by Andres Spokoiny
The fall of the Berlin Wall, the collapse of Lehman Brothers, the Arab Spring, the travesty of Argentina’s early elimination in the 2010 World Cup and many other defining events of the last two decades all share a simple truth: the best of our expert predictions about the future are, quite often, wrong.
The unpredictability of the world impacts us at every level, from our business practices all the way to our very sense of self. It’s hard to find and define our place in a world when our points of reference are themselves constantly shifting. For organizations too, planning and forecasting has become something between impossible and irrelevant.
So, given this context of unpredictability how should foundations – and nonprofits in general – plan? Isn’t planning for uncertainty an oxymoron? In a previous article, I argued that we need to rethink what we mean by planning and strategy, and build in flexibility and room for new circumstances; the old ways of thinking are simply not adapted to the era of information and globalization, of high uncertainty and ubiquitous interdependence.
Darwin noted that it’s not the strongest or the smartest species that survives, but the most adaptable. Unlike nonprofits, in most cases foundations themselves don’t risk extinction; but they do risk funding irrelevant projects, losing their impact and being detached from the realities they aim to affect. Worse than extinction, a foundation that doesn’t adapt risks irrelevance.
But there is hope. A new way of thinking about strategy can help all of our organizations meet the challenges of an ever-changing world. In my experience, both in the business and in the philanthropic world, the organizations that have been able to adapt and succeed have shared some basic features. I’ll call them the Ten Commandments of Strategy for an Uncertain World.
1. Do not try to predict and/or forecast the future.
Forecasting is futile at best and dangerous at worst. An example: 2003 forecasts of oil prices – accepted as gospel by the industry – predicted a 2008 price of $21 per barrel. It reached $150. Bad forecasts have two bad results; they lull us into believing that the future is predictable when it is not and then we actually act and make decisions based on them.
Instead, we should use a “scenarios” technique, imagining different possible, alternative futures. Don’t ask whether these alternatives are probable, just if they are plausible. Don’t try to predict which of your scenarios will actually occur; be prepared for all the plausible scenarios.
Effective strategy for the future isn’t about finding certainty, but about coping with uncertainty. Remember the wisdom of Yogi Berra: “it’s very hard to make predictions, especially about the future.” So don’t even try. There are several alternative futures; your job is not to be a psychic but to prepare your organization to thrive in any of them.
2. Plan based on uncertainties, not on certainties.
Traditional planning is based on what we know, projecting the past into the future. In our world, you need to flip this logic upside down: ask yourself what you don’t know about the future. Isolate and qualify the uncertainties of the context.
It is important to think about uncertainties in a methodical way. Are they social, economic, legal, technological? How uncertain are they? It is pretty certain that French will be the official language of France in 2025, but is it certain that the Euro will still be its currency? Will foundations still be required to spend five percent of their capital annually? Two percent? Ten? What else could affect my world? What might make my core competencies irrelevant? What could destroy my competitive advantage? Conversely, what new possibilities and opportunities will arise, and how can I prepare myself to see them and to seize them?
Try this when planning: leave aside the things you are absolutely certain about and focus instead on what you don’t know.
3. Think outside-in.
Too often, strategists project organizations into the context; they start their planning process from the inside out, ignoring forces and trends that can affect the organization until a later stage. The error in this approach is that, by putting it off, we shift our view of the context to fit our plan, rather than crafting a plan that works.
Instead, make sense of the context starting from the context itself, and not from you. Think of your organization as something deeply interconnected with the world around it, porous and affected by a variety of factors. You need to ask how changes will influence not only you, but your clients, beneficiaries, stakeholders, and more.
We have to believe that we have influence on the world. That’s why we do what we do, to proactively change reality. But to define what kind of influence we want to have, we need to be aware of how the context is shaping us before we try to shape it.
4. Don’t expect linear results.
Many bad strategies are based on the expectation of a linear outcome of any given stimulus: lower prices, people will buy more; give taxpayer money to the banks, they’ll lend it; pour more money into a project, more clients will be served. In a complex reality, of multicausal relations, expecting linear results like these is a fallacy. We’ve always known that “nothing ever goes as planned” but our strategic plans still pretended otherwise.
Instead, be flexible and open minded in order to capitalize on unintended consequences and unexpected results. A strategic plan that understands uncertainty needs to consider different possible outcomes of your actions. It’s not a novel, it’s a Choose Your Own Adventure.
5. Build in flexibility.
An organization completing a new strategic plan usually moves quickly from self- congratulatory back-patting to placing it on a shelf, to sit unread. Plans end up gathering dust because they don’t have the flexibility to adapt to a changing reality.
Being prepared mentally isn’t enough. The strategy itself needs to have mechanisms that make it adaptable; flexibility needs to permeate every aspect of the plan, from the big ideas, to the budgets and cash flows. A flexible mindset with an inflexible budget won’t do much good.
