Friends,
I hope that all is well with you and yours.
Here we are, another seven days into autumn in the northern hemisphere, surrounded by foliage intensely ablaze in colors of yellow, orange, and red. It provides a stark contrast to the endless shades of brown and beige that still make up most of the cardboard mansion décor. Another fortnight remains until, at long last, renovations will begin.
Before we move onto today’s topic, I would like to make a quick personal announcement.
Although I had no real sense of where this might go when I set out, now more than a year and a half ago, I was recently informed that Strategy in Praxis has become one of the most popular newsletters on Substack. I have no delusions about why this is; the success is down to you, ladies and gentlemen, continuously sharing my incoherent ramblings. Without you spreading the word, none would have heard it. From the bottom of my heart, I thank you for it.
I also want to specifically highlight those who choose to give up their hard-earned luca to support me financially. Without exaggeration, it makes a genuine, notable difference in my life, particularly as I have recently prioritized finishing my new book and spending time with my infant daughter over doing traditional client work. Without you, these words would never have been written.
And I do mean that.
Enough of the soppiness, back on topic
As promised, we are today going to dig deeper into Gary Klein’s brilliant work on insights.
Over the last month or so, we have discussed what they are, how they come about, and what one might do to improve their prevalence within the organization. Creating sparks, however, is quickly rendered pointless if there is no oxygen to sustain the fire – and, unfortunately, much of what organizations do ends up obstructing insights and stifling innovation.
Klein identifies two main culprits.
Firstly, there is the predictability trap. Whenever employees are motivated to reduce uncertainty and unpredictability, such as when they are asked to lead a project and its completion ultimately falls on their shoulders, they will prioritize that which has worked before and dismiss creative solutions; they satisfice. Consequently, while it has become a corporate fashion statement to claim that one wants disruptive, critical thinkers, what managers really want is new ideas that mirror existing practices and maintain predictability.
(The strategist reader may also want to note that this is an unavoidable problem with strategic planning. Since it relies on programming with scheduled tasks, success criteria, and defined goals, insights are not only unnecessary, but calls for alignment practically ensure that they will be treated as deviations. As a result, none will ultimately be gained.)
The second way in which companies limit insight generation is by falling into the perfection trap. Often for good reason, companies gravitate towards the reduction of errors; they are easy to define, measure, and manage. Where they go wrong is when the approach translates not into an avoidance of stupid mistakes, but a quest for error-free performance. As we know from previous newsletters, such an undertaking only makes sense for ordered contexts. In complex ones, there are no right answers (meaning there are no wrong ones either). Experiments must thus be allowed to fail, provided they can do so safely.
As one might deduce, this sits poorly with traditional strategic management approaches. Although only an academic would believe that what is written on a page would come to pass verbatim, it is significantly easier to assume that a plan is perfect and without room for improvement. As Klein writes:
“The notion of going beyond perfection strikes some people as odd because they are used to projects with clearly defined goals. When we move into complex settings and work with wicked problems that don’t have right answers, we have to discover goals as we pursue them. The notion of perfection doesn’t work in these settings because we don’t want to stick with our original vision. We want insights about a better vision than the one we started with. We don’t want to be trapped by perfection.”
Practical manifestations
In other words, in order to create performance improvements, we must balance, on one end, the reduction of errors and uncertainty, and, on the other, an increase of insights gained:
Unfortunately, like with so many other corporate balancing acts, the two habitually contradict and work against one another. With reduced uncertainty and fewer errors also come fewer insights. With more insights come higher uncertainty and a larger risk of error.
Given their risk averse nature, or at least the defensive decision-making of managers with stronger incentives for not screwing up than improving, companies tend to end up overemphasizing the downwards arrow over the upwards arrow; instead of enabling an insight-generating culture, they implement a number of insight-limiting processes. Examples include:
The imposition of tighter standards
An increase of controls
Documentation of all sources
Identification of assumptions
Estimations of uncertainty values for the assumptions
An increase of the number of reviews
The justification of conclusions with greater rigor
Reliance on checklists and procedures
An increase of the precision of schedules
Each of them, Klein observes, hinder insight generation. For one, they are distracting, taking up employees’ time and leaving little room for thoughtfulness. But they also put insights in a bad light; new ideas disrupt schedules.
Over time, this focus on robustness (attempting to make the organization fail-safe by eliminating failure) ensures insufficient resiliency. Once anomalies are ignored, the organization becomes passive, lured into complacency by a false sense of stability created by emphasis on that which enforces the status quo. Inevitably, this causes strategic drift, i.e., a gradual deterioration of relative competitiveness.
In many firms, there will be organizational repression at play as well. Inherent in the very concept of organization is hierarchy; established power levels and responsibility for assigned duties. Insights disrupt such hierarchies as they are, by nature, dis-organizing. This creates an obvious problem. For insights to drive fundamental change, they have to first make it up the proverbial food chain. On every level, there may be a person incentivized (in whatever way) to dismiss them. As some of you may remember, this echoes one of my main criticisms against the supposedly adaptive strategic framework of Stephen Bungay; in practice, it becomes little more than a new twist on an old model. But it also shows why it is so difficult for external aides such as advertising agencies to truly solve problems. There are simply too many gatekeepers.
With all this said, it is crucial to emphasize that few, if any, organizations deliberately choose to stifle insight generation. Rather, the stifling comes as an inevitable by-product of how companies are, and have been for a long time, set up, and the mental models most desired in employees. There are many historical reasons why, of course, but chief among them is the traditional belief in the mechanistic firm. And to be fair, in a theoretic world of business physics, all of the methods listed above will indeed create efficiency gains through best practice (though, one might note, also more bureaucracy). But in a complex reality, where practice is novel, they will kill the organizational ability to innovate and, by extension, any hope of long-term survival.
Next week, we are going to look at a third and final thing that might hinder insight generation. As it happens, it is also the most controversial one: stupidity.
Until then, have the loveliest of weekends.
Onwards and upwards,
JP
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