Uncertainty That Matters
We yearn to create a new sense of normalcy in the future of our lives and our business.
That’s a fact! Yet the future before us offers far more questions than it does answers or options.
For the first time for many people and businesses, developing risk management as an essential life skill will be unavoidable. It is the skill that allows people and businesses to cope, survive, and be resilient. The uncertainty we are currently exposed to will demand that everyone becomes intentional with what they want to achieve. Here’s why . . .
We will continue to face mounting threats from the virus for another 18 to 24 months — and in that time there will be opportunities — some that may be missed — and some that will create more uncertainty. We cannot put life on hold until things are ‘back to normal’ — in fact, more than ever there is a need for speed. This need for speed will contribute to what I believe is exposure to risks that many will not even realize they are taking. In this light, I want to break down this discussion into 3 distinct parts — that when looked at as a whole, will make for a picture of what we can look forward to.
I’ll discuss the interactions between Business, Technology, and Risk.
Risk is woven into everything we do — it is present in every aspect of work and the technology we use. Risk needs to be considered for its unique characteristics — A Risk is described as an event, an ambiguity, a variable, or something that is entirely unknown or unknowable. Where do you think the Virus was placed as a risk? I’ll come back to that a bit later.
It is not enough to simply look at risk in general. We want to see risk in ‘our environment’ and consider what can be seen and what cannot. As we all know, risk management is dependent on what can be seen.
It is by understanding what matters most in our environment that we can then have an accurate concept of risk, and that will lead us to be able to effectively manage the risks we can see or anticipate.
Everyone is facing the uncertainty that matters. We all have to adapt to the choices and decisions that will impact health, finances, leisure, careers, and children. These are all important elements of the environment we live in and work in. Creating an environment that has consistency is what will enable people to make sound decisions and take more informed risks. Our environments have an endless supply of uncertainty right now.
We know that certain events will happen with some degree of probability that will impact our lives and our business. Event-based risk is what individuals and organizations are most accustomed to dealing with. To this day, unfortunately, many approaches to ‘event risks’ are still being handled in very traditional ways that don’t align with the current dynamics or speed of business. As an example of ‘event-based’ risks that acutely stand out are security breaches, privacy breaches, and loss of data.
Things don’t just seem to be changing faster than ever — they are. Consequently, life feels increasingly complex and fragmented.
We could be at the peak of complexity, but I think that life will start to simply again, soon. We must begin to separate the past, from the present and the future. What I mean by that is that we must separate the problem from the risk — because they are distinctly different.
Risk is the Uncertainty that Matters
We are caught in the tension between solving the problem and risking through the uncertainty ahead — both are important — Businesses struggle with solving the problems brought on by the Corona Virus and moving ahead with the business transformations started in the past few years. The pressure is on for many companies to become fully digital. It’s essential for their business survival, improved customer experiences, and therefore customer retention, resulting in ultimately higher revenues.
Businesses find themselves in mid-phase between two eras: the pre- and post-digital age. The transition from one phase to the next does not happen overnight, nor does it happen in the time span of weeks or months. It takes years. Digitalization is misunderstood amongst certain groups, much like electricity was in the beginning.
Electricity didn’t change businesses overnight just like digital technologies won’t. It took around 20 years for people to understand that it wasn’t a question of improving existing processes or the way they work. What was needed was rebuilding them from scratch.
My experience is that there are 4 key areas that businesses must address, which have a direct relationship to the interactions of risk, business, and technology.
These are the key areas to focus on that most companies will need to address first.
The Whole Customer Experience
· Understanding customer satisfaction and dissatisfaction.
· Building analytic capabilities to get to know customers better
· How companies offer digital tools for self-service
Business processes
The transformation of processes is very important. Digitizing processes has less to do with technology and more with how companies want to interact. The focus is often on small but important processes that target high-value customer journeys and their expectations.
