More recently (Nov. 19, 2007), I reviewed Michael Raynor’s book The Strategy Paradox, which recommends using scenario planning to manage strategic uncertainty (keep doors open and be aware of and ready to commit to various alternatives as they emerge), to create strategic options (make small risk-conscious strategic investments, each of which will pay off big if that scenario plays out), and to get operating divisions to commit fully to certain short-term strategies (by giving them sufficient resources and indemnifying them from blame if the scenario their efforts are predicated upon does not play out). The idea is that competitive advantage will accrue not to the companies that assume the status quo will continue unchanged (because change is inevitable), but rather to those that take strategic risks across of a whole range of plausible future scenarios.

I’m working currently on a project with Michael to envision and think about a range of options for the 2010-2014 period, that businesses can use to anticipate and prepare for discontinuous risks and opportunities that they might otherwise not consider.

Last week my friend Dave Snowden chimed in with a post on scenario planning in complex environments. In an earlier article, he had proposed three important principles for managing organizations in these new environments:

• Distributed Cognition: using the capacity of diverse networks to contribute to decision making
• Granularity: small things (blogs, anecdotes, crews) are more adaptable and hence useful than large things (books, treatises, organizations)
• Disintermediation: eliminating layers that separate unfiltered information from decision-makers, to improve context and opportunity for important pattern-recognition

As Euan Semple has pointed out, these are aspects of organizations that can be effectively managed — using and encouraging networks, increasing the granularity of information and organizational structures, and disintermediation, are all things that management can actually do, that will improve work effectiveness and enhance decision-making.

In his latest article, Dave says that scenario planning is designed for complicated environments (where one can reasonably anticipate all possible future outcomes) not complex environments (where prediction is substantially impossible). He summarizes the basic scenario planning approach (his diagram is shown above): brainstorm future possibilities; cluster them into a framework; produce a full narrative for a few plausible scenarios at the ‘corners’ of the framework; monitor to detect whether these scenarios are coming true. And, of course, decide what you would/will do if each scenario does appear to be coming true. In my work with Michael, our framework is based on the predominant economic outcomes (positive or negative) and the degree of economic volatility, to create four ‘extreme’ but plausible future economic scenarios; our assumption is that the actual economic future will be somewhere within the bounds of these four scenarios.

Some of the dangers with scenario planning that Dave identifies:

• empirically, it has been shown to expand employee thinking about possible future events, but not to improve resultant decision-making
• the risk of premature convergence on one intriguing idea or well-articulated framework, with most of the brainstormers not thinking critically or creatively about other possibilities
• insufficient consideration of unlikely, discontinuous and unforeseen events (”black swans”) that, if they did occur, would have extraordinary consequences
• failure to look at events outside the business environment (e.g. external political events, resource constraints, changes in suppliers) that could nevertheless significantly affect the business
• lack of diversity in the brainstorming group (and commensurate tendency to groupthink)

Dave argues that instead of trying to anticipate (predict), organizations need to increase their level of “anticipatory awareness” (capacity to imagine, envision and assess how they might deal with, different futures, so that the organization is more resilient — not caught by surprise — and able to react quickly when occurrences that have at least been imagined occur).

To achieve this “anticipatory awareness” Dave suggests increasing the number of people canvassed for their ideas on future possibilities, and the number of future possibilities (”micro-scenarios”) considered, and then using techniques to assess (”signify”), index, and search for patterns in these micro-scenarios. You can see the use of his Distributed Cognition and Granularity principles in this approach. When “monitors” are put in place to early-detect symptoms of any of these micro-scenarios, managers will have a basis to continuously assess the likelihood of each of these micro-scenarios occurring, and the consequences if they were to occur, and make decisions on how to mitigate or adapt to the risks each micro-scenario presents accordingly. So, as Dave explains, even a maverick can proffer micro-scenarios that will capture management attention when the “monitors” suggest those micro-scenarios are becoming more likely — in most organizations, the mavericks with the boldest ideas and predictions tend to be filtered out by middle managers before senior executives hear of them.

After reading Dave’s article, Vera B, one of my readers, commented:

Vera’s comments resonate with my own: That because of our imaginative poverty, and our inability to really understand and follow nature’s model of self-management, we are unable to conceive of, let alone develop “anticipatory awareness” of, discontinuous future events. We can recognize patterns, we can do environmental scanning and constantly watch for ‘weak signals’ that forebode changes ahead, we can extrapolate and project, and we can even (though too rarely) recognize the recurrence of patterns from our past history. But we, and our man-made systems, don’t have the resilience, the sheer numbers of data-providers and of data to draw on, or the billions of years of experience at mitigation and adaptation that nature does, and we can’t hope to. Just look at most science fiction, which presumes that all sentient creatures everywhere in the universe, throughout all time, have and always will look, feel, communicate and act astonishingly like humans today, and will deal with problems depressingly like we do today.

