Jumping out of the goldfish bowl – part 1

goldfish

In yesterday’s post, I presented a goldfish bowl-half empty view of the prospects we face to internalise insights from cognitive science and develop new behaviours to better deal directly with our complex environment.

Now, I’d like to start considering more of a goldfish bowl-half full view and ideally, get some ideas on how we can escape the loop of forgetfulness (or denial).

To start, and in keeping with the historical references behind some of these ideas, let’s begin with Heinrich Hertz’s introduction to The Principles of Mechanics in 1899.

The most direct, and in a sense the most important, problem which our conscious knowledge of nature should enable us to solve is the anticipation of future events, so that we may arrange our present affairs in accordance with such anticipation. As a basis for the solution of this problem, we always make use of our knowledge of events which have already occurred, obtained by chance observation or by prearranged experiment…… When from our accumulated previous experience we have once succeeded in deducing images of the desire nature, we can then in short time develop by means of them, as by means of models, the consequences which in the external world of models, the consequences which in the external world only arise in a comparatively long time, or as the result of our own interposition. We are thus enabled to be in advance of the facts, and to decide as to present affairs in accordance with the insight so obtained….

The images which we may form of things are not determined without ambiguity by the requirement that the consequents of the images must be images of the consequents. Various images of the same objects are possible, and these images may differ in various respects. We should at once denote as inadmissible all images which implicitly contradict the laws of our thought. Hence we postulate in the first place that all our images shall be logically permissible – or, briefly, that they shall be permissible.

You hear in these words, some of the fundamentals of science, the principle of rational analysis and decision making behaviours and, by extension, the fundamentals of risk management.

What happens when nature is found to be contradictory to current knowledge? What happens when our knowledge of previous events does not prepare us for the future or leads to assume incorrectly that we are ‘in advance of the facts’?

Clearly, in some situations, the quality of our evidence may be poor and a lack of logical consistency might be proof of poor data and rightly ignored.

Scientific discovery often introduces new evidence which contradicts the ‘facts’. Over time, experimentation and consistency of evidence leads to new ‘facts’. The more counterintuitive, the harder it is to accept these new facts. In 1899 Hertz wrote about ‘mechanics’ – the ideas of that time are now taken for granted and we have moved on to grapple with quantum mechanics.

If we are to accept the growing body of consistent evidence regarding the psychology (and possibly the underlying physics) of our behaviour, we will need to find a way to apply Hertz’s framework to a world which we are beginning to realise remains largely unknown from the past and contradictory to our present common sense.

Instead of expecting tomorrow to be like yesterday, we will need to learn how to expect the unexpected.

In 2013 we will solve the problem of extreme forgetfulness – again

In 2012 there seemed to be a lot of new content related to understanding human behaviour. From bottom up via neuroscience & biopsychology, top down via social science, social psychology and behavioural economics and middle out via cognitive psychology.

At least it seemed like a lot to me, probably because I was actively looking to feed my own hunger for knowledge in this area.

A look at Google Trends however shows that 2012 was just an average year for ‘behavioural psychology’ headlines compared to the heyday peaks from 2004 – 2006. Closer inspection indicated that this specific phrase is only trending in the UK, Australia, Canada and India. Ahhh – I thought – although American by birth, these days I speak an Australian variation of the Queen’s English and therefore looked for ‘behavioural psychology’ trends.

If you look at the trend for the US spelling, ‘behavioral psychology’, you see that 2012 was a pretty good year for the search term. Maybe the US is just catching up with the rest of the English speaking world, or maybe the rest of the English speaking world has started to use the US spelling for publications. Or maybe something else.

For what it’s worth, if you look at ‘cognitive psychology’ – a search phrase which avoids the spelling issue, the graph looks more like the English result for ‘behavioural psychology’ while ‘social psychology’ searches have been on a definite downward slope since 2005.

While I pursue my Google led education, trend analysis of search terms helps me to visualise the long tail of the usage of concepts which might have been new to me, but obviously have been evolving for some time.

