The Cone of Uncertainty is a concept from the world of Project Management. But, as an idea, it is so compellingly simple and so widely applicable, that it deserves a place of its own in our Big Ideas series.
So, in this article, we’ll take a look at what the cone of uncertainty is, and how it makes a helpful mental model in many contexts.
We take it for granted when new products appear on the market. Perhaps they were made by elves! Well, they must have been made by someone, who followed a process. And that process was the New Product Development, or NPD, process.
The New Product Development process is now mature and well understood. There are many ways to articulate it, and none is that different from what mediaeval craftsmen would have used. But it’s still a big idea. And it’s an idea every manager should at least be familiar with.
Sometimes a Big Idea gets inflated beyond its carrying capacity. People latch onto it without fully understanding it. It becomes over-used and, despite its validity, it becomes devalued. Such is the fate of Thomas Kuhn’s idea of the Paradigm Shift.
How many times in your life have you noticed that, somehow, there has been a substantial change in the way you – and others around you – think about something important? It seems to happen more and more often. Is this a real effect or what getting older feels like?
Or is it just because we have a label for these changes? We call them paradigm shifts. In the 1980s we might have called them quantum leaps, with even less justification. No, they are just changes.
So, what then is a paradigm shift, and how do they come about?
Some big ideas have become commonplace, and everyone understands them. Others have become commonplace terms, which we often misuse. Lateral Thinking is one example of the latter. Yet it’s had a big impact over the last fifty years and will, I suspect, continue to do so over the next fifty.
Lateral Thinking is the brainchild of Maltese thinker and educator, Edward de Bono. It first appeared in his short 1967 book, ‘The Use of Lateral Thinking’. And it’s currently still in print, as ‘Lateral Thinking: An Introduction’(US|UK). But since then, he’s written a whole library on this and related topics.
These two strikingly simple and obvious questions have been answered rather well, by two British management thinkers, Rob Goffee and Gareth Jones.
Rob Goffee and Gareth Jones
Rob Goffee is Professor of Organisational Behaviour at the London Business School and is a long term academic. Gareth Jones, on the other hand, has alternated between academic and corporate roles, teaching at LBS too, and also the University of East Anglia, Henley, INSEAD, and currently, IE Business School, in Madrid. But he has also held senior HR roles at Polygram and the BBC.
Their first collaboration was a relatively unremarked book, called The Character of a Corporation. But it introduced ideas that they were to return to in their second, breakthrough book, and then again in their recent fourth book.
Their second book was called Why Should Anyone be Led by You? It introduced a mass business audience to the concept of Authentic Leadership. This was emphatically not their creation, tracking back to classical Greek thinking, and the Delphic injunction to first know yourself.
But their articulation struck a chord. It came at the right time and was delivered compellingly. Goffee and Jones argued that companies are led in far too much of a technocratic way, by people acting as managers and bureaucrats. They lack sufficient human connection with their people, and self awareness about their shortcomings.
Real leaders, they argued, are confident in who they are and what they stand for. They are not afraid to put that on show and constantly act with integrity in the way that they live the values they espouse. They are able to communicate well, and remain true to themselves, whilst still coping with and adapting to rapidly changing events. Consequently, they can inspire people to extraordinary levels of commitment.
Leading Clever People
The next book Goffee and Jones wrote addressed the challenges of leading an organisation or team made of smart, creative people. This is a typical challenge for many of today’s start-up businesses. It is also important for established businesses that want to bring together innovation teams, and for professional service businesses that want to create a great culture. The book is called Clever: Leading Your Smartest, Most Creative People.
A summary of the do’s and don’ts might look like this:
Explain and persuade
Give people space and resources
Tell them what
Give people time
Provide boundaries (simple rules)
Protect them from the rain
Give real world challenges with constraints
Create a galaxy
Conduct and connect
Tell people what to do
Allow them to burn out
Tell them how
Give frequent feedback
Expose them to politics
Use bullsh*t or deceive
Build an ivory tower
Recruit a star
Take the credit as a leader
Creating an Authentic Organisation
Goffee and Jones’ latest book is Why Should Anyone Work Here? It applies many of their earlier ideas to making a great organisation. At its heart is a simple mnemonic that spells out the six ingredients they argue are needed for a ‘dynamic and future-fit’ workplace: DREAMS.
