Tartle Best Data Marketplace
Tartle Best Data Marketplace
Tartle Best Data Marketplace
Tartle Best Data Marketplace
December 1, 2021

Discussing Agility, Risk, and the Human Element with Leo Tilman

Diving Into the Deep End
BY: TARTLE

Risk and intelligence are two factors that define the success of any organization. Information is everywhere, and yet companies and organizations are still faced with data-related challenges that hinder their development. Is information-gathering all there is to running an operation?

In this episode, Leo Tilman joins Alexander McCaig to discuss risk and its relevance to finance, strategy, and more. Leo Tilman is a leading authority on strategy and risk, who predicted the financial crisis between 2007-2008. He also authored Agility: How to Navigate the Unknown and Seize Opportunity in a World of Disruption, which is featured in this podcast.

Definition of Agility Within Risk Intelligence

To adapt to the everchanging uncertainties that organizations, governments, and even individuals face, agility is a must. This seven-letter word is often defined as the ability to assess and respond to changes, while making it distinct from flexibility or adaptability. What sets agility apart is that it calls for an individual to be purposefully decisive, while still grounded in the will to succeed in whatever endeavor an individual or group is facing. 

Regardless of an entity’s position in the world, they are always within the environment that surrounds them. To understand what defines an individual’s or a group’s agility, we must first define the environment they are in. This is important because it helps provide insight into how agility can be expressed in those specific circumstances.

An environment consists of two components: first, the dominant trends that shape the world around us. These are the specifics of an environment, and illustrate how the environment is a dynamic entity that is capable of changing over time.

The second component refers to the fundamental nature of environments, described through theories. An example is Clausewitz’s theory on war and its accurate description of competitive environments.

The Portfolio of Risks and Risk Assessment

An organization must be proactive in assessing the risks that it will face. Here comes the portfolio of risks, which is a set of risks that an organization must make to meet its objective. This involves multiple facets within the organization, like financial risks, strategic risks, and so on.

However, the executives of an organization need to come together and discuss the risks they face, as well as the environment they are in. By discussing and analyzing their circumstance, they’re able to determine what factors they have control over, and what they don’t.

Because of the vast amounts of data that companies and organizations have access to, it becomes a challenge to try and filter through all the data. Furthermore, companies soon realize that truly valuable information, like data about their clients or competitors, isn’t available all the time.

And so, being proactive about data-gathering is essential. By dedicating time and resources towards gathering valuable data, one can understand not only the situation but also the necessary risks needed to be taken. With that in mind, the portfolio of risks is then created.

The Human Element Within an Organization

Regardless of the amount of information that an organization has, and regardless of the strategies put in place, nothing can succeed without the human element. It is the flexibility of human beings that allows groups to move towards their goals.

It is the ability for human beings to adapt through the uncertainty of an environment, and process information that may change the status quo of their situation. Because of the complexity of the environment that anyone is in, it is up to the agility of human beings to formulate responses towards these changes.

For that reason, cultural assessments within an organization are important to move through the internal fog of data that organizations have access to. Because no matter how well we know our circumstances, our clients, or our competition, none of it matters until we first know ourselves.

How much is your data worth?

Summary
Discussing Agility, Risk, and the Human Element with Leo Tilman
Title
Discussing Agility, Risk, and the Human Element with Leo Tilman
Description

Risk and intelligence are two factors that define the success of any organization. Information is everywhere, and yet companies and organizations are still faced with data-related challenges that hinder their development. Is information-gathering all there is to running an operation?

Feature Image Credit: Envato Elements
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For those who are hard of hearing – the episode transcript can be read below:

TRANSCRIPT

Alexander McCaig (00:08):

Hello, everybody. Welcome back to TARTLECAST. I am joined by an extremely special guest today, and I am thankful to have a moment of his time, Leo Tillman. He is the foremost leading thinker on risk, and I don't put that lightly. He is coming with many badges of honor accredited and spoken to about by some of the world's top dogs when it comes to risk either in a military effort or in an effort for large fortune five organizations. Leo, thank you so much for coming on to join me today on TARTLECAST.

Leo Tilman (00:44):

It's truly a pleasure, Alexander. Look forward to our conversation.

Alexander McCaig (00:48):

Yep. Oh, it's going to be fantastic. And just so the audience knows, you had wrote this pretty phenomenal book on agility. And for many that don't think about agility, many people that take very conservative approaches to their work or to their life, that can actually create undo or unneeded risk within whatever their workflow or daily life might be. So when I went through and read your material, I was like, the application of this, the knowledge needs to continue to be shared. And you touched on a very fundamental point that aligns a lot with what we talk about, and that's the point around data. And so when you think about agility, right, I think that I need information to be agile. How is it that you define information, Leo, like in terms of that agility?

