agile benefits:
- Ability to manage changing priorities
- Project visibility
- Increased team productivity
- Delivery speed
Agile manages and executes differently through popular techniques:
- Daily standup
- Retrospectives (post-mortem to learn and improve)
- Iteration reviews
- Short iterations and release planning
- Hierarchy; Network
Key challenges of implementing agile within the enterprise:
- Company culture at odds with core agile values
- Lack of agile experience
- Lack of management support
While many agile techniques are popular, there are quite a few capabilities beyond agile, or possibly best blended with agile, to aid in leading, managing and executing in a highly VUCA environment.
Beyond Agile- Capabilities for Managing Uncertainty
How should we lead and manage in dynamic situations- those where both employees and organizations embrace uncertainty? Leaders must consider the willingness of the workforce to assume personal risk. “The whole concept of the all-knowing, omnipotent leader is over. Employees know this isn’t reality- and value a more candid dialogue” according to a change consultant quoted in the MIT SMR article “Embracing Uncertainty.” However, this will require a change in culture, including encouraging risk, and a more transparent, two-way communication– both based on a change in behaviors.
The Economist’s Managing Uncertainty, reinforces these themes including chapters on strategic anticipation (e.g., flexible planning), navigational leadership, agility, resilience, collaboration, and learning. And, to focus on the implications of uncertainty relative to strategy for just a bit, the need to consider increasing speed (e.g., from housing bubble to the great recession), interconnectivity (e.g., Arab spring of 2011), and cyber-attacks (e.g., both political- Russia- and commercial- Equifax) as just a few considerations defining a wide-ranging view of the future. “Strategy Under Uncertainty,” now an HBR classic, discusses four levels of uncertainty (e.g., clear– single view of the future, alternative– limited set of outcomes, range and ambiguity). And, like Cynefin, each level comes with a recommended tool kit, incorporating, for example, game theory, scenario planning and pattern recognition. Most of these tools are still relevant today, depending on your Cynefin domain/situation.
Immediately following the unexpected U.S. 2016 presidential election results, the business press was awash with articles on uncertainty. One such article, by Reeves of The Boston Consulting Group, implored an investment in strategic resilience including redundancy, diversity, modularity, adaption, prudence, and embeddedness. Each of these capabilities extend far beyond the traditional risk management approach (e.g., mitigate, avoid or accept risk).
With a focus on leadership, an MIT SMR article “The Five Steps All Leaders Must Take in the Age of Uncertainty” advocates for a new leadership paradigm, with a call for leaders to “master the art of shaping, rather than just operating within [systems],” including the following:
- Understand the broader system
- Orchestrate collaboration
- Manage risk
- Lead with a new mindset (e.g., one of positioning and influencing)
The Harvard Business Press Learning Team has identified 14 characteristic skills needed for managing in a complex world. In a recent Forbes article, the reviewer narrowed the learning team’s critical 8 to “five that are relevant to dynamic, network-oriented businesses future of work organization models,” including:
- Cultivate learning agility
- Develop personal adaptability
- Leverage networks
- Inspire engagement
- Manage complexity
Another MIT SMR article suggests that when “Managing project uncertainty” (both an action and the article name), creating uncertainty profiles can help at a tactical level.
These techniques, and others, can provide a more robust tool kit to enable leaders and managers to both enhance and extend beyond agile. Another area for consideration is business strategy’s scenario planning which has proven a robust technique for thinking about uncertainty for decades.
Beyond Agile- Scenario Planning
According to the chairman of Decision Strategies International, a Heidrick & Struggles company, “Scenarios are well crafted narratives about the future that tell very different stories about what might happen… The aim is to stress-test your current strategy and make sure your plans contain enough flexibility that you will win no matter what the future holds.”
Like agile, “there is no cookie-cutter method” of “Using Scenario Planning to Reshape Strategy,” both a summary and a title of a recent MIT SMR article. The article also includes the concept of the contextual and transactional environment, emphasizing the role of the strategy-environment interaction.
