By: recent survey of U.S. CEOs, which showed that 86% believed that advances in technology would transform their businesses in the next five years. It also showed that 60% of respondents believed that new market entrants would threaten their growth prospects. Even in calm times, fear of the unknown was top of mind for corporate leaders.
As COVID-19 (the novel coronavirus) disrupts lives, businesses, and societies at large, those uncertainties are even more prevalent. Companies are struggling to understand how their supply chains will be disrupted, how their customers will behave (both now and once a “new normal” is established), and how the competitive landscape will evolve amidst the changes that occur.
Panicked decisions are rarely good ones. Indecision can be equally dangerous. Making strong strategic choices for the future requires asking the right questions, getting all available information on the table, quickly testing the uncertainties that remain, and thinking through the implications of those choices across the different futures that could potentially unfold. To that end, I’m sharing the Innovation Knowledge Matrix (IKM) — a tool for finding and addressing the uncertainties that could impact your business.
The challenges of operating in uncertainty
2002 press briefing, then Secretary of Defense Donald Rumsfeld made headlines talking about the difficulties in addressing the unknown unknowns — the things that we don’t know we don’t know. Secretary Rumsfeld’s remarks highlighted a phenomenon that exists as much in business as it does in politics or the military. Quite simply, there are different ways in which companies might not know how the future will unfold, and each of those contexts requires different tools for getting the information you need. While there are many different systems for categorizing risks (e.g., by business function, by timing), the IKM creates a broader segmentation of unknowns that divides risks and assumptions along two dimensions: your awareness of those risks and unchecked assumptions, and your current access to the information that addresses them.
attempts to reorganize, the company ultimately closed all of its stores.
Before pursuing such an aggressive expansion, Crumbs could have done several things to reduce its risk. The company could have run a question storming session to challenge its assumptions on why the expansion could succeed. That could have been combined with scenario planning to understand how its growth would be affected by external market changes. Refreshing its research would have highlighted competitive growth, and ideation sessions around business model innovation would have revealed opportunities to change with the times, including the addition of complementary products, a differentiated customer experience (e.g., Instragrammable “food museums”), or alternative channels to explore (e.g., on-demand delivery).
Known unknowns. The second category exists where companies lay out a view of the future and recognize that there are key assumptions that need to be tested. Unfortunately, they don’t get to know their customers well enough, and they end up designing solutions that don’t resonate. Maybe they try to rely on transaction data rather than talking to customers. Or they ask customers what they want rather than understanding their botched its first entry into the U.S. market. As a former executive put it, “We got our clocks cleaned in the early 1990s because we really didn’t listen to the consumer.” While U.S. customers tried to shop at new IKEA stores, the experience was a struggle. Beds were measured in centimeters rather than standard U.S. sizes (e.g., Twin, Queen, King). Kitchen cabinets came in sizes that were too small to fit American housewares. Consumers were buying vases to drink out of because the glassware seemed comically small. The company revamped its product lines and recovered, but its lack of customer empathy almost cost the organization a crucial growth market.
While IKEA understood the core job of its customers and some of the success criteria — to affordably furnish a new living space in a hurry — it lacked a closeness to its customers that was truly necessary. It could have joined consumers on existing shopping trips, gotten a view of what their 扑克之星亚洲版homes and housewares looked like already, and determined what other jobs consumers were hiring 扑克之星亚洲版home stores for.
Unknown knowns. The third category consists of instances in which key data exists, but teams haven’t asked the questions that would lead them to the right information. Knowledge is siloed or teams focus on trying to generate the best possible solutions (which are highly valued by organizations) rather than spending sufficient time developing the right questions (which are often under-valued). One of the more common problems here is that companies end up repeating the mistakes that others have already made.
In 2013, Target had a troubled entry into Canada when it marked up its prices in Canadian stores to account for its increased operating costs. Canadian customers — used to shopping in the U.S. — balked at the higher prices and refused to shop there. Teams didn’t need to look far outside their organization to find evidence that this could be a problem. J. Crew had made the same mistake in 2011.
Retail may be a low-margin business, but Target could have explored other ways to cut costs and optimize its entry into Canada. Cross-functional teams, collaboration with those outside the organization, and Jobs to be Done: A Roadmap for Customer-Centered Innovation.
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