1. We think we can manage risk by predicting extreme events.
   The advice is NOT to try and predict these Black Swan events (which by definition is impossible), but rather try and identify your vulnerabilities and focus on the consequences of these events and how to withstand them. What my colleagues in Consileo call “building resilience”.
2. We think by studying the past we will be better able to manage risk.
   You cannot use hindsight as foresight as paste events do not bear much resemblance to future shocks. I do not think the article is saying that nothing can be learned from  the past; but rather that Black Swan events cannot be predicted using past trends and happenings.
3. We don’t listen to advice about what we shouldn’t do.
   We tend to like positive advice far more than negative (loss prevention) advice and so give greater weight to the positive advice.  A dollar not lost is economically equivalent to a dollar earned, but risk managers don’t treat them equally.
4. We assume that business risk can be measured by standard deviation.
   Although statistical techniques are useful in concepts like investment risk, they are dangerous in real life where events do not follow a normal distribution. The article also claims that even many quants analysts do not really understand the concept of standard deviation and so what is the chance that non-experts are  going to get it right.
5. We don’t appreciate that what’s mathematically equivalent isn’t psychologically so.
   Here the authors demonstrate that how the same risk is presented can significantly impact on how we react to it. They are basically discussing the concept of framing and our heuristic-driven response to different descriptions of the same thing.
6. We are taught that efficiency and maximising shareholder value don’t tolerate redundancy.
   Basically here the paper highlights how too much optimisation can increase an organisation’s vulnerability. To demonstrate this, a “lean” human being would only have one lung and one kidney!

The article ends discussing the risk of incentivisation if structured incorrectly. I really like their conclusion here which is so appropriate in light of the financial-system driven crash we are trying to recover from; and even the news of the last week where JP Morgan have announced a $2bn trading loss (which I suspect may only be part of the true picture, but we will see …):
“Moreover, we shouldn’t offer bonuses to those who manage risky establishments such as nuclear plants and banks. The chances are that they will cut corners in order to maximise profits.”

The full article may be found at the Harvard Business Review web-site at
The 6 mistakes article
although you may have to register to download it

A while ago we wrote an article called: Taking strategic decisions in the face of “unknown unknowns” which complements this risk article nicely and gives some advice about what you could actually do to address some of the challenges put forward by Taleb.

Decisions in the face of uncertainty

If you would like to discuss how we may assist you and your organisation in addressing critical risks and building resilience, please drop me a line at sgifford@genesis-esp.com

When a group reaches that point can be absolutely critical. Too soon and not enough options are explored; too late and there is insufficient time to properly converge and decisions are made in haste. Two further points are important. One is how much time is actually available to go through the process and the second is how critical is the decision. (my colleague, Peter Bryant, Professor of Entrepreneurship at IE has classified these decision types in a paper – but that is for another article).

When taking all these aspects together, it is clear that the leader / facilitator / coach of the decision making team has a very critical role in deciding when that inflection point should take place. That needs to be based on judgement of when the optimal inputs have been made (and absorbed) and when convergence must take place.

The article does not take the idea much further, but I believe when thinking about the practical aspects of  this, there are two “take-aways” to remember:

1. There are many times when the process will not be as linear as: diverging – inflection – converging – decision. Often an iteration back to diverging may be necessary, if after converging, it becomes clear that the correct solution cannot be reached. This may be disruptive and time-consuming, but often necessary.
2. The team leader must plan and make that inflection point call, consciously and deliberately, rather than let it happen through group pressure or simply running out of time. If this is done well, within a well thought out decision process, the iteration mentioned in 1 above is less likely to be necessary.

As mentioned, the article does not actually reach the same conclusion but has some more detail about the inflection point. It may be found at:
When a group makes up its mind

At Genesis, in our support of our clients when taking strategic decisions, we work to optimally reach this inflection point. If you would like to discuss this, or other aspects of the decision process such as behavioural issues or available technologies, please drop us a line.

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Taking strategic decisions in complex environments is one of the toughest, and most important jobs, of any Executive in both the public and private sectors. Taking good decisions can result in massive value creation, but getting it wrong can equally destroy value – or even destroy a company.

View this entertaining slide show that tells the story of the company: Marcon, and its CEO, Brad and simultaneously offers excellent advice on taking strategic decisions.

