How to deal with uncertainty: The entrepreneur’s dilemma

Denis Duvauchelle is the CEO & co-founder of Twoodo, the ultimate online collaboration tool.

Things don’t stop changing just because we decide to stand still. External forces will always create uncertainty by mixing random events together and push us into different situations. Our ability to take stock of the chaos and react accordingly helps us to survive the storm.

Anyone who has worked in a highly innovative industry, such as IT or SaaS, will know what I mean. Or rather, most people who’ve had life pull them in different directions will also understand.

Nobody seems to make the time to experiment with different solutions despite “knowing” that resisting change rather than embracing it is a formula for destruction. We cling to something we believe is under our control to change or not change – our way of thinking and our way of doing.

“It is irrational to act rationally when one does not know the terrain or destination.”

Edward Weber, Uni. Wisconsin, 1984.

For entrepreneurs, there are two kinds of uncertainties that need to be dealt with – uncertainty on making strategic decisions for the company and uncertainty on how to manage the team.

You can also divide that into actionable advice and fluffy advice – but as far as I can see, they merge with one another and cannot survive independent of the other. So this article will deal with both types of uncertainties.

Part 1: Managing Uncertainty in Strategic Decisions

In start-ups, you are problem-solving and chasing innovation, which by its nature is an errand of uncertainty. Reducing uncertainty comes from how you can integrate the knowledge available to you. Your sources are:

• your knowledge and experience
• your team’s knowledge and experience
• your network
• mentors
• accessible open information sources (eg. online communities, events)
• paid access to information
• past cases studies

Reducing knowledge disparity in the team also helps overcome uncertainty. This can be achieved by:

• being transparent
• allowing all team members access to each other and their communications (via a cloud communications solution, a social collaboration tool, etc.)
• training and learning cross-discipline where feasible
• testing

Problems appear daily for entrepreneurs: There’s a bug to be fixed. That guest blog post was rejected. The designer has had a baby and is unavailable. There are two ways you can approach these problems (laid out by Prof. Angelo Ditillio of L. Bocconi University, Milan):

1) The garbage can approach

Toss everything into the garbage can, rummage around, and solve the problems that you happen to lay your hands on.

This is good for serendipitous solutions and can turn up some surprisingly awesome ideas. You are also constantly jumping in and hitting problems head-on, battling them from accumulating – being busy, but are you being productive?

2) Researching for core problems

Make an effort to identify an underlying problem instead of using the garbage can approach of randomly solving some problems and ignoring others.

This works if it turns out there is a deep structural problem but can be a lot of time wasted if it turns out that the problem was due to totally random circumstances. However, it is arguably the better approach in the long run to increase productivity by eliminating silly repetitive problems that could be solved in one fell swoop.

“A manager can assess a situation by looking at the variables in an industry and assessing the state of those variables.”

Another way to go about it is to follow the scientific method: a) make an observation, b) ask a question, c) form a hypothesis, d) conduct an experiment, e) accept hypothesis, or f) reject hypothesis, test a new one

The following steps are inspired by Edward Weber, University of Wisconsin (published 1984):

Step 1: identify variables

1) Choose variables that make sense according to your experiences and the industry in general.

Example: user retention rate

2) These variables should be theoretically supported (thought leader, industry expert, academic research – whatever makes most sense for your industry.)

Example: Dave McClure’s lean methodology approach to customer retention

3) You should be able to collect data on the variable – this depends on your tools and other available resources.

Example: using Google Analytics to identify the drop-off pages of visitors

4) See if the chosen variables can be combined with each other to make better variables and reduce your list “…it may provide insight into the underlying patterns and relationships into the situation – ultimately these insights should lead to solutions.”

Example: create funnels of events in Mixpanel

5) The variables should be comprehensible to others, not just in your head – or else you will not be able to communicate their relevance and importance.

