Making Decisions in a Radically Uncertain World
Management exercises and tools can help when navigating uncertain times
Anyone leading an agricultural business is familiar with risk and managing the uncertainties that are part of biological production processes. For most seasoned feed and grain managers, such risks are simply part of doing business, a set of factors that must be understood and assessed in any decision-making and planning process.
The COVID-19 global pandemic has taken uncertainty to unprecedented places. Let’s use the term ‘radical uncertainty’ to characterize our current decision-making environment. While the potential for such an event was known, few enterprises were prepared for a shock of this magnitude. How should feed and grain managers think about uncertainty on a level possibly never before experienced?
The “new” normal
Most every feed and grain manager is familiar with managing the normal risk of a typical production cycle. Thinking about the best case, worst case and most likely outcomes help us frame our planning and operational processes. Such thinking leads to questions such as: Do we have adequate storage and transportation capacity for a bumper crop? How can we build flexibility in our cost structure to handle the implications of a serious drought? While a simple framework, asking such questions helps us prepare for outcomes that deviate from normal – at least the outcomes that don’t deviate too far from ‘normal.’
Such a framework is not as helpful when facing truly extraordinary events that bring uncertainty to our business in ways never before seen. Certainly, the global COVID-19 pandemic provides one example, but trade embargoes or a nationwide food safety issue can create situations where uncertainty is great and potential consequences dramatic. How do we think about decision-making in these radically uncertain circumstances?
One decision-making tool useful in such situations is scenario analysis. Here we frame alternative views of the future and then ask questions about the decisions we need to make should those futures materiaize. For example, COVID-19 scenarios might be framed around the length and severity of the pandemic and the impact on the economy. Developing possible futures along these two dimensions provides us with alternatives we can use to consider the implications for a feed and grain business. A multiyear pandemic, along with a deep recession, creates a very bleak future. Rapid availability of therapeutics and vaccines, coupled with a more V-shaped recession, leads to a future that may present opportunities.
Options thinking is another tool that can be used when uncertainty is radical. While a true options analysis can be very complex, the idea is quite simple. When the path forward is not at all clear, instead of placing all of your faith in a single outcome, place multiple small bets that preserve the option of future action. Then, as the future becomes clear, you can exercise the option that makes sense with new information in hand. An example might be online/web-based support. While this may not be the way, you do business in normal times, having a small presence and an operating model that works could position you to scale such support if conditions change.
Leading the possible
Finally, radically uncertain situations may require us to lead differently. Every experienced feed and grain manager knows how to navigate supply and demand fluctuations, typical weather risks, etc. We can draw on forecasting tools, historical trends, best case/worst case budgets, etc. in managing such risks. A March 2015 McKinsey Quarterly article titled “Delighting in the Possible” by Zafer Achi and Garvey Berger calls these situations’ managing the probable.’ We know enough to make good decisions, using existing tools, within a set of bounds that likely will frame the future.
In situations where the uncertainty is radical, such an approach rarely works, as history doesn’t matter, and our familiar references and tools are not as helpful. In such circumstances, Achi and Berger talk about ‘leading the possible.’
The general idea is to reframe our thinking to consider truly out-of-the-box solutions beyond our normal frame of reference, break familiar patterns, and offer the potential to help us navigate something we have never before experienced.
How do you do this? The authors start by challenging us to ask different questions: What do I expect not to find? What might I be discounting or explaining away a little too quickly? What would happen if I changed one of my core assumptions on an issue?
These kinds of questions force us to think more broadly about our problem, which is essential in dealing with radical uncertainty. Constraining ourselves to a narrowly defined problem may make us feel better as managers. Still, it may prevent us from identifying the possible solutions needed to address the challenges presented by the radically uncertain situation.
Play devil’s advocate
Another tool the authors suggest is the idea of taking multiple perspectives. When we are facing something new and different, new and different voices may be needed to help us think creatively about the solution.
Truly listening to what other people have said – especially those we don’t normally hear from, perhaps even someone with whom you don’t agree. Why do they hold their particular opinion? What insight does it offer?
These counter opinions may help you see the problem from a different angle and, in the process, find an insight that you didn’t see before.
Managing and leading in situations where uncertainties are truly radical challenges the very best. Deep experience as a manager may lead us to draw on familiar tools, perspectives, and frameworks that have worked for us in the past — even though we may need to address the situation through an entirely new lens. Take a step back when faced with radical uncertainty and think broadly and differently about the issues in front of you. ■
Dr. Akridge is Provost and Executive Vice President for Academic Affairs and Diversity and Professor, Department of Agricultural Economics, Purdue University.
Dr. John Foltz is Chair, Department of Animal Sciences, The Ohio State University, Columbus, OH, and Dean Emeritus, College of Agricultural and Life Sciences and Professor Emeritus, University of Idaho, Moscow, ID.