Navigating Uncertainty: The Art of Imperfection in Strategy

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0:56Hello and welcome to another episode of the Duct Tape Marketing Podcast. This is John Chance and my guest today is Charles Kahn. He is the author or co-author of the best-selling book Bulletproof Problem Solving, The One Skill That Changes Everything. And he's got a new book coming called The Imperfectionist, Strategic Mindsets for Uncertain Times. He's also the co-founder of Monograph Capital, a life sciences venture firm in London and San Francisco, and was previously CEO of the Rhodes Trust in Oxford. He's a board chair of Patagonia and sits on the Nature Conservancy European Council. He was founding CEO at Ticketmaster City Search and was a partner at McKinsey & Company.

1:41So, Charles, welcome to the show. It's really good to be here, John. Thanks for having me. You've been a busy man. I have been a busy man. So I do want to talk about your book, but I can't pass over talking for a moment, if you will, about Patagonia. And I'd love to just talk a little bit about the, I don't know, how, maybe you have to remind people, but a lot of people certainly are familiar with the story. But how unprecedented and maybe how important for the environment the current kind of shift in, would we call it, ownership has been?

2:16I lost you for a second there. I hope it's not my internet here. So I had just teed up a question about the change in Patagonia, which hopefully people have read. You might remind people of the scope of it, but just how unprecedented that change is and how important for the environment you think it's been or will be. Yeah, look, I mean, it was a number of years in coming and I think it's going to have a huge impact. We already have many people calling us and sending emails about how they can do something like this, too. And as you know, Yvonne and his family gave away the entire company to fight the environmental crisis.

2:54But I do think it's really worth saying that you don't have to, you know, in order to do good, you don't have to do something as bold as that. I like to think of the example of, for example, MasterCard. 9 % of MasterCard shares are held by the MasterCard Foundation, which gives away, you know, a billion dollars a year. So there's a lot of good that people can do without doing something as extreme as what Patagonia did. We think it's a wonderful example. In some ways, Yvonne teed it up in 2018 when he changed the mission of the company from making the best gear, doing no unnecessary harm and using capitalism to fight the environmental crisis, to we're in business to save the home planet.

3:35And what, you know, what he and the family did September 14th last year, I think was the kind of the culmination of setting us that kind of a challenge as the mission of the company. Yeah. The company has had a long history of, you know, of socialism and, you know, environmental stewardship. But as you mentioned, that was sort of unprecedented. So in the subtitle of your book, you used the term uncertain times. So I'll just tee this up. Are we in particularly uncertain times? It feels like it. I mean, you know, when you look at all of human history, of course, things change very little. And then if you really look at the last, you know, 75 or 100 years, really within the lifetime of our parents, everything has changed.

4:23And then if you just look at the last two decades and you look at programmable biology, artificial, the impact of artificial intelligence, automation, robotics, politics, things are changing actually much faster still. Even in the last decade, things are changing faster than the previous decade. And I think what it means is all the frameworks that we were taught, the ways of thinking we were taught, you really need to set them aside and say, what are the right mindsets for approaching the world that we live in now? Yeah. And of course, you could certainly make a case for the last three or four years, you know, acceleration happened even faster.

4:58And really, as somebody who's written and writes about problem solving. I mean, wasn't that basically, like it or not, an incredible environment to test problem solving? Yeah, I mean, it's funny. I think, you know, problem solving is now. And, you know, it's been my life's work. But in a world where, you know, the internet knows more than you could ever know. And there are more specialized people in every possible field and every type of influencer, what's the one or two things that humans can actually do better than anything else? And I think the answer to that is problem solving in small groups.

5:41And I don't think there's anything more essentially human than that. There's a particular type of problem solving that I always find intriguing. There's examples of it throughout the last couple of decades, particularly, and that's the business leader who is faced with solving a problem of their cash cow going away, right? The industry is changing in such a way that they are going to have to like kill the, you know, let's use another metaphor, the golden goose. And some choose to ignore it because, Hey, you know, I'll be out of here in a while. You know, how do you address that? Put that problem that you don't in some ways you can say you don't want to solve.

