I was intrigued by the title of the American documentary film “The Unknown Known” directed by Academy Award winning filmmaker, Errol Morris, on the former U.S. Secretary of Defense, Donald Rumsfeld. At the beginning of the documentary, Rumsfeld argues that a major purpose of the Department of Defense is to evaluate “unknown knowns,” or “the things you think you know, that it turns out – you did not.”
This is so true for business as well.
We think our business is doing well since we are earning profits, but it turns out that they are just book profits and we are actually in cash losses. We think our sales are growing, but the quality of sales is actually going down, resulting in increased ageing of debtors. These are things which we understand, but are not aware of its implications and only realize it later, sometimes too late.
Talking of Unknowns and Knowns, we can therefore have a Rumsfeld Matrix for Business comprising of 4 Quadrants or situations.
Things which we are aware and understand
Things which we are aware of, but don’t understand
Things which we understand but are not aware of
Things which we are neither aware of nor understand
Let us look at each of these Quadrants in the matrix in relation to your business and the relevant strategy, that need to be employed, in each of these situations.
Quadrant 1 - KNOWN KNOWNS.
These are things you know and are aware of them. You also have the full facts and understand what you know. For example, you know your company, your products, your people, your territory. You also know your present competitors, your market share, your product mix, profitability and all the other measures, and their respective risks. Since there is certainty of information, there is a feeling of comfort and confidence. Hence this is the ideal quadrant to be in, always The strategy in this quadrant is therefore to exploit the situation you are in and play on your strengths, through your current competitive advantage.
Quadrant 2 - KNOWN UNKNOWNS
These are things which you know and are aware that they are important for your business, but find it difficult to predict its impact. For example, these could be the future health of the economy or interest rates. It would also be the demand curves especially in a cyclical industry and pricing in a competitive environment. These are things you know, which could affect your business, but it is difficult to understand and foresee their implication on your business. These could be tricky; since it involves predicting the future. The strategy in this quadrant is therefore to exercise Caution and explore possibilities and options. There could be a lot of Learning and Development requirements. However if the learning is complete and the prediction of the future implications are accurate, it could be a smart competitive advantage for you.
Quadrant 3 - UNKNOWN KNOWNS
These could be information that you have, but is based on wrong facts or assumptions and hence could be a Pandora’s box. This is what Mr. Donald Rumsfeld referred to. In Business, the “unknown known” could be wrong metrics or assumptions on the basis of which decisions are being taken today, which are actually detrimental to the company. These could also be competitors, technologies, services and trends, which are out there in the world, today, but you have not discovered or given adequate attention to them. These could affect your business significantly. The strategy in this quadrant is to carefully dig deeper, to expose the wrong assumptions. It is also necessary to do environment scanning and data analytics, to cull out information out there and then take necessary corrective action.
Quadrant 4 - UNKNOWN UNKNOWNS
These are the real Unknowns. These are unpredictable events, which happen and end up disrupting everything. They come out of the blue, unexpected. For example, a terrorist attack, the irrational behavior of a competitor or an unexpected new law or new government, departure or fraud by key people, or natural calamities like floods, earthquake or a tsunami.
The unknown unknown is something, which you do not have control over and hence there is this feeling of Fear of the Unknown. The strategy in this quadrant is to do a Risk Analysis and prepare for Disaster Management. And in case disaster happens, you need to be quick thinking, and innovate to turn problems into opportunities to enhance business. There is a need to be flexible and nimble in this quadrant.
All Unknown therefore present the following challenges,
1. Dealing with uncertainties and unforeseen circumstances
2. Managing interpersonal relations among the different stakeholders
3. Taking advantage of opportunities, as they come.
The key to Success is tackling these challenges and undertaking the journey from the Unknown to the Known, by closing this gap. A successful organization is one which accepts that there will always be “unknowns” and is able and willing , to respond accordingly.
For a Successful Business, it is therefore about transforming and converting
So, what are you waiting for? Prepare to Rise and Surge in your business.