Lessons of innovation in times of uncertainty

If 2020 proved one thing, it is that our world is becoming more and more uncertain. How can individuals and teams cope with such levels of uncertainty? Can this level of uncertainty come with new opportunities? Vaughn Tan is convinced that with the right “uncertainty mindset” we can all learn to innovate. An assistant professor of strategy and entrepreneurship in London, Tan is also the author of a remarkable book entitled The Uncertainty Mindset (2020) in which he shares what he learned about innovation in the research and development labs of high-end kitchens.

I interviewed Tan about the uncertainty mindset, what it means for work, roles, and management, and how it can make us grow. I’m convinced his insights are relevant for all kinds of teams facing increased uncertainty.

Vaughn Tan, you couldn’t have picked a better time to publish a book about the uncertainty mindset! What did 2020 teach you about it?

VT: The bright side for me was the discovery that you don’t need to be physically in the same room as people to be able to work with them. I’ve also started talking to more people who live in different places. I’m now willing to look outside my local community, and everybody else is doing the same. Having a book published in that context helped me to meet many people I wouldn’t otherwise have met. Other people reached out to me from everywhere else like never before.

This year many people have started to understand there’s a difference between risk and uncertainty. Risk you can prepare for, but not uncertainty. Can you explain what the difference is and why it matters?

There’s generally a great misunderstanding about risk. Both risk and uncertainty are about not knowing what will happen next, but the difference is that with risk, you know all the possible outcomes and how likely each one of them will be. So you can plan for it. That’s what risk management is all about. You try to mitigate risk by knowing the probabilities of the possible outcomes.

Technically, that’s what risk is. But in reality, we barely ever face that kind of risk. Most of the time we don’t know what the future holds, but we call it “risk” even though it’s actually true uncertainty.

What we’re facing now is true uncertainty: we don’t know all the possible outcomes, let alone how probable each one is. Even if we knew what they were, we still wouldn’t know how desirable or undesirable they were. That’s what’s happening to a lot of people and businesses these days.

The problem when you think something is “risky”, even though it’s uncertain, is that you entertain the illusion that you can in some way calculate what the correct course of action is, and make a cost-benefit analysis. It’s a fallacy. Had we had the uncertainty mindset, in Europe, we might have paid more attention to what was happening in China at the beginning of 2020 and been more cautious. We might have taken the position of, “We don’t know if it’s going to be truly bad, but if it is, it’s going to be terrible”.

There’s another distinction you make in your book that I think is illuminating. It’s the distinction between efficiency and innovation. In cuisine, you say there’s been a paradigm shift from efficiency as the core principle to innovation as the core principle (even if both still matter). Why does what’s happened in the world of food provide relevant insights for everyone else?

There’s a continuum that every business must operate on, with efficiency on one end—ie making sure you get better and better at doing what you already know how to do—and innovation on the other end—figuring out how to do something you don’t know how to do yet. If you go near one end, you get further away from the opposite end.

To do something new, you always have to fail at doing the new thing first. If you do something, whether it’s learning a new language, making a new dish, coming up with a new product, or starting a company, there is no getting it right the first time, unless you are unbelievably lucky. And getting things wrong means wasting resources, which is the opposite of being efficient.

When you do get the new thing right, you may not even realize it at first, because often the best innovations are the ones for which there is no market demand yet. So you may have to create a market for it first. There will always be flops. If you’re lucky and very insightful, you may have fewer flops than successes.

In short you cannot innovate without failing and wasting stuff. Conversely, if you want to be efficient you can’t afford to try new things.

Obviously, few businesses are completely at one end of the continuum or the other because they wouldn’t be able to survive. They have to find a balance between the two. Historically the most famous example of a company that managed to find a great balance between the two is Apple. Pixar is another example.

What happened in the world of cuisine is that suddenly there were new platforms to share knowledge. Knowledge about cooking techniques and the chemistry of ingredients was not widespread before the internet. If you wanted to innovate, you had to create your own knowledge platform, which was incredibly expensive.

Today there are all these blogs, forums, and books, all of them disseminating information about how to do things. Also, there used to be gatekeepers of information about what quality is, such as established newspaper critics, who used to seek out consistency—going to the same restaurants over and over again.

Individuals no longer require big institutions to provide a platform for producing content. Collectively these individuals have a bigger and louder voice than the establishment now. They’re not bound by the same obligations. They’re more interested in innovation than consistency. As their influence grows, innovative restaurants that offered new experiences with every visit became the restaurants that bubbled to the top in this alternative world of gatekeepers, while the more conventional restaurants that emphasized execution stayed near the top in the old world of traditional gatekeepers. All of that explains the shift in that world (and others) towards a focus on innovation.