6:25Yeah, well, you know, I mean, in many ways, that's what the book is about. You know that you have Schumpeter's creative destruction, right, which is that which the Austrian economists said that's what capitalism is about. And of course, you know, it's the job of every company, including companies like Patagonia, to either reinvent themselves or become part of the trash heap of, you know, past ideas that didn't work. And what the book, the new book, which is about problem solving under high uncertainty, is about can you make that transition? Can your company or organization, because half of our examples are nonprofits, can you recreate yourself or not?

7:04That's what it's about. So there's been a lot of, I mean, a lot of people would agree with this idea that trying to be a perfectionist, you know, is a kind of a dead end that people, I think, given up on that idea. But have you taken it to another extreme that might be interpreted by using the word imperfectionist might be interpreted as like good enough? No, I mean, and of course, you know, the double meaning and imperfectionism is intended. You know, there is no, if you think about like linear programming or even chess where all the rules are actually known. And, you know, that's one of the reasons why machines are so good at it.

7:40That isn't the world that we live in. Today, you know, when you and I were going through university, strategy was about understanding industry structure and who the players are and thinking about the conduct of those players within the structure. Well, when the structure is blurry, you know, we have super competitors like an Apple or a Google or a Microsoft, and where things are changing so quickly that the person who disrupts your business is just as likely to come from outside as inside, probably more so. That way of thinking about strategy as if it were a programmable game is completely wrong.

8:18You need to think about strategy as more of a dance. And that's where this idea of imperfection comes in. So what you need to do is be curious. You need to gather data. You need to see things from multiple perspectives, including the perspective of people outside your industry. You shouldn't be thinking about what your classic rival is going to do. You should be thinking about some rival you've never even thought of. And so you should anchor outside your own way of thinking about yourself and even find sources or solutions in, for example, competitive games like Kaggle, where you use that in order to provide a new way of thinking about your own business.

8:58So that's imperfectionism. It's interesting, though, because as I listened to you describe that, I think a lot of people would talk about strategy as a science. And you were talking about strategy as an art, maybe. Chekhov, who was both a scientist and an artist, said the only difference is artists embrace uncertainty. And I think that's really where you're headed, isn't it? I wish I put that in the book. I mean, Chekhov is one of my favorite authors, and I think that's right. What we're saying is that strategy is more like rugby than linear programming and more like an art than a science. And it's about an orientation you take toward the future rather than trying to discern each corner, you know, like in a Tron game, right?

9:43So you, like all good authors, have a framework, I guess, the six mindsets, we might call them. and some of them I think are pretty obvious. I won't have you unpack them all. I mean, pretty obvious where you're going with them. But the one I really do want to hear about is Dragonfly Eye just because it's so interesting. Yeah. So call it a framework if you like, but in some ways I'd like to think of it as an anti-framework. Ah, okay. You're the author, you get to. Well, I mean, I went to business school and went to work at McKinsey and we were taught Michael Porter, and structure, conduct, performance in McKinsey.

10:23And all I'm saying is here's a group of six things, you know, arrows you can put in your quiver. Pull them out as you need them. Dragonfly eye is one we like a lot, and we use the analogy of a dragonfly, which has thousands of separate cells in their eyes. And they collect information that's much richer than the human eye can capture. We don't know exactly how their dragonfly eye brains process information, but we do know that they can see far more spectrums of light and far more angles than we can. And we use that analogy to say, when you're thinking about strategy, don't just think about it from the perspective of yourself and your company, which is, of course, the very natural thing to do.

11:06And at a place like Patagonia, we've been going for 50 years. Of course, you're rooted in your own history. What we're saying is step outside that, Anchor outside that and say, force yourself to think about what does it look like from the perspective of one of your upstream suppliers or one of your downstream customers or one of your existing rivals or perhaps think about it from the perspective of a potential rival. If you see the kind of strategic problems that you're facing from a variety of perspectives, you're much less likely to just drop into that rut that we're all used to thinking about.

11:43Like maybe we need to cut price. Maybe we need to add another product color. I mean, that's bullshit. That's, you know, that's the kind of old way of thinking. Maybe we need to blow ourselves up and think entirely differently. And of course, that's what businesses find so difficult to do. Well, and I mean, I'll give them a little bit of support. I mean, because unfortunately, sometimes what that requires is, and we're going to go, we're going to like get hit by our shareholders pretty hard for a while. I mean, we're going to, you know, we're going to have, you know, some real trouble explaining people why, you know, we see the future that they don't.

