Japan’s “Black Swan” Catastrophes — Implications for Consulting Firms

We need to understand these are multi-faceted and emerging catastrophes. New risks will appear as events unfold over weeks and months. The need to identify and mitigate risk is not limited to pre-event assessments; and early solutions and priorities will shift and change.  It will also require new perspectives and tools to manage complexity.

Catastrophe destabilizes….everything, but it especially destabilizes relationships.

The Nature of the Beast – Catastrophe

These relationships run the gamut from missing or deceased family members to long standing contracts with global trading partners. A catastrophe unfolds within a shroud of fog and in an uneven manner.  Not all significant problems or issues appear at once or with brilliant clarity.  This characteristic increases uncertainty and complexity — two attributes of catastrophic events made even more significant when three catastrophes happen simultaneously, i.e. earthquake, tsunami and nuclear incident, and feed off each other.

As you may recall, a catastrophe is a sudden, discontinuous change in the system and in its environment.  It is an event that may be anticipated, but cannot be predicted with any degree of precision as to when or where it will take place, not can we predict the severity of the event in advance.  This lack of precision often causes people to be overly optimistic about the likelihood of the threat taking place, its severity, the vulnerability of their system, and the consequences of the threat coming to fruition. For the most part we live in a world of mundane risk and opportunity….a little gain here and a little loss there, with most fluctuations in the environment taking place at the margins.   People look forward to risk assessments about as much as they look forward to having lunch with their insurance agent.  Talk and preparation for catastrophic incidents are even less popular because you’re preparing for the proverbial long shot.

So if you did a risk assessment you probably did not spend a lot of time and money on “black swans.”  But hey, we’re talking about clients, right?  Obviously top tier consulting firms with global interests realize the increase in connectivity, inter-dependence, and opacity in the global supply network not only affects them, but also their global clients, right? Can you answer these questions?

Introspection

How does the catastrophe in Japan affect the Firm?

  • On the ground in Japan and globally
  • In  functional practices
  • Across functional practices (it is a multi-disciplinary world)
  • In market verticals
  • Across market verticals (it is an interconnected and interdependent world)

The context, of course, will naturally focus on how varying degrees of instability will dynamically change relationships between consultant and client, and among clients. Ah, in plain English please? Okay, the global networks are all screwed up.

Had network theory ever been applied to this problem to map relationships and key variables, the catastrophe changed everything anyway.  Any solutions predicated on pre-catastrophe environment have, as they say at the Santa Fe Institute, “danced.”  Yet, as Catastrophe Cat reminds us, catastrophe opens wide a door of opportunity and begs certain questions:

What are the implications for consulting firms that wish to address risk and an operational re-build in this “yucky” environment?  Check out this uncertainty and complexity matrix, which is basically a high level peek at the tools that are useful for differentoperational environments.

 Capabilities?

Do you have the capabilities to respond to emerging issues that are grounded in complexity and resilience theory? Huh? Well, let me show you the uncertainty complexity matrix.  If you exclusively think and operate inside the red circle (which is what we were taught in business school) where the tools are largely deterministic and probabilistic models grounded in assumptions of stability, you will fail miserably to add value in a turbulent environment grounded in high levels of uncertainty and complexity.

The system is being stressed and will continue to be stressed for some time to come.  The issue is where the breaks will occur, where will the system “snap back” and where will there be a “step change.”  Prior to a catastrophe we could have stress tested the system.  As the catastrophe unfolds we can work quickly to identify potential stress or break points and explore dynamic strategies to prevent further catastrophic failure, or to identify newly emerging needs to a population that will be undergoing the consequences of a catastrophic natural disaster for some indeterminate time to come.

Next Steps?

Take some time to be introspective…it will pay off now and in the long run.  Pick needy clients.  Pick a smart Team staffed with people who understand, who “get it” and have experience in dealing with high levels of ambiguity.  Rent the skills you don’t have in inventory. Launch quickly.  Document the process so it can be leveraged.

Comments/Discussion?   John Marke – 636-458-1917

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2 thoughts on “Japan’s “Black Swan” Catastrophes — Implications for Consulting Firms

  1. The “rub” here is that TEPCO and regulators were in bed together, the plabt operators did lots of really stuipd things. I’ve come from the nuke weapons clean up world, where one of our poster campaigns had the title “don’t do stupid things on purpose.”
    This is an example of what not to do.

  2. Pingback: The Foundational Models Thinking About Complexity, Risk & Resilience (Part 2) | Prologue

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