Leading and Adapting in Uncertain Times: A Hypothesis-Driven Approach

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.

The Path to Agility Starts with Acknowledging the Unknowns

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.

The Potential Opportunities and Benefits are Tremendous

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.

Introducing a Hypothesis-Driven Approach to Business

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?

Why Teams Struggle

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.

A Proven Approach: Plan, Do, Check, Act Cycle

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:

1. We set objectives and key business results that must be met.
2. We create a hypothesis to achieve those objectives.
3. We define ways to test the hypothesis and begin the tests.
4. We come together at regular intervals to determine if we are on track to meet the business objectives, and to share successes and what didn’t work, so we all use the best path forward.
5. We level-set on the best results so far and repeat the five step

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.

How Teams Reach the Summit

I was working with a leader here at Broadcom and this was an analogy he used as we worked to change our own behaviors:

1. Think of your objective as a mountain summit. All teams have the same goal to reach the summit as quickly and efficiently as possible.
2. We give teams some guiderails, such as the west side of the mountain has already been determined to be the better side.
3. The teams each look at the mountain, assess their own skills, and determine what they believe is their fastest path to the summit. Some might choose the short, but steep route, others might choose a less steep but longer route, believing they can move more quickly. When a team decides they want to try the east side of the mountain, they are redirected towards the west (per the guiderails in step 2).
4. Every week or two, leaders meet and compare notes, discussing what worked, what didn’t, what got better results, and what inhibited progress. Based on the learnings to date, teams can evolve plans and guidelines. In this example, the team that took the steepest route might be ahead of the others. Another team may try part of that same route and not be as fast. The goal is not to make every team take the same path but to make sure all teams know the parameters in play for each path and when a particular path is most successful. Our findings need to influence and inform the next steps we take, not dictate them.
5. Repeat the process. Do not let teams go months without checking in. The retrospective and learning parts of this process are extremely important to its success.

Here’s an example of what a hypothesis-driven approach may look like in practice:

• A division wants to increase sales by 8% this year. This is the “summit.” This outcome is a given and isn’t negotiable.
• Each sales territory manager works with their own team, as well as product management and marketing counterparts, to create a plan for how they might reach that goal in the shortest amount of time. This is where the hypothesis comes in. It’s not the goal, but how you reach that goal that is the hypothesis.
• Each team tests their hypothesis and tracks results.
• The marketing and product management teams keep their eyes on news, global changes, customer pressures, and more, and help the sales teams pivot as quickly as possible when new information is available.
• The territory leaders come together every week or two and compare results. They share what is working and not working and modify their plans and hypotheses based on the findings gathered thus far.

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.

Conclusion

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.