12:19So, I mean, that's probably what holds people back, right? Yes. And, you know, of course, my friend who was, you know, my colleague in business school, Clay Christensen, you know, wrote books and books about this. You know, you can either choose to be the disruptor of yourself or you can let other people have a go at disrupting you. and it is difficult and you face pressures from your shareholders, from your employees, from your mother who says, what are you thinking? But if you don't do the job to rethink yourself, and it's funny because I was with Yvonne Melinda online just on Friday and Melinda made this point.

12:59She said, you know, we've been doing this since 1970. And every few years we reinvent what it means to be Patagonia. Not the core ethic of serving outdoor athletes and doing it in a way that doesn't damage the environment, but we rethink what it means to do those two things every few years. And if you don't have that flexibility to do that, you end up being toast, right? And especially in retail. Think how many retailers are still around, right? When you were a kid, there was Montgomery Ward and Sears. Where are they today? Kmart. Kmart. Yeah, AMR2. AMR2. And I think that this is the challenge for all of us as the world gets faster and as technologies make it easier for other people to attack our business, even when they didn't grow up in our business.

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15:29And here's the best part. You can license this entire system for your agency by simply participating in an upcoming agency certification intensive. Look, why create the wheel? Use a set of tools that took us over 20 years to create, and you can have them today. Check it out at dtm.world slash certification. That's dtm.world slash certification. So in a lot of ways, I mean, I think people would think about this idea that you're explaining in maybe 10-year windows, like where are we going to have to be? And I mean, you're really talking about real time, right? I'm talking about real time. I'm talking about your planning horizon should be less than a year.

16:11And you should be scanning the horizon for both opportunities and threats all the time. Think about the folks who work in banks right now. I mean, what's a bank going to be in 10 years? Who are the most interesting players in banking right now are not banks, right? And look at players like Amazon. So in 2007, they had no position in consumer finance. Today, they have a 24 % share. Their payment system has a 24 % share of transactions that are occurring in retail in the United States. That's just a few years. They didn't do it by acquiring a big consumer finance company or a bank. They did it by making small steps, investing in this little enterprise, hiring a team from this failed fintech.

16:58You know, very small moves that were they, which they used to build up their capabilities and understand more concretely what was beginning to play out in consumer finance. they imperfectionously stepped themselves into a very strong position, just as they had done in cloud computing and just as they're doing again now in consumer health care. Right. Yeah. And there probably were failed bets along the way that didn't work out, you know, but I think that's what you're making, right, is we have to be doing lots of bets, right? Many. The book starts with Amazon's stepping into consumer finance. And the four examples I give that they did from 2007 to 2015 were all failures.

17:44They all look like failures, but they weren't failures. Each one of those was a learning step for Amazon. Each one of them helped build their assets and capabilities, helped build their team and the team skills, and helped build the team's understanding of the game field that was slowly or quickly unfolding. So for this real-time strategic problem-solving leader of the future, are there attributes that they either need to develop, embrace, or have that you think are going to serve them? Yeah, and you know, I'm going to give you the most obvious of all, and you'll say it's boring, but the very most important thing, because all of us humans are subject to incredible cognitive biases, is curiosity.

18:29And when you read, you know, Daniel Kahneman's book, Thinking Fast and Slow, he tells us all the ways, you know, with our giant brains, we actually use that processing power just to convince ourselves that our initial thought about something is correct. Instead of using that awesome processing power to really think. The starting point of real thinking is to be curious. The second one we've discussed already, which is to see things from other perspectives before you jump in. The third thing you can do is conduct your own experiments rather than relying on other people's data. Right. And that's, you know, in the Internet, we've learned let's do a B testing or ABCD testing before we hone in on something.

19:11And then let's make small steps where we learn things. Right. Yeah. I think validate validating our existing point of view is sort of a survival mechanism, isn't it? It is. And, you know, of course, when you when things would jump out of the bush and eat you. Yeah. You know, that that kind of instinct to grab on to the first thought, flee. It made sense. And in the world we live in today, it doesn't make sense. It's counter counterintuitive and unhelpful. So I don't think, by the way, that your answer of curiosity was boring. I think it's I think it's I think it's a superpower, quite frankly, for a lot of the most innovative people out there.