If you contemplate the possibility of sudden change but your decision-making mechanisms are long and tortuous, you still won’t be able to react quickly. If employees are tied down by long bureaucratic procedures, they will never be able to be attuned to the context, detect opportunities, and design creative solutions to problems. If commitments don’t have “escape clauses”, it will be impossible to change, even if you realize that you must. With clarity on and a commitment to the broad mission, it becomes possible to reconcile the need for a flexible strategy with steadiness and stability in our values. Flexibility isn’t about mercurial changes of direction; build trust with your partners so they know that even if programs go away, your organization won’t.
A good strategic plan needs to know that there will be detours in the road. As in trips with friends, sometimes the detour is where you have the most fun.
6. Planning can’t be sequential anymore.
In the past, strategy was developed following a sequence: gather information; analyze; plan; implement; evaluate. It’s a tidy package, but when the time comes for implementation, the analysis may no longer be relevant. For strategy to be effective and relevant, start implementing as you gather information. It may look like a messy mix of planning, implementation and evaluation, but agility and flexibility are complex.
Don’t wait to have a fully developed plan in place; start testing ideas from the information gathering stage right away. “Pilot projects” will give you more information and help you test your assumptions early on. You’ll end up integrating evaluation into the planning process, rather than tacking it on at the end, when it may be too late.
7. Try. Fail. Try again. Fail better.
Don’t look for a single-bullet solution. With non-linear and unpredictable outcomes, answers will come from experimentation and trying multiple alternative solutions. Effective strategy needs to incorporate a “trial and error” methodology. Failure needs to be tolerated and “intelligent failure” even encouraged.
For many foundations, this represents a deep cultural shift. If you’re operating in a culture of risk avoidance, people will be afraid to fail and won’t experiment with new solutions. If even “failing smart” has a negative impact on people’s rewards and evaluations, nobody will be inclined to try new things. Worse, when failures occur, they’ll be covered up, potential insights will be lost, and people will resort to blame games to protect themselves. This may especially be true for grantees who fear loss of funding if they admit to problems or failures.
“Intelligent failure” is hard, but I have a definition. I mean a failure that is a) incurred while trying to find creative solutions to a problem and b) one that allows you to test assumptions and learn for the future. This kind of failure increases intellectual capital in the organization and helps you improve for the future. Failure isn’t the end of a process, it’s your R&D.
8.Have Strategic Conversations.
Gone are the days where strategy was decided by a few executives in a board room. In our complex, unpredictable world you need the input of different stakeholders, from recipients of services to employees, from funders to suppliers, from grantees to board members, from external experts to disgruntled clients.
Pool together all the brainpower your organization has access to for a “strategic conversation.” This may require a culture shift, because doing it well demands that people at different levels have the freedom to discuss core issues affecting the organization. It doesn’t work without flexibility, openness and a culture that tolerates and even encourages dissent. Minority opinions need to be recorded, given credence, and followed up on, because, again, we don’t know what the future holds.
In the book Start-up Nation that describes the Israeli economic miracle, Dan Senor and Saul Singer argue that the culture of chutzpah was one of the key elements that produced an environment conducive to innovation,allowing – even encouraging – everybody to challenge their bosses, irrespective of hierarchy. A strategic conversation in an Israeli start-up is lively and passionate and everybody speaks their mind. The result is a richer and accelerated innovation culture and a better competitive strategy.
When planning, it’s dangerous to be alone. Use your networks, cast a wide net and canvass as many opinions as possible. There’s time to narrow down later.
Once you have a strategy, “windtunnel” it. See how your strategy will fare in different scenarios. How would your grantmaking strategy work in the event of a major crisis? How do your assumptions change in a different reality? Do simulations and submit your strategy to the ”stress-test” of different realities to see how they perform. Keep asking “what if” until you’ve exhausted the options.
Once you identify different possible scenarios and how they might affect your strategy, try to find “early warning signals” that can hint that a given scenario is coming to fruition. Then you can adapt your strategy and use your Plan B without delay.
10. It’s all about value.
Any organization’s main goal is to provide value. A foundation’s staff, grant-making, systems are all at the service of the value proposition you use to solve problems and make change in the world. One of the most important exercises to conduct during a strategic process is to define the value proposition that you present to your different stakeholders. It will help you frame the entire conversation: every element can be referred back to the basic question of “what value do we add?” Does a particular activity help us deliver value? Does this core competency make us better at providing value?
Framing the strategic conversation around “value” forces us to focus on the end users – in our field, the society we’re trying to serve.
In the world of accelerated unpredictability, strategy is very different from the calm, reflexive process of the past. It’s a messy exercise, with many actors, a lot of experimentation, and iterative processes of learning. It is difficult and hard to manage, but utterly fascinating.
By thinking differently about strategy we can finally solve the oxymoron of planning for uncertainty. We can sail the uncharted waters of the 21st century confident that, even though we don’t have a map, our ship is strong enough to withstand the turbulence.
Andres Spokoiny is President and CEO of the Jewish Funders Network. JFN offers strategic planning and technical assistance to foundations and funders through its Philanthropic Services department. For more information, contact [email protected], or visit philanthropicservices.org.