Start With The End In Mind
Yesterday I met with Mike Vernon, a partner in Consulting People. We were discussing approaches to risk identification and management.
Both of us have observed growing complexity in commercial relationships. Businesses are looking for faster, cheaper delivery systems. They are coordinating large, interdependent value networks. They are coping with fast-changing technologies that increase capabilities, yet demand rare skills. Overall, the environment is generating a wide array of risks, some of which are missed or not adequately understood. Others tend to be dismissed as things that will somehow get fixed during execution.
In practice, business executives will continue to jump into opportunities and relationships without full consideration of the dangers. That is inevitable and it is probably right – because the alternative would often be to have no business. But some of the risks can be far better anticipated and managed, while others are created by the current way in which risks are handled. Mike made a comment that I thought especially helpful – “Start with the end in mind”.
Risk assessment in most organizations relies heavily on the combined efforts of specialist groups and functions. The problem that this creates is that each group tends to see risk in a narrow context – which may even be highly individual. For example, some will focus on protecting assets, others may want to be sure that they would win in a court of law or can extract penalties. The risk driver for those in Procurement may be the need to demonstrate savings, or for Sales to get maximum commission. And many business unit executives care about winning the deal and meeting targets. Each of these is a valid risk issue and it has been generated through a management system designed to create counter-views and motivate varied aspects of performance. The problem is, how effective can such a system be at times of rapid change and in view of the unexpected complexity of today’s business conditions?
It seems to me that the traditional approach to review and approval is no longer effective for a significant portion of today’s more risky business dealings. It is not sufficiently adaptive and depends on historic knowledge and perspectives rather than forward-looking anticipation of problems and issues. In part, this is perhaps because functional groups tend not to think about the bigger picture. They do not always have the end in mind when they think about the risks or about how they can best contribute to a solution. If assessments started from envisaging the goal - satisfied users, repeat business, needs met, business performance and reputation enhanced – perhaps we would be better at extrapolating the steps needed to achieve those goals and then to identify some of the barriers or obstacles that will occur along the way. Certainly this might be better than the reverse-mirror view of predicting the future based on what has happened in the past.