Page 29 - The Resilient Organization

16 Part One: Why Resilience Now?

is not the magnitude of our forecast errors, but our absence of awareness
of it” (italics added). In part, the knowledge we have (provided that others
know we have it) prevents such outlier events from happening, at least if
they are human intended.
There is fundamental uncertainty about future prospects. The future is
unknowable. On which, then, do we build our strategies?
Second, there are a number of extraordinary events that disturb the
assumed normalcy. Taleb (2007), again, writes about rare, potentially cata-
strophic events that he calls “black swans,” whose occurrences cannot be
predicted in time. Bill McKelvey, a professor at UCLA’s Anderson School of
Management, has strongly criticized the use of normal distribution as a
basis for organizational theorizing. He has suggested that the power law
distribution—an expression of probabilities frequent in networks—is a
much more accurate basis for study when there is connectivity. Power law
distributions have long tails, suggesting that they do not behave the way
that events do according to normal distribution. It is not only that people
are “boundedly rational” (Simon, 1979) or that biases and decision-
making heuristics distort the choice toward less “rational” or theoretically
optimal outcomes (Kahneman & Tversky, 1979). It is also that risks, in rare
instances, may become highly correlated even if they have shown independ-
ence in the past. It is a sort of domino effect, a collapse of past tendencies
into one big meltdown. The world has become so interconnected that every-
thing now depends on everything else: banks don’t lend, organizations run
out of money, people stop buying, there are no jobs. There is no market to
buy and sell.
A potential third strike against strategy is the temptation for ruling by
hindsight. Professor Karl Weick at the University of Michigan is attrib-
uted a saying akin to “Strategy is sense making in retrospect.” The
realized outcome looks inevitable only now that we know which dots to
connect and which to ignore. Naturally, looking forward we see potential
for a multitude of possibilities. Honda’s entry to the U.S. car market is
perhaps the most often told story of retrospective strategizing (see
Pascale, 1984, 1996). The Honda representatives discovered the demand
for small motorcycles by accident. (“An old lady asked where to buy a
motorbike like the one the Honda representative was driving.”) Reluctant
to dilute their brand image as a maker of great cars with small