Ep 34 How Do Leaders Make Decisions When There's No Time and No Certainty?

We cannot isolate the future from the present, and we cannot isolate the present from the past. We have to look at everything. So what I worked in strategic foresight, so enabling companies to build a strategy based on megatrends, future scenarios on a time horizon from 3 to 12 years. And, but it was mostly disconnected from everything what happened in the past and what is happening in the present.

Welcome to the Jump Leap Long-Term Strategy Podcast, Episode 34. In today's world, you don't have 6 months to make a decision. You may not even have 6 days. The threats are faster, the timelines shorter, and the stakes higher. So how do you make decisions under duress when certainty is impossible? You certainly don't want to make things worse. And that's the challenge that we're tackling today. Is there a way to achieve some kind of balance between the need to escape a difficult situation while at the same time planning for long-term success? Tune into this episode to hear from me and my special guest Marcel Melzer as we tackle and try to solve this wicked problem together. We'll be exploring ways of maintaining a long-term focus in the middle of a disaster or a disruption. I'm Francis Wade, and welcome to the Jump Leap Long-Term Strategy Podcast. And we're back. As you can see that I'm joined on the screen by my special guest, Marcel Melzo. Let me tell you about Marcel. He's an engineer and strategy consultant with experience in supply chain, aviation, and manufacturing. He's also the founder of something called Foolish Futures, where he combines strategic foresight with decision intelligence. He offers a 48-hour decision-as-a-service model in which he helps leaders make fast, confident choices under uncertainty. Marcel, welcome to the show.

Hi, Francis. Good to be here. Looking forward for the conversation.

Creative. And folks, you should know that Marcel is dialing all the way from Germany. I'm here in Jamaica. Thank goodness we have technology. But if this is the first time that you're dialing into our— the show, to the Jump Lead Podcast, you may not know that this is a bit different than other podcasts. So this is a problem-solving session where Marcel and I will be working on the problem together, assuming that neither of us has the total or complete answer. And the first part of our show will be spent in diagnosis. And the reason we're gonna spend most of the show in diagnosis, as Einstein tells us to do, is that we're hoping to share with you our underlying thinking or philosophy, kind of our approach, so that you can use it yourself. It's far better than just telling you what our conclusions or outcomes are and you have, you know, you're kind of like, where did that come from? Here we're actually gonna break things down so that you can see, you know, weigh the pros and cons of our different points of view. I mentioned Einstein. Einstein said if he had an hour to solve a problem, he'd spend 55 minutes thinking about the problem and 5 minutes thinking about solution. So in this show, we spend a lot of time thinking about the problem. We're also going to hope for some serendipity, that we discover some things that neither, either of us didn't know before. If that happens, I'll just say, oh, we'll just ring the insight bell because we do have a little bell that we ring when we come up with something new or different. So let me start off with a story. Terence is a chief supply officer in a mid-sized company. In the past 2 months, the company, the organization, has been thrown into a whirlwind. Why? Some 50% of their raw materials come from a single country. So that's not bad by itself, except that in the country that the raw materials come from, there has been a radical change in leadership, and now his company faces a brand new 75% tariff on its main raw material, hamselium. So there's an overt threat also that it may increase. Based on rising geopolitical tensions. This may ring a bell. There are two other possible sources of Hamselium, but they're only available in small quantities at 150% greater cost. So this is not a new problem. The fact that they source the raw material from only one country has been a subject of speculation within the company for years. A few wise heads had suggested that they find a substitute. Problem is that this substitute would take at least 5 years, maybe 10, of steady R&D investment. So the plans never really got off the drawing board. However, about a decade ago, they did hire an expensive consulting company, and that company produced a trend map sort of predicting the trend of the demand for hamstelium. Unfortunately, the report is gathering dust on the shelf, but you know, it was interesting at the time, he recalls. People talked about it. So they have made these half-hearted explorations, and he thought they were kind of headed in the right direction, but they really didn't implement the— I didn't complete the ideas, they didn't finish the exploration, and now it was costing them. And today his biggest fear is that the continuous distraction of tariffs will only delay the investment they should have made 20 years ago when the idea of finding a substitute was first floated. So guess what? Today he's losing sleep. He doesn't want to let the company, its employees, and its customers down. So a disruption and, uh, um, distraction. And Marcel, have you, have you seen or have you been around this kind of terrible drama before?

