Swans are white. They just are. So when a black swan shows up, it feels strange.
The unexpected always feels strange.
Since Nassim Nicholas Taleb wrote his book, it seems that we have moved from one Black Swan to the other. A Black Swan, he says, is “an event, positive or negative, that is deemed improbable yet causes massive consequences”.
On July 18th 2008, JC Trichet, head of the European Central Bank, expressed his views to the press: “Our base-line scenario is that we will have a trough in the profile of growth in the euro area in the second and third quarters of this year and, following this, a progressive return to ongoing moderate growth.”
At the very same time perhaps, an enthusiastic Communications Manager was finalizing the PPT slide-deck of Lehman Brothers’ Long Term Vision. To be cascaded down the line.
Cascaded, yes, that’s the word. But in fact, a Swan Song. On September 15th, 2008, Lehmann Brothers declared bankruptcy.
And so much for all the predictions about moderate growth. We know the rest of the story.
Today, after five years of renewed faith, investment and development in the nuclear energy business, we are glued to our TV’s looking at terrible images from Japan. In a matter of two weeks, Germany announced it will not renew its nuclear program. Green parties are poised to win seats in elections where they had little chance before. Regulators are having a field day demanding audits and reviews. But who could have predicted a tsunami 23 meters high? Black Swan!
And who could have imagined, back in December 2010, that a scarce few months later democratic movements would be toppling dictatorships in the Middle East. Or that an international coalition and NATO would be manning a military operation over Libya? And that the youth in these countries would be using Facebook and Twitter to gather for change and freedom? More Black Swans. And who has any idea about where this will lead? Nobody.
What’s next? We wonder, how can we live with Black Swans? Do we board the next flight to Delphi and ask a modern age Pythia?
We’ve seen the shock waves resound through some of our client companies as they have been hit by sudden and largely unexpected events in their environment. Some of them badly hurt, not only with respect to performance, but more profoundly with respect to their very identity, their vision of the world, their strategic thinking, and their pre-conceptions of what the future would (should?) be. All it took was one book by an unknown doctor to finger-point the lethal risks of one single medicine, Mediator, and government healthcare institutions are dramatically increasing their oversight on all pharmaceutical products. And the entire pharmaceutical industry has to review in detail all products, all communications about their pipeline in a way they never had to do before.
As we work with Leadership Teams who are challenged in these very substantial ways, we have noted a few approaches and behaviors that appear to be more relevant than others. Here they are:
Listen to what you don’t want to hear
A world with Black Swans requires acceptance, creativity and agility more than tried and true methods and comfort zones. By definition, Black Swans overthrow preconceptions and common sense and so leaders need support to take greater risks and initiatives—above and beyond how things “have always been done.” This means that leaders give space and voice to people who think differently and question the status quo, including questions about how the business is being run. But oh how counter-cultural! What happens when a senior manager raises serious questions with respect to new product development and no one wants to hear about it? How do you get beyond the “group-think” excitement of new products, new markets, new acquisitions, new hires—new whatever!—and listen to a totally different point of view? How can you make sure that people who do not agree with the “rest of the crowd” continue to their point after having been repeatedly shot down?
Use a Scenario Thinking approach to strategic planning.
Scenario thinking, unlike classical strategic thinking, does not explore “probable” futures, projecting existing trends into the next 3, 5 or 10 years. Instead it pushes teams to formulate “plausible” futures that are all about uncertainties and surprises. For Nassim Taleb, Black Swans are part of “plausible” futures but these are too often overlooked. A scenario thinking approach allows leaders to discuss in the most open way possible, pitting different views of the future against one another. Creative options are developed allowing for increased agility in decision-making as the world changes.
Foster accountability, team effectiveness and cooperation.
Speed and resilience are key to living with Black Swans for they demand rapid reactions and also high levels of consistency. Does this sound paradoxical? In many corporate environments it is. The corporate culture will make the difference. The three critical cultural aspects are accountability and empowerment at individual level; trust and teamwork where the various part of the organization that need to cooperate are poised to do so when people can truly challenge ideas before reach conclusions together; and cooperation so that required.
These are some of the things that companies can do in order to better cope with what we, at ICM Associates, call the “U3”: Uncertain, Unexpected, Urgent.
When it all comes down to it, reality seems to systematically contradict our forecasts, our common sense, reason and models.
How can reality be so wrong?!