Thursday, January 29, 2009

Antidotes to Uncertainty: Adapt and Innovate

Financial history is a roller-coaster ride of ups and downs, bubbles and bursts, manias and panics, shocks and crashes.

---Niall Ferguson, The Ascent of Money

We are learning from our current worldwide financial crisis that the assessment of risk and uncertainty are two different concepts, two different thinking modes. Risk relates more to what we already know projected onto a number of future scenarios. As Niall Ferguson explains, risk is measureable uncertainty. That leaves real uncertainty as unmeasureable and thus as unknowable. Ferguson quotes John Maynard Keynes from his 1937 book General Theory: “There is no scientific basis upon which to form any calculable probability whatever. We simply do not know.” If only more of us were Ph.D. trained mathematicians!

Because surprises do happen despite our best efforts, leaders are in a bind. If the “long view” generated through strategic and scenario planning is limited (yet still relevant for mitigating risk), what can a leader do to off set disaster (uncertainty)? Darwin long ago gave us hints—adapt to our environment or perish. “The wild rewards the capable, adaptable and instinctive” explains Gino Ferri, professor at Laurentian University author of The Psychology of Wilderness Survival.

Anyone who has taken survival training knows that adapting is no easy matter. It’s down right scary. Leaders need some help!

Given the difficulty of figuring our how to adapt, one predominant message for leaders is to surround ourselves with great people who are diverse in expertise and who do not necessarily share our point-of-view. If “a team of rivals” worked well for Abraham Lincoln, as historian Doris Kearns Goodwin contends, then it should work now. This means reaching out to one’s broader network and replicating the “team of rivals” at other key nodes.

A second important message is to set up an environment for innovation. But, people can’t innovate well in an environment of fear. With daily job losses everywhere in the world, it’s hard not to feel anxious. The “team of rivals” approach fits well with setting the stage for novelty in thinking according to creativity researchers. The depth and breadth of knowledge elements available with minds from different disciplines and experiences increase the opportunity for unusual possibilities from which to choose---for real innovations. They suggest, in addition, that leaders consciously develop a positive emotional environment of surviving and thriving despite uncertainty to foster the creative spirit.

According to Teresa Amabile and others, there are spin-off bonuses to an emotionally positive work environment. The effect lasts for days. If the leader works at stoking the fires of hope and possibility, the positive feelings can last indefinitely, as well-documented in current brain research. These are greatly assisted by the joy individuals feel when generating ideas. It seems our brains and our beings thrive in such environments.

There is ample evidence from the history of long-lived organizations that adapting and innovating are central to survival. This is encouraging for all leaders grappling with the chaos we are facing.

Arie de Geus’s template for survival in a turbulent business environment provides further guidance. In his study of long-lived organizations (The Living Company), some more than 400 years old, he found four “habits”:

1. Sensitivity to the environment (learning and adapting)
2. Cohesion and identity (building a community with a cause)
3. Tolerance (ability to build constructive relationships with other entities within and outside itself)
4. Conservative financing (ability to govern its own growth and evolution effectively)

If, as Ferguson observes from his study of the history of money, that booms and busts are products, at root, of our emotional volatility, then, the lessons from surviving the “wild” can temper such ups and downs in our favour. This takes leadership of the right kind. Not greed. Not self interest. Not every “man” for himself. Instead, it heralds leadership which trumpets teamwork, respect for each other, including divergent views, and the certainty that together we can adapt, innovate, survive and prosper.

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