At the Uncertainty Project, we explore models and techniques for managing uncertainty, decision making, and strategy. Every week we package up our learnings and share them with the 2,000+ leaders like you that read this newsletter!

In case you missed it, last week we talked about designing for aligned autonomy.

Getting started, navigating uncertainty

Strategy, uncertainty, and decision making…

At The Uncertainty Project, we explore ideas on how to acknowledge uncertainty with more purpose and rigor, as you craft your strategy, to improve internal collaboration and communication (around what is not known) .

Starting last year, we began to organize these ideas into playbooks that attempt to integrate strategic practice with methods and techniques for handling uncertainty. These will evolve as we continue to learn together. 

This post is a summary of some of these practical ideas.

Who this is for:

You are a mid-level leader, responsible for a LOB, product or product line, shared service, function, etc. You have a budget. With the budget comes expectations that you can both “run the business” (i.e. execute your day-to-day responsibilities…) to achieve performance goals, and “change the business” to improve effectiveness, efficiency, and position the group for what comes next. 

At this time, you are sitting down to create (or revise) your strategy.

Initial conditions:

You currently lack a clear, documented strategy for your LOB, product line, shared service, function, etc. 

But you do have a:

• List of your active teams: who consume most of your budget and deliver the results you are accountable for 

• List of your active projects (or initiatives): with approved levels of spending, that define how you’d like to change over the next several quarters.

What we are aiming for:

We are looking for better ways to (1) view, frame, and connect the work in the teams and on the active projects to (2) acknowledge and address uncertainty, and (3) mitigate the related risks.

Quick overview of the approach:

1. Clarify your turf

2. Connect current investments to current spending

3. Explore challenges 

4. Identify uncertainty

5. Make strategic investment decisions

6. Mitigate risk

7. Close the learning loops

Clarify your Turf

You were given a budget and expectations by another leader (that you likely report to). Refine your understanding of your space within the organization design by defining the Decision Rights that you have.

Describe your responsibilities in terms of the decisions that you are expected to own, like: 

• Decisions to create and staff teams

• Decisions to fund and staff initiatives/projects

Capture a statement of your decision authority, and share it informally with your boss and your peers to reach a shared understanding. Encourage them to do a similar exercise, to clarify their own boundaries.

Connect Investments to Spending

Take your list of active teams and your list of active projects, and draw the relationships between them. Which teams are contributing to which projects? Are there dedicated project teams? Do some teams contribute a fraction of their time to some projects?

Teams spend the money allocated to projects, mostly via the team members salaries (labor costs). Show the connection of project timelines (approved and expected spend) to team roadmaps (planned spend). 

Also identify which teams are primarily focused on performance alone (i.e.  “running the business”). Their performance goals might be something like the throughput of tickets, or the satisfaction of the services delivered to some customer (internal or external). The point is, these kinds of teams might not be contributing to any projects.

This is your baseline.

Explore Challenges

With this baseline in place, it’s time to talk about where we are struggling.

Start by discussing perceived challenges:

• In what areas is the status quo no longer good enough? 

• Where are external trends threatening to hamper performance? 

• Where are competitive threats growing stronger?

Steer this honest dialog to build a shared understanding of the beliefs that form the foundation supporting your current plans. Document these beliefs in some way,  to support Belief Challenging and the use of Tripwires down the road.

Write up summaries of the top challenges, as narratives, to set the stage for strategic conversations.

Identify Uncertainty

Next, express and capture the “known unknowns”. Where do we wish we had more, or better, information? What assumptions are we currently making (riding upon) as a foundation to that list of projects (and performance goals)?

Use Assertive Inquiry to tamp down the tendency to jump to solutions and advocate for them. Seek to explore the possibility space thoroughly first. Then compile the most critical assumptions, organized via Assumption Mapping.

Finally, translate the challenges and uncertainties into the language of risk. Some challenges matter more than others. Some uncertainties matter more than others. Express this by framing a future condition (an “if clause”) and assigning a probability of its occurrence. Then describe the impact it would make, if the future condition were to happen. Start with a relative scope (i.e. 1-100), or some loose proxy for economic impact (like change in expected value).

Use the risk list to communicate with the rest of the leadership team, stakeholders, and team leads. Work together to prioritize the risks, as a way to spark meaningful action against challenges and uncertainty.

Make Strategic Investment Decisions

This risk conversation should motivate the leadership team to push against the status quo. In the first stage, we baselined where the money is being spent today, in terms of projects and teams. Next step: explore adjustments to apply the money more effectively against needs and risks.

The activity here should be to earmark funding for the specific challenges, without getting into solutions. Easier said than done. This stage should focus on the zero-sum game of fixed budgets. To attack a new challenge or risk, or to buy some information to reduce uncertainty, leaders must reallocate funding from something today. Where in the baseline are we not getting our money’s worth? Where have the expectations or circumstances changed?

Buying information with discovery or experimental efforts is a way to throw money at a problem, not to build something (a big bet), but to learn something (a small bet).

When a larger bet is needed, we can use Decision Framing to help us apply the most appropriate (and cost-effective) decision making approach..

Review the risks that sparked the active baseline projects as well. Are those risks as significant as the new ones that were just captured? What is truly keeping you up at night? Try a Pre-Mortem to add feasibility and execution risks (from active projects) to your list. Maybe that’s actually what’s keeping you up at night.

Mitigate Risk

With prioritized risks leading the way, we can start to hypothesize around actions. This is another key step in acknowledging uncertainty: we acknowledge that we really have no certainty on whether our actions will make the difference we intend, given how complex our environments and systems are. 

So we find small bets where we can gain information, with minimal investment or immediate outlay. By framing our spending as an attempt to learn, instead of an attempt to deliver, we help shift the conversation from producing outputs to chasing desired outcomes.

We explore possible causality between our hypothesized actions and those desired outcomes with group exercises like Causal Decision Diagrams (CDD).

This also sets the table for healthier conversations with high-performing autonomous teams. By framing bets (investment) as hypotheses (to reach desired outcomes), we can ask the teams to detail the specific changes to make, given the constraint of the bet size. In this way, they retain their autonomy, while leaders retain their influence. Communicating constraints as SImple Rules, or as Even-Over Statements are good techniques for finding this balance.

Close the Learning Loops

Lastly, and most crucially, leaders must be constantly harvesting the insights they’ve been growing in their gardens. As bets finish, we study the outcomes to assess what we’ve learned. 

Note: We need to be careful not to evaluate the quality of our decisions solely based on these outcomes, though. Use Outcome Fielding to make that secondary decision-about-the-original-decision. 

This emphasis on framing learning loops how we shop for, and buy information, to reduce uncertainty.

Contrast this to how we operate today, when we monitor work effort. In most settings, it doesn’t feel like this. Instead, we ask, “Is it done yet?”, or “Will that goal be met?”. This transactional approach pulls attention away from the non-linear exploration needed to address challenges and resolve uncertainty. 

Learning needs to be the focus. Execution is a means to and end. The end is learning.

Join us this week for the Decision Architecture discussion series!

We’ve 4 more live sessions to cover topics around Decision Architecture (the fist one was last week). It’s free and exclusive to Uncertainty Project! (just to make sure we can facilitate/manage actual discussion). Join us this week if you’re interested!