So how do these results relate to forgetfulness? Well, trend and citation analysis can help highlight the mind boggling amount of content that is related to these behavioural concepts which are often described by present day authors and journalists as new and groundbreaking. While the old saying that a wizened guru expert has forgotten more than you’ll ever know about a subject might not be true, it seems quite likely that our collective consciousness has forgotten almost all of the things ever written about behavioural psychology.

Recently, I saw a number of twitter and blog discussions putting forward the view that Nassim Taleb’s new Antifrigility book is old news, repackaged by an attention grabbing popular author with a strong (well, arrogant) personality. Various references were sited to academics, economists and business commentators over years gone by who had posited similar or perhaps more profound ideas but with a less flashy style – from Ackoff to Argyris, Schien to Schon, Snowden to Stacey, Plato to Popper and on.

The pattern of debate sounded very familiar to me – it’s the same one you can find in other contexts related to the study of soft systems in general and human behaviour theory in particular.

This year I enjoyed consuming content by authors such as Duncan Watts, Daniel Kahneman, and Nassim Taleb, I have also followed meme trails back to earlier work done in the early 20th century to the present and can see that each generation carries notable contributors to the field however many of the contributions involve similar concepts perhaps with a different emphasis or nuanced definition (or maybe even just a different spelling).

It certainly doesn’t help when some of the high profile research in the area is found to be fraudulent. None the less, even when there are genuine scientific advances in the study of human behaviour, these advances don’t seem to have much impact on how we behave. We are still blindly assuming cause and effect where there is none and we continue to assume that our decisions reflect choices of control over the environment.

If you follow the behavioural science long tail back up stream you find that successive generations get similar insights from their experience, write it up to fleeting effect and interest, and then it becomes forgotten, certainly by the mainstream and, in many cases, within the social science community itself.

Unfortunately, it doesn’t really matter if someone published a good proof highlighting consistently poor decision making behaviour under rigorous experimental conditions in 1920 or 1940 or 1960 or 1980. If the insight isn’t accepted into the mainstream, it doesn’t contribute to the evolution of knowledge. If the material didn’t catch on when it was published, it’s probably not going to catch on now.

It’s almost a moot point whether the ideas of Nassim Taleb are original if they were never incorporated into ‘common knowledge’. To some degree, in behaviour science, credit must be given not just to the idea but also to the effective communication and adoption of that idea. Without effective communication, we won’t internalise the insight and improve our behaviour and evolve the practice and the theory. Therein lies the great opportunity for those in the business of popularising behavioural practices – you can be successful for the packaging even if your science is weak or your insights were described and published thousands of times before.

I predict that in 2013 the long tail of behavioural science will continue, possibly even with some upwards kinks with new discoveries coming from neurobiology. I’m also confident that we will once again find more proof that we over simplify the world and over elevate our individual roles within it. Once again, we will find this intriguing, and continue the long commentary as observers rather than participants. By the end of the year, we will have traversed the the circumference of the goldfish bowl, and all will be new again.

I hope you enjoy this year’s swim around the bowl.

Strategic Risks and Opportunities to Accelerate!

In the November HBR there’s a new piece by seminal uber guru of change management John Kotter called Accelerate! in which he proposes that organisations formally adopt a second, fundamentally different, strategic system of management to complement their operational management practice.

He claims, and my experience mirrors and agrees, that while traditional hierarchies and management processes do well at keeping the lights on in the short term, “what they do not do well is identify the  most important hazards and opportunities early enough, formulate creative strategic initiatives nimbly enough, and implement them fast enough.” Despite 15+ years of attempts to improve these processes, the pace of change is simply outstripping the ability of this system to cope. Organisation that face real threats or eye new opportunities or compliance requirements try – and fail – to cram through some sort of major transformation using change processes.

