“In preparing for battle I have always found that plans are useless, but planning is indispensable.”— Dwight D. Eisenhower
“Never look back unless you are planning to go that way.”— Henry David Thoreau
“If anything is certain, it is that change is certain. The world we are planning for today will not exist in this form tomorrow.”— Phil Crosby
“When we are planning for posterity, we ought to remember that virtue is not hereditary.”— Thomas Paine
“The reason that everybody likes planning is that nobody has to do anything.”— Jerry Brown
“And I think that still is true of this business – which is basically research and development – that you probably spend more time in planning and training and designing for things to go wrong, and how you cope with them, than you do for things to go right.”— Alan Shepard
“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”— Abraham Lincoln
“The time to repair the roof is when the sun is shining.”— John F. Kennedy
“An ounce of action is worth a ton of theory.”— Ralph Waldo Emerson
“An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.”— Jack Welch
In Part 1, System D was explained as a way to deal with unforeseeable events and situations – black swans – that focuses on agility, adaptability, and creativity. In our chaotic times, we need these abilities more than ever. But just how might we actually develop them in practice when they are so different for everyone? An example via a case study was offered for this purpose. Here, it concludes.
Black swan events and situations – unforeseeable in nature, magnitude, and timing – once rare, seem to have become rather frequent. These appear to make planning by individuals, businesses, and organizations very difficult, and even impossible. But the only alternative is reactive responses, post-happening.
The fundamental problem is that you can’t plan for an unforeseeable event or situation. Instead, you have to plan and act so as to develop capabilities that improve your chances of surviving and even prospering, whatever may come along. This approach is so very different from targeting a “most likely” scenario, which of course will never happen.
The essential capabilities are agility, adaptability, and creativity. But how, specifically, might an organization go about this? Every organization is different.
Part 1 offered an example as a way to illustrate how this might be done: HGL Diagnostics. You will need to read the first part of the case before reading this continuation and conclusion. First, a brief repeat of the company and its key management players:
Case Study: HGL Diagnostics – Part 2.
HGL Diagnostics, based in Cambridge, MA, develops, sells, and services specialized medical diagnostic devices and related AI-based diagnostic software. Founded in 1990 as a small analytical lab, the business grew steadily and somewhat profitably under the direction of its co-founder, CEO, and major stockholder Edward (Ed) Gage, MD, PhD. By 2023, the company had about 200 employees and sold its growing array of highly-advanced products to hospitals and labs worldwide.
Key employees in HGL besides Dr. Gage include: CFO/CIO Julie Warren, CTO and self-styled “resident genius” Dr. Paul Abbott, CSMO Beth Thomas, and COO Dr. Kim Liu. Also deeply involved was Dr. Karl Schmidt, Board Chairman and co-founder. The majority of its employees are high-level technical professionals.
Although U.S. headquartered, the company has offices in: Zurich, Switzerland; Taipei, Taiwan; Johannesburg, South Africa; and Sao Paulo, Brazil. Offshore locations were small mainly sales and service operations.
Part 1 ended with this look-ahead:
The second part of the case looks at what this hypothetical executive team might have come up with as a way to use current threats, however unlikely they may actually be, to develop and execute action plans aimed at strengthening HGL’s agility and adaptability.
Note that this is not risk assessment or risk management, which generally deal with events and situations having at least some roughly quantifiable probability of occurring. What this case example is dealing with are a small set of events and situations having both completely unknown but non-zero likelihood, and unknowable nature, magnitude, and timing. Black swans, effectively.
Planning and acting require concrete, real targets in terms of the organization’s specific nature and situation. Choosing threats of an assumed black swan nature, magnitude, and timing turns this effort into one directed toward identifying and eliminating, or mitigating potential damage from, these specific threats. It assumes, in practice, that while we have no idea what may actually happen, we are going to become as strong and resilient as possible.