19:51and it's something that's hard for some people. So what do you think about the idea of, I mean, there are a lot of, I can just hear some companies saying, well, we're just a entrenched, boring industry. We're just cranking along. You know, what's, so curiosity has died, right? So how do you go out and buy that? How do you acquire that? How do you, like, do you just bring people in that are not from your industry in any way, shape or form to go, why are you doing that? So first of all, I do think it's a great idea to bring people in from outside, But I think you can reinvent yourself from inside too.

20:23And one, you know, so first of all, there's internal processes you can do. You know, you can bring your team together more frequently. You can get rid of hierarchy in your company. You can push decisions down further into the organization. And when you do strategy sessions, you can make sure that the most senior people speak last, not first, right? I love breaking teams into two and having them contest each other. The other thing you can do is keep part of your external research budget to literally source ideas from outside. So let me give you an example. The Nature Conservancy, which is a nonprofit, wanted to build a system for detecting what kind of fish are caught at sea, are protected, and which ones are okay to keep.

21:08And they didn't have that capability inside. So they used Kegel to actually create a contest for artificial intelligence engine that would recognize fish using onboard cameras. They didn't source that from internally. They sourced it from externally. And a group of boffins, they paid prizes$150 ,000. And that$150 ,000 created a whole new system for saving protected fish at sea so that those fish could be thrown back. And tuna was the species they were looking at. So even a boring old organization can source some of its most leading ideas from outside and by using its, you know, frontline people much more effectively inside.

21:52Yeah, I think there's probably no question. That's where I think some of those crowdsourcing things have become so useful is that there's no question there's people out there that have solved the problem they didn't know you had. You know, it was just something they were tinkering with. Right. And they weren't thinking about fish when they were inventing this camera-based shape recognition. Yeah. Right. And they loved it. They said, oh, look, this is a fin. And so they used that computer vision in order to recognize the characteristics of different fish in a boat that was bouncing up and down.

22:25And it worked. Yeah. So as you were answering that last question, I wrote down the word culture because that's really what you're talking about in a lot of ways. That's what has to change, right? Yeah. And in the companies we think of as nimble, you know, they're just a subject to the same human frailties that you and I are. They build in cultures that lead to constant questioning of what they're doing. So he may not be everyone's favorite person, but when Elon Musk is running things at SpaceX, he's constantly asking impossible questions. And it creates a culture of asking impossible questions.

23:04He says, we need a flight computer. Everyone says, great. And he says, we need a flight computer for$10 ,000. And everyone says, that's impossible. And he says, make it happen. That kind of thinking that leads to what you have in that case, which is the cost per kilogram of launch is 93 % less than it was at NASA before he started SpaceX. That's nuts. You only do that by throwing out the window, the playbook. of NASA. And so we're going to have a launch of this giant stainless steel rocket. What does he tell us? It's going to be entertaining because he doesn't know if it's going to work. And a number of the previous launches have failed.

23:45And of course, we don't put people or animals on those when you're still experimenting. That's experimentation and scale. And that's pretty cool. Well, Charles, it was great having you stop by the Duct Tape Marketing Podcast. You want to invite people where they might find out more about your work and your latest book, How to Become an Imperfectionist. Sure. I mean, you can find that at theimperfectionist.org or bulletproofproblemsolving.com. And look, it isn't really about the book. It's really about this set of ideas. You know, in a time of fast-moving change, we all need to be more mentally nimble.

24:23And, you know, these are mindsets that will help us be that. Awesome. Well, again, thanks so much for taking a few moments to stop by the podcast. And hopefully we'll run into you one of these days out there on the road. Don, it was a real pleasure. Thanks so much. Hey, and one final thing before you go. You know how I talk about marketing strategy, strategy before tactics. Well, sometimes it can be hard to understand where you stand in that. What needs to be done with regard to creating a marketing strategy? So we created a free tool for you. It's called the Marketing Strategy Assessment. You can find it at marketingassessment.co, not.com,.co.

25:00Check out our free marketing assessment and learn where you are with your strategy today. That's just marketingassessment.co. I'd love to chat with you about the results that you get.