Kotter’s been researching, mentoring and watching transformation programs for more than 40 years and it may well be that these traditional change processes (many of which he influenced) did work in the past. In my own 25+ years observing hundreds of transformation programs of different scales, only a handful could be said to have delivered on their original promise. Irrespective of just when the myth may have started to overshadow the reality, Kotter now sees that the old ways are not going to work any longer and is prepared to call the Emperor naked.

His solution, in a nutshell, is to leave the traditional management structure to do what it does best – work on the assumption that your market will remain stable long enough to execute a pre-formulated strategy and ask most people to shut up, take orders, and do their jobs in a repetitive way. This will deliver returns for a while – until the environment changes to such an extent that your strategy is no longer relevant. This reminds me of Stuart Kauffman‘s use of the concept of fitness landscapes in evolutionary complexity.

In parallel with the traditional structure, Kotter proposes that you proactively engage a ‘strategy system’ which uses a structure of a distributed, loosely coupled network of peers across the organisation who’s passion for new ideas brings them together to develop more holistic situation awareness to identify extreme risks and opportunities and iteratively evolve new execution models to deal with those. This more agile approach ties in with much of the current state of the art in complexity and extreme risk management which proposes running many ‘safe to fail’ experiments in order to have the best chance of landing on the next fitness peak in the landscape.

The role of the traditional organisation structure is to facilitate the strategy system and foster new structures which may, in turn, one day evolve (devolve?) into another traditional management organisation suited to the next landscape.

In order to provide some kind of continuity and overall stakeholder / shareholder returns, it seems to me that the Board of Directors or equivalent governance body needs to have an influence on the assurance of informed decision making which sits at the intersection of the two systems.

Peter Whyntie, Executive Director of Compliance Australia recently wrote an article in the Chartered Secretaries magazine entitled “Strategic risk management – the neglected element of ERM'”. The article is behind a membership wall, but you can listen to a podcast summary here. Peter comes from a risk management perspective and, it seems to me, arrives at a similar place. Longer term strategic risks need to be seen through a much wider lens that the traditional risk and control structure found in operations management. The key difference is that strategic risk assessment is externally focused using the lens of your risk appetite.

My impression of much of Kotter’s earlier work is that it has been internally focused around leadership, culture and change management within the organisation. The strategy system he proposes now is focused externally and places the organisation in a role as an adaptor and adopter, resilient to change and co-creating in a complex environment where the distinction between internal and external is being redefined.

The take away from both of these is that you need to be more aware of your external environment and the assumptions you make as to how fit you are to exploit it and survive in it. This will require participation by a broader group of stakeholders who can help to formulate a more holistic common operating picture and show that there are many different senses of common sense out there.

An extreme impact exercise is a good place to start a process which leads you to exercise the unexpected.

Social media risk exposure owned by no one and everyone

A ‘survey’ reported in CFO Journal yesterday asked people what they believed their greatest risks were related to social media and which part of their organisation manages social media policy and regulatory compliance.

The risks were the usual suspects of disgruntled employees, information leaks, and customer dissatisfaction.

The surprising thing for me was the distribution of policy (and presumably risk) ‘owners’ across the organisations of those surveyed: Don’t know 29.7%, Social media 19.3%, Legal 17.4%, HR 12.3%, Risk Management 10.8%, No one 10.5%.

Who owns the policies and who owns social media risk in your organisation?

WIth such a broad range of owners, it’s unlikely that any kind of standards or experience based practices are mature here and it suggests to me what a long way we have to go before social media management is part of the fabric of a modern organisation. Most importantly, it also suggests just how exposed organisations are and will likely be for some time to threats arising through the vector of social media.

My initial reaction when I saw the article link tweeted by @Manigent was to moan about another claim that social media policies were a form of risk management or mitigation. A policy should reflect the culture and the norms – a policy does not in itself change behaviour. WIthout the education, monitoring and sense of value in the intent of the policy, it will be ignored. It seems to me that if a risk related policy was important enough, you’d have a consistent role across organisations that was responsible for that risk.

