How to deal with uncertainty
It’s cliche when people say, “Entrepreneurs are the risk-takers.” To the contrary, entrepreneurs actually seek to avoid risk. They are risk mitigators. They seek to reduce the uncertainty in a new venture. Those who do not reduce uncertainty are the risk takers. This is what happens in established companies.
When uncertainty creeps into the core business, the natural reaction is to stay away from it. But this is actually “risk-taking.” Continuing to execute the way “it’s always been done” in the face of uncertainty is a path to failure.
In this blog post, I’m going to talk about how to explore in the core to reduce uncertainty in order to improve operational efficiency, while also uncovering new opportunities.
Understanding Market Needs
In the startup world, exploration is the norm. It’s not necessarily because people think of it that way, but because the default nature of a new business is not knowing. There is no blueprint yet for building, marketing, selling and delivering new value for customers. The first step is (or ought to be) understanding the market needs. This requires interviewing potential customers and running experiments all before building any of the product.
In established businesses, leaders and employees assume the blueprint they use to execute on the business is fixed. But as the last few years demonstrate, little is fixed. Pandemic, war, supply chain issues, ransomware attacks, inflation–it’s crazy out there! All these events ripple across the business landscape, disrupting the markets. The blueprint maybe doesn’t work anymore.
How do you fix that?
You have to act like a startup, again. You must go out into the world to discover what has changed and what additional changes are coming. You have to balance execution work with some exploration in order to have an operational plan that evolves with the environment.
If you turn a blind eye to risk, you’re putting the business in jeopardy. The overarching point of my book Disruption Proof is that complexity and uncertainty for the core business is greater than ever, and is the new normal. The number of economic downturns that we’ve had in the first 22 years of the 21st century is extraordinary, and it’s confusing to old school economists, politicians, and even Wall Street.
The continuous disruptions are due to the digital revolution. These events have always happened somewhere, but because of global interconnectedness and the speed of information, the effects are global. Using the models that described the 20th century can only get us so far.
The core business needs to realize that when faced with rapid market changes, you can’t merely do what you did yesterday. You have to adapt. And to adapt, you have to increase your awareness of what’s going on around you, both inside and outside the walls of your organization. You must include into your normal work this idea: “We need to do some exploration.”
How to Explore
When it comes to “explore in the core,” the number one objection I hear from leaders is, “We don’t have time.” I think to myself, well, you’re not managing your teams properly. What I say is, “if you put it on the calendar, you just made time.”
I’m a big believer in agile practices because, as the name suggests, agility allows you to change plans based on new information. You use sprints to define work over a fixed period of time, then pause, reflect, and define the next sprint.
When you pause and reflect, the agile team:
- Checks in with stakeholders (including internal or external) customers to ensure you’re on the right path
- Takes in new information from the environment. (What’s happening inside and outside the walls)
- Reflects on how they might improve the work
- Defines the next stage of work (aka sprint)
You have to balance execution work with some exploration in order to have an operational plan that evolves with the environment.
Exploration work might mean interviewing customers, running experiments, speaking with experts–anything that reduces uncertainty. The goal is to bust assumptions and cut through biases to get to new knowledge, which allows the team to improve efficiency at delivering the desired outcome. The likelihood is that teams will also discover insights that point to new growth opportunities.
Exploration improves execution efficiency, while laying the foundation for future growth. This is why we explore in the core.