How many reports have been drafted to try and predict the future
The world is going through a collective crisis, offering plenty of both successful and poor examples of crisis management. Just about every social unit is trying to adapt to COVID-19, including governments, organizations, businesses and households.
However, there are a few fundamental misunderstandings as to what crisis management really is. This keeps these units from being successful. The reason this occurs is largely that companies want to forecast and predict the future, which is a doomed endeavor. However, planning for scenarios is a method far more likely to succeed.
In my previous article, I talked about the concept of AQ (adversity quotient), and how building it up makes you both a more resilient and more effective employee. Now, I’ll put that into a greater context, and show the new road companies and individuals alike need to take in the face of crises.
The Forecasting Fallacy
Part of the issue with forecasting is how many companies and governments are obsessed with it. Think of how many reports have been drafted to try and predict where your company will be the next quarter, the next financial year, or in a five-year plan.
By nature, there’s security in detailed projections, graphs, and charts. Companies will pay through the nose for external management consultants or AI models to try and extract predictive insight from existing data.
Forecasting isn’t necessarily a useless endeavor, but it’s not reliable, and issues start when it is taken as such. All our existing understanding of maths, physics, and psychology implies that the better usage of time and resources lies in planning for scenarios rather than trying to forecast the future. The unforeseen can and does happen, and you can’t predict anything with complete certainty. It’s like trying to predict the exact shape of an individual snowflake.
Using Chaos Theory To Understand Crisis Management
Some of us may remember when the chaos theory became popular in the late 1990s, and the “butterfly effect” was a term getting tossed around boardrooms. While it may not be as trendy as it was back then, there are some basic mathematical principles that apply perfectly to crisis management. They are the ‘three-body problem’ and the ‘strange attractor.’
Three-body problem
The three-body problem suggests that while you can use math to predict the motion of two objects in a system, you can’t predict it when you add a third or more objects. No matter how accurate your data is for those first two, the third object spoils it.
If you can’t even get an accurate prediction for three inanimate objects, things get even more complex if you introduce people making choices and exhibiting free will. This is what happens with companies every day. Not to mention outside factors like your competition or the government. So, when you invest in all those company forecasts and approve your budget based on the forecast, you are really just acknowledging one of many possibilities. this is just one possibility of many.
Strange attractor
The strange attractor explains why you can’t predict everything, and that the world isn’t completely random. For example, you don’t know exactly how water will flow down Niagara Falls down to the droplet. But you’re pretty sure those droplets won’t fly backwards. The strange attractor principle essentially explains that systems that seem chaotic still have some form of organization.
Think of things like the shapes of snowflakes or clouds. Factors like economics work on the same principle, in that they may be hard to understand, but there are underlying rules. Knowing this is key to handling a crisis, so you can anticipate possible outcomes and futures and plan accordingly.
To conclude this history lesson, we need to ask ourselves: when did the idea of accurate business forecasting take hold? It’s largely due to relatively stable regions propagating the myth that accurate business forecasting was possible. There’s a reason why business forecasting took greater hold in the American Midwest than it did in continental Europe or Asia during the 20th century. When factors like warfare, civil unrest, plagues, and natural disasters are not too removed from the collective consciousness, more people are focused on the understanding of probabilities.
How does this manifest? Disaster recovery planning is a perfect example. Professionals in this field look at plausible worst-case scenarios and put contingency plans in place, allocating resources as needed. Chances are even your business is currently using this in some capacity, with secure data backup facilities, network fallback, and cooling or power supply protection. The problem is that we need to go further. You can’t predict the future, but you also can’t allow crises to happen and just take it as the whim of a random universe.
Utilizing The Adversity Quotient To Your Advantage
Now, I want to dive into how to implement IQ (intelligence quotient) EQ (emotional quotient) and AQ (adversity quotient) to put these principles into action. IQ is our fundamental problem-solving ability, EQ is our ability to work with and understand the emotions of others, and AQ is the resilience to deal with adversity.
These are three metrics baked into our species, from the day of our distant hunter-gatherer ancestors. Those that were deficient in any of these three areas were less likely to survive. Let’s illustrate this with a basic situation, a group of these primitive ancestors is out of food:
- Low IQ: Making a poor, illogical decision, like trying to eat a poisonous plant and dying.
- Low EQ: Failure to motivate the group to work towards a common goal, like trying to hunt a large animal. The person with low EQ tries to do it on their own and dies as a result.
- Low AQ: This can take two different forms. In the face of a crisis, they could panic, make a poor decision, like trying to steal food from a larger animal and die as a result. There’s also the possibility of being depressed, giving up, and starving.
Without the size and strength of other animals, humanity’s intelligence, ability to understand each other, and resilience are what allowed us to survive as a species. Today, they allow us to function better as organizations.