Going digital requires reinventing the entire business process to cut out some steps altogether. It is leaping beyond automation to more strategic tasks. This goes beyond efficiency.
Companies using ‘Design Thinking’ discover the ‘speed’ with which they are able to deploy collaboration and video conferencing tools among others, to enable remote employees to stay in contact with clients and co-workers. Even before the Virus, digital transformation was replacing one-way communication mediums with broad communication methods and remote work.
Operating Model
Besides the transformation of processes and customer experiences, digital transformation is also about the transformation of business models. Digitalization has given birth to an interconnected world that unites customers, employees, managers, and systems together in a network of unprecedented complexity and opportunity.
The opportunity here is to move toward a structure that is agile, flexible, and more collaborative while keeping the rest of the business running smoothly. Agility can only come through simplification. Making sense of a new interdisciplinary model of work is what is redefining companies — in simple terms — fewer silos. The organizations that successfully transform, align their strategy to the capabilities of its people and the processes and technologies to meet the customer objectives. This is a much outward-looking business model to drive internal capabilities and value.
The Digital Enterprise — Architecture:
New technologies are blurring industry boundaries. The landscape is seeing new sets of non-traditional competitors. What many executives struggle to understand is how their transformation will unlock new business opportunities beyond the markets they currently serve. With this type of transformational thinking — more new value is created.
Companies whose IT constraints make it hard to deliver a cutting-edge customer experience will generally want to focus on the technology and process elements first. A strategic digital framework provides executives with a coherent structure for thinking through and managing at-scale digital programs.
While each of these building blocks is important, the real value is in being able to integrate them and manage the cross-business contingencies, dependencies, and risks of a large-scale digital initiative.
That is our challenge today. Like the use of electricity — that made employees more efficient, working longer hours and enjoying safer, quieter working environments — yet all were seemingly unremarkable improvements.
It was only 20 years after electricity was in common use that business environments were transformed — machinery could be arranged in new ways — they could make products and deliver services more efficiently with fewer workers.
Later still, it became clear what electricity changed — it was everything.
In short, electricity was used not just to improve efficiency, but to transform it. Much like digital technologies — yet here we are now more than 20 years since the ‘digital age’ — we must ask ourselves . . . How many new risks are we willing to take that will result in remarkable achievements as we move into our next age? The Experience Age.
Moving out of Information to the Experience Age
It’s been 25 years since the introduction of the World Wide Web. Some experts are saying the Information Age is coming to an end. The internet and mobile devices are everywhere — we capture images and experiences continually — We are now entering what is being referred to as the “Experience Age.” What does that mean?
The Experience Age refers not to the information we’re consuming, but rather how we choose to consume it. It is combining digital with experiential. We’ve reached a saturation point with the amount of information we’re consuming. So, it’s only natural to get more selective about where, what and how we consume.
According to the Digital Marketing Firm, Pebble Design: “With mobile connectivity and the revolution of camera technology, we are entering an ‘experience age’.” The “Experience Age” is here and it is moving us toward connecting people more with the experience rather than just focusing on the informational facts. The “Experience Age” is one in which people want to experience everything. It is felt that experience is comparable to getting the most out of life.
Evidence of this phenomenon is in the 21% decline of Facebook Status updates, where people want to represent their truer selves as the result of everything they have done, and not by the accumulation of it.
With a connected camera televising our life in-the-moment, accumulated information takes a back seat to continual self-expression. Realtime sharing of experiences is what connects us now.
As humans, we are seeking experiences more than just information. This is a very important concept to fully grasp for any industry, and all businesses to adapt to. This is especially true as the business is continually working to stay on top of security and privacy issues, all the while their own employees may be sharing their lives on the internet and social media sites.
Consider the travel and the hospitality industry where you can now use different devices to check-in, check-out, order room service, or when on a plane, order onboard amenities. While you are doing this, the information is being collected to deliver the next experience that is designed to cater to the customers’ likes and wants versus a generic one-way communications environment. They are counting on that experience being shared publicly or to a large connected network.