Diversity increases creativity, which decreases with uniformity. Don’t do diversity because legislation compels you to. Do it because it has a positive impact on the bottom line: more creativity, better decisions, happier workforce.
(I know – a bit of a fix)
The more open and transparent you are, the happier people will feel. And if being open is likely to expose unfairness that will anger people, radical honesty will compel you to fix the problem, rather than hide it beneath dissembling..
“You need to tell someone the truth before someone else does,” said Jones. “Think of BP’s failure to control information after the [Deepwater Horizon] oil spill. Reputational capital is much more important and much more fragile than we ever thought.”
(This acronym-building is tough!)
This is not just about improving the business; it’s about adding value to the people within your business… as a means of improving your business.
There it is… Their earlier work popularised the concept, so its front and centre here too.
But, reflecting on how the ideas have settled in over the years, Goffee and Jones note that in the US, authenticity is too often read as ‘be yourself… find your true north.’ But their view is that an effective leader needs to be ‘yourself more skilfully.’
This is about ensuring everyone in the business understands the real purpose behind the tasks they do.
(one last shoe-horn!)
Businesses need systems. But this too easily leads to over-bureaucratisation. Rules need to work for the business and enable staff to do what’s right, not just prevent every single possibility of doing wrong.
Exploit an existing market and beat your competition
– or –
Find a whole new market where there is no competition
These two approaches have been championed by some of the greatest management thinkers and corporate leaders. W Chan Kim & Renée Mauborgne gave these strategies compelling names, and championed the latter in in a phenomenally high-selling book. They called it the Blue Ocean Strategy.
W Chan Kim
W Chan Kim was born in Korea, in 1952. After studying at the University of Michigan’s Ross Business School, he joined the faculty, becoming a professor. In 1992, he moved to the prestigious European Business School, INSEAD, in France, where he is The Boston Consulting Group Bruce D. Henderson Chair Professor of Strategy and International Management and Co-Director of the INSEAD Blue Ocean Strategy Institute.
Like Kim, Renée Mauborgne studied and taught at the University of Michigan Ross Business School. They moved together to INSEAD. Mauborgne is an American, born in 1963 (AVGY). The two have been long term collaborators, and their primary work together has been the research and writing about corporate strategy, which led to the concept and book, called Blue Ocean Strategy.
Blue Ocean Strategy
The 2004 HBR article, Blue Ocean Strategy, and the 2005 book of the same name are both best-sellers. The book’s sales are approaching 4 million. So clearly, if you’re a manager with any interest in business strategy, you need to know about this idea.
The concept is disarmingly simple.
A Blue Ocean Strategy sees a business finding a new market that is unexploited, and creating a market space for itself. Kim and Mauborgne’s metaphor is that Oceans represent market spaces.
They contrast new market spaces (blue oceans) with existing markets (red oceans). Companies that adopt a red ocean strategy focus on beating their competition and for this, an understanding of strategic concepts like Porter’s Five Forces will help.
The critique that Kim and Mauborgne level at red ocean strategies is that they often operate in crowded (or overcrowded) markets, offer limited opportunities for growth, and require lower profit margins. The bottom line impact of a red ocean strategy is, at best, conservative.
Instead of this ‘market-competing’ approach, they advocate a ‘market-creating’strategy, which places an emphasis on ‘value innovation’. This strategy should see customer value increasing, while costs drop, because (in Porter’s terms) you are targeting differentiation, rather than cost leadership. Differentiate yourself, they say, by finding new demand that competitors cannot yet address, and meet it.
As you’d expect from two leading academics, Kim and Mauborgne have created a Blue Ocean Strategy Institute, which they co-direct, and built a suite of analytical tools for companies to draw down on.
Critique of the Blue Ocean Strategy
The first critique could equally be seen as an endorsement. Their idea is not new. Numerous business strategy thinkers have developed and published similar ideas, like Gary Hamel, C K Prahalad, Kenichi Ohmae, and even the venerable Igor Ansoff.