Something very similar happened in the world of software development, didn’t it? With new alternatives (Github for example) challenging traditional gatekeepers.

You can see some of the same dynamics in many industries. It used to be that, for the most part, the big work was carried out in big institutions—large universities, corporations such as IBM and Microsoft—and then there were more and more on-demand infrastructures like Amazon Web Services available to everybody. When you take away the need to have a large corporation behind you for basic infrastructure, then you open up the possibility for lots of small developers to do interesting new things. App stores, for example, are basically distribution channels for people who are starting new software products.

Today lots of industries are going through tremendous changes. And it’s impossible to find a unique reason for these changes: a lot of different factors are at play. Because they all happen at the same time, they push things over the edge, so to speak.

What you describe in this interview and in your book is a paradigm shift. Could you say more about the impact of this shift on the organization of work and on management? What does teamwork look like in an innovative team?

For many decades we’ve believed that it’s better for employees to have specific, clearly defined roles, to know exactly what tasks they need to perform and to get evaluated on those tasks. These well-defined roles had to be stable. And it meant that hiring was also designed in that paradigm of fixed, well-defined roles.

But this model doesn’t work for innovation. By definition, if you innovate you don’t yet know what you’re trying to do. If you’re a company that wants to be innovative, how can you have roles that are stable and defined in advance?

Not every company wants to be innovative. But the thing is, every company faces unprecedented uncertainty. You don’t know what your company will have to do to respond to that uncertainty. Whether you want to innovate or whether you face uncertainty, you have to have open-ended roles. The employee, the organization, and the other team members must explicitly acknowledge that the role is open-ended.

An open-ended role doesn’t have to be amorphous. You could, for example, say that 60% or 70% of your role consists of things that are known and 30% or 40% of things unknown. As an employee, it’s up to you to figure out the unknown part of your role, what you’re good at, what you enjoy, and what might be valuable for your company.

So the first thing is to make sure that both the employee and the organization understand that the role is open-ended and how much of it is open. There needs to be an open discussion about it. The organization cannot assume the employee knows how much is fixed and how much is open and vice versa.

Another important thing is to treat all work as a way to figure out whether someone is good at something or not. It may sound harsh but it’s not really: you’re always tested at work. Every single thing you do is potentially a test. But because these things are small-scale, it’s not as brutal as it may seem.

What all this does is it creates these very interesting teams you referred to in your question where everybody knows what everybody else is good at. They don’t need to be managed as much––in some cases they need no management at all. They don’t need to be told what to do. A person will do something because she’s good at it and wants to do it, and everybody else in the team knows her skills and choices because they’ve gone through the process of testing what they’re good at and what they want to do every single day.

It’s a completely different way of thinking about how teams get built. You can’t just put together a team at the beginning, then have them do some team-building exercises for three days and then you’re done. Everything has to happen slowly and continuously, and in much more detail, over the lifespan of the team.

What about remote teams? How does that kind of magic happen if people aren’t together in the same room?

It’s a problem with work that requires physicality. For example, if you’re a hardware design team, or if it’s about a plate of food. But if the work can be sent around to other people for them to look at, think about, and comment on, then that’s the baseline requirement. In a lot of industries that’s doable now. Team building can happen virtually, so long as the output can be evaluated remotely.

But that also means that they need to figure out settings in which work in progress is shared with other team members for comments. Innovative teams share their unfinished work along the way, rather than waiting until it is perfect. That’s how they get to build these multi-dimensional, detailed mental maps of who the team members are, what they’re good at and what they like.

For remote work to remain innovative, you have to get used to the idea that it will sometimes seem inefficient. Sometimes a meeting will take longer because you need to talk about work in progress, give feedback and learn how the other people think. So it’s possible for remote teams, albeit challenging: you can build these kinds of teams with open-ended roles remotely.

Innovation and uncertainty involve discomfort at work. How do you cope with it?

Absolutely. One of the big problems with doing new things is that it requires you to actively go out and seek failure. (If you want to avoid failure, you have to stick to the things you are already doing.) I’m learning a new language right now. To learn I must put myself in embarrassing situations where I say the wrong word and have no idea how to construct a sentence. These forms of failure are uncomfortable, but you can’t learn and grow as an individual or as a team without going through an uncomfortable phase where things just don’t work yet.

Most people find it difficult to voluntarily do something that is filled with failure or has the prospect of failure. So one solution is to put them in a situation where they have no choice. That’s what I call “desperation by design”. You commit people in advance to something that has a chance of failure and you give yourself a definite time frame by which it must be done. Either you do the hard, uncomfortable thing right or you fail and learn something in the process. It’s this intentional creation of a small amount of desperation that will unlock all the learning.

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