Warren Walker, Delft University of Technology
DMDU GOES MAINSTREAM (McKINSEY)
Warren Walker (Delft University of Technology) and Vincent Marchau (Radboud University)
In November, 2020, McKinsey & Co. published an article entitled “When nothing is normal:
Managing in extreme uncertainty”. It makes many recommendations for private companies that DMDU’ers have been recommending for public sector decisionmakers for the past 2-3 decades. In fact the military has been following many of these recommendations for the past 50 years or more. One of the most important messages from this history is that the boundaries between decisionmaking under uncertainty in the military, the public sector, and the private sector are becoming more vague.
The first paragraph of the article says: “In normal times organizations face numerous uncertainties of varying consequence. Managers deal with challenges by relying on established structures and processes. These are designed to reduce uncertainty and support calculated bets to manage the residual risks. In a serious crisis, however, uncertainty can reach extreme levels, and the normal way of working becomes overstrained. At such times traditional management operating models rarely prove adequate, and organizations with inadequate processes can quickly find themselves facing existential threats . . . The magnitude of the uncertainty organizations face in this [coronavirus] crisis—defined partly by the frequency and extent of changes in information about it—means that this operating model must enable continuous learning and flexible responses as situations evolve.”
In the face of these threats to the existence of a company, the article goes on to say that their traditional operating models will most likely not work, and that the assumptions underlying them must be challenged. Although the article is several pages long, we can summarize its recommendations in the following bullet points:
- Traditional approaches learned from years of management might not apply.
- Conventional business strategy is most often based on assumptions about a probable course of events. In today’s crisis situation, a single “most likely” planning scenario should not be used.
- Managers cannot take their own assumptions as facts, since new information could emerge
that invalidates them. Extreme uncertainty demands continuous learning and constant review of assumptions.
- Create a ‘red team’ of experts to stress test managers’ decisions, identifying potential weaknesses or overly optimistic assumptions, and enabling more robust decisions.
- Implement a monitoring and early warning system for events that might trigger a crisis.
- Be adaptive, and be prepared to shift course if the situation changes.
- The cycle of learning and redesign must recur with frequency sufficient to ensure that responses reflect the evolving situation.
- Move quickly, and avoid ‘paralysis by analysis’. “Delayed decision making is not advisable in a crisis as fast moving and severe as the COVID-19 pandemic.”
- “Crisis-tested managers will develop a tolerance of ambiguity, a quickened operating cadence, and a culture of constant refinement, review, and revision.”
What are some of the main messages to DMDU’ers from this article?:
- Each of the bullet points is fully consistent with the ‘prepare and adapt’ approach as prescribed by the DMDU Society.
- The bullet points are not new, but the urgency of using DMDU approaches is boosted by the pandemic. (Now the private sector has become aware that it is affected by deep uncertainty as well.)
- Future challenges for the private sector (which DMDUers might play a role in communicating) include:
- Making managers aware of the existence of deep uncertainty;
- Specifying the pros and cons of (not) handling deep uncertainties;
- Helping to incorporate DMDU approaches into existing management models.
 Patrick Finn, Mihir Mysore, and Ophelia Usher, “When nothing is normal: Managing in extreme uncertainty”, McKinsey & Co., November 2020.[https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/in-conversation-managing-in-extreme-uncertainty?cid=podcast-eml-alt-mip-mck&hdpid=c1f8a52e-ed2e-471a-9619-05ebc6aa7a57&hctky=2372953&hlkid=b9aa818410e94f80a112e27c968e8796]