Why this article?

Now, for a change, a topic in which satirical exaggeration is not so easy for me. What might be the reason? Maybe the topic is simply too close to my heart, too important to me. Also, I have not yet completely penetrated it myself, thought it through to the end, internalized it. At least that’s what my gut tells me. I already question the title again. Shouldn’t it actually be “I” instead of “you” (or at least “we”)? But it’s OK. After all, I already have a certain advantage, because I have already dealt with it. That’s enough of doubt. What is it about? It’s about risk management.

There are lots of standards and even more literature on it. To get things clear right away: in principle, what they say is not wrong.

Ok. With exceptions. Some of them are already more on the level of the 80’s – the 1880’s.

For example, the work by an author from Central Switzerland who, apart from the fact he wrote in 1880, also calls for risk management to be suppressed in favour of success management. This will never ascend to the most important insight into risk management in projects. Rightly so.

This includes the books of Tom DeMarco, whom I certainly hold in high regard. Several of his books are right behind me in the bookcase. But dust has collected on them. “Waltzing with Bears” was published in 2003 and was thus written before a time that made us humbler in terms of risk management (at least the practitioners, see also author from Central Switzerland).

I once had the opportunity to see Tom personally at a conference. When asked by the audience which disciplines of project management he considered to be the most important, he answered after a short reflection: stakeholder and risk management, as these would most likely address the handling of imponderables. In my opinion, NLP practitioners like to use the term “interesting” when they can’t get much out of a statement. I also thought “interesting”.

It took a while before I realized that Tom was using this term to name what he saw as the central purpose of project management: dealing with imponderables.

Traditional risk management

Classical risk management distinguishes between “known unknowns”, the project risks accessible to us, and “unknown unknowns”, i.e. experience has shown that they are rather “bad surprises”. For dealing with “known unknowns” standard literature offers us proven and familiar procedures. But what about the “unknown unknown”? The generally postulated approach is “monetary reserves based on organizational or industry-specific experiences,” also known as the “management reserve.”

The Black Swan

But what events in our world (and in projects) are really devastating? Events that are predictable and caused manageable damage? The opposite is the case: So-called “black swans” like 9/11, the banking crisis and Fukushima have profoundly changed our world to this day, often by (mostly) men, trained at highly praised elite universities, previously assessed as “impossible” or not even suspected (also applies to individuals from Central Switzerland).

In his book of the same name, Nassim Nicholas Taleb demonstrates the devastating effect of such events and explains why we are so susceptible to them: through the unreflected way in which we infer the future from the past.

His wonderful example for clarification is the story of the turkey. The turkey is kept and fed from birth by the farmer. Every day anew. The turkey grows and thrives, is protected from disease and that every day ….. until Thanksgiving. We can assume that the turkey was somewhat unprepared and did not consider the consequences of the event (are there actually turkeys in Central Switzerland?).

Such “black swans” lead our thinking up the garden path: because they can be explained afterwards, they give us the impression that we “somehow” anticipated them (as D. Kahnemann’s investigations prove).

Are the common approaches to risk management in projects still up to date?

I think not.

In a world in which more change takes place every day than in the whole of 1880, the almost exclusive focus on what is known and experienced is de facto pure arrogance paired with ignorance (and this also applies to Central Switzerland).

Even iterative approaches such as Scrum, which are rightly said to be better suited to rapid change and high complexity, provide only partial concrete answers. Shorter sprints and transparency about the state of the delivery outcomes are very helpful, but do not turn a turkey into a visionary yet.

But how can we position ourselves in projects in such a way that we are better prepared for unknown unknowns, or perhaps even draw something positive from them?

It is getting thinner here, but not as in central Switzerland.

And now I’m back to the first part of my contribution and my assessment that I haven’t thought this through to the end.

I can’t (yet?) deliver patent recipes. First of all, it is only food for thought, which can help in dealing with changes in projects and modifying one’s own behaviour not only to address randomness, but to make it an ally.

At present, there is much talk about “resilience” as a recipe against susceptibility. Resilience or robustness, however, do not bring any real development: the resilient turkey does not survive Thanksgiving either.

Und jetzt endlich ein paar konkrete Überlegungen

• If experience-based forecasts do not protect the turkey from the Black Swan, why continue to rely on forecasts in this context? It is much easier to see if something is vulnerable than to predict events. Knowing the imponderability of making decisions and communicating them is more promising than explaining later why things had to go wrong.
• What actually makes systems stable? Often it is layers of redundancy (overcompensation); these are particularly easy to observe in nature.
  For example: A tobacco species in North America can only be pollinated by a very specific insect, whose caterpillars are unfortunately also the plant’s biggest enemy. If the plant is nibbled by this caterpillar species (amazing how the plant knows that it is exactly this caterpillar species), it releases a scent that attracts the particular caterpillar’s greatest predator, a beetle (first protective layer). If this does not work sufficiently, the plant transforms its flowers so that pollinating insects (the one with the caterpillars) can no longer crawl into the flowers and thus move on (second protective layer). For the sake of completeness, it should be mentioned that the above-mentioned scent warns other plants of the same species close by and the flower transformation takes place in such a way that hummingbirds can take over the pollination job.
• Detailed planning means that deviations are perceived as harmful rather than helpful to those involved in the project. Forward-looking action is therefore called for, which in turn means a quite high level of prognosis. Randomness cannot be eliminated by trying to eliminate randomness, because chance does not give a damn about our efforts!
  Randomness is to a certain extent the fuel, because detours can also lead to the goal. If this is combined with the acceptance of a certain variation in the delivery outcomes, this already has some characteristics of the above-mentioned tobacco.
• “Prepare for the worst, the best will take care of itself” is a proverb. To deal with the unlikely instead of relying exclusively on forecasts would probably have helped the Lehmann brothers.

If we just take a good look around us, we will find dozens of examples of systems that have proven more than just robust against black swans. I appeal you to learn from them. I call for more to be collected and for consideration to be given to how we can better integrate them into organisations and their projects. Everywhere, even outside central Switzerland.