The Information-Action Paradox … why an abundance of data reduces the ability of business leaders to deal with uncertainty, to make strategic choices, to act on the need to change.

June 22, 2023

Every market is uncertain. Every business leader needs to lead in a blur of change.

Volatile, dynamic environments bring new challenges to decision-making. Executives still yearn after stable environments, where the future is predictable, and data about past years can be used to evaluate future choices. No longer.

At the same time we have more data than ever before – customer insight, financial analysis, operational performance – but its largely all backwards looking. Yes, we can look for patterns and build projections, but they are based on future assumptions. Not easy. And trying to get even more specific, to build a business case, for example a discounted cashflow analysis, to demonstrate profits over future years is even harder.

In a data intensive world, executives don’t like to be intuitive. They feel naked.

While huge amounts of data, particularly driven by the realtime tracking of digital platforms and devices, allow us to be much more granular in our short-term behaviours, to optimise the present, to personalise to customers, it actually hinders our confidence, to look forwards, to imagine, to be strategic.

The Information-Action Paradox

Innosight, the consulting firm led by Scott Antony, describe this paradox particularly as leaders face the need to change. They see digitalisation, disruption and discontinuities ahead, but they feel incapable of action.

On one hand, they need convincing data to make the case that transformation is necessary and to show that their companies are about to find themselves on “burning platforms” –when there are limited options to change. But by the time public data about trends and market shifts is convincing, the window of opportunity has shrunk, if not disappeared.

So how can leaders avoid ending up on a burning platform then? The key is to act before compelling data is widely available, a challenge that is complicated by the lack of information in periods of uncertainty.

In a new article “Persuade your company to change before it’s too late“, Scott introduces a simple conceptual model to help companies map out where they stand when it comes to their knowledge and their ability to act. They call it the “information-action paradox.”

Of course there is a powerful role for data in business. First because today’s markets and activities are fast and fragmented, with data enabling focus and optimisation. And the increasingly powerful AI platforms enable futures to be anticipated, although only based on what they know so far.

We still need human beings to lead, with vision and imagination.

Tools to Lead in an Uncertain World

Scenario planning is complex and easy. Infinite possibilities can create a rich diversity of possibilities and options, but also confusion and chaos. The challenge is not to predict the future, but to be prepared for it.

It’s a great approach to use with boards and executive teams to build a rich conversation around future possibilities, future alternatives, future choices.

My first experience of scenario development was with Royal Dutch Shell, the oil business, which started using the technique in 1971, to understand the implications of oil shocks, and as we reach peak oil, the ways in which the world can shift to renewable energy. Shell’s process is complex, although produces fascinating stories of possible futures.

A simpler approach, to stretch thinking and debate possibilities, can be achieved as a team within a few hours, largely using the insights and ideas in participants heads, rather than requiring huge amount of prepared data. The collaborative process, the rich discussion, the strategic stretch, is what matters. I use these steps

Future drivers: Consider the potential drivers of change that will shape the future of your broader industry, and the world of your customers. You could use megatrends as a stimulus, or develop your own drivers based around possible social, technological, economic, environmental and political (STEEP) changes.
Critical uncertainties: Select a number of particularly interesting drivers and describe extreme opposite ways in which they might play out (polarities). For example, will retail shift primarily online with home deliveries, or into a rich social experiences on the high street? Consider the extremes, even if a balance seems likely.
Plausible scenarios: Bring together some of the most interesting polarities. Most simply do this be creating 2×2 boxes built on any two polarities. For example, the retail shift, alongside economic boom or recession, or strong or weak sustainability focus. Each quadrant of each 2×2 is a mini scenario. Repeat, and discuss.
Strategic implications: With a large number of mini scenarios from the group, bring them together in a rich picture of possible futures, sharing and discussing as you progress. Evaluate as a team the potential timeframes and certainties. How do they cluster? Which are most risky, and most rewarding? Which do we like most?

With a better understanding of possible futures, you can start to future-proof your business against the worst scenarios, but also choose the futures which you would like to create.

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