Shell’s use of scenarios in strategic planning is demonstrated in a number of exhibits in the California Management Review article, “Three Decades of Scenario Planning in Shell.” For example, “Bringing Scenarios to the Business” demonstrates the idea of scenario layers driving down from Global to Focused (e.g., Country) to Project (e.g., investment decisions) with explicit definition of implications at each level.
In our experience, scenario planning remains as much of an art as it is a science. Its most important impact may be facilitating leadership teams’ mindset away from linear forecasting and toward multiple paths with alternative visions of the future- requiring the necessary flexible capabilities based on impact (e.g., consequences) and some level-of-certainty of occurrence (e.g., probability).
When thinking about how to develop, manage and leverage the dynamic capabilities of agile, capabilities for managing uncertainty, and scenario planning, we have created an enabling approach to change, based on dynamic social networks.
Beyond Agile- Enhanced Execution through Dynamic Social Networks
GE’s vice-chairman, John Rice, describes the company’s efforts to bust silos, increase collaboration and build internal marketplace of ideas and solutions through social networks in a recent McKinsey Quarterly article. Based on our work with clients and thought-leading practitioners over the last decade, we have developed an integrated approach on how-to manage and lead Dynamic Social Networks. The basis of our Dynamic Social Network approach is founded on three key elements.
- Link network-type with work-type
Two types of social networks accomplish very different change and improvement objectives: purpose-driven and general-purpose networks
- Lead and manage through a dual operation system
With traditional hierarchy as a base, adding the skills and tools to manage and lead networks
- Increase workforce engagement
Four areas of focus will drive workforce engagement, including
– Community management
– Adoption process
– Right tool selection
– Experiential, community-supported learning process
Managing Today’s and Tomorrow’s Uncertainty
Uncertainty has always been with us. However, as today’s trends blur traditional boundaries, the Tayloristic management paradigm of the 20th century, linear by design, needs to be supplemented by a faster, more nimble approach to achieve speed and flexibility through agile, integrated with traditional and “beyond agile” capabilities and methods.
Agile characteristics such as short sprints, roadmaps and minimum viable product, complemented by individual capabilities, scenarios and networks, can help you and your organization to support, to integrate with traditional, siloed-hierarchy, to execute processes and projects in all Cynefin domains- each with their unique mix of volatility, uncertainty, complexity and ambiguity (VUCA).
Good luck in your journey to find the right blend of agile, uncertainty management capabilities, scenario planning and networks with traditional leadership, management and execution approaches. You now have at solid introduction to frameworks and a way-of-thinking to help you make you sense of various levels of uncertainty, and to provide a winning combination we refer to as Business Velocity- the integrated approach needed to sense and respond quickly in today’s VUCA world.
These endnotes represent specific reference materials used in preparation of this post. As there are a number of topics pulled together for this discussion, the notes are sequenced to build on previous references, and, hopefully, make any additional reading easier for you. We have utilized this approach in lieu of formal footnoting or bibliography. Also, a few summary comments are included with most citations. The comments are meant to give you a sense of the cited resource. Please note the citation summary comments may, or may not, have been specifically addressed above.