Leo Tilman (01:46):

Great question. And again, it's something that we have thought through for a very long time. And it stems from a belief that we had for many years now that the greatest challenge facing organizations, individuals, governments, is to be able to navigate this radical disruption and accelerating change and uncertainty that surrounds pretty much any realm in which we operate. So defining agility and creating this entire theory and framework for agility was an attempt to say, and to clarify, what does this mean to be agile? And what does it take in terms of knowledge, capabilities, cultures, processes? And of course our work was written for organizations, but it definitely applies to individuals and investors and not for profits as well.

Leo Tilman (02:42):

So to us, agility is the capacity to detect, assess, and respond to change. And what makes agility fundamentally different from flexibility or adaptability is the fact that while we detect, assess and respond to change, we do it in ways that are purposeful, decisive and grounded in the will to win. And of course, as you can imagine, every one of these words is a loaded one, and we can definitely dive in, but that was our attempt. And it stems from the challenge that we thought everybody was facing, but also the lack of clarity. And everybody's sort of using these words very casually and not differentiating between core competencies that are vital in this environment.

Alexander McCaig (03:34):

Right. And you think about core competencies, you think about agility, you think about these terms that you say are loaded. They really require definition, because definition allows you to have proper intention about how you act upon it. So if I had a lens of this world to absorb information, Leo, I need to have a specific intention of how to act, but if I can't define my lens for how I do this, well, then I don't really know to receive all the information coming in. Is that correct?

Leo Tilman (04:04):

Absolutely. And I think it's a two part question. Part one is your notion of data environment, and I'd love to talk about that. And the second one is, how do we specifically use this information and how do we determine what information is relevant? So would love to comment on the first one. So when we think about agility or the general capacity to navigate disruption and change, you need to first and foremost ask the question of, what is the nature of the environment in which we operate, right? Because it's not possible to define what it means to be agile without fully understanding the environment in which you operate.

Leo Tilman (04:48):

And to us, this environment consisted of two parts. Part one are the dominant trends that are shaping our world today, right? The fourth industrial revolution, geopolitical conflict, climate change, bio events like the pandemic, coupled with societal dislocations, nationalism, populism, the arm race of technologies. So, that's the environment. And thinking very precisely about what these trends are and how do they create this new normal is very important. So one part of the data environment is, how do we describe and conceptualize the big trends that are shaping our world? But equally importantly, there is another component to this discussion, and that is diving into the fundamental nature of environments. And it's fascinating to read, for instance, Clausewitz On War-

Alexander McCaig (05:45):

Nice.

Leo Tilman (05:46):

... or works of that kind, which are 200 years old, and yet they describe the nature of conflict and the nature of competitive environments incredibly precisely, and we can totally recognize all the things that they talked about. So we dove into that question as well. And to Clausewitz, for instance, any environment of conflict and competition and dynamism was enveloped by what he called fog and friction. Fog is the informational ambiguity. It's the fact that we don't quite know what's happening. And almost irrespective of how hard we work, there will be certain aspects of this environment that we just don't know, right? And the friction is uncertainty. It's the fact that we start implementing our plan and something unexpected happens internally or externally, or our competitors behave in unexpected ways, or there's some sort of geopolitical event that completely changes the environment. So being very proactive about thinking about the trends, thinking about the kind of data you need, but also acknowledging that all of this is enveloped in this fog and friction and chaos is really helpful in trying to figure out what we need to make decisions, but also how we will be making those decisions under uncertainty.

Alexander McCaig (07:15):

That's super interesting. I know that Clausewitz, they still teach Clausewitz at some of the top military schools around the world, even though the literature's that old, the framework, the definition of dealing with fog or friction can be applied to many other methodologies and approaches that we're currently using. Whether you're in physical combat, where it's one enemy against another, or you're dealing in competitive environments, like one large corporation or organization against another, the same rules still tend to apply. And so having the upper hand really deals a lot with having the knowledge and information, the data and learning [inaudible 00:07:51]. And so that leads me to that question where if we think about the fourth industrial revolution all right, and data being the key driver for all the spokes, all the systems in this battlefield, how do you see the role of data in decision making? And considering the fact that you have the fog in the environment, which creates that complexity, how do you see that actually evolving?

Leo Tilman (08:18):

Absolutely. And I think one of the ways to do that is to think deeply about these steps for agility, right? First we want to study the environment so we can detect the change in the environment that matters to us, right? The second one, once we detected it, we have to assess what it means; what it means in terms of the signal, but also what it means in terms of our potential actions, right? And then we need to shape the action and execute it, right? So, so from this perspective, it becomes quite pragmatic of how you would think about information. So detection, right?