Yeah, so yeah, definitely. And, uh, so I can feel with Terence, uh, at the situation he is in. I think for him it's difficult for him in two areas. The first one is really to solve the situation and keep the business running. So keep the business running in terms of the material flow. So the most important thing for him and his company will be to serve the customer. So this is what he has to guarantee. So on a business continuity side. But secondly, I think he's also in a challenging situation regarding the organizational structure, because when I understand his position correctly, he is in the upper management, but there's still someone above him. And so he is finding himself in the situation of keeping his teams aligned to solve this situation, but on the other hand, also to be aligned with his boss and the CEO to, to, um, steer through this situation. So I think this is, um, a really tricky situation for him. And as I told you, from, from two perspectives.

Yeah, from above and below. Yeah, yeah. So he's got to, he's got to somehow convince and persuade, you know. And so this is a change management problem as well. He has to convince and persuade levels above him and levels below him. And he can't just, you know, send out an email or, you know, launch a memo or even give a speech because the concerns at the level above him are different from the concerns at the level below him, which makes it more, all the more complicated, no?

Yeah, definitely. And what you have told that there was a study several years ago, and for me it sounds like there could have been a decision made in the past which would have led to the situation now that there are different options to, to deal with this, uh, this situation, but they didn't take any action in the past. So I think it's, we have to make clear that like it's in many business critical situation that the problem is not the problem itself, which we see right now in the present. The reason for the problems was happening the past. So, um, so if, if, uh, Terence is looking in the past and he is able to reflect on there was maybe a decision not made correctly, or we didn't, um, jumped into the topic of securing material flow also with a different supplier and so on, um, we can assume that also other people in the company, and especially in his team, are are doing the same reflection. And this is not really helpful to deal with this situation because many people will run through the company and will say, I told you it's a risk. Why didn't we manage differently? Why do we pay our C-levels? What are they doing? It should be part of the risk management of the long-term strategy and so on. And now these operational guys, they find themselves again in the situation of firefighting mode.

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And they are the guys who are solving the problem and keep the business running. And, uh, so it's a typical situation to see how also operational and strategic levels in companies are disconnecting.

Yeah. Yeah. And it's, you know, unfortunately it's extremely common, right? Because they, you know, if you were to travel back in time and interview the executives who were there, they would say, oh yeah, well, you know, we meant to do something about it, but you know, we had this fire to put out and we had this drama going on and we had this disruption and we had, So they'll list off all the things that they were busy doing on a short-term basis, and they would say they never really got around to putting together the long-term plan, they never really got to figure out the steps to substitute ham cellium, they never really got to. So they could make a compelling case for how they were being good stewards of the immediate, and, and, you know, sort of appeal to the You know, or, you know, we're human, you know, because these are the kind of things I hear from executives all the time that they have really good reasons. Good reasons. They talk a good talk about why they can't focus on the long term and they couldn't and why they put off big decisions until they were never made. But they make a compelling case. You know, they make a good argument and it sounds like, well, you know, they can be forgiven because they were trying their best. What do you think of that whole line of argument?