The planning context and three initial planning and action targets
COO Kim concluded the initial meeting with the reminder that …
“Please let us all keep in mind that the remote likelihood of our target scenario – a return to COVID-type lockdowns and restrictions – does not matter. What we are looking for are actions to take should it happen – or not.”
The team had identified three targets for action and had committed to weekly planning meetings and action steps, if possible. The current targets:
- A ‘Pandemic 2.0’ drill of some kind
- A small team to address supply-side problems, weaknesses, and such
- People – the possibility of losing certain really key people due to disabling illness, or simply quitting.
CEO Ed had asked the team to think about each of these and what might be done to make a concrete immediate start on each one. The next meeting would focus on developing actions and assignments.
The second meeting and initial priorities
Kim, having suggested a Pandemic 2.0 drill of some kind to avoid a repeat of the near-fatal experience of the 2020 COVID lockdowns, was assigned the first target. She asked Paul to assist since systems were central to everything in HGL.
Dr. Kim Liu, Chief Operating Officer
Kim: “I want to lay out first the major problems we encountered and the points of greatest impact. Then I want to recall what we did, or attempted to do, and what happened – especially regarding what didn’t work. Paul was deeply involved in all of this so he will be more familiar than I about the details. The focus, I think, of this drill should be on areas where we had the greatest trouble and where the lockdowns had greatest impact. We really didn’t do as well as we should have, especially myself. This mess cannot happen again.”
Paul: “We had about zero capability to do things remotely then, as I so painfully recall. Such a situation had never occurred to any of us. Black swan indeed. We did manage to get virtually everybody working remotely, except of course for our service and production folks. This capability is still mostly awful, but it sort of works. Sort of isn’t anywhere near good enough. Step #1 for me is to get a list of exactly what needs to be transitioned from current mostly-centralized functioning to full-hybrid, whatever that means in practice. My deliverable for next week is this list.”
Dr. Paul Abbott, Chief Technical Officer
Kim: “Great start, Paul. You are looking inside, so I’ll look outside. Our full range of vital external contacts, functions, and processes. Big focus on customers, so maybe I can ask Beth to help out here. Beth … could you make me a list of what went wrong on the customer side last time, and then add any ideas you may have for not repeating the misery. Again, all within the context of a drill that we can actually implement. I’d like this drill done within 2-3 weeks at most. Let’s move.”
Ed: “I very much like what I’m hearing. Specifics. Urgency. Actions in small steps. I especially like Kim’s suggestion that we shoot for an actual lockdown drill within 2-3 weeks. Try to keep it as simple as possible (hah!) and focused. Make it something we can learn from rather than making it perfect (hah!) this run.”
Dr. Ed Gage, Chief Executive Officer
Supply side problems, weaknesses, and much else
Paul: “Let me repeat as best I can what I said in our last meeting. Our suppliers, vendors, subs got badly hammered last time. We also found out quite a bit about which ones can cut it and which ones can’t. This job is far from done. In fact we still really don’t know much about how to do it properly.”
Paul: “We have a set of quite serious problems to deal with here. Top of my list would be communications with all involved. Step #1 then would be developing a list of all who should be kept informed, supply-side. We should be able to do this in a few days at most. I have a smart intern who’d love this chore. Step #2 would be setting up, say, a weekly Zoom update meeting to let everyone know what’s happening at our end and what things need attention at their end. No idea who all should be involved, but we’ll start with a small number so we can learn something. Or maybe a lot. We’ll try to have this Zoom meeting set up in time for the lockdown drill.”
Paul: “We also have a bunch of longer-term problems, like not enough supplier redundancy, and suppliers in shall I say ‘risky’ locations. Our supplier situation is, speaking frankly, just a mess. I haven’t the slightest idea about where to start. So, I just happen to have yet another intern who has been dealing with vendors and subs. I’ll ask Cassie, a most patient and innovative associate, to give me a starting list of just three items to address. By next meeting. I hope.”
The frightening key people problem
Kim: “I almost hate to bring this one up, let alone try to address it. We deal almost daily with some sort of missing-person problem. It is not something in the future. It is now, probably the forever-now. Time to tackle it head-on, because it could kill us on the next black swan go-round.”
