Frameworks are powerless against uncertainty and ambiguity

Published on 7 February 2018 by Isaak Tsalicoglou.

A tale of a business team attempting to tame reality with structure to little avail, and of its lessons regarding uncertainty and ambiguity.

Almost five years ago, I was part of a consulting team serving a client in Switzerland during my year at the IMD MBA. Our market-leading client was facing a situation of a neglected product family that had once been highly appreciated, and therefore also highly lucrative.

A not entirely unheard-of situation

As some of the client's engineers with key knowledge of the product had moved on to other roles or companies, the organization had slowly bled product knowledge and development competencies. Something very similar had occurred with the salesforce's readiness, willingness and ability to allocate time on pursuing leads and opportunities for that product line. Sales of the product were thus not only indirect, but also entirely passive, as old customers ordered a replacement of their units every so many years with a phone call, or contacted the company for spare parts for their fleet. New customers were few and far between, and typically the result of word-of-mouth referrals – neat, but insufficient to sustain market share, let alone drive growth.

The result had been a constant decline of revenues to the point of questioning whether the product was worth keeping in the portfolio. Justifiably so; despite the high contribution margin of each unit sold, the progressive inability of the organization to efficiently support customers with product inquiries and technical support requests was starting to consume precious management attention at a high hidden cost that was accounted for on no spreadsheet, but was felt widely as a frustrating pending decision; a Damocles’ sword above the product’s head that sometimes was there, and other times wasn’t.

The client had been reluctant to invest in rebuilding that knowledge and development capability towards a product line revamp, but was also not entirely ready to phase out the product line and part with the alluringly high margin. There was a hunch that the product line would grow, and some hope left that it would do so if given proper sales attention outside of the organization. In the end, the hunch proved to be right, and the hope misplaced.

Bring in a consulting team

The client initially brought us in to develop a wholesale distribution strategy with a global footprint – n.b., not to evaluate the feasibility of such a strategy, which had already been decided upon based on extrapolations of the hope.

As often happens in consulting projects, clients think they know what they want and mistake it for what they need. Why is that? My favorite explanation is that the world is full of spineless consultants who don't dare to tell their client what he needs to hear, in fear of being perceived as “not delivering” on the project scope. The result of this mismanagement of expectations is then that the consultant ends up not delivering on value; the slides and rationalizations only look nice upon completion of the project, not so when their predictions and wishful thinking fail to materialize down the road. Over time, clients grow accustomed to sycophants who humor their illusions that they know what they need, and so are not really open to consultants who are in business in the brutally honest pursuit of client value.

But I digress. As it turns out, this was not entirely one of those cases.

Our team soon got very busy trying to “crack the case” with all our arsenal of business-school jargon, frameworks, and inspiration from what other companies had attempted and succeeded with.

We mapped the business system. Put down MECE issue trees. Generated hypotheses. Filled walls with sticky notes. Clustered them, also under a category named “Other”. Scribbled ideas on whiteboards like cavemen. Drafted interview guides. Interviewed the client's salesforce. Interviewed customers. Evaluated competitors. Benchmarked product features. Consolidated our knowledge. Developed concepts. Applied frameworks. Drew 2x2 matrices, S-curves, and bell curves.

Apply until desired results or total loss of meaning

Structure, structure, structure, in the face of ambiguity. And yet, the problem just wouldn't yield to our wise-ass MBA shenanigans. The elephant in the room was the question that remained unaddressed: “why should this proposed solution to your growth challenge be the right one, at all?”

Admittedly, we were too green to challenge the project scope, and too proud to let ourselves admit defeat. Cognitive dissonance and frustration increased, as the meaninglessness of the question became apparent and remained unspoken. For two very long weeks we attempted to develop the undevelopable and still grew none the wiser regarding what the wholesale distribution strategy could or should be.

To the contrary: we gradually realized that a wholesale distribution strategy was entirely unfit for the product and the target markets. In fact, we became increasingly convinced that not only was such a distribution strategy a sure-fire way to decimate inventory turnover, but also that there was latent customer-value potential in the product line. Thankfully, one person dared to mention this possibility, setting in motion a change of heart of the entire time that felt like dominos falling on each other.

There was one last barrier: one teammate abruptly came to the realization that our team's validated conclusions would have to collide head-on with our client's non-validated assumptions, upon which our entire consulting engagement was predicated. With a bit of group dynamics, we managed to overcome this hiccup, and so went ahead to deliver to the client what some would consider "the bad news".

Yada yada yada, the client proved to be quite open to hearing to our views, and in fact appreciative that we challenged his initial assumption. He thus rescoped the project half-way through, and we ended up researching and developing keep/kill/partner options for the product line, including market sizing across target industry segments and geographies, new business model concepts and operational models, etc. From an exercise in futility, the project became fun and memorable.

VUCA yes, but can you even deal with UA?

Shortly before our midterm “bad news” update to the client, I was asked to write a guest post for my class' blog. Earlier today a friend of mine reminded me of the project, and so I set upon to find the blog entry online.