Making Better Decisions – A Boardroom Fable

 If you prefer, you can view the slideshow on this page (scroll down); or alternatively, you may download the presentation by completing the form at the bottom of the page.

Please feel free to share this with colleagues and friends and help us help the world in:

“improving lives through better decisions!”

If you are interested in buying our manual on The Genesis Decision Making Process with best practices in decision making – please click here:

Genesis Decision Making Process

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]]> http://www.genesismc.co.uk/blog/boardroom-fable-making-decisions/feed/ 1 http://www.genesismc.co.uk/blog/economist-global-economic-forecast-march-2012/?utm_source=rss&utm_medium=rss&utm_campaign=economist-global-economic-forecast-march-2012 http://www.genesismc.co.uk/blog/economist-global-economic-forecast-march-2012/#comments Thu, 01 Mar 2012 19:16:18 +0000 admin http://www.genesismc.co.uk/blog/?p=1560 Continue reading →]]> Latest global economic forecast
From The Economist
March 2012

The Economist Intelligence Unit have just published their latest economic forecast so I thought I would bring it to your attention. There is a powerpoint version and a slightly more detailed summary.

Good news or bad news? Really hard to say as it depends upon your perspective.
Bad news? Growth is slowing around the world and we are hovering on a recession in Europe (and actually in a recession in certain countries such as Greece).
Good news? There is a growing sense of some level of stability arising after the peaks and troughs of the last 24 months – although stability at low GDP levels and high commodity/oil price levels. However, some of the really big risks seem to be decreasing (not disappearing) such as a melt-down of the Eurozone.

It must be said however, that the aggregate level hides a lot of variability at the granular level. For instance, we believe that “averaging” Europe can be very misleading as there are significant variations between countries.

The other danger at looking only at economic data is that many of the socio-political issues are not raised – many of which could have significant consequences. For instance the reaction to tough austerity measures in countries at the periphery are a tinderbox. The longer-term effects of a related issue: high unemployment in many countries and/or regions, does not seem to be being addressed in any type of coherent way. This combined with dual-level “recoveries” (such as positive stock markets and relatively high executive salaries; against smaller companies starved of cash, facing lower consumer demand and even going out of business) will fuel the fire of dissatisfaction.

But not all is gloomy as where there is risk, there is always opportunity for those organisations with the insight and flexibility to capitalise on these. It simply requires shifting perspectives and being prepared to challenge past ways of thinking.

The Economist is a great magazine and information source and we would strongly recommend anyone interested in their outputs to sign up on their web-site. In the meantime, here is the presentation and the pdf.

Economic forecast March 2012 – presentation

Economic forecast March 2012 – summary

I trust you find value in these documents and our brief synopsis. If you would like to discuss any of these issues and how your organisation may be impacted, please mail Simon Gifford at sgifford@genesis-esp.com.

When I publish an article (or in this case a broadcast), I normally try and summarise it so that my too-busy readers are able to get the gist of what is being said without reading the original article; or at least are able to make a judgement on whether or not they want to read the original article.

In this case, I am not going to do that as this video has too much excellent content to allow me to summarise it. I will only say two things:

• It includes excellent input on decision making, the use of technology, the new leadership paradigm, group intelligence and the fact that you must have women in a team to increase the level of this intelligence (that should provoke a few of you to watch it at least).
• I personally believe that the discussion here holds the kernels of the future of  leadership and management; and so strongly recommend anyone who has an interest in better understanding this topic and wanting to get more out of their organisation – be it public sector or private sector – takes the necessary 40 minutes to watch this IBM Think Forum video.

Decisions and leadership meet technology and crowds

The World Economic Forum is over and it appropriately included a degree of soul-searching and even an admittance that mistakes had been made. This has been a good lead-in to my deliberations as I compose the 4th habit in the series (the 7 habits of highly effective decision makers) which discusses making ethical considerations a priority in decision making.  (This may be THE most important of the 7 habits).

In my research on the topic, I have “discovered” a really special man Professor Clayton Christensen from Harvard Business School who poses some fantastic questions. I would like to share two elements of his work with you.

