Insights

Known Unknowns And Unknown Unknowns

A client in the medical equipment industry recently shared the following experience with me:

“You might remember about a decade ago the media having a great time with Secretary of Defense Donald Rumsfeld when he made the comment about ‘known knowns, known unknowns, and unknown unknowns’. It’s probably true that politicians have to be careful when they try to turn a clever phrase, but he was right in citing all three categories as relevant to decision making and operations. Our company has spent the last year dealing with ‘known unknowns’ and ‘unknown unknowns’. And it hasn’t been a fun experience.

“In retrospect, we probably bit off more than we could reasonably chew. We tried to combine a significant change in our technology with entry into a key new global market. Going back to the insights that were provided fifty years ago by Professor Igor Ansoff[1], we should have recognized we were in the territory of ‘New Product AND New Market’, the most challenging of the possible combinations.

“We went wrong in two ways. First, while we did a pretty decent job in cataloging the ‘known unknowns’, we didn’t shine in terms of figuring out how to address them. Looking back on our plans, we understood some of the issues we were going to confront and some scenarios that might unfold as we moved forward. But our plans for addressing them were pretty basic. We just didn’t have the expertise to do better. And second, we really didn’t think about the ‘unknown unknowns’. That cost us in several ways, time and money both.”

One of the realities of most strategy implementation projects is that eventually the firm involved will find that it must sail into uncharted waters. The nature of those uncharted waters changes from project to project – a new geographic market, a fundamental change in the firm’s business model, an unfamiliar technology, etc. And, as the firm cited above suggested, sometimes there are many dimensions of uncharted waters that interact in ways that add even more to the challenge. An important part of project planning involves the identification of those important uncharted waters that the team will have to navigate – not only figuring out the “known unknowns”, but also trying to at least think about the possible character of the “unknown unknowns”.

Another firm with which we worked had made an important strategy decision involving entry into China’s market. They recognized that this was going to involve new challenges along many dimensions, and as part of the implementation project planning effort, they created an Advisory Panel of individuals from other organizations that had experience in doing business in China.

At the first meeting of this Advisory Panel, they presented their strategic plan to the members of this group, as well as outlining the implementation plan that had been drafted by the project team. The questions they asked of the Advisory Panel were these: “From your experiences in China, what are the surprises we should expect? What is going to be different in China relative to our experience? Where is our plan naive?”

To a certain extent, getting answers to the above questions might be viewed as basic “blocking and tackling” in the context of solid project management, although far too often we see firms heading into uncharted waters without creating any such compass. This firm viewed the answers that they got from their Advisory Panel as pure gold. Not only did they gain insights as to how to address the challenges that they had already anticipated, but they learned of some challenges that had previously been in the “unknown unknowns” category.

The steps that this firm next took, in any case, make it onto the roster of creative practices. After gaining answers from its Advisory Panel to the above questions, the executives responsible for this project then set out to identify other firms, mostly in non-competitive industries, that were likely to have faced similar challenges. Some of these firms were identified quickly by queries to the Advisory Panel, while others required some research and networking.

Once they had identified such firms, members of the implementation team were tasked to visit with individuals in these organizations, and complete a quasi-benchmarking effort to learn from their experiences. Through that process, the uncharted waters became much more real, and the implementation team built an inventory of great insights as to what to watch for and what had helped these other firms in dealing with such challenges. The learning that emerged from these discussions was then incorporated into both the implementation process itself and into the monitoring process associated with the project.

As it completed these benchmarking efforts, this firm also shared what it had learned with its Advisory Panel, and brought them back twice during the implementation project to provide an experienced perspective on progress and problems. In one of the executive interviews that we did in developing our framework for strategy implementation[2], Mark Weber, President of Federal Signal’s Environmental Solutions Company, emphasized the need to bring “the right kind of gray hair” into strategy and implementation planning and execution. Through both the Advisory Panel and the external benchmarking process, this firm certainly responded to that challenge.

Most businesses have at this point learned the value associated with hearing messages from the market, and have put into place voice of the customer programs and other initiatives to gain insights from suppliers, channel partners, and customers at all stages of the customer chain. When sailing into uncharted waters, initiating programs to gain lessons from other environments can yield the same, high-quality contributions. Other firms, often in very diverse industries from the one in which your firm participates, have often gained insights into how to resolve the “known unknowns” that your firm has identified, and can often also shorten the roster of “unknown unknowns”. To gain these contributions, however, it is necessary to take creative steps like those that were implemented by the firm heading into China’s markets.

Author: George F. Brown, Jr.

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