Kim: “As I stated last week, I still don’t have a list of our key people, why they are ‘key’, and what we might do to make sure they don’t quit or to fill in somehow if they become long-term disabled. Our HR manager has been unable to do this for reasons I still don’t understand. This will end.”
Kim: “I can’t do this myself, as much as I may want to. Frankly, I tend to intimidate lower level folks. Intentionally, probably thanks to my happily-past lawyer days, but it is the way I get things done. So, who has some real people skills in here? Well, I know just the person – Beth. If she has any spare time in her 24/7 life. I’ve seen her work with all kinds of people and she has, I believe, a magic touch. People trust her and confide in her. I’ve seen it many times. Beth?”
Beth: “ Are you really talking about me? I hardly know such a person. I am truly nasty at heart. But maybe I can make a start at least. I understand that you want to leave HR out of the loop, at least for the moment. And you can’t really ask who the key people are, since that may trigger a bunch of calls to recruiters. No, it has to be approached rather subversively. This is my specialty gained from dealing with customers who can be most unpleasant (but we need them).”
Beth Thomas, Chief Sales and Marketing Officer
Ed: “Could we frame this key-people hunt using some kind of recognition award? A real one. Asking “… who do you, ‘associate’, think has done the most toward HGL’s success, and who would be most painful to lose to Illness, etc.?” I have a resource outside who does this sort of thing for a living, and who I have worked with often on various boards and the like. Or does this idea sound too manipulative, or sneaky?”
Beth: “Both, but it may be worth a try in a group or two to find out what happens. We need to assess responsiveness to our asking for such individual assessments. No point in creating a new problem when we have more than enough. Kim … why can’t you ask your HR manager directly for a list of key people? Any good HR head should have this handy.”
Kim: “Now we are getting into a known personnel problem. Katy [the HR manager] has some serious personal problems that have greatly affected her work. A while back, she was stellar. But we can’t in good conscience replace her right now. Why don’t I just ask her in the context of Ed’s recognition idea? She might respond helpfully because she knows absolutely everybody – very well – in many dimensions. Enough said. I’ll get that list for next meeting.”
Ed: “Good enough to get things moving productively. Let’s start simple. See you all next week.”
The third meeting, and reality strikes
Kim opened the meeting with just a “Hello all” and got immediately down to business. She listed deliverables that she had received so far:
- From Beth and Paul: List of what needs to be transitioned on another lockdown order [Paul], and a list of what went wrong last lockdown and a few ideas on quick fixes (Beth).
- Supply side issues to address (Paul).
- Key people identification (Beth and Katy).
Kim: “Everyone has done a great job on getting something to move ahead with. Ed and Karl have blessed me with many helpful, or mostly so, comments and thoughts. Where do we go from here? Paul?
Paul: “Lockdown drill: I want to quickly put together an action plan for lockdown (or other catastrophe) transitioning. Things that we can do in a week or so, and also things we need more time for. The latter I’ll set aside for now, assuming that they are not show-stoppers. Action plan deliverable for next week.”
Beth: “Well, this really turned up a can of worms, speaking nicely. Customers avalanched us with complaints, ideas, and wrath. We were greatly humbled. Even though I talk daily with customers, I had no idea about their underlying feelings and needs. Well, now we – myself, at least – now know. When we asked for their input, we had no clue about what they struggle with. Daily interactions are mainly putting out fires of the day. Problem here is that we have now surfaced their deeper concerns, so we don’t dare not respond immediately and constructively. My plan is to get a few of these folks who don’t yell (much) at me to see if we can get a list of top priorities for attention. This will be my deliverable for next week. To be very honest, I am now terrified of this customer situation.”
Ed: “Great job Beth. Painful as it may be, we need to know about all of these customer concerns. Today. We need to figure out which ones, maybe three (my favorite number), and to get started immediately on repairs. Beth … can you get your non-yelling group of customers to help us zero down on what is truly most important to them. I in turn am terrified by what they may tell us.”
