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How to Innovate in the Age of Uncertainty

As volatility increases, traditional forecasting decreases in effectiveness. How can leaders choose wisely among options for how to proceed?
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The authors of Just Start: Take Action, Embrace Uncertainty, Create the Future posit that “the way we have been taught to solve problems was designed for a different time. To deal with uncertainty today, we need a different approach. Hint: It involves mimicking the way entrepreneurs do things.”

Leonard A. Schlesinger, Charles F. Kiefer, and Paul B. Brown sought a solution to a problem that increasingly vexes not only business executives but anyone trying to make choices about which direction to take when creating something. How do you forecast future possibilities and choose among options in a world grown suddenly more risky and unpredictable? The question led the authors to look at the thinking and decision-making of entrepreneurs, “because there is nothing more uncertain than starting a business.” Here’s some of what they discovered:

“When you look at how entrepreneurs reason, you immediately notice that most of the successful ones approach uncertainty in the same way, and it is radically different from the way the rest of us do.

“Most of us use what can be called predictive reasoning when trying to create something new (whether it’s a project, new product or service offering, or even an entire enterprise). We:

1. Forecast the future.

2. Construct a number of plans for achieving that future, then pick the optimal one to pursue.

3. Amass all the necessary resources (education, money, help, and so forth) necessary to achieve our plan.

4. And then we go out and make that plan a reality.

“We have become so indoctrinated with this way of thinking that it is more or less the only way we approach anything.

“But what is a very smart approach in a world of knowable variables is not smart at all when the world’s governing circumstance is uncertainty, and variables can’t be predicted. Think of the uncertainty embedded in questions such as, Is quitting my job and starting something new a good idea? Will the prototype we’re developing at work find a market?

“When the future is unknowable, how we traditionally reason is ineffective at predicting what will happen next. Forecasting pro forma results grows closer to folly.

“So, if reasoned forecasting based on historical information won’t work, how should we proceed toward the future instead? That’s where the entrepreneurs come in. They:

1. Take a small (‘smart’) step toward what they desire.

2. Pause to see what they learned by taking the step; and…

3. Build that learning into what they do next.

“This process of Act-Learn-Build is repeated until the creators are happy with the result or decide that they don’t want to (or can’t afford to) continue. Pilot and adapt.

“The pivotal move in the process may be the ‘smart step.’ What’s a smart step? It is an action based on the resources you have at hand, and it never puts at risk more than you can afford to lose.

“Having taken the step, you pause to reflect on what you have learned. From there, you take another smart step or quit if your desire has waned (or you have discovered something else that you want more), or if you have exceeded your acceptable loss.

“You repeat this process until: a. you succeed; b. you no longer want to continue; c. you exceed your acceptable loss; or d. you prove to yourself it can’t be done.

“That’s the lesson entrepreneurs have to teach about how to take action in the face of uncertainty today.”

This article was originally published at The Build Network.

Last updated: Feb 11, 2014

THE BUILD NETWORK STAFF

The Build Network staff curates provocative, actionable leadership advice for executive teams running sustained-growth companies.




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