Wednesday, November 18, 2009

Strategic Planning Analogy #292: Parachuting Cats

Back in the 1950s, malaria broke out amongst the Dayak people of Borneo. It was serious enough to call in the World Health Organization (WHO) to find a solution. Their solution? Spray large amounts of the chemical DDT on the island.

The good news was that this effort was effective in killing most of the mosquitoes which carried the malaria. The bad news was that there were a series of negative side effects.

First, the thatch roofs on the houses started collapsing because the DDT also killed off the wasps which ate thatch-eating caterpillars. Second, many of these insects that were poisoned got eaten by gecko lizards, which ended up poisoning the lizards. Third, cats which ate the lizards got poisoned and started to die.

Without the cats to eat them, the rat population exploded. The rats carried diseases, such as sylvatic plague and typhus. With so many rats around, there was an outbreak of these diseases in the human population of Borneo.

Hence, the World Health Organization was called back in to solve this new health problem in Borneo (which, by the way, they had created). Their solution? Parachute live cats into Borneo.

The World Health Organization was given a task—eliminate a serious outbreak of malaria in Borneo. They developed a solution which accomplished the task immediately in front of them. Unfortunately, WHO’s choice of action had negative unintended consequences.

It was not just one batch of unintended consequences, but a series of them. There were five layers in this series of unintended consequences:

Layer one: DDT killed more insects than just the ones carrying malaria.
Layer two: Lizards who ate the poisoned insects became poisoned.
Layer three: Cats who ate the poisoned lizards became poisoned.
Layer four: Without the cats, the population of rats skyrocketed
Layer five: The skyrocketing rat population infested the humans with new disease outbreaks.

Businesses have many problems to deal with, just like the WHO. In the rush to solve the immediate task at hand, businesses risk doing the same thing the WHO did—choose a path that solves the immediate problem, but has a series of negative unintentional consequences.

Just solving the problem of the moment is not enough. If we ignore the long term consequences in our decision-making, we can end up having our own version of parachuting cats.

This story touches on two principles we have talked about often—the tyranny of the immediate and the law of unintended consequences. The tyranny of the immediate occurs when solving the crisis of the day is the only task you get time to work on, leaving no time for long-term thinking. You can read about the tyranny of the immediate here, here, here, and here.

The law of unintended consequences says that decisions you make often affect more than you realize, and usually in a negative manner. You can read about the law of unintended consequences here, here, here, and here.

The first point I want to make in this blog is that the more a company is held hostage to the tyranny of the immediate, the more likely it will create unintended consequences. If the WHO hadn’t been so focused on the immediate crisis of malaria, they might have taken the time to realize that heavy doses of DDT create more problems than they solved.

The second point is that unintended consequences often come in layers. If you only look out one or two layers, you can miss the serious negative side effects. Killing a few wasps and lizards doesn’t sound too bad. It wasn’t until you got to layer five (sylvatic plague and typhus outbreaks in humans) that the really bad negative consequence appears.

The same is true in business. Often, you cannot see the real disaster ahead until you look out a few layers. Look at all the layers of unintended consequences which came out of the simple decision to bundle high-risk mortgages. It didn’t just crush the housing market. Subsequent layer after layer of unintended consequences almost lead to a total global economic meltdown.

This leads into the third point. I believe that one of the most critical roles a strategist provides a company is the ability to look for all the layers of unintended consequences. While most of the rest of the organization copes with the tyranny of the immediate, the strategist can rise above the immediate and focus on the long-term implications—layer upon layer. This expertise will be an invaluable contribution to the discussion on how to handle the crisis of the moment. This contribution can help prevent a firm from going down a disastrous path ending in some version of parachuting cats.

In order to make this contribution, two factors must be kept in mind:

1. Avoid Setting Up the Strategist in a Position Where They Get Sucked Too Far Into the Tyranny of the Immediate.
If the strategist is given too much responsibility for near-term performance, then the risk is for the strategist to be doomed to just as much tyranny of the immediate as everyone else. When that happens, the strategist cannot provide that critical long-term perspective going out several layers, because they have no time to think about it.

I see this risk cropping up in two areas. The first is in the role of the Chief Marketing Officer (CMO). CMOs Officers are often given two roles. First, they are responsible for the long-term positioning/strategy of the brand. Second, they are responsible for the near-term sales and advertising promotions.

The first role is to rise above the tyranny of the immediate to protect the long-term brand strategy from unintended consequences. The second role dives deep into the middle of the tyranny of the immediate, trying to put out the fires that affect near-term sales.

From my observations, when someone has two roles like this, the tyranny of the immediate wins the battle for time. The long term suffers. It is no wonder that the average CMO tenure is less than one year. They are set up to fail because it is so hard to fulfill both of those requirements. For more on this, see CMOh, No!.

The second place where this problem can come about is if the strategist is in the Finance Department and also has responsibility for the annual budgeting process. There is a risk that so much attention will be placed on the one year budget and worrying about variances in current performance to this year’s budget, that the long-term concerns will be pushed aside.

The tyranny of trying to get this month’s/quarter’s/year’s numbers to turn out as budgeted can lead to hasty decision-making. You may find a way to get the numbers to work, just as the WHO found a way to get rid of malaria. However, the long term consequences could cause grave tragedy several layers into the future. You’ll be parachuting cats before you know it.

Therefore, I believe that strategists need to be protected from the tyranny of the immediate in their job responsibilities. You’ve got a whole company to deal with today. Let the strategist devote their time to examining all of those layers of consequences into the future.

2. Avoid Setting Up the Strategist in a Position Where they have No Influence on the Immediate.
Of course, if this isolation from the immediate is taken to an extreme, there can also be problems. The long-term perspective of the strategist needs to be applied to the decisions of today. Otherwise, what good is having that perspective?

Strategists shouldn’t be locked up in an ivory tower and only be allowed out in the spring for an annual planning off-site meeting. Not only does that make the strategist out-of-touch with what’s going on, it makes them irrelevant at the point in which operational decisions are made.

If the WHO had a strategist locked up somewhere, he could have come out in the spring and said, “I knew that DDT spraying would cause more harm than good. I knew those bad layers would occur.”

That does nobody any good. What was needed was to bring such a strategist into the room at the time the decision on DDT was being made and get the strategist’s perspective BEFORE making the move.

Don’t exclude the strategist from the core daily decision-making. Get that long-term multi-layered perspective. Use that perspective in your analysis before making the decision.

To avoid negative unintended consequences, one needs to include a longer, multi-layered perspective into the discussion during the tyranny of the immediate. The best way to do that is to have the strategist participate in the discussion without being held accountable for the pressures of the immediate.

Everything is interconnected. Once you realize this, it is easier to find and prevent those unintended consequences. And the good news is that the more you eliminate those unintended consequences, the less you will be held hostage in the future to the tyranny of the immediate (which is often caused by unintended consequences).