As John Gray tells us in Straw Dogs, our species is preoccupied with the needs of the moment, and despite our fascination with stories about the future, it is just not in our nature to do nature’s job of managing complexity. I read about the inevitability of us using geophysical engineering to “solve” the climate change that our ignorance of complexity has caused, by seeding the upper atmosphere with millions of tons of heat-reflecting metal particles, and I shake my head and sigh. The apes have been left in charge of the laboratory for far too long.

One of the most important things I’ve learned in the last few years is that, except for senior management, no one in most organizations really understands what the business of the organizations is all about — how decisions are made, what information is used and how, etc. And, at the same time, senior management really has no clue about what goes on at the front lines of their organization, or outside their organization — what potential new recruits think, what customers really think about the organization, etc.

This should be obvious, if you think about it. Senior managers are insulated from the front lines and customers. No one wants to tell the boss what’s wrong with the organization — it’s a career-limiting move. And senior managers are too busy to spend much quality time with either employees or customers. To the extent they interact with customers it’s with the senior managers of those customers, who are likewise unenlightened about what is going on in their own organizations. So decisions are made, often, in a vacuum, based on deficient and filtered information.

As for the line employees, they usually have never been exposed to or taught about what goes on in other parts of the organization, or how managers make decisions. This is getting worse: The current generation of young employees are likely to work in 12 organizations in their careers — not enough time to really figure out “the business of the business” in any of them. The tragedy is that often neither they nor their senior managers think they need to know what the business is all about, unless and until they become senior managers themselves. So most employees spend their entire careers feeling under-appreciated, disconnected, unconsulted, and annoyed at stupid instructions and useless information requests from management. An they have a ton of very useful information about customers, operational ineffectiveness, and what’s going on in the world and the marketplace, that is never solicited, and never proffered.

I care about all this because I have spent about 1/3 of my career in an area called Knowledge Management. This discipline began about 15 years ago, and has largely followed the track of other business ‘fads’ like business process reengineering and total quality management — a flurry of investment and enthusiasm, followed by disenchantment and finally abandonment.

The problem with KM is that the people charged with introducing it into organizations were mostly front-line back-office people — middle managers with a background in library management, IT or training. Few of them really knew how decisions were made and resources allocated in their organizations. The library people saw KM as a content management exercise. The IT people saw KM as a set of technology projects (intranets, extranets, groupware). The training people saw KM as an e-learning vehicle. Senior managers were mostly unenthusiastic, worried that it would spawn more IT bureaucracy like e-mail, and not seeing any new value provided by it. Their hope, tragically, was that KM might automate some back office functions and allow cost savings (e.g. blowing up the corporate library).

We might be able to understand the reasons for KM’s failure if we looked through the eyes of senior managers, front-line employees, and customers, at the value of information to organizations. The diagram above shows how this looked in the days before ubiquitous computers — say, in 1975.

At that time, internal memos, typed up by secretaries, instructed front-line and back-office employees what to do, and required them to report production data that managers could use for making decisions. Written information flowed vertically, not horizontally. Managers talked with other managers, and employees talked with other employees, and occasionally with outside colleagues, to learn their jobs and share what they had learned. A few employees had started using the Internet and other electronic sources of information for research, but most research was done using the internal library or outside journals. Customers received printed marketing material from the organization, and submitted their orders. These were the principal information flows in organizations at that time.

This actually made a lot of sense, when you consider how senior managers saw, and operated, their organizations. The job of senior managers was and is to make the organization sustainable. Managers do this by making critical decisions, issuing instructions, capturing performance data, and tweaking those decisions accordingly. The variables they need to watch and make decisions about are:

1. Cash flow: The net result of sales, investments, loans and share issues, government incentives, operating expenses, R&D, dividends, and capital expenditures.
2. Share price: Investors’ assessment of future growth in cash flow, which is critical to obtaining low-cost capital.
3. Risks and opportunities: Threats from new and existing competitors, a variety of threats to reputation and business continuity, regulatory changes, rate changes, supply changes, frauds, disasters, and opportunities to innovate, make acquisitions, outsource, reorganize or change capital structure

To manage cash flow, they pressure employees to find ways to increase sales and reduce costs. Budgets, resource allocations, and monthly targets and reporting are their levers for doing so. To manage share price, they need to ensure that cash flow is always steadily rising. When cash flow from operations fails to meet targets, they look at layoffs, outsourcing, capital budget reductions, increasing government incentives through lobbying, cutting dividends or reorganizing (e.g. divesting unprofitable operations).

To manage risks, they will acquire, sue or out-advertise competitors, hire PR firms to whitewash and greenwash their social and environmental misdeeds, put controls in place to reduce risk of fraud, buy insurance and hedges to reduce exposure to rate changes and disasters, lobby against new regulations, lock in or acquire suppliers, outsource non-critical operations.