- “Agile 101,” The Agile Alliance. A subway map infographic linking many Agile tactics by metaphoric routes of Agile’s “tribes” e.g., daily meeting; Graphic illustrates the central role of Scrum. https://www.agilealliance.org/agile101/
- “Embracing Agile,” Rigby, Sutherland & Takeuchi, HBR. Six practices providing a practical guide to agile throughout the enterprise including “Understand where agile does or does not work,” a summary of the initial Agile Manifesto (c. 2001) principles. https://hbr.org/2016/05/embracing-agile
- “A Quick Introduction to Agile Management,” HBR 4M20 video. Video touches on four key roles (leadership team, initiative owner, process facilitator, innovation team) and a 10-step scrum process. https://hbr.org/video/4846148015001/a-quick-introduction-to-agile-management
- “Agility in US national security,” Dowdy and Rieckhoff, McKinsey. Focus on responsiveness in face of volatility, uncertainty, complexity and ambiguity (VUCA); “Average S&P 500 company is now being replaced every two weeks;” speed and stability analysis; Concept- modular teams being the apps of the organization; Concept- Utilize OODA (observe, orient, decide and act) loop paired with moving the decision making lower within the organization. http://www.mckinsey.com/industries/public-sector/our-insights/agility-in-us-national-security
- “Has Agile Management’s moment arrived?” Knowledge@Wharton. Concept- Traditional business models (future looks like today, and we are good at forecasting) have not proven to be accurate; Concept- Agile emphasizes responsiveness; Concept- Agile requires “recognizing a pattern and responding to it” http://knowledge.wharton.upenn.edu/article/agile-managements-moment-arrived/ (Also see Sense and Respond, in “Managing Uncertainty” section below.) http://knowledge.wharton.upenn.edu/article/agile-managements-moment-arrived/
- “11th Annual State of Agile Report, Top three insights,” VersionOne 2M12 video. Agile adoption is growing, with more than one-half of surveyed companies’ teams still not using agile; Measuring enterprise agility with business value is not the most popular metric (speed is); Organizations continue to invest in Agile. https://explore.versionone.com/state-of-agile/11th-annual-state-of-agile-report-top-3-insights-2 Also see “11th Annual State of Agile Report,” VersionOne. Top three benefits 1) Ability to manage changing priorities, 2) Project visibility, and 3) Increased team productivity. https://explore.versionone.com/state-of-agile/versionone-11th-annual-state-of-agile-report-2
- “There are known knowns,” Wikipedia. “a phrase from a response United States Secretary of Defense Donald Rumsfeld gave to a question at a U.S. Department of Defense (DoD) news briefing on February 12, 2002 about the lack of evidence linking the government of Iraq with the supply of weapons of mass destruction to terrorist groups.” https://en.wikipedia.org/wiki/There_are_known_knowns
- “Johari Window,” Wikipedia, Often a framework applied to business analysis, but does not consider the unknowable; possibly best applied to further analysis of simple and complicated domains where knowledge may be available. https://en.wikipedia.org/wiki/Johari_window
- “What VUCA really means for you,” Bennet, HBR. Introduces the framework of Volatility, Uncertainty, Complexity and Ambiguity, including characteristics, examples and approach. https://hbr.org/2014/01/what-vuca-really-means-for-you Also see “Volatility, uncertainty, complexity and ambiguity,” Wikipedia. “The notion of VUCA was introduced by the U.S. Army War College to describe the more volatile, uncertain, complex and ambiguous multilateral world which resulted from the end of the Cold War” https://en.wikipedia.org/wiki/Volatility,_uncertainty,_complexity_and_ambiguity
- “Breakthrough Ideas- Risk, Uncertainty & Doubt,” Nohria, HBR. Brief article touches on a number of concepts including: Taylorism’s focus on managing risk during (20th century); progression to Ford’s assembly line to budgeting tools to insurance, hedging, and portfolio management all focused on mitigating or managing calculable risk (20th century); And, today’s need to manage uncertainty which is incalculable, in a world where stable equilibrium is unnatural, and the role doubt plays with no “right” outcome. Concept- scenario planning is a tool which can help. https://hbr.org/2006/02/breakthrough-ideas-for-2006
- Essential Scrum, A practical guide to the most popular agile process, Rubin, Addison-Wesley. Discussion introduces and frames the concept of domains of uncertainty within Agile; See Cynefin domains, p 7-9.