Without even realizing this, technology enables us to use that information to provide better service using digital devices. We are creating a digital personalization age that focuses on experiences and the delivery of these experiences — much like YouTube!
There indeed has been a change and there are three hallmarks of this shift from information to digital personalization and an experienced-based age.
· Our expectations of “service” have changed
· The explosion of self-service
· Cell phones are now our window into the world
When you look at who wins and who loses with the Experience Age, the winners will be the companies that have the vision to see this change as their next opportunity. Brands such as Netflix, Accenture, McDonald’s, Spotify, Amazon, Apple, Virgin Atlantic, Marriott, and Uber, among others are those who took risks when there was much ambiguity and unknowns on the horizon.
The losers will not have built up their capabilities to move quickly and adapt to the massive change in interactions like Blockbuster, Radio Shack, Ericsson, US Airways, Howard Johnson, and yes, others too. Every industry can learn from the wins of the winners and the losses of the losers.
Being innovative and proactive is what defines the best companies in the world with built-in flexibility and resilience. Given that everything moves so quickly these days companies have little choice but to change with a vengeance in order to keep up with the “new consumer” and their growing expectations of a great experience.
BUT the experience age will not be an all-inclusive on.
The Digital Divide
The ability to access computers and the internet has become increasingly important to completely immerse oneself in the economic, political, and social aspects of the domestic or international scene. Not everyone has access or chooses to access this technology. Those people cannot be left behind.
The gap is widening. It is the gap between certain members of society, often identified as the poor, rural, elderly, and the handicapped who may not have access to computers, televisions, mobile devices or the internet; and the wealthy, middle-class, and youth living in urban and suburban areas who have access. That gap is growing along already strained economic and racial divides and it has changed how we interact with the world.
Not addressing the digital divide will expose risks to economic growth and wage increases, along with easier access to medical care, online education, and job opportunities.
The issue of the digital divide has not yet been adequately addressed. There are those who wish to minimize the divide and those who are skeptical that it even exists. In regard to the global digital divide, a type of complacency exists. A recognition of the digital divide will attack the notions that access to modern information technology can be easily made to disappear by redefining the issue.
The Irish News has reported on new research that indicates that heightened privacy fears are putting more non-internet users off and that risks worsening the digital divide. While the University of Oxford has found that most people choose not to be online because they are not interested. But a growing number of independent studies have cited anxiety about widely reported privacy issues, as well as a lack of knowledge on how to use the internet, as the reason for staying offline.
Dr. Grant Blank, of the Oxford Internet Institute, states: “These concerns could perpetuate the digital divide, with many people missing out on the benefits of the internet, such as access to health information, employment opportunities, and reduced prices online.”
Despite active internet users reporting positive experiences and outcomes, almost 70% say they are uncomfortable with targeted advertising and the tracking of their data that is subsequently used by tech giants or the information is sold.
So here we are . . . in transition between the information and the experience age with business and technology facing current problems, risks and opportunities.
Interactions
The Experience Age means that we’re no longer content with instant messages. It’s not the information we want; it’s the emotional connection. That connection comes through sophisticated and integrated platforms that promote video sharing, photo sharing, and even the use of emojis. Users want to be able to convey meaningful thoughts, feelings, and jokes through their interactions, and these days that nearly always includes a visual component.
Many successful technology companies have used video integration as a means of meeting these user needs.
Businesses need to create an operating model that will provide the experiences that their customers want. They will be able to achieve that by leveraging new technologies.
New technologies will allow businesses to step into the Experience Age where the primary input is visual, and the dominant feedback is attention.
Consider the experiences on Zoom — A key ‘experience’ tool of the 4th Industrial Revolution — it represents a fundamental change in the way we live, work, and relate to one another.
It’s a fusion of advances in artificial intelligence (AI), robotics, the Internet of Things (IoT), 3D printing, genetic engineering, virtual reality, quantum computing, and other technologies.
