THE RIOT POINT

The Lab

The fruits of riotous experimentation.

Deer, Snow Storms and Weak Signal Detection

Vegetarians need read no further.

We are expecting snow this afternoon which means a high possibility of venison for dinner on New Year’s Day.

You see, my brother-in-law is a keen and successful hunter. He tells me that deer can sense an approaching snow storm and, in response, a herd will gorge heavily upon all available food sources even if this requires breaking cover. And while this action may expose one or two individuals to predators, the herd’s resilience will be greatly increased as a result of the newly acquired fat deposits.

In other words, sensing a weak signal of a possible shift in the environment, the deer build up an excess of resources to cope. This allows them to, literally, weather the storm and, having done so, emerge with sufficient energy and capability to recover quickly and exploit the new situation—often at the expense of competing grazers and to frustration of predators anticipating debilitated prey.  

This is a perfect example of how to solve a complex emerging problem. 

In contrast, there are no records of the dominant buck holding quarterly review updates of his 5-year Calorie Consumption Plan. No doubt such a plan would have forecasted the herd population expansion at a steady 2% annual compounded growth rate, all of which would have been based on the “just-in-time-fat-reserves™” re-engineering workflow.  Nor is there evidence of a managerial buck losing ‘points’ as a result of mis-predicting the depth of fallen snow, and consequently giving up ‘calorie share’ to another herd. 

Here’s the key takeaway; individuals and organisations need to build up a slight excess of resources in order to be resilient, and the poorer they are at picking up weak signals, the deeper these relevant reserves have to be.

In other words, you can only run lean if you satisfy two conditions:

1. You have excellent weak signal detection; and

2. You are able to build up appropriate resources at sufficient levels rapidly.

If can’t satisfy either  or both of these conditions, you need to carry an excess of resources constantly.

How can tell whether an organisation suffers from poor weak signal detection?

Firstly, senior managers spend an excessive amount of time on improving ordered internal processes, and insufficient time engaged in the more complex market.  That’s too much time shielded in the forest rather than being on the boundary, sniffing for changes in the wind even if it does expose you to danger.

Secondly, the future direction of the company lays too much reliance on the small strategic planning group. Instead this group should support leaders in engaging a broader array of actors from all parts of the customer activity cycle, and so gain a broader understanding of the landscape and how to influence it.

Finally, these organisations tend to treat complex problems as if they were ordered problems and thereby believe (wrongly) they have tight control over their destiny. Thus they are captured in Mark Twain’s maxim, “"It's not what you don't know that gets you into trouble. It's what you know for sure that just ain't so." 

Businesses with poor weak signal detection should carry large resources reserves, but I often observe the reverse. Financial markets push companies to distribute closing cash balances out as dividends, and those retaining cash are chastised as being “unimaginative.” Apple provides but one high profile example.

This is entirely the wrong message. 

Applying a “just-in-time” mindset to a complex business problem leads to collapse into debt. At least “just-in-case”gives you a fighting chance. I have seen more desperate and bad decisions made by businesses drowning in debt, than I have seen by those swimming in cash. 

And what’s true for businesses can also be extended to individuals. For example, imagine you have take a decision about your career. Under which circumstances would you make a more emboldened, vigorous, confident (but not desperate or fatalistic) decision?

A. With sufficient liquidity to cover one month’s living expenses;

B. With sufficient liquidity to cover twelve months’ living expenses. 

If you chose B, start building reserves for you and your business.

If you chose A, I have a “just-in-time-fat-reserves™” franchise available if you’re interested.

Deer, Snow Storms and Weak Signal Detection