Paul: “Supply-side issues. I hardly know where to start. We have so many, as you’re all mostly aware. Firstly, we have a list of suppliers and subs, with contacts, who have agreed to help us where they can. We have set up a weekly Zoom meeting with them to get details on their concerns, and hopefully to pass along whatever progress we have been able to make. Expectations out there are quite low, but we may end up surprising them.”
Paul: “You will not be surprised to hear that we already have a pretty impressive starting list of supplier and sub concerns. The bad news is that most of these are substantial. The good news is that quite a few, so far at least, can be addressed rather quickly and simply. My first lesson, I’m embarrassed to admit, is that in many cases we are our own worst enemy. Our action target list is now focused on a few items that can be fixed quickly and that can serve to give hope to our own supply-side folks. We want a few successes to report on for each of our Zoom meetings. A morale issue, both inside and externally.”
Ed: “I’m going to admit a basic responsibility for much of this. I have been obsessively focused since day one on growing HGL. Operating problems like these just didn’t get any attention, absent a crisis or ten. They were handled mostly in fire-fighting mode. We are today finally in a somewhat stable and secure business position overall, so this may be the perfect time to attend to these kinds of important operating matters. They are indeed points of weakness and vulnerability from whatever comes along. If we move quickly, many will be resolved before the next black swan arrives.”
Beth: “Key people: As if I didn’t already have enough to terrify me, wait until I tell you about what Katy and I have learned so far about our “key people”. Are you ready for a reality hit?”
Beth: “Katy actually does know who our real key people are. But I finally got her to tell me the reason. She was scared. Many of these key people are today talking with recruiters, she has heard. As you all know, we have some very strong and talented people. Big bucks are being offered to pull them away. Katy says that many of these offers are from huge firms. They appear to be losing their key folks to disability and other issues, and have resorted to raiding firms like ours.”
Beth: “Now I am frightened along with Katy. Katy is very good, but not strong. She cannot handle this herself. Ed … we are going to lose a bunch of key people soon, or sooner, if we don’t do something. A recognition award won’t cut it. This is way more serious. Kim … I’m thinking of some kind of retention bonus. Maybe even a year’s salary for a three-year commitment. Recruiters will have a tough time matching that, according to Katy. She is on board with us. I trust what she says.”
Ed: “Yikes! I had no idea at all about so much of this. Our lockdown planning exercise after just a week has exposed some extremely serious weaknesses. These are existential in nature. These could take us out even if lockdowns don’t happen. This is awful. But it does reaffirm our going-in assumption that the threat context doesn’t matter. What really matters is knowing and fixing our fundamental vulnerabilities and weaknesses.”
Fourth meeting and some hope
Kim, for a rare change, was initially quite subdued. Not even a quick “Hello all”. Then she recovered, and resumed her lawyerly character.
Kim: “Lockdown drill: Beth had it right. We truly have a can of worms – weaknesses and vulnerabilities – to deal with. Immediately. It doesn’t matter what may be coming along to smack us. We are going to fail under almost any serious situation unless we get busy now and fix these. The good news is that we have some action targets identified and some initial ideas about how to get moving.”
Kim: “First, the good news. Paul and Beth, along with some other key people (ouch) have drawn up a lockdown drill plan. It won’t encompass everything, but I think it covers enough to roll it out. Beth is keeping customers updated almost daily on our drill plans. Oddly enough, our drill efforts are being copied by quite a number of these. I hope that’s good. In any case, our lockdown drill is scheduled for Friday next. This will give us the weekend to repair whatever the lockdown drill broke. Our plan is to keep customers fully informed – fully and candidly – on what happened and what we learned. Feedback so far, according to Beth, is promising. Also what I am hearing internally.”
Ed: “Kim … excellent job from you both. I had no idea about our quite numerous points of weakness. A bit overwhelming at first, but now I am fired up to get as many of these as possible shaped up. Quickly. Next Friday is lockdown drill day. Hard hats for all. Could we actually do this to make it real? I’ll wear one.”