The second critique is harder for Kim and Mauborgne to shake. There is little or no empirical evidence that their strategy works, in the sense of creating lasting competitive advantage through its deliberate application.
Without a doubt, businesses have innovated throughout history, creating new markets from nowhere. And many of them have gone on to maintain dominant positions for many years. You cannot argue with the thesis that finding a Blue Ocean and quickly becoming the top predator there works. Their book is full of modern case studies.
But, who has read the book, decided to launch a blue ocean strategy, applied the tools, found some blue ocean, and created a dominant position?
The counter to this argument is: ‘it’s only been a few years’. But as time goes on, we are waiting for the evidence.
So, what is Blue Ocean Strategy?
Is it an innovative management theory that contains a deep new insight backed by rigorous research?
Or is it a brilliantly packaged re-casting of familiar and self-evident ideas, illustrated by a number of compelling case studies?
Arguably, it is how Nonaka and Takeuchi took some of their thinking forward that has led to a far bigger transformation. In 1985, they co-wrote an article for the January 1986 edition of Harvard Business Review. Called ‘The New New Product Development Game’, this article was instrumental in revolutionising the discipline of Project Management.
Takeuchi and Nonaka gave us a new way of thinking about how to develop products and deliver projects. And they coined an evocative sporting metaphor for their process, which has stuck: Scrum.
Born in 1935, Ikujiro Nonaka gained a BS in political science at Waseda University, then started work at Fuji Electric, where he created their management programme. Nonaka left Fuji in 1967, to study at the University of California, Berkeley. He was awarded his MBA in 1968, and his PhD in Business Administration, in 1972. He took posts at US universities, before returning to Japan, as a professor at the Graduate School of International Corporate Strategy, Hitotsubashi University.
Born in 1946, Hirotaka Takeuchi got his BA from the International Christian University, Tokyo. After a short spell working at McCann-Erickson, he went to the University of California, Berkeley, where he got his MBA in 1971, and his PhD in 1977. During his time at Berkeley, he also worked summers for McKinsey & Company in Tokyo and, more important, met Nonaka.
Takeushi took a lectureship at Harvard in 1976 until 1983, when he joined Hitotsubashi University School of Commerce, where he became a full professor and Dean of the Graduate School of International Corporate Strategy. He stayed until 2010, when he returned to Harvard, as Professor of Management Practice, where he is now.
The New New Product Development Game.
In January 1986, Harvard Business Review published ‘The New New Product Development Game‘ by Takeuchi and Nonaka. This was about a new way to do New Product Development, or NPD. They drew on the idea of ‘ba’ – a Japanese coinage of Nonaka’s, meaning a meeting place for minds and the energy that draws out knowledge and creates new ideas.
They also took a look at the Toyota idea of teams coming together to solve problems. They introduced a sporting metaphor from the game of Rugby; that of the scrum. They used scrum to denote the way teams work together intensively when the ball goes out of play. In a work environment that demands creativity and innovative problem solving, this is just what is needed.
The model they created for Scrum Teams is of a cross functional group that can work autonomously to resolve its own problems. Their organisation is ’emergent’ meaning there is no assigned leadership or structure; it just emerges from the effective collaboration of its members.
To work best, a Scrum Team needs to be co-located, and work together full-time. This allows a high level of cross-fertilisation of ideas, and a dedication to working on their shared problems, tasks, and initiatives.
Scrum as an Agile Project Management Methodology
Agile project management seeks to avoid the all-or-nothing approach to projects that used to characterise traditional approaches – especially when done in a way that slavishly follows a set of ‘rules’. Although good project managers have always incorporated a lot of plan-do-review (the Deming Cycle), the growth of software development projects demanded an increase focus on agility and incrementalism.
In Scrum projects, a Product Owner is responsible for detailing the business requirements and ensuring that the business gets a good return on its product development investment (RoI). The Scrum Team, led by a Scrum Master, selects one subset of functionality from a product backlog of undeveloped functions, divides it into tasks, and works intensively on developing the outputs for a fixed time, known as a Sprint, which is usually 30 days.