Creating New Value by Risk Taking
In the wake of ever-changing risks, environments, technologies, and business priorities companies are faced with increasing demands from a variety of stakeholders. Companies want better approaches to manage risks and create value.
A multitude of surveys and studies continue to reveal that companies still see much room for improvement in risk management, despite any enhancements they may have made. My findings in reviewing many of the studies and surveys reveal that companies continue to focus on ‘the Risk of an event’ that could happen, knowing that it’s just a matter of time, probability, and impact before it does.
There is so much more to risk that just a risk event down the road, so I won’t focus on the risk event today.
Risk is ANY UNCERTAINTY THAT MATTERS. What does that mean?
It means that . . . Risk is a situation or condition where you are not sure about a future outcome that matters and that will have an effect on your ability to achieve your objective.
For example: Uncertainty (Risk) can be variability; it can be ambiguity, or it can be entirely unknowable. Both threats and opportunities are in scope with every type of risk. Let’s consider each one in turn . . .
1. Variability risk requires knowing the business and understanding how a range of different outcomes from business activities will deliver results, profits, and value to its customers. Successful businesses know what level of variability they can withstand and still succeed.
Some examples of variability include: Revenues, staff loss, supplier consistency, productivity, product quality, and growth.
Management needs to have its finger on the pulse to decide on their risk appetite for variability, which is the amount of risk or uncertainty they are willing to accept in pursuit of the business strategy.
Variability can be brought on by some common sources such as: Errors in reliability or validity of measurements, random errors that happen by chance, even systematic errors brought on by bias or misclassification due to information bias.
During this period of COVID, many businesses were exposed to variability risk in combination with ambiguity risk.
2. Ambiguity risk is due to a lack of understanding or due to knowledge gaps about a situation. I’ve worked on numerous regulatory programs where the scope of new regulations was unknown at the outset; this can make program and strategic planning a challenge. When there is excess ambiguity I will more often advise to err on the side of caution — with regulations, the value in that is the protection from large financial fines due to failure to manage the risk of weak measures, often due to process breakdown.
What ambiguity risk brings on is the need for agility and expert input.
During this COVID period, I believe that all businesses will continue to experience excess ambiguity. This will be due to knowledge gaps about the long-term effects on the business, technology, customers, employees, suppliers, and the environment.
3. Emergent Risk or Emerging risk describes risks that are poorly understood, unknown, or unknowable. These risks are expected to grow in significance. At times we don’t even know they exist. These are commonly known as the ‘Black Swan’. These risks are game-changers. COVID is a Black Swan. We knew an epidemic was possible — what was unknowable about it was the scale. COVID presented the world with a combination of risks — the event (pandemic), variability (how many lives will be affected), ambiguity (understanding how it will spread), and emergence (the scale of pandemic and its significance to the world).
Examples of Emergent risks include continuing unknowns related to the virus, innovative technology disrupters, emerging issues with climate change — in those instances it is the potential conditions we cannot imagine that will require a response.
Conclusion
Looking at the world through the eyes of business and technology going forward, what will be most important in creating value will be a high degree of awareness around 3 key areas.
- Capabilities: Ensuring that business has the capacity, competency, and the will to act. This involves people, technology, business models, and plans — there will be a need to have a stronger than ever awareness of the conditions that give rise to new risks.
- Trust: Data, Information, and Technology are all interdependent. The last few years have given rise to issues that betray trust, breach security, question sources, and destroy value. Risk-based decisions will be paramount as business gives greater consideration to security, privacy, and protection of trust.
- Planning: Businesses cannot afford to be reactive. Responses will have to be developed and be in readiness mode, because as we learned with COVID; being reactionary is much more expensive and less effective as opposed to when a plan is in place with capabilities to respond to variability, ambiguity, and emergent risks.
Taking these 3 factors into account will help both business and technology to thrive and create value in our next 20 years, as we move through the ‘Experience Age’.
