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Strategy

How We Manage Uncertainty

As a business owner, you face continuous complexity. The world is uncertain: times are changing, and you need to be prepared to deal with it. How do you know where to focus your effort and initiatives? One practical approach we have helped companies use is the “Known and Unknown” framework, especially when building new products.

The known and unknown framework is often applied by organizations that deal with a lot of ambiguous scenarios to gain foresight. NASA, for example, uses this framework to evaluate risks in space exploration. The North Atlantic Treaty Organization (NATO) uses this framework to anticipate possible future developments, which crucially inform defence and security decisions. Organizations that understand the importance of navigating ambiguity in product strategy and operations have set up teams focused on foresight to address this need.

While initially conceived by the former U.S. Secretary of Defence, Donald Rumsfeld, for military decisions, it has been finding its way into the product and design conversation. Rumsfeld argues that a fundamental purpose of the Department of Defence is to evaluate "unknown knowns" or "the things you think you know, that it turns out you did not," and anticipate hostile actions before they take place. Usually organized as a matrix, it can also be used to explore possible future scenarios for customers or a business. The practice of speculative design, for example, aims to question how our current designs impact society in the future. Thinking this way can also help us explore alternative strategies for creating products to be well-prepared for the future.

The em-muzzle is a project by early speculative designers, Dunne and Raby, that extrapolates existing mass surveillance technologies. The kevlar mask blocks the eyes and ears of the dog so that it can guide its handler to an electronically unmonitored zone. - Dunne and Raby

One helpful trick to make the framework easier to understand is to consider the first word as your level of awareness, and the second as your level of knowledge or understanding.

Using the framework as a practical approach for building products

When creating a new product, you are navigating a path of unknowns. Ambiguity can make you feel both opportunistic and frightened at the same time. We are continually looking for ways to make sense of ambiguity, thinking through assumptions, and trying to mitigate the risks associated with our vision. This is a process of trying to turn the unknown into something known.

To understand how you might use this framework in practice, let’s examine The Toy Company, a hypothetical company that has been selling toys in Canadian stores for over 30 years and now feels the need to compete in the global e-commerce space.

1. Known Knowns: Things we are aware of and understand

Known Knowns are facts that we already know to be true. This information comes from research and background knowledge we already have. Most of the time, these are good indicators of the current state of the problem you are dealing with and its limitations.

A straightforward example might be, “The Toy Company wants to increase sales through online channels.” We know there is a shift in their business strategy, and that will probably mean a shift in their organizational structure and roles. This information is valuable for companies as they start to plan and prioritize initiatives for their changing situation.

2. Known Unknowns: Things we are aware of and do not understand

Known Unknowns are assumptions you have about the risks associated with this decision. We usually have a good sense of things we need to shed more light on, but we won’t know how accurate the guesses are or how likely they might happen without further work.

For The Toy Company, some assumptions might be:

  • We should sell the same products online as in retail stores
  • The future economy will push consumers to shop for toys online more than in-store
  • Demand for online toy purchases is rising

In each of these examples, we know that they have an impact on the business; however, we are unsure of the magnitude. These things are important to consider but are mostly out of your control. This is where predicting the future will have to happen. How can we start to move items from Known Unknowns to Known Knowns? A natural approach is to research and contextualize your business within the landscape that you are positioned in to explore options and possibilities. We want to arrive at a well-informed hypothesis that can contribute to your competitive advantage.

Research should provide enough context and insight to start making sense of the relationships between knowns and unknowns. These facts and assumptions can now begin to work together to tell a more holistic story of the core problem you are solving.

3. Unknown Knowns: Things we aren’t aware of but understand

Rumsfeld describes the Unknown Knowns as defence situations to anticipate and for which to be prepared. Similarly, Unknown Knowns make up the unconscious biases about the preferable future of your product or business. Are you neglecting any competitors, technologies, or trends that may be relevant to your strategy? In this case, we can use “how might we” and “what if” questions to address the Unknown Knowns.

Illustration by Dunne and Raby in the book, Speculative Everything

For The Toy Company, you might initially want to build a chatbot to service customers online. Instead of jumping to this solution, try asking, “How might we improve the online customer experience?” Starting at a solution closes doors for any divergent thinking. There may be levers other than technology to consider. An open-ended question formulates a distinct problem to solve and doesn't focus on the specific solution driven by technology.

Instead, start with divergent thinking. It’s non-prescriptive and focuses on solving the right problem. Try to develop a deep understanding of the problem you are trying to solve. Question your assumptions rather than leaping to a predetermined solution—dig into the root of the issue at hand.

4. Unknown Unknowns: Things we aren’t aware of and don't understand

While inspired by the onset of opportunities, beware of the Unknown Unknowns. This area is probably the most confusing. Even if we can conceive of potential scenarios, we become aware of them in the process, meaning they don’t meet this criterion. These unknown unknowns represent real risks to any endeavour, as you are unprepared for them if they do happen.

If The Toy Company were able to predict anything, it wouldn’t truly fall into this category. For the sake of this example, halfway through building out a digital team and launching their e-commerce offering, The Toy Company might discover what their appetite for risk or disruptive technology is. They might think they can predict how they would feel in the face of change, but until they are thrust into this new reality, their reaction is still uncertain.

It is essential to be conscious of the unforeseen. Many businesses fail to acknowledge unknown initiatives or outcomes before proposing a solution, leading to disagreement way too late in the process. Keep in mind, Unknown Unknowns always exist though we have no control over them. The best solution is to be flexible, resilient, and nimble in the face of change. This is your best approach when managing the unknown.

Managing Uncertainty

As a leader, your responsibility is to foresee a preferable future for your company and customers. Navigating all types of information and making sense of it will arm you to do so with clarity. Ambiguity is less daunting once you can compartmentalize how each piece of information might instigate change. Use uncertainty to your advantage for understanding power dynamics. The systems surrounding your company offer the opportunity for growth and change.