It's funny to look 5 years back and realize that some of the learnings of that project are still valid and more relevant than ever. People expound upon VUCA this and VUCA that and the theoretical impact on developing strategies and other imposing topics; but actual accounts of what it feels like to be in even a small part of a VUCA situation (here, a UA situation) remain untold. Small, niche industries especially remain in the shadows, while business schools prefer to write about the big names, where market knowledge is abundant, industries are more consolidated, and every big player is scrutinized so frequently by investment analysts, that finding information is a mere duckduckgo search away.

So, I thought I’d repost this story and share the lessons learned, also to the benefit of the current class of the IMD MBA.

Here's a slightly edited story of that highly turbulent and enjoyable time. Take out of it what you will and, at the very least, the Rumsfeld quote. He might have been skewered by the media for what sounded like the ramblings of a confused person, but his quote was wise.

Those who like Lean Product Development might be surprised to realize that it's highly prescient of what is happening all the time in development endeavors of all kinds. And those of you who like structure will enjoy finding out that it’s nothing more than a 2x2 matrix on the knowledge of knowledge.

2 weeks of 6 people pretending they know that they know

5 years earlier

“There are known knowns; there are things we know that we know. There are known unknowns; that is to say, there are things that we now know we don't know. But there are also unknown unknowns – there are things we do not know we don’t know.” — Donald Rumsfeld

It is not the first time that the quote above inspires me to write about work experiences, and it definitely isn't the first time that this quote describes fittingly the ambiguity we have to deal with during this year of “Real World, Real Learning”.

During the first module of the program, all of us were exposed to “things we do not know we don't know” by working with startups in different stages of growth. This amazing level of uncertainty certainly caused a lot of headaches to those among us who weren't used to working on a “clean slate”. At the same time, our mandate to add value to the startups in any way possible was in a peculiar way liberating: after all, if there are so few constraints almost anything you might discover and do – within reason – is bound to make a positive difference to the business. With the average work experience among the class members being seven years, and with us trying to apply the formalized knowledge we acquired in class, working on the startups felt like shooting at sparrows with a Howitzer.

One and a half months after the conclusion of the startup projects, and after a total of more than four months that feel more like two years at the typical IMD pace, the tables have turned. During the International Consulting Projects of Module 2, we suddenly find ourselves exposed to “things that we know we don't know” and, most importantly, things that we will probably never really know, in the scientific sense of “knowing” that is dear to those of us with a more technical background.

While working with a nascent venture earlier in the year, we learned to deal with uncertainty. Working with a mature, established company now requires dealing with ambiguity, especially since the challenge of this project relates to “global strategy and growth”.

Instead of Howitzers, it seems now that applying MECE frameworks on messy reality is like shooting ping pong balls at armored vehicles.

Because yes, it definitely helps to structure your approach to the problem. However, as my classmate Dan says, “no plan survives contact with the enemy”. And you know what? In a philosophical way it is deeply gratifying to see that business reality doesn't conform to 2x2 matrices, bell-shaped curves or neat sigmoids. What a bland world it would be if it did!

I am particularly inclined to pontificate about this topic, because in the past two weeks the project of my team has turned out to be much more “squishy” than what I expected, essentially guaranteeing a maximization of our learning. We have the mandate to develop a go-to-market strategy for an expanded product portfolio using specific distribution channels for a well-established market leader in a very specific industrial niche, with the aim of supporting organic growth.

In non-MBA and non-smart-Alec jargon, this means: find a way to sell more, everywhere. Somehow, most business challenges seem to boil down to this one.

In the beginning, the situation seemed to be pretty clear-cut, as it always does:

  • here are the products,
  • here are the customers,
  • here are the competitors,
  • therefore, it should be straightforward to define a go-to-market strategy.

First: look at past business cases, the theory we have covered in class and our own notes. Second: descend into the library's dungeon and scour the strategy and marketing sections for books to devour for sweet, sweet knowledge (and, for what most won’t tell you: anxiety dissipation).

Third… discover that there are many fascinating things to discover in the neatly categorized books full of abstracted content, except for cookbook solutions to real world business problems.

After that, it's back to the drawing board. In our study room, the whiteboards, the walls and the flip chart have been filling up with “worry boards”, “parking lots” of ideas, timelines, ideas, hypotheses and conclusions on sticky notes at a fast pace. After the initial, preordained valley of confusion and getting to know each other better, we've been spending an increasing number of hours every day doing real work, sometimes together, sometimes independently, and often in subgroups.

Sometimes we work well together, sometimes we don't. It's not very different to work teams in real business out there, because it is real after all – the dwindling revenues are not a simulation; for our client, they are reality.

We are discussing, building on each other's ideas, debating what is helpful and what isn't, helping each other contain everything except laughter – of which there is plenty to be had, confronted with the absurdity of real market situations or hypothetic ones, while role-playing customer journeys, decision-making and purchasing processes.

Today we are reaching the end of the second of four full-time weeks of our project. As you are reading these lines, our team is traveling to our client's site to present the midterm results of our research and ratify further work packages and travel requirements.

It would be presumptuous to say that the next two weeks will go exactly as we plan them, but hey… when was the last time you saw a Gantt chart that accurately depicted the reality of your project?

This project is teaching us many things. Paramount among them is the ability and readiness, in a team full of different characters, to stare down the complex and interconnected problems and unflinchingly plot a course despite uncertainty and ambiguity. This has been one of the core elements of the IMD MBA program from the start, and it is encouraging to see it reverberate through all experiences and with increasing intensity.

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