- “A Leader’s Framework for Decision Making,” Snowden and Boone, HBR. Defines five contexts (domains) of Cynefin as a sense-making framework (simple, complicated, complex, chaotic and disorder); Article includes decision by context supporting table addressing leadership approach. https://hbr.org/2007/11/a-leaders-framework-for-decision-making
- “Cynefin Framework,” Wikipedia. Article provides history and uses of Cynefin framework. https://en.wikipedia.org/wiki/Cynefin_framework
- “Understanding Complexity,” van der Koogh, Medium. Contributed the domain analogy to games of varying uncertainty and complexity. https://medium.com/@evanderkoogh/understanding-complexity-cf1771fa087d
- “The critical difference between complex and complicated,” Kinni, MIT SMR. “Complicated problems can be solved with systems and processes;” “complex problems involve too many unknowns and too many interrelated factors to reduce to rules and processes.” http://sloanreview.mit.edu/article/the-critical-difference-between-complex-and-complicated/
- “Black Swan Theory,” Wikipedia. “The non-computability of the probability of the consequential rate events using scientific methods;” [The improbable, the unknowable]. https://en.wikipedia.org/wiki/Black_swan_theory
Endnotes: Managing Uncertainty
- “OODA Loop,” Wikipedia. Observe, orient, decide, and act; Decision making framework for more robust decisions; sequencing needs to vary depending on Cynefin domain. https://en.wikipedia.org/wiki/OODA_loop
- “Embracing uncertainty,” Sweetman, MIT SMR. Four-part situation framework (status quo, unsettling, stifling, dynamic situations) considering both employee and company roles; study focused on doers, who often understand decisions better than managers. http://sloanreview.mit.edu/article/leadership-embracing-uncertainty/
- Managing uncertainty, strategies for surviving and thriving in turbulent times, Syrett & Devine, The Economist, Touching on “new patterns of uncertainty” (p 11 Cynefin confirming domains) and key capabilities including flexible planning, leadership’s role, agility, resilience, open collaboration, predictive learning. https://media.economist.com/sites/default/files/pdfs/store/Managing_Uncertainty.pdf
- Sense and Respond, How successful organizations listen to customers and create new products continuously, Gothelf and Seiden, Harvard Business Review Press. Through a two-way conversation with the continuously changing marketplace, collaborative learning through sense (listening) and respond (acting). The sequencing of a continuous feedback loop with the marketplace through concepts, like Sense-and-Respond and OODA can be adjusted to align with Cynefin domains of uncertainty. Also see introduction of outcome focus versus output focus, p 116.
- “Strategy Under Uncertainty,” Courtney, Kirkland and Viguerie, HBR. Prescriptive use of 1) analytic tools, 2) Strategic posture (shape, adapt, reserve right-to-play) and 3) Strategic portfolio; Concept- four levels of uncertainty (clear enough, alternative, range, true ambiguity); Introduction of scenario planning, game theory, systems approach (Senge) simulations, options. https://hbr.org/1997/11/strategy-under-uncertainty
- “A fresh look at strategy under uncertainty: An interview,” McKinsey. Uncertainty is formalized into a four-part (levels of uncertainty) framework. http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/a-fresh-look-at-strategy-under-uncertainty-an-interview; Also see, “Strategy under uncertainty,” Courtney, Kirkland & Viguerie, HBR
- “The world just got more uncertain and your strategy needs to adjust,” Reeves, HBR. Focus on the need for resilience including six principles (redundancy, diversity, modularity, adaption, prudence, embeddedness) given current social-political environment driving uncertainty. https://hbr.org/2016/11/the-world-just-got-more-uncertain-and-your-strategy-needs-to-adjust
- “The five steps all leaders must take in the age of uncertainty,” Reeves, Levin, Harnoss and Ueda, MIT SMR. The “New Leadership Paradigm” includes 1) Understand broader system, 2) Master system intervention, 3) Orchestrate collaboration, 4) Manage systemwide risks, and 5) Lead with a new mindset (one that “transends corporate boundaries”). http://sloanreview.mit.edu/article/the-five-steps-all-leaders-must-take-in-the-age-of-uncertainty/