Yeah. So what you describe as a symptom is, when I understand correctly, the trade-off between short-term strategy and short-term actions and the long-term strategy. And this is what I, when I told you about the disconnection between operational level and strategic level in the company itself, it's exactly the same like disconnecting long-term strategy and the long-term strategy. And when I, when you try to cite these C-level guys about their reasoning why they couldn't have done different, what comes to my mind is that there is also an underlying issue in the paradigm of how the understanding of time is. So, um, when we talk about long-term and short-term, it's about time. Exactly. That's the only differentiation. Strategy is same, but it's long-term, short-term. And, um, when you look at time, it's not long-term, short-term. It's, it's looking in the future, definitely. But, um, not only the time horizon is the interesting part of what does it mean in terms of times, but also when we look into the long-term and the future, that there's not only one So, it's, it's not only, it's not the task of the C-level strategy guys to look into the future and try to predict how the future will be. The task is to look into the future, to lay out different futures. So it's plural, and then to prepare for it in the best possible way. So, like when I hear the rationale, what you, kind of try to cite, of, I was not able to prepare for this because I, they had to make the trade-off between, um, going this way or the other. Oftentimes it's the case, but most of the times you are also able to prepare for different futures. And when you are able to have this paradigm in your strategy, um, layout and strategy building processes, that might be a different case also here. So I think this is also one of these, um, underlying paradigm issues which led maybe to this kind of situation where Terence finds himself now.

Right. So let's delay the solution or the creating different futures or exploring different futures and scenarios when we get into the solution part of our conversation. Because the first part is, you know, most organizations have leaders that they also argue, like you said, that, well, you know, we can't predict the future, so therefore we shouldn't even think about it because we're going to predict it wrong. These are the compelling arguments I hear when I talk to people. You know, because we can't predict, we don't want to get things wrong, so therefore we don't want to make any plans because As if this were the— and then they might bring in that, oh, but you know, we just had COVID and Jamaica just had a hurricane and there's gonna be more hurricanes, so we can't predict the future. So therefore, we shouldn't even think about the future, we should just think about the next week. And these are smart people. And what does one say? So what can Terence say when a member of the board has that point of view and they're fighting for it? Because chances are that's what also afflicted the C-suite when they were, you know, when they considered Hamsterlion 10 years ago. Somebody, some bright spark raised their hand and said, well, you know, we can't really predict what's gonna happen with Hamsterlion, so 'You know, maybe we shouldn't spend any of our time on it.' And they implied that they shouldn't spend any time on it, or they undermined the effort. Or after they had this great conversation, someone went back and said, 'Eh, you know, we don't really know what's going to happen.' But that point of view that we can't know what's going to happen and therefore we shouldn't have a conversation about the future is rife. Especially in Jamaica, right? No, you know, the shock of the Hurricane Melissa is such that it's hard to think about the future because the shock of the immediate disaster and the recovery from the disaster is so strong. You know, it's an emotional thing. Everyone is distracted, but it's hard to argue for any kind of long-term thinking when the future looks so uncertain. So what does one say? How do we convert them, the ones who are convinced that there is no long-term thinking because there is no prediction that's possible?

So when you ask me what I I would tell Terence, I think he is having a good argument now to tell why it would make sense to make it differently because they find themselves right now in the situation which obviously is not good and obviously they could have done differently in the past. So they have a good reason now to start the discussion about how to, um, take a different approach in the future first.

And second, um, he has some new— sorry, just to jump in— he has some new data to work with. Yeah, to make the case. Great.

Okay. And, and second, um, when we try to understand what is hindering to make this long-term strategy and try to predict or prepare, what you said is that we don't know what will happen and this is hindering us. But what exactly is behind these words? And I think it's this feeling of uncertainty. So we are uncertain where the world goes, where the future goes, where the markets of the business goes, and so on. And I think when we would talk to the bosses and the C-levels of Terence and we start the discussion about this uncertainty and so on, I think we will figure out that in the past, past decades, when they act like this, it was working out because these kind of events which are happening now with the material which you described, they didn't occur so often. And when they occurred, they were not that huge and were not bringing that much risk for the business. But, um, there's maybe, I can, I can tell you there's one, um, uncertainty index, which is, um, described by McKinsey and The Economist. And they are describing the, the, um, yeah, the uncertainty index over the last decades. And what they have shown is that it's doubled since 1990 and, um, these Major shocks, really major shocks. They are not occurring like in the past, every 11 years. Now it's every 5, and each peak in the last decades is stronger than the last one. So I can understand, I can fully understand that the leaders and the high management is, they have learned differently. Let me tell you like this.

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