Leo Tilman (08:54):

So what are the things in the environment that we need to monitor and detect in order to be agile? Well, part of it is those dominant trends that are happening, right? Part of it is the nature of the uncertainty that surrounds our world. But there are other you anchors that can really focus our attention on the right information. One anchor is your strategy and leadership priorities, right? If you have a clear vision for the role that your organization wants to play in this new normal, then its strategy and its priorities will imply certain information that you need to make those decisions. If you want to capture new market shares, or you want to develop new products, or you want to engage clients on a new level, just thinking deeply about these priorities will inform us what type of information we need to monitor this, to think about, et cetera.

Leo Tilman (09:55):

So grounding the conversation about data in information, in strategy, vision, priorities is one big direction that we take with our clients. The second one-

Alexander McCaig (10:09):

So... Go ahead.

Leo Tilman (10:12):

... is interesting and unusual, and that is, how do you use risk management and how do you use risk intelligence in trying to answer the same kind of question. And that would be a different kind of a conversation where you would say, "Okay, so let's look at our organization. In that, let's look at what we call its portfolio of risks. Meaning, what risks we take in order to deliver our products and services, run our organization, make sure we are resilient, et cetera, et cetera." And that's where the wealth of the entire field of risk management comes into the conversation, where we systematically go through financial risks, operational risks, strategic risks, et cetera. The moment we know what type of portfolio of risks underlies our current organization and how these portfolio risks could change as we evolve our strategy and develop new things, that informs us too, about the kinds of things in the environment that we need to watch.

Leo Tilman (11:16):

So one of the typical conversations that happens with boards and executives of large companies is A, they acknowledge the fact that they don't spend enough time thinking and discussing these types of issues about the broad environment in which they operate. And then there's a lack of internal clarity of what we should be looking at. And so because there are infinite number of things that we can look at in the environment, which ones are relevant? So these two complimentary approaches that stem from agility. One is the role of strategy and vision, and another one is the role of risk, really focuses our attention on what matters.

Alexander McCaig (12:07):

So if I understand this properly, if I set a specific intention, if we have clarity and discussion around our strategy, it will afford us the filter for the data that we have coming in so we can analyze what we have control over and what we do not, and then where we can act dealing with that new risk profile that has afforded us for how we want to direct our company going forward. Is that correct?

Leo Tilman (12:38):

That's exactly right. It will also force us not only to have a discussion on the kinds of things that we need to be watching in the environment and thinking about, but it will also beg a question of what information do we have and what information don't we have, right? Because one of the biggest challenges today stems from the fact that large organizations have infinite amount of data, an infinite amount of things that they could be analyzing and looking at. On the one hand, it creates a sense that we have everything we need to have, and it's just a matter of synthesizing it. And the biggest challenge there is to A, synthesize it in ways that are conducive to effective decision making, but also figure out what part of this data is relevant to us. And again, that would be connected to strategy and vision and priorities, et cetera.

Leo Tilman (13:37):

But this conversation will also make us realize something that is timeless, and that is, truly valuable information about our clients, about our competitors, about our adversaries, it's really not readily available. So what can we do to really fight for risk intelligence, which is the concept that we created, which tries to emphasize that this is not a passive exercise. This is not an exercise of sitting back and having all of this data come to you and then just trying to determine what is relevant. It's a matter of dedicating time and resources and, in the military context, dropping special forces behind the enemy lines to truly understand what is happening. There are analogs of that pretty much in every realm. So fighting for intelligence that we must have, even though that intelligence is hard to get, is an important part of this conversation.

Alexander McCaig (14:37):

Right. And I had shared with you how the total marketplace operates. And you say you need sort of that inside edge, you need to understand the people that support those systems. So if I were to take the proactive approach for my business and understanding what our strategy and our risk currently is, I would want to go out and source that data from those individuals directly which support our organizations as a whole, nationally or internationally. Right? So if I'm dropping myself behind enemy lines, I would jump on the total marketplace and say, "Well, let me go speak with those other people on the other side, let me meet them on that bridge." And that would afford me information and agility to act upon that. So then that begs the question then in my mind, so how do you see businesses overcoming this challenge that you speak of, finding that agility, getting behind the enemy lines? Is it using marketplaces like ours to source data from individuals directly, or do you find other specific avenues that they may be taking to acquire that information?

Leo Tilman (15:37):

Well, look, there are no generic answers to this question, right? It all is a function of what business are we in as a company, what is our strategy, and what information we have determined that is a must have to make effective decisions and become super competitive and effective? Sometimes it's a matter of tapping external resources in the way that you described. And more often than not, there's a very concerted conversation to be had is, where do we think this data is available? How we would engage the relevant stakeholders, how would the business model work, et cetera, et cetera. We didn't spend as much time on that part, knowing that there is an infinite number of possibilities and each company would try to determine these things in the regular course of business.