One answer in the ‘greatest risk related to social media’ survey question was “Our culture doesn’t get it” – now, if more people understood that, it could lead to real risk management and genuine mitigation.

 

Resilience – Synchronisation, Synthesis and Memory

The recent events leading up to and during the Sandy storm in the United States will provide a great deal of fodder to the blogosphere over coming weeks and months – some of it useful. Hopefully some of the experience and insights will register somewhere deep down in  the instincts of the key stakeholders in government and emergency management as well as those who either profited from or suffered losses as a result of the storm.

Encouraged by a professional interest and driven by an inherent obsessive compulsive appetite to drink from the fire hose of real-time data feeds, I was glued to the Twitter feed for many hours. This experience alone was educational in that it helps you to see how, even in such a short message format, the consistency of content and style helps you to develop (or imagine) a cast of characters playing out in a vast story. Emergency management agencies and official government public information channels were quite rightly, measured and clear and projected a trustworthy, capable impression. I found some commentators offered mind opening insightful views, while others were clearly using the storm to push their own, often unrelated, agendas. I developed a sense of what was sensationalist vs what was genuinely incredible.

With my mind still boggled this morning, I saw a blog post by Andrea De Maio at Gartner pointing out that while social media was a good, scalable channel for communication, it didn’t offer any help for strategy development and day to day management. “Proof that social media is nothing else than a tool that many people as well as governments decide to rely upon when something out of the ordinary happens.”  The suggestion I took away was that social media fails to support the development and formation of strategy which occurs during ordinary times when people are “chatting about sport results,  or favorite actors, or how to bake”. In an extreme event, when people “feel compelled to collect and relay information that can help other people, then it is time for authorities to join the chatter, search for patterns, use this additional and powerful channel.”

In my 30 or so years of watching operational and strategic contexts, it seems to me that these observations are not about social media – but rather about business and society and in saying so, demonstrates the amazing and rapid maturation of social media to reflect, influence and co-create business and society.

Unlike previous strategy and execution environments, the technology of social media allows you to listen and partake in a never-before-experienced tsunami of diverse conversations aligned through a consistent underlying theme. In this case it was Sandy, it might otherwise be your customers, your brand, your product or your competitors.

On the surface, this may appear as a very large, very fast, stream of random noise. Research shows that too much noise in our neural networks, in particular too much noise with out of the ordinary spikes, can limit our ability to interpret and retain information. Classic signal-to-noise research confirms this and highlights the ability to cancel certain consistent patterns of background noise in order to improve fidelity of the signal. We do this kind of thing all the time in our own processing of sensory inputs in order to avoid melt-down and pay attention to things which are out of the ordinary. The trick is to know what is noise and what is signal.

Interestingly, new research indicates that the act of identifying something as being ‘out of the ordinary’ is not a fully automatic pattern matching algorithm in our robot-brains but rather requires some of our cognitive attention bandwidth.

A strategy is a set of principles which you can use to navigate a network of possibilities to steer you towards a goal. Our brains have had a lot of practice doing this kind of thing and I believe that social media offers us a glimpse into a network analogy for social interaction which any strategic thinker would do well to understand.

In order to regulate how much attention we pay to certain things, our brain has a way of surfacing things which ‘operational sensor’ think are important. In a grossly simplified way, these signals have a similar challenge to those of Tweets. It may be that our brain has found a way to selectively synchronise multiple impulses, assess the energy of those impulses and synthesise these into an appropriate directed amplification – in the words of the researchers – “We propose that selective synchronization renders relevant input effective, thereby modulating effective connectivity.”

Social media analysis techniques are evolving and, by coincidence or not, applying selective synchronisation concepts. Software developed by the CSIRO in Australia offers hope of improved situation awareness during out of the ordinary, extreme events.

This leads me back to Andrea’s post – in which he refers to the CSIRO technology, but seems to only see the data analysis/situation awareness element and not the bridge towards cognitive processing patterns and human behaviour.

