Black swans are on the increase: Japanese earthquake; the uprisings in Egypt etc; BP Deepwater Horizon. Each had profound business implications. Maybe a few foresaw the risks, but most people had little idea they were coming.
Is there a way to develop sharper antennae, anticipate black swans and prepare for them? Some 15 knowledge management experts (see right) took part in a discussion to consider how we might get a better grip on the messy interconnectedness that lies at the heart of this challenge.
Modern organisations are no longer standalone entities. They are relationship ecologies, spanning continents, working through vast numbers of connections.
Technology advances have shrunk distance and time, making outsourcing and partnering viable routes to get know-how, any time, any place. Production facilities and major suppliers are on different continents. Mobile knowledge workers offer services from anywhere. Service delivery moves between time zones. Risk can be traded on intricately connected markets and accumulates far away from its shaky foundations.
For efficiency and to apply deep expertise, organisations divide and specialise. For reach and effectiveness, they connect and integrate. Technology increases the options for division and specialisation, but this makes integration harder. The span of what we need to know is much larger and the hand-offs at the interfaces become more complex and more open to misunderstandings. Distance and time no longer buffer organisations against distorting effects.
Crucial information lies buried in the complex network of employees, customers, partners, suppliers, and external stakeholders. Small, critical details are overlooked in the messiness of complex decisions. Governments, regulators and influence groups have a large impact on outcomes.
Tools need to be future-sensitive
Most business systems/processes aren't future-focused. If the future is not a direct extrapolation of the past, they won't protect us against risk and crisis. Worse, they can lull us into a false sense of security. 'What if?' questions, blinkered by our knowledge of the past, give the right answer to the wrong problem.
Scenario planning is often used to sensitise people to possible futures. But this has limitations. Scenario planning is too big an exercise to do frequently and its success depends on whether those involved really push past preconceptions. The insights underpinning the scenarios may be lost: transferring the essence of what matters minus the emotional connection that comes from involvement is always a weaker form of communication.
Sophisticated decision-making protocols, CRM systems cannot easily sift the mass of information and spot patterns indicating risk. Even if they did, human nature is such that warning signs might be ignored. As entrepreneur Margaret Heffernan points out, we have to consciously guard against 'wilful blindness'.
Many things blinker human perspective, not least experience. Years of experience may focus attention on the familiar and filter out the unfamiliar, so it becomes harder to notice vital differences or unusual signs.
Humans have a long history of using stories to make sense of the world. They play a role in self-legitimisation, so we tend to look for things that affirm our truth rather than disagree with it. A corporate narrative, accepted collectively, is slow to change, even when it loses relevance. Many classic corporate re-inventions were driven by crises that arose when collective narratives got out of synch. Kodak believed people would always want printed photos - and was overtaken by the digital revolution.
It takes considerable courage to deliberately abandon a successful formula. Fear of the unknown easily outweighs assessment of future risk. So what can we do?
Fore-search: learning prospectively
To learn prospectively rather than from experience requires distinct skills in what intellectual capital (IC) expert Leif Edvinsson calls 'fore-search'. This is an ability to focus systematically on the future. It is the opposite of research, which looks backwards to make sense of what has already happened. Six interrelated practices (see diagram next page) contribute to the capacity for fore-search.
Discover the hidden value of 'un'
To recognise what is new requires a shift of attention. Transfer focus from the familiar to factors and people usually ignored. Involve the uninvolved; bring unasked questions to the surface; challenge unquestioned assumptions; relish the uncomfortable; give undivided attention to the unfamiliar. This increases our chances of noticing the symptoms of the next wave of disruptive change.
Consider revising organisational metaphors: they have a deep unconscious influence on us. They are packed with assumptions about what works. Listen carefully to their usage; assess their limitations and suitability; consider how alternatives would change perspectives.
Hold knowledge cafés, Socratic dialogues and use open space technologies to involve a broader cross-section of people. Use social media to bring diversity into strategic decision-making, to bring unrecognised needs to the surface and respond quickly to ripples of external opinion.
Ask powerful questions
Leadership must create a climate in which probing questions and challenges to status quo are an accepted part of organisational development, rather than linked to blame and fear. Honesty can be painful, but a facilitator can manage the ground-rules of conversations and encourage people to discard obsolete assumptions.
Edvinsson advocates 'quizzics' - a dialogue in which participants spend an extended period answering one question with another, only considering solutions once the questions are deep and challenging. 'Leadership jams' are also becoming legitimate spaces for raising the big questions, because they draw on the diversity of perspective and develop ownership of emerging trends.
Institutionalised routines to draw out critical questions are important. So is recognising that powerful questions can generate strong responses: a head-on challenge can feel like an attack. However we generate the catalytic questions, they must be presented in ways people can digest.
Humour is a good route for presenting controversial messages in a palatable way. Art and poetry are other well-established ways to stimulate people to think the unthinkable and to present an alternative view.
Synthesising input from many stakeholders inside and outside the institution makes the challenge more palatable. Knowledge management consultant Dave Snowden captures self-tagged micro-narratives: thousands of short stories that can be mined for connections and trends deep in the detail. This clarifies undercurrents, avoids interpretation bias and provides solid evidence for new thinking.
