This year could be one in which the global economy grows wildly or it can be one that sees continued contraction, and the factors that shape those realities are completely out of our control. Therefore, the key is to be ready, willing, and able to pivot at a moment’s notice. This is a great year to learn to be flexible in adapting the paths we take to reach our goals and objectives. This will be a great year, therefore, to take a hypothesis-driven approach to leadership.
For many business leaders, it can represent a big step to admit what they don’t know. However, it is this fundamental realization that’s needed to drive innovation today.
For the last few decades, the standard was to devise detailed plans for how to reach our goals. The reality is that leaders simply don’t know the fastest way to reach those goals, and the best approach may well evolve before the objective is met. When you really look at how we run businesses, at how we “place our bets” when we fund products or projects, we need to admit to ourselves that the plans we put in place were never guaranteed to bring us the outcomes we thought they would.
Twenty years ago, development teams started admitting that they couldn't plan software work upfront because they didn't know what they didn't know. It is this realization that drove the creation of the Agile Manifesto. Similarly, in the past year, we started to acknowledge the unknown unknowns we have at the strategic level, and the BizOps Manifesto was created.
As I think about the next few years and what they might bring, one thing is clear: Those companies that are poised to adapt and take advantage of emerging opportunities will springboard ahead of those organizations that keep following a static plan.
We used to be able to devise a three-year plan and expect to stick to it. Those days are gone. Now, a three-month plan may be too long, if we’re not staying on the lookout for ways to pivot. For example, if you are in any part of the travel industry, you should be checking daily for signs that indicate things will reopen. Letting your competition get ahead of you by even one day may ultimately cost you millions.
However, agility doesn’t mean organizational chaos. We still need to set objectives and outcomes that our business needs to meet. The fastest and best way to reach those goals is what can change at any time. Therefore, while we still need longer-range planning, we must be intentional in what we strive to accomplish and assume the plans for how we get there will need to change.
To meet their demands for agility and results, leadership teams need to move to a hypothesis-driven approach. For our purposes, we’re taking a definition of hypothesis that’s loosely based on the principles of Lean UX. In Lean UX, the idea is that in designing and delivering user experiences, you want to start with a hypothesis and validate that hypothesis as you go.
We believe that the key business outcome will be achieved if, and only if, our customers find value in what we do. This sounds simple enough. But it’s very hard to move from how many are running their companies today, to where they need to be. Increasingly, making this move will be key to maintaining and growing market share.
We need to set objectives for our companies, and then check back frequently to ensure we are taking the best route to meeting our goals. Planning and verbalizing ideas for how to achieve these goals and objectives is still an extremely valuable exercise. What is not valuable, however, is strictly following those plans, without continuing to make sure that the assumptions we made about reaching those goals are still valid.
The plans we put in place are our hypothesis, our best guess for how to achieve our outcomes. We have no more certainty about these plans than we do about the initial software plans we create. It all sounds logical so why is it hard to do?
In past decades, it was common to create annual objectives and strategic visions, and then establish detailed plans for accomplishing those objectives. Once that was done, we then focused on the detailed plans and getting every part of them fully completed. In the process, we often completely lost sight of the objective we were striving for. We never checked on whether we were making progress towards those business objectives along the way.
Almost as soon as our plans are complete, someone in the company should be tasked with making sure that the path chosen is the quickest way to reach our goals, and that remains the case moving forward. If at any time the path chosen isn’t optimal any longer, we need to pivot the organization to one that is.
This isn’t meant to create chaos, so having processes and guidelines in place is going to be key. The processes we create must enable work to flow seamlessly through the organization. In addition, these processes need to reduce bottlenecks, have fast feedback loops built in, and align closely with our customers. Data must be a natural outcome of these processes and we need to understand how to read and respond to the data generated.
When looking for how to do this, we don’t need to devise new methods or frameworks. There are plenty of proven models we can choose.
According to Wikipedia, the Plan-Do-Check-Act (PDCA) cycle “is an iterative four-step management method used in business for the control and continuous improvement of processes and products.” With origins that go back to the early days of lean manufacturing in the 1950s, this method is also referred to as the Deming wheel, the Shewhart cycle, the control circle, and other names.
At the leadership level, using PDCA, or other standard loops (such as the OODA loop), can help us understand how we can change our behaviors so we stay focused on reaching our goals and objectives, rather than simply finishing plans. Our new process might have the following steps:
Like I said earlier, I am borrowing from tried-and-true methods because I believe that good ways of working have already been defined. The steps above pull from PDCA, as well as the concepts of Agile methods and evolving architecture. And while implementing PDCA might sound easy, it can be harder for internal organizations that are used to competing against each other, with people who are accustomed to withholding information so another group doesn’t “win,” or to seeing information as power. Leaders in those types of organizations will need to watch closely over the process and make sure they aren’t incentivizing the lack of teamwork. Successes and struggles must be documented and shared. To stay competitive in our markets, we must be intentional in the changes we make.
I was working with a leader here at Broadcom and this was an analogy he used as we worked to change our own behaviors:
Here’s an example of what a hypothesis-driven approach may look like in practice:
Every team in the organization operates in this way, creating a business with consistent goals and objectives, while enabling teams to determine their best guess at how to reach those goals. This happens at every level in the organization, as everyone works towards the same objectives.
This year, trying to plan strategies will be difficult, perhaps more challenging than ever before. We can establish objectives easily enough, but knowing how to achieve them is the trick. Will our globe be open by December or will we still have partial shutdowns? These uncertainties can lead to planning paralysis, or we can use them as a catalyst to create processes that allow us to pivot as needed so we can compete into the future.
What we assume during strategic planning, especially this year, may not be valid for the business over time. Even if the decisions are backed by historical data, the market and industry can be affected by other factors. By taking a hypothesis-driven approach, we can take these uncertainties into consideration and enable the business to pivot quickly.
Laureen Knudsen is an award-winning senior business leader with 15+ year career that spans IT, financial and healthcare systems, and analytics. Co-Author of Modern Business Management: Creating a Built-to-Change Organization. Laureen leads a team of experts working to define the future of business to bring Lean principles and agility to all parts of an organization, focusing on optimizing end- to-end process flows and removing waste.