Each day, the team gets together for a daily Scrum Meeting to share learning, report progress, discuss challenges, and solve problems. At the end of the sprint, the team should produce a working product that is stable and useful. After a reflection and learning process, the team then works with the product owner to define the subset of functionality it will work on in the next sprint.
The team continues like this until the Product Owner concludes that the next sprint would not create enough additional value to justify the incremental cost.
We tend to think of leading management theorists as coming from the United States. This seems especially so of Scientific Management. But when the privilege of naming things for the world’s largest audience goes to those who write in English, history creates a bias. And because that audience largely reads only one language, that bias gets amplified.
One of many losers from the Anglo-centric nature of management and business thinking was Karol Adamiecki. He was a Polish engineer, turned economist and management thinker, who can claim to have invented the Gantt Chart before Henry Gantt, PERT before the US Navy, the Theory of Constraints before Eliyahu Goldratt, and much of Scientific Management before FW Taylor.
Karol Adamiecki was born in southern Poland, in 1866. He studied engineering at the Institute of Technology in St Petersburg, graduating in 1891. He then returned to his home town, where he took charge of a steel mill. He stayed for nearly 30 years, during which time, he formed his ideas about management.
In 1919, he left the mill, and became a lecturer at the Warsaw Polytechnic, becoming a professor in 1922. There, he further codified and published his ideas. In 1925, he founded the Institute of Scientific Management in Warsaw, becoming its Director and remaining until his death in 1933.
Adamiecki’s Law of Harmony in Management
While running the steel rolling mill, Karol Adamiecki developed sophisticated thinking around management that was, from our perspective, ahead of its time. The three principal components were:
Harmony of Choice
Management should select and supply production tools that are mutually compatible. He went on to argue that this should be especially so in terms of their output production speed. This anticipated the Theory of Constraints, and the ideas of Eliyahu Goldratt by 75 years or more.
Harmony of Doing
Sequencing and scheduling of activities need to be fully co-ordinated to optimise production efficiency. Here, he not only developed a tool that looks very similar to the Gantt Chart, well before Gantt published. His approach also anticipated the US Navy’s Program Evaluation and Review Technique (PERT) and du Pont’s Critical Path Method (CPM) by over 50 years.
Harmony of Spirit
I imagine the Pharaohs’ overseers were constantly emphasising the importance of creating a good team. But this is another theme that feels very modern – perhaps even more so than the other two. Let’s not forget that Taylor’s view of Scientific Management was mechanistic and process-oriented. It took Mayo to bring humanism to the fore, and ideas of team working in management only started to dominate from the 1970s.
Adamiecki started to publish in 1898, several years before Taylor did so.
Harmony of Doing:
The Harmonograph or Harmonogram (or Harmonograf)
In 1896, Adamiecki solved the problem of sequencing and scheduling in production and published, in1903, his solution. He called it a Harmonograf. And it looks very much like what we now call a Gantt Chart. However, Henry Gantt did not publish until 1910. There is no evidence to suggest Gantt copied Adamiecki’s idea.
In constructing the Harmonograf, however, Adamiecki describes a process that is pretty similar to the PERT and CPM methods. He certainly is able to include critical path and float. These are two concepts Gantt did not consider at all.
As Adamiecki described his methods, he was able to optimise production schedules by sliding paper tabs and arranging paper strips. In a very real sense, he developed an analog scheduling computer.
Without a doubt, Adamiecki’s thinking was of its time, but way ahead of its rediscovery. He possibly failed to realise just how valuable it was. But more likely, he simply suffered from an Anglophone bias in scholarship and manufacturing. Publishing in Polish simply did not get him recognition far beyond the borders of his home country. Even now, it is only in the Karol Adamiecki University of Economics in Katowice, that his name is celebrated.
And I have to ask, could this happen again? Yes. I think it can, will and probably is happening now. Last week, we met Vlatka Hlupic. Arguably, her work is known despite her Croatian origin, because she lives and works in London. With the US and the UK increasingly looking to close their borders for differing but related reasons, the next Karol Adamiecki’s work could well lay undiscovered for just as long as that of the first.