Paul: “Supply-side issues: We have set up and done an initial Zoom meeting with core suppliers and subs. Went much better than expected. Suppliers are getting the sense that we are serious about fixing things, and they seem very eager to help. What we learned almost immediately is that our initial target concerns were not the ones that suppliers would choose. Instead, they have redirected us, majorly. “
Paul: “We are now working on the supplier group’s stated priorities. Some quick fixes, some painful slow fixes, but these are actually in motion. I am getting some very encouraging responses from our Zoom interactions, some of which I’ll share with you all next meeting. Surprisingly, to me at least, we are already getting a few of our suppliers to make some helpful changes at their ends. They seem to like our ideas … so far, anyhow. Our progress will tell the tale here.”
Beth: “Key people: This initially scary effort has gone so much better than our best hopes. You will I think be happy to hear that Kim has made some special assistance available to Katy, who was struggling with personal things that you could hardly imagine. Katy, in response, has turned out to be a dynamic performer. She has made quiet and private contacts with many in HGL – key folks as well as folks who really know who the key folks are. We will have by next meeting a list of those who seem to be our key people – we now actually have a definition of “key” – and what we might do to keep or if necessary replace them. Lots of redundancy will be needed I’m afraid, but worthwhile costs I believe. Julie, I’m sure that you can find some extra funds for making sure that each of our key people is adequately backed up.”
Julie: “I hate to spoil the party when we are all having so much fun, but reality as they say bites. Our financial strength is, to state it optimistically, also of great concern to me. Growth has eaten so much of our earnings, borrowing capacity, and equity injections. We are actually pretty lean right now, operationally. We have at the moment very few places to further reduce costs. This is inherently a high cost business.”
Julie Warren, Chief Financial Officer & Chief Information Officer
Julie: “Dealing with the actions that seem to be bubbling up from this group is not going to be free. I think that some serious money – that we do not presently have – will be required. Short term. So, Ed and Karl, we need to raise some new capital. Soon. I will be able to let you know how much shortly, after I’ve heard what all of our action planners are intending to do. I’m sure you know that quite a few of these actions have serious money implications.”
Julie: “In case you all don’t have enough to do on this effort, I needed to alert you to the rather urgent need for additional capital. We are in a pretty decent financial position right now, and our steady and okay-profitable growth is such that makes our bankers happy. We are quite highly leveraged already, so maybe bankers are not the right source now. We may need an equity injection, either from our so-far generous private investors, or perhaps from making an initial public offering.”
Julie: “ The latter, however, has to be considered in the context of a market collapse and de-dollarization – another of our background worries. But my guess is that a public offering is not possible right now. Might we consider getting a major player in our industry to invest for a minority interest? We have recently received a couple of feelers from major investment bankers, and I have several other suggestions for this. Perhaps Ed and Karl should take the lead here. We need to move very quickly, I’m afraid.”
Ed: “Ouch. You are quite right, Julie, as always. I have feared this moment since almost the early days of HGL. We have struggled mightily to stay private. The cost: a heavy debt load. Much of which must be rolled over soon. And some at much higher interest costs. This is a serious weakness and vulnerability. Karl … why don’t you and I, as Julie suggested, involuntarily volunteer to pursue this potentially urgent, and even survival, need? Since all here are stockholders, I’m sure that what we come up with will be of great interest. Thank you so much Julie.”
Dealing with whatever may happen is essential
The HGL executives have quite quickly come to focus on a number of critical weaknesses and vulnerabilities (these are different, yes?) that do not depend on anything particular coming along. Their changes are such that they can provide strength – resilience – for whatever the business is hit with. The initial focus issues will serve to get things moving. The financial focus issues are existential.
An especially good aspect of their efforts is the almost obsessive focus on small-steps plus immediate-actions. And learning from each action step. Their plan is dynamic, evolving, and based on results from each step.