First a video of a talk he gave when receiving the McKinsey Award for the best HBR article. He talks about some of the flaws we make in measurement of profitability. Among other problems created, he demonstrates how they force us into a short-term bias and into one that reduces our likelihood of creating jobs. I think more and more that companies goals must start encompassing wider targets than profitability – and alongside CSR. For instance, is it not time that we started reporting on job creation and increased number of employees (as a positive)?

Have a look at the video (it is less than 5 minutes), and then come back for the article …

HBR awards

The second element of his work I would like to share is his article (that won the HBR award). It may challenge your thinking – or at the very least have you re-assess the priorities in your life. The questions he asks his Harvard class are:

•  First, how can I be sure that I’ll be happy in my career?
• Second, how can I be sure that my relationships with my spouse and my family become an enduring source of happiness?
• Third, how can I be sure I’ll stay out of jail?

He then discusses the concept of a strategy for your life and resource allocation within that frame. Personally, I found the article refreshing and inspiring – and perhaps what many of us need as we move through some of the character-forming challenges that the world is providing us at the moment.
(Note you may have to register for HBR too read this – registration is free and Genesis gain no benefit from this in any way).

How will you measure your life

We normally end our articles with an offer of assistance with the issues that the topic raises when they are within our capabilities at Genesis. We certainly cannot claim to be experts in assisting people to re-align their values and measurement systems. However, we would be able to coach an individual or group through the process, probably using some of the tools we have available.

Because we believe it is important to give back to the world, we would be happy to offer such a facilitation for FREE to anyone (or any group) who would seriously like to undertake this. We could do this remotely or face to face and would only charge for any out of pocket costs we incurred in the process. Write to me confidentially at sgifford@genesis-esp.com to start an initial discussion.

(Note: we obviously have a constraint on time and so the offer is only available to the first 5 people/companies who contact us).

Having trawled through many of the summaries, videos, tweets and other reports on the conference, I am trying to pull together my overall feelings and perceptions about the 2012 Davos conference.

There were hundreds (perhaps thousands) of issues discussed, but the big themes arising were the Eurozone crisis, the jobless situation particularly among the youth, the impact of social media, the questioning of the capitalist system and the gap between the have’s and have-nots (included/excluded; in-system/marginalised). Naturally, there was also discussion around the ubiquitous topics of energy, social entrepreneurship, visions and values.

I had (still have) a level of discomfort about the composition of the gathering. The governments, regulators and financiers, who must hold some of the blame for what is a less-than-comfortable world economic environment, are those selected to discuss the situation and what should be done about it – without much input from the other 99,999% of the world who are trying to muddle through the mess. And doing it at a venue that costs most of the business people about $40,000 to attend the 5 day event!

A classic example, Vikram Pandit (CEO of Citibank), co-chair of the Forum said “Jobs should be our number one priority”. A few stats about Citibank: they took a $45bn bailout, share price has fallen 91% since Pandit took over in 2007; they announced a 4,500 job-cut in December and Vikram received a $3,7m bonus for his 2011 performance. I am sure some must doubt his capability to envision and champion job creation schemes.

Having said that, I do fully support the Forum and believe Klaus Schwab’s initiative is very important. Perhaps there were fewer solutions forthcoming in this round, but at least the debates were had and new ideas put on the table. Furthermore, despite the tough times and apparent insurmountable problems, the almost TED-like feeling of optimism and good-will that most delegates take away has to be a good thing given the power that many of them wield.

One of the sources of optimism and a highlight of the conference, was the input from the 70 YGL’s (young global leaders) who were invited to participate. Many of them with fresh perspectives on issues and with significant successes already achieved, they offered a new energy and challenge to the status quo. I can recommend watching the closing video  (Note: WEF web-site sometimes has some technology issues in accessing the videos – keep trying!)where 4 of those YGL’s were on the podium – including a young South African woman: Rapelang Rabana. She was an inspiration, especially in comparison to the tired panel called “Africa: from transition to transformation” chaired by Gordon Brown and with 5 African heads of state including SA’s Zuma – all except perhaps Condè (President of Guinea), were embarrassing to watch as they blamed everyone and anyone (except themselves) for non-delivery on the continent and seemed unable to articulate an inspiring and credible vision for Africa. (The fact that some of these leaders continue to address Gordon as Mr Prime Minister left me wondering if they knew he is one of the millions who has recently lost his job!).

