“Never make forecasts, especially about the future!” (Samuel Goldwyn)


This is a post about uncertainty, hence the issue of forecasting and the proposition that the value of long term strategic planning is worthwhile.

First, why long term strategic work is worthwhile:

“If you don’t know where you’re going, you might not get there.” (Yogi Berra)

Nassim Taleb, who is a major influence on my thinking and views on uncertainty and risk is apparently NOT a fan of long term strategic planning. The reason is obvious: uncertainty makes such efforts unworthy. Over the years, I have observed that many people have arrived at similar conclusions. Many of these I suspect have gotten to this conclusion without any knowledge of who Taleb is.

My first recollection, of this conclusion is many years ago when the sceptic offered as evidence that strategic plans ended up being shelf ware before the “tomes” were finished being printed and distributed. The evidence was that the effort spent had very little value and return in subsequent activities and efforts. I have observed this phenomena myself, first hand as well as for the those around me.

Much strategy planning worked is built upon the efforts to do some form of forecasting. Forecasting if it is based upon experience (that is, past events) is a form of extrapolation into the future. Sometimes this is done in a more conversational way (through techniques such as SWOT analyses) or quantitative ways (big data, surveys, applied research, etc.). There is a crucial assumption to any of these efforts:

“The future will be like the past in ways that matter to us!”

Yet there is an ocean of evidence that this does not turn out to be the case. It seems that the future always gives us surprise circumstance which invalidates our best planning efforts. For me, Taleb provided a very helpful context for understanding why this happens AND, will always happen. No wonder the interest in strategy work, especially long term is questioned, even avoided.

What is an expected consequence of this retreat from taking the long view? We will not make any long term investments, especially in infrastructure. Why bother? Won’t it become a “white elephant” investment anyway?

I have a personal concern (and it may very well be very incorrect). I wonder if the growing concern over the infrastructure in our nation’s transportation systems, our utility systems (especially civic ones), education, etc. may be in some part due to this retreat from willingness to do long term strategy work? I am not so naive as to think it is the only reason. But! If we consciously or unconsciously adopt the perspective that the near term is all that is worth paying attention to, wouldn’t we be inclined to pay attention to what seems important in the near term.

I am aware that in most governments there are long range planning groups that often work off decade long forecasts on demographics/populations in their jurisdictions. Yet, how successful are they in their forecasts and more importantly influence on the stakeholders that will have to approve the investment implications of them? It isn’t uncommon for many of us to bemoan the supposed fact that politicians are concerned with their term in office and the next election. And, the voting electorate, they are struggling with making rent and mortgage payments, cost of food, etc. These last two groups, very understandably, have a priority on the shorter term.

Yet, in spite of it all, politicians and citizens do pay attention to the longer term. People pay attention to many issues that affect the longer term livability features in their communities (even if in some comes it across as NIMBY).

How about in business organizations themselves? Not withstanding their espoused aversion to longer term planning, I look at an organization’s capital investment program to see how far out they are prepared to look. Depending upon the business, the outlook can be decades. Try opening up a new mine, building a pipeline, etc. These may be extremes, but it is not uncommon for a capital program to look five to ten years out. It just takes that long to get the job done. Yet, in spite of the understood (sic) uncertainty out there, many organizations make these kinds of investments on a somewhat regular basis.

So if we are well advised to abide by Goldwyn’s advice along with Taleb’s concerns about the implications of uncertainty on our lives how do we live today with the future in mind?

Yogi Berra’s quote suggests how we might approach this. It is less about predicting the future than making the future you desire:

  • Where do you want to be tomorrow?
  • What do need to do starting today to ensure the likelihood you will get there?

To me, the above two questions are the job to be done in strategy work

I subscribe to the metaphysical view that the future is not pre-ordained (like reading a book that has been written). Those who subscribe to a future that is something to be uncovered (versus created) would have little need to do any strategy work at all (after all it will be what it will be).

If we adopt the suggested perspective on the role of longer term strategy, then we appreciate the need for aspiration, vision and mission. These are all about where we want to be (aspiration), how we want to live out this journey (vision) and how we want to fundamentally get there (mission). The rest of the strategy effort is just that: a lot of effort!

Strategy is exactly like flying, sailing, hiking, etc. A plan to get somewhere where we view the journey through the lens of the pilot and navigator.