- “Corporate Learning in a Volatile, Uncertain, Complex, Ambiguous World,” Shah (Future-of-Work contributor), Forbes. Includes introduction, assessment and prioritization of Harvard Business Publishing’s “8 critical capabilities for a complex world”; author’s focus is on 5 (Cultivate learning agility, develop personal adaptability, leverage networks, inspire engagement, manage complexity) of 20 elements grouped into three categories (leading the business, leading yourself, and leading others). https://www.forbes.com/sites/rawnshah/2015/09/22/corporate-learning-in-a-volatile-uncertain-complex-ambiguous-world/#2389563a66a9
- “Managing Project Uncertainty: From variation to chaos,” De Meyer, Lock & Pich, MIT SMR. Considers risk management and getting beyond risk management to the “unforeseen uncertainties;” Introduces four types of uncertainty (variation, foreseen uncertainty, unforeseen uncertainty, and chaos). http://sloanreview.mit.edu/article/managing-project-uncertainty-from-variation-to-chaos/
- “How to Prepare for the Unexpected,” The author defines scenarios, their objective, and a six-step approach on “how to.” https://www.inc.com/paul-j-h-schoemaker/scenario-planning-prepare-for-unexpected.html
- “Using Scenario Planning to Reshape Strategy,” MIT SMR. Article profiles the “Oxford Approach” to scenario planning and provides several case studies. http://sloanreview.mit.edu/article/using-scenario-planning-to-reshape-strategy/
- “Scenario Planning,” Wikipedia. Article overviews history of scenario planning, and the concept’s origins at Royal Dutch/Shell; Considers social, technical, economic, environmental and political (STEEP) trends; References Senge’s system thinking and how “many factors may combine in complex ways to create sometimes surprising futures.” https://en.wikipedia.org/wiki/Scenario_planning
- “Three Decades of Scenario Planning in Shell,” Cornelius, van de Putte and Romani, California Management Review. Article covers history and evolution of scenario planning at Royal Dutch Shell. http://strategy.sjsu.edu/www.stable/B290/reading/Cornelius,%20P.,%20A.%20Van%20de%20Putte,
- “How GE is becoming a truly global network,” Rice, McKinsey Quarterly. Rice, GE’s vice chairman, discusses their focus on internal networks, enabling technology, culture and leadership to “move at a speed that’s determined by customer and markets.” http://www.mckinsey.com/business-functions/organization/our-insights/how-ge-is-becoming-a-truly-global-network
- “Enhanced Enterprise Execution, Catalyzed by a Dynamic Social Network,” Everson and Reeder, Adjuvi Working-Draft Whitepaper. Our approach provides for increased business velocity (speed and agility) to manage in an uncertain environment by complementing processes and projects with business social networks within the value chain, focused on: aligning the right network-type to the work-type, leading and managing through a dual operating system, and increasing workforce engagement. https://adjuvillc.box.com/s/pm9vme97etxs029ribp2jr95q86dllxr
NOTE FROM THE AUTHOR:
McKinsey has published a piece including 18 agile practices for organizational agility.
– Shared vision and purpose
– Actionable strategic guidance
– Sensing and seizing opportunities
– Flexible resource allocation
– Action-oriented decision architecture
– Fit-for-purpose accountable cells
– Active partnerships and ecosystem
– Open physical and virtual environment
– Standardized ways of working
– Performance orientation
– Rapid iteration and experimentation
– Information transparency
– Continuous learning
– Shared and servant leadership
– Cohesive community
– Entrepreneurial drive
– Role mobility
– Technology, systems and tools
See “How to create an agile organization,” McKinsey Survey, October 2017.
NOTE FROM THE AUTHOR:
Upon revisiting the 2017 McKinsey survey, McKinsey correlates companies with more complete agile programs (“the ability to quickly reconfigure strategy, structure, processes, people, and technology toward value-creating and value-protecting opportunities”) within industry sectors characterized by high-levels of change, unstable environments, and volatile or uncertain environments.
– “two-thirds of respondents saying their sectors are characterized by rapid change”
– “the more unstable that respondents say their environments are, the more likely they are to say their companies have begun agile transformations”
See “How to create an agile organization,” McKinsey, October 2017. https://www.mckinsey.com/business-functions/organization/our-insights/how-to-create-an-agile-organization