Introduction

Leadership is about paying attention to ideas and trends in the periphery as well as organizing for the unforeseen and rehearsing potential responses to future scenarios. Data, of course, can help, but so too can experience and an openness to be continually “trying, learning, and adapting.” In this selection of articles from MIT Sloan Management Review, we look at how leaders can develop thoughtful strategies for thinking through complex problems.

From “Five Rules for Managing Large, Complex Projects”:

• “Megaprojects” — defined as projects with budgets exceeding $1 billion — have proved notoriously difficult to deliver on time and on budget; one estimate suggests that 90% of them end up over budget.
• Complexity usually increases with project scale, and complexity can give rise to uncertainty and an inability to foresee the difficulties, changing conditions, and unanticipated opportunities that will be encountered once the project is underway.
• One way to manage the uncertainties is to follow five simple rules that encourage innovation to deal with uncertainty and confer the flexibility to change — while maintaining the stability required to deliver projects efficiently.
• These suggestions are applicable to all large-scale, long-term projects, not just projects with billon-dollar budgets.

From “Moving Beyond the Silicon Valley State of Mind”:

• Christian Madsbjerg’s book Sensemaking: The Power of the Humanities in the Age of the Algorithm is a polemic defending the need for the liberal arts in business.
• Relying on data alone is taking “a journey determined by the reductions of a GPS,” writes Madsbjerg. Sensemaking, on the other hand, is like following the North Star: It provides the essential context for data — the rationale for collecting it and the perspective needed to gain insight from it.
• In an excerpt from the book, Madsbjerg illustrates the difference between traveling by the North Star and traveling via GPS by comparing the approach that Napa Valley winemaker Cathy Corison takes to her craft with that of Leo McCloskey, founder of Sonoma, California-based Enologix Inc., a consultancy that applies predictive analytics to wine making.
• In Madsbjerg’s words, Enologix, promotes “a ‘Moneyball’ approach to wine making, an audacious move in a culture that holds firmly to its identity as an artisanal craft.” In contrast, “when you drink Cathy Corison’s wine,” he writes, “you are experiencing everything she cares about: a profundity of data that can never be captured in an algorithm.”

From “12 Essential Innovation Insights”:

• For decades, MIT Sloan Management Review has published research and insights about innovation. For this article, we tapped into that knowledge base, looked for older articles that still retain wide relevance, and distilled 12 key innovation insights.
• For example, Innovation Insight 1: Innovation isn’t necessarily about new things; it’s about new value. In a 2006 MIT SMR article titled “The 12 Different Ways for Companies to Innovate,” the authors note that viewing innovation too narrowly “blinds companies to opportunities.” Starbucks, for instance, initially innovated not by producing a different product but instead by creating a different kind of customer experience — offering what the company called a “third place” for gathering that was between home and work.
• Innovation Insight 4: Remember that being first to market is no guarantee of success. A 1996 article “First to Market, First to Fail? Real Causes of Enduring Market Leadership” noted that in the disposable diaper market a well-reviewed product called Chux predated Procter & Gamble’s 1961 introduction of Pampers by decades. But P&G managed to leverage its technical and financial resources to build a position in the mass market. Likewise, in the U.S. market for light beer, several products predated the introduction of Miller Lite in the 1970s. To build market share for Miller Lite, Miller Brewing Co. was willing to spend heavily on advertising — something that Rheingold Brewery of New York didn't do with its pioneering light beer, Gablinger’s.

From “The Critical Difference Between Complex and Complicated”:

• If you manage complex things as if they are merely complicated, you’re likely to be setting your company up for failure. That’s according to the book It’s Not Complicated: The Art and Science of Complexity for Business, by finance professor Rick Nason.
• Complicated problems can be hard to solve, but they are addressable with rules and recipes, or systems and processes. The solutions to complicated problems don’t work as well with complex problems, however. Complex problems involve too many unknowns and too many interrelated factors to reduce to rules and processes.
• A technological disruption like blockchain is a complex problem. A competitor with an innovative business model — an Uber or an Airbnb — is a complex problem. There’s no algorithm that will tell you how to respond.
• When facing a problem, managers tend to automatically default to complicated thinking. Instead, they should be “consciously managing complexity.” That means embracing four tactics: Recognize which type of system you are dealing with; think “manage, not solve”; employ a “try, learn, and adapt” operating strategy; and develop a complexity mindset.

From “Using Scenario Planning to Reshape Strategy”:

• There’s an increased interest in scenario planning. Rather than tying their companies’ futures to strategies geared to single sets of events, many senior executives are trying to understand multiple views about possible futures.
• Unlike approaches to scenario planning that take a probabilistic stance (making predictions in percentage terms or as best-case/worst-case scenarios) or a normative stance (envisioning what a future should look like), the so-called Oxford scenario planning approach is based on plausibility. By recognizing the part of uncertainty that is unpredictable and by actively exploring the sources of the turbulence and uncertainty, the goal is to iteratively and interactively generate new insights to help organizations reperceive their circumstances.
• A core feature in the Oxford approach is making a distinction between the immediate business environment an organization inhabits (where business transactions take place) and the broader environment, or context, in which it operates.
• Mini case studies detail how Rolls-Royce and the Royal Society of Chemistry have used scenario planning.

From “The Flare and Focus of Successful Futurists”:

• The art of forecasting the future requires simultaneously recognizing patterns in the present and thinking about how those changes will impact the future so that you can be actively engaged in building what happens next — or at least be less surprised by what others develop.
• Futures forecasting is a learnable skill, and a process any organization can master. It is meant to unite opposing forces, harnessing both wild imagination and pragmatism.
• A Six-Step Forecasting Methodology requires teams to alternate between broadening (that is, “flaring”) their thinking and narrowing (that is, “focusing”) it.
• Executives can spot emerging trends early on by making observations at “the fringe” of society or a particular research area rather than in the mainstream. They can uncover patterns by categorizing information on the fringe and looking for contradictions and rarities.