The terms ‘Utopian Socialist’ and ‘Captain of Industry’ are rarely applied to the same person. But they are both sound descriptions of King Camp Gillette. Yet the revolution Gillette arguably led at the sharp edge (!) is not taking us towards a utopia. Far from it. The inevitable consequence of his successful business strategy is a world of depleting resources and growing land-fill.
King Camp Gillette was born in Wisconsin, in 1855. His father was a patent agent, inventor and entrepreneur, who encouraged Gillette and his brothers to tinker and make things too.
The family moved to Chicago and then, after losing pretty much everything in the Great Fire of 1871, to New York. There, Gillette started his business career as a travelling salesman. After a series of jobs, he ended up at the Crown Cork and Seal Company. There, his boss, the company’s founder, recognised Gillette’s ambition to build a business of his own. His advice was:
‘Invent something people use and throw away.’
The Disposable Razor Blade
We all know how that bit of the story ended. The safety razor was already becoming popular in the United States, but still needed to be sharpened frequently. Gillette wondered if he could produce a blade cheaply enough for men to use it until it was dull, and then throw it away and use a new one.
It turns out, he couldn’t at first. So he sold his blades at below cost price, until he could get the manufacturing volumes high enough for the cost price to drop. Gillette had also invented the handle, and his second great innovation was to stop trying to make money on the razor itself. Instead, he gave it away, as a means to tie users into his blades.
Disposable products that people need to replace regularly
Loss-leading accessories that tie users into the consumable items
Built-in Obsolescence, and a Product Eco-system
Today we’d call these ‘built-in obsolescence, and a product eco-system’. But the formula was phenomenally strong. So strong, in fact, that it was widely emulated – especially once Gillette’s patents expired.
Gillette also initiated the third pillar of the modern shaving business. He was constantly introducing minor innovations and improvements to keep ahead of his competitors – double edged blades, and then tin bladed razors.
Contemporary Corporate Strategy
In a market dominated by a few big players (Gillette among them), the demand is necessarily pretty static (the male population – particularly in affluent nations is not growing, and neither are we growing second heads). In the BCG Matrix, these are ‘cash cows’ – highly profitable lines with minimal growth prospects. All a company can do is defend against its rivals and try to steal some market share. So the strategy of constant incremental improvement remains to this day.
As, obviously, does the Gillette brand. Gillette himself resigned from the business in 1931, due to ill health, but it has retained his name to this day. It is now owned by Proctor and Gamble as one of over 20 global consumer brands. But that’s another business strategy entirely.
Gillette lost a lot of his millions to the Wall Street Crash, but maybe he was okay with that. He wrote a number of books that set out a Utopian ideal for a world of no competition, no wars, and benign monopolistic corporations providing employment and welfare. That’s a dream that still lives on at one end of the political spectrum. Perhaps it’s sad that creating this utopia is not what Gillette is remembered for. Instead, we remember him for the disposable razor blade. Oh well, now I’ve finished this article, I’d better go and have a shave.
What is the meaning of corporate strategy? Is it about getting to the front of the queue, keeping your place in the queue, or is it something different. Gary Hamel, once considered by Forbes Magazine to be ‘the world’s leading expert on business strategy’ might argue it is starting the next queue.
Very Short Biography
There are very few biographical details about Gary Hamel available. He was born in 1954, attended Andrews University. His first job was in hospital administration, but he soon started a PhD at the University of Michigan. There he met long-term collaborator, CK Prahalad. In 1983, Hamel joined the faculty of the London Business School, where he has remained to this day.
However, in 1993, we transferred from a full-time to a visiting professorship and moved to Silicon Valley, co-founding a consultancy firm, Strategos, a couple of years later, with Prahalad. This timing was clearly linked to the publication of their landmark Harvard Business Review (HBR) article, Competing for the Future in July/August 1994. It was followed later that year by the book of the same name, Competing for the Future, which became a massive seller.