I’ve had the good fortune to work with clients from the bottom up and the top down in the strategy to execution space in commercial organisations and government, including national security and emergency management. I have never seen a reliable, repeatable process for strategy design and successful execution. At this stage of my journey, I believe that is because traditional strategy assumes that we live in a complicated but controllable – ordinary – world and that unexpected events are exceptions. The real world is complex, you’re fooling yourself if you think you can control it. The best strategy is to become exceptional at adaptation and resilience and this requires an out of the ordinary ability to sense emerging changes.

As long as they get a time to reflect, people can learn a lot from extreme impacts – just ask an emergency commander.

The Sandy Social Media experience will be one more set of connections in our collective network of interaction and memory and, in time, we will all learn to manage strategy with selective synchronisation to achieve more effective connectivity.

Big data and big ethics

My favourite story this week comes from an article published in February in The New York Times Magazine entitled How Companies Learn Your Secrets. Click the link and please read it – it’s mind blowing.

Ok, if you didn’t read it, here’s a summary – Target stores in America developed some sexy analytics to interpret shopping transaction data to create personalised individual marketing campaigns and incentives. So far so good. The market that they were targeting was pregnant women (leaving the pregnant men’s market for future growth opportunities). They were able to establish a sufficiently high correlation of shopping behaviour during the early phase of pregnancy that they could predict a future birth and the creation of a new ‘mother’ customer. Targeted advertising of baby and motherhood products in the lead up to the birth combined with incentives appear to have contributed to a massive increase in revenue for the retailer.

At this point, it looks like one of the already well worn feel good sales stories for big data – give us the IT budget and we’ll give you unheard of growth in revenue.

That probably wasn’t the thought foremost in the mind of the father who went in to complain to his local Target store about his daughter receiving promotions which were age inappropriate and unsuitable for a conservative, I’m guessing, Christian, household. It turns out that the daughter hadn’t told her family she was pregnant – instead, Target brought the conversation out in the open through their personalised marketing!

After the extreme impact of this social marketing gaffe, Target commissioned further research and found that – shock – instead of appreciating their offer of ‘help’, a lot of people thought that it was just too creepy to have a retailer stalking them along life’s journey.

The agile response to this consumer feedback was to include irrelevant promotions along with the targeted promotions so that consumers thought that the ‘right’ products had appeared serendipitously. Whoa!

This story alone would make a great movie – or maybe some future HBR case study in what to do or not not do in FMCG social marketing. Even more interesting to me was the underlying psychology and behaviour theory which suggested the goals for this kind of campaign.

As the article explains, with many useful references, buying habits are hard to break. This is another side of previous comments in this blog about the ease of intuitive, recurrent thinking compared to hard consideration of multiple dimensions and possibilities. From Target’s point of view, if someone always buys milk from their local grocery store it would take an extreme impact to change their default behaviour and buy milk from them instead. No matter how great the marketing, the potential milk buyer simply won’t register the possibility of buying milk elsewhere. Target could try to engineer an extreme impact – maybe giving it away for free or tainting the competitors supplies or……..they could wait for mother nature to deliver the event and track that through correlated evidence of behaviour.

Extreme life events such as divorce, death (of someone else – not the customer), and birth, cause extreme impacts and these events create a sufficiently complex environment that the customer will be open to change behaviour and break with old habits. I was already aware of this pattern from my work in crisis management and national security but I never made the connection to buying baby products. It makes perfect sense and best of all, I can speak from personal experience of the complexity introduced with a baby – particularly the first baby.

One of the challenges in educating people about complexity and extreme impacts is the difficulty of conveying that sense of a mind altering experience which sweeps away long held beliefs and assumptions.

Unfortunately, the baby example doesn’t really hold for true extreme risk. As a metaphor it would require that the woman wakes up one morning to unexpectedly find herself 6 months pregnant. In other words, if terrorists bought the same range of products from their local store a few months before an attack, it would make life a lot more simple for the intelligence community (this does kind of happen in a way, but we’ll come back to that later).