To manage opportunity, a few will invest in innovation, but for most larger organizations, it is much safer to acquire small innovative companies, to use leverage (borrow from the bank) when interest rates are lower than profit margins, and through planned obsolescence by constantly forcing customers to replace or upgrade, and locking them in to the organization’s product.

This is what senior managers do. It is not surprising, therefore, that they tend to see IT, KM and training as “non-value-added” activities. They were getting the information they needed before the advent of computers, so why should they invest in new IT and KM projects? And since they expect and receive little loyalty from employees, why should they invest in training them, when the essential knowledge they need must be obtained “on-the-job” anyway?

In the 1980s and 1990s, most organizations invested in three new technologies, mostly reluctantly: fax, e-mail, and intranets. Fax was a faster and cheaper way to send marketing materials to customers and to receive orders, and send instructions to and collect performance data from remote operations, and it was not an expensive technology to introduce. Its heyday was a mere decade.

E-mail and corporate intranets were introduced in most organizations in the 1990s. Senior managers expressed concerns that e-mail would be a scourge, and many attempted to limit its use. They were right about it being a scourge, but not successful in limiting its use. It was a stealth success — permitted because it was not that expensive, but quickly used for mostly inappropriate purposes. Corporate intranets were used at first to automate the two dominant types of shared organizational information: policies and procedures, and directories. Eliminating hard-copy manuals and directories was a welcome change, but intranets quickly became massive repositories for millions of context-free archived documents that were of almost no use to anyone but the author. The consequence has been an explosion in complex server technologies, taxonomies and search technologies — for information that almost no one finds to be of any value. Documents touted as ‘reusable best practices’ were dumped into the corporate intranet and abandoned. Some organizations ended up hiring intranet ‘garbage collectors’ to remove the most useless and obsolete content.

To try to connect to customers, many organizations in the 1990s and 2000s have invested in ‘extranets’ (websites that only customers had access to) and sophisticated, interactive public websites. They found to their chagrin that decision-makers in most organizations were too busy to visit their websites, and that most of the people browsing the web pages they had so carefully crafted were job-seekers, students doing papers, the competitors, and the media.

So here we are in 2009, and the principal information flows in most organizations are still exactly what they were in 1975, as depicted in the chart above. What’s changed:

• Instead of typed memos, instructions are now sent to employees by e-mail; performance data is sent back up to management by e-mail, or captured electronically automatically.
• Peer-to-peer conversations are still mostly real time and face-to-face or voice-to-voice (or IM); asynchronous conversations in e-mail threads are arguably the least effective. E-mail has allowed more conversation with colleagues outside the organization, and with young workers much learning occurs through such conversations, though IT security in most large organizations prohibits many of the social media used by young workers to communicate outside the organization, nullifying much of this advantage and creating considerable animosity.
• The library has been largely supplanted by the Intranet, but it is now much harder to find things and there are fewer information professionals able to help you find stuff, so searching takes longer and is less effective. The Intranet in most organizations is still used principally for the same two purposes: looking up policies and procedures, and directories. Most other Intranet content is unused or in some cases misused.
• E-mail has allowed a massive increase in the amount of work delegation between employees in most organizations. It is easier to delegate work when you don’t have to face the person you’re asking to do it, even though the chance of it being done well is less. E-mail also allows much more procrastination in organizations — people send requests for information to others Friday afternoon, as an excuse to put off working on a project until the next week. There is considerable evidence that e-mail has had a significant negative effect on productivity and work effectiveness, because there is no accountability to the sender for time of the recipients that has been wasted, and because it costs nothing to send an e-mail to an unlimited number of recipients.
• After a period of disintermediation (people doing their own on-line research instead of having librarians, assistants or information professionals do it for them) there has been a swing back to reintermediated research, as most employees learned they lack the significant competencies needed to do quality research. Young workers tend to still do their own on-line research, but only until they find an appropriate intermediary and reach the level at which they are permitted to delegate research.
• Most marketing material is now sent by e-mail and also duplicated on the organization’s public Internet site, but in these electronic forms it is mostly unread.

In other words, in adding to the volume and complexity of information systems, we have added relatively little value, and in some cases actually reduced value. The reason for this is simple:

1. We have not done anything to substantively improve the ability of senior management to manage the business (i.e. to manage cash flow, share price, risks or opportunities). 
2. We have not done anything to substantively improve the effectiveness of any of the information flows (arrows in the above diagram) that matter in organizations, or the quality of the information.

We have, in short, implemented a solution that addressed no problem. We introduced new KM tools because we could.

If that were the end of the story, we could just shrug off KM as another business fad and move on. But there is something happening in organizations today that is beginning to improve the quality of information and the effectiveness of information flows that matter, something that creates a second opportunity for KM people to actually do something useful.

