Planning in a world full of unknowns

If you’ve talked to me at any point in the past few years, then you know I’ve been thinking about how organizations are structured (and I’m sure you found I didn’t need much coaxing to get talking!). It’s something I’m passionate about, but my thinking has evolved as the technological and business landscapes have changed.

It sounds cliche, but the pace that technology is changing today amazes me. And the more I observe open source communities, which are driving so much of that innovation, the more amazed I become.

That accelerated pace of innovation is throwing a wrench in the way organizations plan for the future—so much so that traditional methods of long-term planning are essentially dead. Organizations hoping to keep pace with rapidly changing environments and their competitors need to rethink how they go about preparing for what's ahead.

If you look at more traditional organizations with hierarchical structures, you’ll notice they’re optimized for efficiency. They're built to ensure that people act repetitively and with as little variation as possible. They require leaders who dictate a plan and then ensure that employees execute that plan (and only that plan) exactly.

But they're only able to operate this way because they presume their environments are static and that the future is comfortably certain. The hard reality is that today's organizations aren't operating in contexts of comfortable certainty. They're coping with extreme ambiguity. No one—and I mean no one—can predict the future.

Despite this, more and more companies face the demand to respond to these uncertain conditions, to somehow foresee the unforeseeable technological shifts, and to know the unknown future. This demand requires people to work with greater creativity and critical judgment—to stop acting repetitively and start responding to new information and situations with greater agility. Our conventional models for building organizations are just not suited for what's required of us today.

I shared some thoughts on this with attendees at Red Hat Summit this year. I also wrote about it in March, when I said:

We need to come up with a different solution for optimizing organizations for a very different economic era, one that works from the bottom up rather than the top down. We need to replace that old three-step formula for success—plan, prescribe, execute—with one much better suited to today's tumultuous climate: try, learn, modify.

Successful organizations will be the ones embracing this iterative approach to planning—especially when it comes to understanding and responding to changing customer preferences and needs.

As we continue helping our organization adjust to this new style of planning, we'll need to develop new ways of thinking and of talking about the future—which is still, admittedly, full of things we do know, but increasingly filled with things we don't know.

For example, I would argue that traditional organizations were structured around "known knowns"—things management knew they knew about and, therefore, could plan for. Planning for the future is much easier when an organization can see all the variables affecting it laid out in front of them, when the organization can anticipate and prepare for them in advance.

However, the technical, social, and economic shifts we're seeing today force organizations to deal much more with unknowns. They're confronting "unknown knowns," things they know they don't know about. They're also struggling with "unknown unknowns," or things they don't even know they don't know about. Innovation in its purest sense—something truly creative and unforeseen—falls into this third category.

All three of these variables—known knowns, known unknowns, and unknown unknowns—impact all kinds of organizations all the time, but traditional theories of management and organizational design really only tend to address the first type.

I wonder: How will the open, networked organizations of the future help us better understand the other two?