Their efforts are focused on not at an unlikely black swan event or situation, but on any event or situation that can impact their business and threaten their survival. Whether any of the initiating events occurs is irrelevant. All that matters is the knowledge and conviction that something major will happen … soon.
There is no endpoint to situations like HGL’s. They are business-as-usual. HGL’s survival and prosperity depend upon dealing effectively with whatever events or situations come along each day, black swan or not. But, you can’t deal directly with an external situation that you don’t and can’t know anything about. You can only deal with identifiable weaknesses and vulnerabilities (noting again that these are different) in yourself, and your organization or business.
The world is going to do nasty things, unforeseeable, forever. The best you can do is to eliminate or minimize as many weaknesses and vulnerabilities as possible. Today. Be agile, adaptable, and creative.
- That big changes are coming is starkly clear from articles like this one by Ken Moriyasu, Nikkei Asia diplomatic correspondent, and Shigesaburo Okumura, Nikkei Asia editor-in-chief, in March 2023: “Trilateral Commission calls 2023 ‘Year One’ of new world order”:
“Three decades of globalization — defined as integrated, free-market based and deflationary — has been replaced by what will be a multidecade period of globalization defined as fragmented, not-free-market-based but industrial-policy based and structurally inflationary. This year, 2023, is Year One of this new global order.”
“The Trilateral Commission is a private group of elites formed in 1973 by David Rockefeller to discuss control of Europe, North America, and the Asia-Pacific region. Membership is invitation only and their meetings are shrouded in secrecy.”
“They are another version of the World Economic Forum in every way possible. They have developed a Task Force on Global Capitalism in Transition to move the modern world away from capitalism. From its website:”
“Capitalism or market-based economies are at a historic transition point. Capitalism’s positive impact on prosperity and well-being is unmatched. Nonetheless, many people are frustrated today by its inability to handle some of the greatest challenges facing society. There are growing concerns about whether market-based economies will be able to address three major challenges. First, climate change. Second, the disruptions triggered by the digital revolution. Third, rising inequalities.”
- Tom Luongo via ZeroHedge tries to see what may be going on behind the curtain of de-dollarization: “Luongo: BRICS Summit Proves Geography Trumps Currency”:
“The older I get the more time I spend asking the question, ‘Why does someone want me to know this?’ Our media is so compromised that questioning the editorial bias of every issue is a full time job. And I know that it is done on purpose to distract us from the real issues in some instances while advancing an agenda in others.”
“In 2023, the topic of de-dollarization has been all the rage. It’s been a non-stop barrage of hype and hyperbole. The din of de-dollarization talk became so loud in the lead up to the recent BRICS Summit that it drowned out what was really on the agenda for those few days. This talk came from all sides, from the BRICS leaders themselves as well as the western press dominated by both British and Davos interests.”
“People fell all over themselves talking up the ‘BRICS gold-backed currency’ trying to edge each other out in being ahead of the curve on this issue. After a while it became another moment to ask who benefits from all of this amplification?”
“If de-dollarization wasn’t the point of the Summit this year, then what was? Expansion. And not just expansion for the sake of expansion, but geographically strategic expansion. The BRICS formally added six countries — Iran, Saudi Arabia, United Arab Emirates, Argentina, Egypt and Ethiopia. They could have added others and almost added Algeria if not for a last-minute veto by India on behalf of France.”
“Algeria is symbolic of the fight between Italy and France for access to African oil and gas. There can be no Ital-exit from the EU without Italy minimizing France’s influence in North Africa, shoring up its energy needs as collateral for a return to the lira. Thankfully, with the help of Russia and China, the Africans are taking care of the Italians’ French Problem all on their own.”
“If there is one common theme beyond the geography (more on that in a bit) with all six of these countries it is their relationship with the supposedly former British empire. From the Arab states and Egypt to those that defied the Brits in the past — e.g. Iran and Argentina — these additions represent a power shift that is profound. One look at the world map should make this point crystal clear.”