So what is the place for forecasting in such a strategy perspective? In two basic issue areas:

  • Are underpinning assumptions about our environment behaving as we hope – expect – need to behave? Navigators work on assumptions about weather, topography conditions, currents, etc, to be able to determine whether they are on course, adrift, or even serious jeopardy. The forecasts tells us how critical ( and when and by how much) to respond so we get back on course. This is risk management: we are dealing with variances from expected occurrences.
  • Are there circumstances arising that were unexpected (at the very least unassumed to be present) that may impact our journey? This is the uncertainty of surprise events in our journey. They may or may not matter. How will we determine if that is so? We are concerned about the surprise events in the context of the impacts (consequences) on our journey. The forecasts are about potential impacts (and when, by how much, etc.)

Uncertainty in our journey has a couple of life lessons:

  • Always be attentive to outliers. By definition they are a surprise and surprises are the evidence of significant uncertain like events.
  • Always, think and build into your strategy, the potential capacity to take advantage of surprises. A taken advantage of uncertain like event is by definition an opportunity. Guess what the outcome could very be if you aren’t able to take advantage of it? At best you survive (resilience is the competence here). At worst, you lose big time. Taleb call this being “anti-fragile”
  • There is great value in building one’s capacity to dealing with psychological, emotional and cognitive shock. Why? What do we tend to do when go into shock? It takes time to recover enough to get one’s “bearings” so that we can face that which shocked us. Depending upon the nature of the shock we can take some time to recover and we maybe significantly damaged as a result so we cannot bring our full best selves to bear on the matter. Time to recover may be very important to survival let alone taking advantage. Being damaged (think of a torn muscle here) means you are still partially incapacitated, means what you might have been able to do you are unable to do.

Where might we be most vulnerable to the shod of uncertainty? In organizations I would look at the logistical aspects of our strategy. This is why in times of war, resistance groups attack transportation infrastructure. If the figurative “frontline” of your strategy meets unexpected problems, it is critical to be able to deploy some of your “reserves” to support them. The weak link becomes that which enables the reserves to redeployed. So the logistical aspects of our strategy include: having redeploy able reserves AND the capability to do so when necessary.

So if you are flying, what will you most sensibly do regarding logistics? Have enough fuel to get there even if the journey takes twice as long, and knowing where you shift to if continuing the journey is impractical at this time.

Taking potential advantage of opportunities is not always simple (even if you have the capacity to do so). Again, think of flying. What are the implications of having surprising headwinds and getting to the airport significantly ahead of time?

I am a strong advocate of long term strategy. I  use it in my life and I always recommend it to others, especially those who say it is impractical in their lives, work, etc. I always ask them what a long term strategy looks like, invariably they describe some time and effort taking edifice. I ask them where they have made longterm commitments in their lives (personal – marriage, children, mortgage, etc.; work – capital plan, ongoing customer support obligations, etc.). Then I lay out what I look for in a long rage strategy touching on what is outlined above.

Over the years this general approach has served me personally quite well, and there has never been a ream of paper on any shelf.

Mark

 

 

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About 123stilllearning456

As a management consultant I am passionately interested in talent management and risk/uncertainty issues. In the area of talent management I propose that we seek strategies that look beyond the staffing/employee centric frames of reference. I have been frustrated at the "closing down on possibilities" by these more conventional staffing/employee centric approaches. I have been impressed where people have found systematic solutions to their talent management issues by going beyond the conventional approaches. In the area of risk and uncertainty, I am interested in making this topic relevant to more normal decision making situations. My conceptual foundation is to use the micro-economist's fixed/variable cost theme. I also think it is important to look at these issues for people through their emotional and psychological lens. As a premise I think risk and uncertainty only exist where there is a person who cares about possible events and its consequences. Hence, risk and uncertainty are social based concepts (no sentience, no risk and uncertainty). A major influence on my thinking in this area is Nassim Taleb of "Black Swan" fame. This BLOG provides me with an opportunity to express my thoughts on topics that interest me. As this is an online diary, content is more important to me than polish. I apologize if this distracts from readers' enjoyment and learning. Still I find this a useful way to live up to my namesake, learn more from others and hopefully provoke creative thoughts and ideas in others.
This entry was posted in Creativity, Decison Making, Performance Management, Risk & Uncertainty, Strategy, Values. Bookmark the permalink.

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