What is happening is that people are beginning to manage their own information, and information processes. They are finding workarounds to the dysfunctional processes in the organizations they work in. They are finding ways to draw on people in their growing online networks to do their jobs better. They are realizing that, if tomorrow’s workers will end up working in a dozen different jobs in their lifetimes, they need to take responsibility for their own learning and their own knowledge, and take it with them from one job to the next. Increasingly, they are keeping their knowledge in their own personal repositories, and in their own personal networks.

I have written before about what I call Personal Knowledge Management, which is an attempt to enable workers to do this more effectively. My problem was that PKM is impossible to sell to senior management, because it has no value for them. I toyed with the idea of trying to sell it front-line workers directly, perhaps by starting a magazine called Working Smarter. The problem with this is that everyone is at a different stage in their evolution towards PKM, and there are no standard answers or approaches — we each have to muddle this through for ourselves, based on our own ‘knowledge set’ and information behaviours.

But perhaps if we outlined a future scenario of where this PKM trend is headed, we might be able to evolve an approach that would accommodate the needs of both individual workers and the organizations struggling to cope with this phenomenon.

To this end, let me start with a story of a young business analyst named Jon:

This is a composite of a number of real cases of young people working around dysfunctional information systems I have witnessed in the last two years. I expect it’s going to become more and more common.

Let’s suppose that, in twenty years, Jon’s information behaviour becomes the norm. Eventually organizations will have to face the problem, and end the guerilla war that is brewing between the IT security people and Gen Y in a growing number of companies and institutions. I think it is unlikely that most will be able to resolve the perceived security threats in such a way that they could allow the Jons of the world to do what they want inside the firewall. What is more likely is that, just like the calculator and telephone, the laptop (soon to become even smaller and more powerful) will evolve to be a ubiquitous personal device that people will carry with them everywhere. At that point having redundant computers (and phones) on everyone’s desk will become absurd, and IT security can start to focus on protecting confidential data from being accessed, rather than trying to lock down employees’ appliances. At that point, the role of the rest of IT, and KM, will have to change completely. Here’s a scenario of how I think it might look:

Major information flows in organizations, c. 2025?

In 2025, every individual in every organization uses their own personal computer for both personal and work applications. Almost all information is Web-based, with organizations’ proprietary information only accessible through authorization software. E-mail has disappeared, replaced by a virtual presence application that includes instant messaging, screensharing, voice/videoconferencing, filesharing, calendaring, tasklists. Employees maintain a Company Sector on their machines in which they put information that can be accessed 24/7 by other employees. Most people also maintain a Public Sector on their machines in which they put information that can be accessed 24/7 or subscribed to by anyone in the world (this has replaced blogs and applications like Facebook), and Community Sectors in which they put information that can be accessed 24/7 by other members of that Community. The aggregation of the Company Sectors of all employees of an organization replaces the corporate Intranet of past generations; it can be viewed by anyone in that organization. The aggregation of the Community Sectors of all members of a particular community replaces the community tools (forums, wikis etc.) of past generations; it can be viewed by anyone in that community.

The IT department is still responsible for maintaining security around the organization’s proprietary information, but very little content is left in this category. IT also checks that the information in employees’ machines’ Company Sectors is appropriate for sharing, and auto-replicating properly.

The KM department still manages the purchase of external information, though almost all information in 2025 is free; information producers have realized that their business model is to apply that information to specific customers’ business environment, in consulting assignments, rather than trying to sell publications. Most of the mainstream media were nationalized after they went bankrupt using their traditional business models, and now operate as public services.

Most of what the KM department does now is trying to facilitate more effective conversations among people within the organization and with people outside the organization, including customers. They facilitate many meetings that use the virtual presence application, especially those that involve more than five people. That facilitation includes organizing the meeting, distributing advance materials, facilitating the discussion (conflict resolution, staying on schedule etc.), and even recording, editing and publishing the meeting as appropriate. They run courses in effective conversation, meeting and presentation skills.

In addition, the KM department conducts environmental scans and conducts research in areas the organization wants to focus on, and publishes and runs short video presentations on the results. They also browse the content of the aggregate of the Company Sectors of all employees of the organization, notifying managers and employees of content that may be worthy of follow-up, and they assist employees to manage their subscriptions to people’s Public Sector content. And, when the organization holds sessions and conferences on strategy, risk, innovation or customer relationships, the KM department is on hand to do advance and just-in-time research.

.     .     .     .     .

If you’re in KM, or in a business that has a KM function, I’d be interested in your thoughts on this. I’ve been known to be a bit ahead of my time in thinking about the future of business and technology, but I think this scenario is quite feasible. The organizers of this fall’s KM World conference are looking for some thought leadership in this area, and I plan to use this article to provoke some ideas from those who have been working in this area as long as I have. So tell me what you think.