This set Hamel up for a string of high-selling books, prominent HBR articles, prestigious consulting assignments, and eye watering fees on the conference circuit.
Following the sale of Strategos in 2008, Hamel founded the Management Innovation Exchange. This is an online community dedicated to innovation and disruptive thinking, that very much chimes with Hamel’s approach to strategy as disruptive. He remains influential and sought after and, as a relatively young man, seems likely to continue to influence strategic thinking for a number of years.
Hamel’s Big Ideas
What are the ‘Big Ideas’ that managers need to be aware of? And, in particular, how can we separate out Hamel’s ideas from those of long-term collaborator, CK Prahalad, whom Pocketblog has already covered?
Here, I’d like to focus on the flavour of the ideas that seem more to arise from Hamel’s thinking. But I must emphasise that I have no insight into how the two work together andI am aware I may be misinterpreting, so welcome comments.
The first big idea that Prahalad and Hamel put forward was that of core competencies. Corporations need to stop focusing on what industry thy are in, and start looking at what they can do well, as their source of competitive advantage. Hamel is fond of citing examples like Amazon and Apple, who are in the retail and consumer electronics industries respectively… or were.
Now, Amazon is a dominant player in provision of web servers, cloud storage, and data processing, whilst Apple makes much of its money today as a music vendor and software marketplace provider. It was the asset bases and the skill-sets of their people that allowed each business to grow into new markets and achieve a dominance there.
It seems to me that these examples illustrate Hamel’s particular contribution – he favours taking contrarian lines and looking for the surprising, disruptive directions of thought.
Prahalad and Hamel charted a shift in corporate strategy from the 1960s and the focus on portfolios and selecting winning product sets, to the 1980s and the focus on efficiency, continuous improvement, cost-cutting and re-engineering, and Total Quality Management (TQM) – all as means of tweaking the corporation to ever better incremental performance levels.
In the 200s, the focus needed to shift again, and in 1994, they foresaw this, under pressures of globalisation, technology shifts, changes in customer expectations, deregulation, and new entrants into markets. Corporations would increasingly need to answer long term questions about where they will be in the future. And if they don’t have the answers, then someone would surely displace them.
Companies, Hamel and Prahalad said, should no longer seek to optimise their position within a fixed market, but should rather either change the rules of their industry altogether, or go and find new markets to conquer.
Hamel distinguishes between:
These are the founders of their industries, who built dominance by an audacious and concerted move into a new or emerging space. Henry Ford, whom we covered two weeks ago is a great example.
These are the fast followers – companies that copied successful Rule Makers and also built a strong presence in the same market, largely by taking an established formula, and applying it well. Some would never catch up their rule maker. Others would find substantial improvements or deploy sufficient hunger, to overtake the incumbent leader.
These are businesses that disrupted the rules by which the incumbents play. They do things sufficiently differently to rock the market and change it forever. Some have been driven by technological advances, but others have been equally radical by simply applying new thinking. Virgin Airlines and then EasyJet each disrupt the British Airways near-monopoly n the UK, for example.
Strategy as Revolution
Nowhere is this clearer than in Hamel’s 1996 solo HBR article, ‘Strategy as Revolution‘. It seems to me that this article really set the scene for ten years later when Hamel co-founded the Management Innovation Exchange (MIX). Here, he put forward ten principles to consider, if you want to create a truly innovative strategy. I’ll pick out four:
Distinguish between ritualised, calendar-driven strategic planning from the true practice of challenge and investigation that leads to real strategy.
Harness revolutionary ideas throughout the company, because many of the staunchest defenders of old and comfortable orthodoxies are at the top of the organisation.
Don’t worry about making change. Instead, focus on engagement with the people who can make the change happen.
Embrace surprise: you don’t need to plan the whole route or even be sure of the ultimate destination. The direction is the strategy.
It’s too soon to write a conclusion on Hamel. His focus on disruption has helped many businesses change, but it is not clear whether he is riding the wave, or controlling the wave machine. If you want a constant stream of stimulation and challenge though, it is well worth checking out and even participating in his Management Innovation Exchange.