Make knowledge base redundant
Continuous improvement is great, but can blind us to fresh possibilities. Chris Collison talks of a heart surgeon at Great Ormond Street. Exhaustive improvement hadn't reduced the risk to patients moving from life support to intensive care. After a long day, the surgeon was watching F1 racing on TV. Suddenly, he made the connection between patient transfers and efficient pit-stops. He invited Ferrari to share its approach, which led to a big increase in survival rates. Sometimes the existing knowledge base has built-in limitations. Looking beyond the narrow confines of deep expertise can be the source of inspiration.
People focus more on improvement than innovation. Creative talent is specially selected and developed; formal structures separate innovation from business-as-usual. This can slow agility. IC expert Daan Andriessen's research highlights how metaphors create connections. Jazz is a metaphor for innovation: expert musicians improvise by playing with their deep knowledge to create something new together. They innovate and learn as they perform.
Experiment and improvise
Improvisation comes from ignorance of the future rather than lack of expertise. Speed comes from trying alternatives. Small novelties can achieve agility and change.
Promote the confidence to experiment. By acting rather than planning, we influence conditions. Social technologies can catalyse improvisation. They help edge people towards different solutions. Research shows we are made to think about the future - but we need the opportunity. Don't shape conversations and actions too early. When people have time to improvise and come up with their own outcomes, the possibilities are greater.
Get involved with future centres
"The future is only 14 seconds away," says Edvinsson, but often our enterprises are dominated by controllers rather than navigators equipped for nimble exploration. Having a space in which to explore the future can encourage more navigation. A 'future centre' brings together people inside and outside the organisation, giving them time and space to play with ideas. In 1996, Edvinsson established the first such centre, at global financial services firm Skandia. There are over 30 future centres around the world, including Ericsson's Foresight Centre, ABN Amro's Dialogue House and Fuji Xerox's Future Centre. Mindlab in Denmark serves the knowledge development needs of the ministries of economic and business affairs, taxation and employment. The LEF Future Centre in Holland was set up to solve the challenges of the country's geography.
Most future centres have different working areas, each with its own ambience and mental stimuli:
n knowledge centre for access to information;
n conversation area at the heart of the centre;
n area containing art etc to stimulate thoughts;
n laboratory to experiment;
n space to support implementation.
Self-organised and 'leaderful'
Professor of knowledge management Karl-Erik Sveiby suggests that sustainable societies have a non-hierarchical view of leadership. Power comes from wisdom rather than position. Hierarchy limits access to timely knowledge and the need for speed produces decisions based on superficial understanding. People distanced from outcomes care less about the implications of their decisions.
In sustainable organisations, leaders emerge according to the needs of the situation. Distributed leadership can be more sensitive to critical conditions, but sustainability demands decisions take account of the big picture and the knock-on impact for the whole ecology. Sveiby calls such organisations 'leaderful'. They are rare, but they do exist.
In Finext, a Dutch financial consultancy, there are no senior managers. Instead they have a rotating leadership, with the leader as a facilitator paying attention to group dynamics. Knowledge-sharing meetings are an essential feature at Finext and decisions are taken with care at every level. The result is an organisation that has prospered for over a decade without a central decision-making body.
Developing leaders confident to ask powerful questions, able to explore the 'un' search for redundancy in current knowledge, requires strong support for reflective practice. Coaching can help develop decision-makers who can harness collective intelligence, recognise preconceptions and assumptions, dare to speak the unspoken and articulate solutions that transcend the tension between long-term values and short-term pressures.
The messiness of organisations increases the risk from black swans. Fine-tuning fore-search antennae is key to developing an organisational faculty for discernment.
Some 15 leading thinkers participated in a 'fore-search fiesta': a facilitated exploration of what hones the organisational faculty for discernment amid uncertainty and how managers can use their collective intelligence to shape more agile enterprises.
Verna Allee, co-founder and CEO of Valuenetworks.com
Steve Andrews, knowledge management practitioner at University College Hospital, London
Daan Andreessen, professor of intellectual capital at INHOLLAND University of professional education in The Netherlands
Elena Antonacopolou, professor of organisational behaviour at the University of Liverpool Management School
Chris Collison, independent consultant, and co-author of Learning to Fly
Raj Datta, vice president and chief knowledge officer of the Indian software firm, MindTree
Ron Donaldson, knowledge ecologist and independent consultant
Leif Edvinsson, professor of intellectual capital at Lund University and first ever director of Intellectual Capital
David Gurteen, independent knowledge management consultant and facilitator
WB Lee, professor of the Knowledge Management Research Centre at Hong Kong Polytechnic University
Richard McDermott, president of McDermott Consulting and expert in communities of practice
Victor Newman, professor of knowledge and innovation management, Greenwich and OU Business Schools, business consultant and author
Geoff Parcell, independent consultant, co-author of Learning to Fly
Dave Snowden, professor of knowledge management at the University of Canberra, founder and chief scientific officer of Cognitive Edge
Karl-Erik Sveiby, professor of knowledge management at Hanken Business School, Helsinki
Jane McKenzie and Christine van Winkelen are researchers at Henley Knowledge Management (KM) Forum. Judy Payne is director of Hemdean Consulting