So let’s not confuse the discovery of correlation over a large population sample experiencing a regular (although at least initially quite private) event with a low likelihood / high consequence event where you don’t know the population and the events are emergent.

The real extreme impact here was the sudden appearance not of a black swan, but of a discount retailer playing the role of a stork.

Where does ‘convenient’ stop and ‘creepy’ start? I guess we can thank the commercial imperative to help provide us with some of the experiments. In any case, it’s worth considering how your own big data initiatives will play out and whether you will be perceived as using this power for good or evil. That’s an extreme risk.

Grasping for goals, reaching for the straws

Surprise, surprise, evidence is emerging to show that people (i.e. us humans) have evolved higher cognitive abilities in our pursuit of goal driven outcomes. Neurophysiological, neurobiological, neuroimaging, and computational studies march on but this turns out to be old news – a 2001 paper entitled An Integrative Theory of Prefrontal Cortex Function offers some evidence which supports the hypothesis that ‘goals’ are an integrative concept that can bring together a range of cognitive mechanisms. In the author’s words “The PFC is critical in situations when the mappings between sensory inputs, thoughts, and actions either are weakly established relative to other existing ones or are rapidly changing.” This sounds a lot to me like a crisis situation or one where the situation awareness is weak and the decisions are critical.

If you know your goals, then presumably, you’re well placed to maximise your mental efforts towards a clear mission in life – right? Well, as usual, the thorny issue arises as to whether you know what you think you know. Some researches in 2008 reported in Nature that in some situations, your brain makes up its mind up to ten seconds before you realize it. More and more studies are highlighting the fact that, in order to keep us sane, our conscious view of the world is inherently flawed – by design. Even the PFC command centre is highly dependent on the synthesis of inputs which the subconscious is offering up, complete with bias and unexplored assumptions.

Which leads me back to my current favourite subject of risk assessments. An interesting book which came out in July this year called Risk Intelligence: How to Live with Uncertainty helps the cause by promoting a useful definition for a measure of risk awareness.

At the heart of risk intelligence lies the ability to gauge the limits of your own knowledge — to be cautious when you don’t know much, and to be confident when, by contrast, you know a lot.

The author, Dylan Evans, has a deep pedigree in the psychology of estimation and he has applied this to the psychology of risk estimation (building on Kahneman and Tversky). He has commercialised his research and is spreading the word out on the hustings. You can even do a free test on his web site to find out your own ‘risk quotient’. I’m only offering this up as I apparently have a ‘high’ RQ of 78.85 which puts me in the upper quartile of the 28,677 people who have taken the test.

I think it’s important to get the Evans message out because a lot of risk management today is based on the fundamental notion that you can plot risks according some qualitative scale of likelihood and consequence. This is fine for controlled environments with high stability (until they fail catastrophically – more of that later), but it is often applied to the wrong environment. The more we can show people how naive most of this is, the better.

I do however wonder whether the RQ rating might lose it’s subtlety and be seen as an ability to predict – it’s more of an ability to restrain yourself from being wrong so often.

Putting these threads together, we have an amazing goal seeking brain which is directing you through your subconscious and allowing your conscious mind to imagine it is in control and knows what these goals are. Occasionally, as a reminder of your naivety, the subconscious allows the conscious to make a fool of itself all in the interest of the underlying complex resolution towards strategic goals. Sounds a lot like most of the tiered organisational management models I’ve seen.

I’ve been holding back in what would otherwise be a continuous reference to the work of Dave Snowden. Suffice to say that risk management techniques designed for complicated contexts don’t make sense in complex contexts. Risk intelligence is an interesting look into the complicated, maybe even as it approaches the complex – but it is itself a false comfort in the real complex world where events emerge truly unexpectedly and potentially with a very high consequence.

At least that’s what my handicapped and uninformed conscious mind is telling me….