Recently we sat down with several of the world’s top CEOs to discuss how to make hard decisions and lead through uncertainty. We live in a world fraught with unknowns and change. Recessions threaten, wars disrupt, and economic volatility challenges. As a professor at INSEAD, I’ve devoted my career to studying innovation and uncertainty, writing about it in my recent book, The Upside of Uncertainty.
In our conversation, one CEO of a major consumer brand known worldwide put his finger on the critical issue of leading in uncertainty. The CEO pointed out that there is a paradox that makes it incredibly difficult to make good decisions under uncertainty: “If you look at the companies who over the long run create extreme value, they are almost always investing counter-cyclically,” this CEO reflected. “We all know it. But we never do it. Why?”
We see this tension in companies, in careers, and most of all in personal life: we shy away from the really big decisions, the ones that could change our trajectory because they are … well, uncertain. I remember this challenge keenly when opting to step out of my MBA and forgo five years of income to earn a PhD. Why not just take the “safer” route and just take the job? But is that “safe” really so? Recently I ran across a well-known quote by Helen Keller, the famous disability rights activist that struck me: “Avoiding danger is no safer in the long run than outright exposure. The fearful are caught as often as the bold.” As I have learned to take more risks, and watched my friends who have not, my personal experience matches Keller’s observation. So why then do we step back at the critical moments that could create a step-function change?
As my coauthor Susannah Harmon Furr and I wrote about in The Upside of Uncertainty, we all forget a fundamental fact about uncertainty: uncertainty and possibility are actually two sides of the same coin. There is no innovation, no change, no transformation, no growth without uncertainty. They are inextricably linked in the sense that uncertainty is the moat that protects a new opportunity. There is an old saying that illustrates this fundamental truth: no risk, no reward. And yet, still, knowing this, when the uncertainty arrives, we so often get skittish and shy away and thereby miss the opportunity.
How can we overcome this tendency and instead make smart, courageous decisions that open up new opportunities? One CEO we spoke with reflected on their decision to open retail stores at the moment that retail seemed to be entering an apocalyptic moment: “People said online is taking over. Physical stores have no future. But we sat down and did a careful analysis, looking at how our customers experienced [our product] when they could see or touch it,” our contact explained. “Even though it was risky, we believed in the idea. We decided to go against the wave and it was fantastically successful. That has been essential to our success. We are willing to take risks.”
When I asked if it was an easy decision, the CEO smiled and admitted, “it is super hard to make these decisions. … It probably matters that you have a leader who has tried things and is willing to try. Otherwise, you may be too nervous to try.”
Go to Hell Money
Another leader shared a piece of wisdom that has helped guide his ability to make courageous decisions: “I remember my last class at INSEAD, and the professor said, ‘It’s important to save up for some “go to hell” money.’ What he meant is that it helps immensely to have a fallback so you can dare to do what you believe in.”
In fact, he touched on a critical point about navigating uncertainty we discuss in The Upside of Uncertainty. If we are too afraid, because we have no fallback, we might never take the bold decisions that unlock the greatest opportunities. It’s easy to say, but hard to do. What this leader touched on is a principle we discovered in our research that can help you make those courageous decisions.
Runways and Landing Strips
One tool we wrote about in The Upside of Uncertainty we called “Runways and Landing Strips.” One of the ways the innovators we studied got comfortable with uncertainty was to lengthen their runways. What does that mean? In the startup world, your runway is the number of months you have for your idea to take off before you run out of money, and is calculated as cash reserves divided by monthly expenses (or monthly income less expenses). Finding creative ways to lengthen your runway, whether for a corporate project, a startup, or in your personal life can significantly lower your stress and help you make good decisions.
For example, when my coauthor Thomas Zoëga Ramsøy had to make the hard decision to leave a comfortable career in academics to start his applied neuroscience firm, Neurons, he told us, “Frankly, the key was reducing my personal burn rate. … I just got really creative in lowering my monthly expenses so I could sleep at night. It took so much stress off my shoulders and gave me time to figure the business out.” Today Thomas has worked with some of the world’s top brands like Google, Coca-Cola, IKEA, and H&M.
A second approach is to broaden your view of your landing strips. What do we mean? So often people get obsessed with the status quo—their current job, situation, or task—and don’t want to take any risks to disturb it. By contrast innovators take that risk and they get comfortable by broadening their view of the possible positive outcomes—the many potential places they could “land”—beyond their current position. Another of my collaborators, rose from being a junior manager to head of innovation at a Fortune 50 company because he was willing to take the risk. He reflected to us that the key taking the risks which led to his success was that he wasn’t afraid of being fired: “I knew I could take what I’m learning and get another job, maybe even a better job.”
Making decisions under uncertainty is never easy. Learning to see our runways and landing strips can help us stay calm under pressure and unlock the possibilities. Doing so is the key to a rich life and career. In the words of Helen Keller, “Life is either a daring adventure or nothing. To keep our faces toward change and behave like free spirits in the presence of fate is strength undefeatable.”
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