Leo Tilman (16:31):

Our focus was almost on the internal side of things. And it stemmed from the fact that more often than not profound changes in the environment start to come in at the very edges of the organization in super ambiguous ways. And it takes someone who is alert and professional and understands our priorities to say, something is up. I just heard something from a client that doesn't make sense, or I just learned about something that our competitors are doing, which is different from what they have done before. I know that this information is relevant to senior decision makers at our organization. We have the culture where even if I'm wrong and I'm crying wolf, my feedback would be welcomed and rewarded. And I would not be penalized either for bearing bad news or for distracting people from what they're doing. So all of a sudden there is the knowledge component to it, there is the process component to it, and there is the culture component to it. And all have to work together in order for us to be able to detect these really ambiguous things that are happening and then conceptualize them and escalate them to the right folks.

Alexander McCaig (17:57):

And again, I want to make sure I have this correct. You can have all the information in the world, you can have all the strategy in the world, but unless you have the culture, the flexibility as human beings to take in other inputs that may well, in fact, challenge the status quo of what you do, and that may be the data that's challenging it, you still have to be flexible enough to adapt to it, to be agile within the culture itself. If that is not a human element that is actually accruing to you, then everything else is really for not, is that what you're saying?

Leo Tilman (18:38):

That's right. And so far in our conversation, we have focused mostly on what it takes to detect and what should we be detecting and what kind of information is relevant and how do we figure it all out. So it's amazing that we spend half an hour just on one step of this process, and that is of conceptualizing the environment and deciding what we're going to watch and why, right? What you brought up now is the step of assessment, right? Because on the one hand, we have these ambiguous, super complicated things coming our way, and we need to figure out what do they mean in general and what do they mean to us? And then we have to say, "Okay, so if that's the case, what should we do? Should we create a response? Do we think that deliberate inaction is the right strategy?"

Leo Tilman (19:31):

So this assessment part is super complex, right? Because it involves a great deal of knowledge, multi disciplinary knowledge. It involves a great deal of uncertainty, right? So as you said, if you don't have the culture where dissent is welcomed, not only welcomed, but it's expected, where leaders don't monopolize conversations and stifle the discussion, where everybody feels that getting to the truth, getting to the bottom is the most important thing and it overrides hierarchies and ideologies, et cetera, we can't figure out because what we are dealing with is just too complex. So the role of knowledge, but even more importantly, culture in this assessment step is super critical.

Alexander McCaig (20:27):

That's interesting. And so do you think it would behoove organizations to do cultural assessments of themselves ahead of time? Because you could be taking all this data in, but have a lot of inaction on it, or know, even if you step in with your own firm to advise somebody, that yes, you have all this, but it won't be for any good because of these cultural barriers that you currently have. So no matter how well we understand our clients, no matter how well we understand human beings, if we don't understand ourselves, then we can't help anything else. So all this outside data that we're pouring in, putting resources into trying to get, we need to have our own internal cultural data very well understood to move through, essentially, our internal fog.

Leo Tilman (21:12):

Alexander, I really, really enjoyed our conversation. I think the issues that you're bringing up are fundamental. And as I mentioned before, in frank conversations, boards and executives openly acknowledge the fact that they're too busy to spend time on something this fundamental, in that sometimes they feel that they're flying blind in the face of disruption and change and in uncertainty. But there's definitely a movement, there's definitely a realization amongst senior decision makers that intelligence gathering, risk management, planning are integral components of any kind of successful, agile organization. And they also are starting to realize that agility in the way that we describe it, in the capacity to navigate disruption and uncertainty, has two equally important components.

Leo Tilman (22:12):

One is a strategic agility, which is the capacity of the leadership teams to respond to major changes in the environment and reposition entire enterprises in terms of products, services, business models, human capital, to this new reality. And the second one is a tactical one. Once we have the strategy, once we dispatch our whole organization to go and implement it, everybody in this process will encounter their own challenges and surprises and changes in the operating environment. So they too have to go through detect, assess and respond process at their own organizational level.

Leo Tilman (22:53):

And it takes both. It takes both strategic and tactical agility to really, really be successful in a disruptive environment like we're in today. So data plays a huge role, a huge role in detect, assess and respond, both on the strategic level and the tactical level. But as we discussed today, having the framework of how to put this all together, having the right processes, knowledge, cultures are equally important. So when that all works in unison, it becomes really powerful.

Alexander McCaig (23:28):

Wow. Leo, thank you so much for coming on and sharing that. I really do appreciate it. And like us on this call, we had to be agile, and we've seen that there are benefits from it and this knowledge can be shared. So thank you again very much for coming on the TARTLECAST.

Leo Tilman (23:40):

Truly a pleasure.

Speaker 3 (23:41):

Thank you for listening to TARTLECAST with your hosts, Alexander McCaig and Jason Rigby, where humanity steps into the future and source data defines the path. What's your data worth?