I would encourage Klaus to continue including these Young Global Leader’s and also try and open it up to other inspiring segments of the world population who are making positive changes in the world – after all you don’t have to be in the top 0,001% of the worlds richest or less than 30 years old to “make a dent in the world”.

Another theme that is not new, but is increasing in importance and close to our hearts here at Genesis, is the issue of collaboration in decision making. As leaders become more alert to the ramifications of their strategic decisions and the impact that the outcomes have on many lives across continents and even generations, there is a growing acknowledgement that more people must be included in the decision making process. We are not saying that all decisions should be consensus decisions; in fact, we believe the overlap between consensus decisions and intelligent decisions is probably not that large – but where possible, “outcome-stakeholders” need to give their input. Not only by reminding decision makers about the potential impact of the decision, but frankly many people who do not sit at the boardroom table are able to offer crucial, creative and critical insights into the deliberations that could have a significant impact on increasing the possibility of a good outcome. Given we are in a world where many problems require new and innovative solutions and not simply a refinement of past responses, the broader and richer the input, the more likely we are going to make decisions that take us to new heights in growth and exciting, positive results.

At Genesis, we have been lucky enough to find technology partners who are able to provide solutions that can take us beyond old, stale ways of thinking and more importantly allow us to creatively and rapidly gather rich inputs from a broad range of stakeholders. These inputs are important whether we are solving problems, taking decisions or crafting new strategies - and we would be happy to see how we, or our partners, could help you to gain these benefits. Call or mail me for a discussion or demonstration of some of these tools.

Let me leave this summary with (my interpretation) of the thoughts of 3 of the young global leaders when asked what advice they would give the “older generation” when addressing the tough issues of today:

• Listen: to everyone, not just your colleagues in the boardroom. Listen to youth, disenfranchised people, women, customers … really listen!
• Do not always think linearly – think divergently and creatively.
• Consider new technology and the scalability that can be gained through harnessing some of the tools available.

Occupy Davos supporters in their "igloo"

Teach a man to fish, you’ll feed him for a lifetime. Expose a man to the Internet & you’ll change his life.
Rapelang Rabana

An interesting (video) overview of data visualisation and its power to influence decisions from the World Economic Forum Ideas Lab in 2011

Gaining Understanding from Data Visualization | World Economic Forum-Gaining Understanding from Data Visualization.

As we lead up to the annual WEF Davos meeting (The Great Transformation: Shaping New Models) starting this week, I thought I would bring to your attention their latest global risk report.

Any critical initiative – whether it be taking a strategic decision or crafting a new path to guide you through the continuing global economic crisis, it is critical to consider the future environment in which the initiative will be undertaken. An important part of this is understanding how the environment could change and the WEF Global Risk 2012 report is excellent input to this.

The report is detailed and well put together, but I strongly recommend having a look at the  ”data explorer” section which has an exceptional set of interactive graphics. Click on the link below to reach the report.

WEF Global Risks 2012

The global economic crisis is impacting on almost every organisation in one form or other. From a decision making perspective, there are two broad ways in which we are impacted

• We are being forced to make certain decisions because of the crisis. For instance:
  • Do we investigate new markets to make up for our falls in revenue from traditional sources; or increase our focus on our existing markets?
  • Should we be retrenching staff or considering other ways to reduce costs?
  • How can we discover, and capitalise on, the opportunities that are hidden within this environment?
• Our normal decision making process is also impacted through the need for more frequent strategic decisions and greater uncertainty when making them. For instance:
  • The decision to make a capital investment in new capacity is made more complex through the difficulty in forecasting future demand.

In the latter half of 2011, a small global group of experts formed part of a digital workshop to consider these types of challenges that individuals and organisations face when taking strategic decisions in the economic crisis that the world is facing. The objective is to provide some actionable advice for people who are looking for ways to lead their organisation through the challenge and to grasp the new opportunities that always abound in such environments.

The full article can be found here:

Please tell us a litle about yourself and we will send you a free copy of the article: surviving and thriving in the global economic crisis.

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We are also building a knowledge repository of useful information concerning leadership through the crisis on our web-site; and have started with some workshop ideas. Go to the page by clicking here:
Decision making in the crisis