In essence, to handle an unfolding crisis in your business, you need to apply all 3 toolsets, but especially AQ. As we covered in my last article, without proper AQ, EQ and IQ are rendered useless. Look at some of the largest success stories in business. All of them hit crises and overcame them. Henry Ford guided his business through the Great Depression. Steve Jobs was kicked out of Apple in 1985, the company he co-founded and later came back to rescue it from the verge of bankruptcy. Bill Gates at Microsoft faced legal battle after legal battle—including with the US government in 1998 on the very serious issue of antitrust laws that could have seen Microsoft broken up.
However bleak things seemed, none gave in to panic or decided to give up. Rather they used some concrete principles of AQ. Now, let’s talk about some of the ways you can integrate all 3 skills.
Applying Your IQ, EQ, and AQ During Times of Crisis
So, when a crisis scenario does happen, what are some of the universally applicable steps you can take?
Use Triage To Find The True Root Issues
When a crisis hits, you need to know as fast as reasonably possible what is going on. This means looking to reliable and accurate data to get to the root of the issue. Relying on opinion, third-hand information or apocryphal data is very risky.
In a medical situation, this is solved through triage, using IQ to figure out the extent and nature of a crisis. When under pressure, many are tempted to skip this step. You may have your stakeholders, peers, and the media demanding you take action now. However, taking the wrong action to appease them may only cause more issues later.
Have The Right People Involved
It’s a clichée that a crisis brings out the best and the worst in people. What you need is to have the right people doing the right things—that’s where EQ comes into play. Very few big crises are solved through solo effort. What you want to do is use your EQ to scout out people that:
- May want to exploit the crisis for their own ends.
- Have fixed views that they will not change, even with accurate data.
- Are unable to perform under pressure.
The skillset that you need to prioritize includes:
- Critical path analysis to understand and implement disaster recovery plans.
- The ability to take the necessary risks.
- The ability to deal with failing, and learn from said failure.
A lot of this boils down to AQ more than anything else. A person can be perfectly competent when things are going well, but when presented with a major crisis, their behavior may turn emotional or irrational.
There are many more character traits that can come to the surface in a crisis. Inflexible people will exhibit cognitive dissonance (inability to change views based on new data) and confirmation bias (looking for data in order to support a pre-existing position and ignoring data that doesn’t).
Narcissistic people will make the crisis about themselves. High functioning corporate sociopaths and psychopaths will be looking to see how they can use the situation to get what they want. Unstable people may even break down completely. Your HR team needs to be scouting for these traits now to find the best crisis team possible.
Learn As You Go
The nature of many crises is that they are partly or wholly unforeseen. That’s what makes them crises. Nobody can be prepared fully and everyone working to solve the issue can be on a learning curve. Some measures may work, while others won’t, but the key is not having a rigid outlook. This means making sure that you don’t overreact to failure or success on the path to a resolution.
Understand There May Be More Than One Answer—Or No Answer At All
It’s very important not to fall into the trap of looking for a single ‘best solution’. In many cases, there will be more than one solution, and you need to balance costs and benefits. Risk assessment and mitigation are important as well.
In some cases, the crisis simply cannot be solved. That’s a hard truth but it can be the reality. In that case, AQ is especially important when working out what is a good exit strategy and what you can salvage.
We have plenty of examples of companies failing to take resilient and intelligent action in the face of a crisis. Kodak, for example, once dominated the optical film motion picture and home photography market. When the market looked like it was about to go digital, some key stakeholders in Kodak ignored this crisis (as profits were still good) and did not embrace the new technology, leading to their demise. You can also see past dysfunctional corporate behaviors in the American motorcycle industry when faced by the crisis of new Japanese competitors or retailers who didn’t adapt to the rise of Amazon.
Equally, you see success stories of companies that reinvented themselves in the wake of crises, like Honda, Nintendo, Harley Davidson, Lego, and, of course, Apple. In each case, it was the IQ, EQ, and AQ of key individuals that changed the course of these businesses.
One key AQ skill is the ability to look at the big picture and then reframe the problem. Harley Davidson knew they had little chance of beating Japanese competitors head-to-head, so when their crisis hit, they reframed themselves as a lifestyle company and survived. Lego was aware that digital building blocks might well appeal more than physical building blocks to modern kids and moved into that space.
Moving Forward
There are countless examples of unexpected world events altering the course of business, possibly forever, but you still see institutions completely stunned when the unforeseen hits. This doesn’t need to happen. We have all the mental tools to understand and act constructively in the event of a crisis, it’s a matter of honing those tools. Making sure that your IQ, EQ, and AQ all work in harmony, based on a pre-established action plan, is key for finding a way forward in the age of COVID-19, as well as future adversity to come.