Step 2: define your objectives

Once you have your variables, you need to view them from a point of view of your objectives for the company. Your interpretation of the variables will depend on the the knowledge resources mentioned above. View the results from the point of view of your objectives and identify gaps; then, these gaps need to:

a) be feasible to resolve and

b) have the team’s/manager’s intention of being resolved

In other words, based on the example above: do we have the resources to improve our retention rate, and is improving the retention rate a priority for the business?

Step 3: are the conditions right, and if not, can you create counter-conditions?

Conditions need to be right for your strategy to work. This is the most uncertain. Identify what conditions are relevant for your plan to work. Forget the rest unless you can create counter-conditions.

Once you know how the variables affect your objectives you can better define what is the best way to grow your business. You can find a better product/market fit. You can better avoid taking actions that would not help reach your goals.

Part 2: Uncertainty in the Startup Team

As long as you don’t know everything about everything, and how everything converges and diverges with other occurrences or objects, there will be uncertainty. Managing uncertainty is about influencing your team positively in an uncertain situation, not increasing control of them.

Unfortunately, the opposite happens too often. The most scary uncertain situations are when we cannot test both options before choosing – and we must choose fast.

Step 1: Goal identification, or “where are we going?”

The vision of what your company will be is the overarching goal. This can be broken down into sub-goals all the way to the micro-tasks necessary to achieve the big goal.

The “big goal” will look realistic once the paths to the sub-goals are laid out, which lowers negative feelings towards uncertainty (even if the uncertainty itself remains the same).

Step 2: Assess the steps that need to be taken to reach the goals, or “why are we going this way?”

Your awareness of the limitations of your resources, and ability to identify the right conditions, will shape the creation of the steps towards your goal. Be able to defend each choice and discard anything trivial or distracting from the process. Showing your knowledge of the uncertainties lowers uncertainty in the team.

Step 3: Be knowledgeable of contingency paths for the most critical goal paths, or “the highway is closed, what’s the best B road route?”

Let’s take an example. One of the main goals for startups is to acquire customers. It’s an unavoidable path. There are also many paths to achieve this goal. Assess the best alternatives in the event that your principle strategy doesn’t work.

It is important to have a second-best set of actions ready to go so that momentum is not lost for such an important goal. Having alternatives lowers uncertainty because the team is also kept in momentum by having contingency plans to fall back on, even if temporarily.

Step 4: Frame your uncertainties in positive honesty, or “I get that life is unpredictable, but we’ve prepared as best we can, right?”

Frame it positively – deliver uncertainty in a way that makes people hopeful, not hopeless. Show that uncertainties are ridiculously common. Chaos rules. It always has and always will be that way.

But human adaptability to chaotic situations is what has led our species to be so successful. Our reactions to uncertainties spawn innovations and ideas every day. In any case, our speculation of the consequences is usually far worse than what would happen in reality. Acceptance of uncertainty lowers the fear of uncertainty.

Step 5: Arrange the actions into cohesive steps, or “what task do I do next?”

You can control what you get done most of the time, especially when it is divided into manageable chunks (like what we do at Twoodo!). When something stumps you, get busy doing something else (there’s always something – just make sure it’s a relevant task to the goal at hand).

Also, accept that increasing control or management decreases the team’s ability to deal with uncertainty. If you remove all the decision-making powers of your team in order to control uncertainty, the resulting demoralization will increase uncertainty. Let go.

Step 6: Lean on others… but not too much

Every startup CEO has been in your position. There are millions in it right now. Unloading your frustration to those who get it is a great stress-reliever. It’s also great to ask advice on what to do in tricky situations.

The key point is to collect enough advice – reach a saturation point where you are hearing the same key issues over and over. Overindulging will lead to every possible solution being thrown at you, and damages your decision-making ability. Underindulging will mean you get a limited range of ideas.

In the end, your gut feeling of what is right for your company should guide you amongst the advice. Choose to take advice from an appropriate sample size of people and/or stick a time limit on it. Be decisive. Just how bad will the fallout be if you are wrong? Probably a lot less than you think.

Step 7: If it’s not important, it’s not a problem

When you have clearly identified what you need to achieve your goals, anything outside of that is irrelevant and can be pushed from your mind. It will only serve as a distraction. Pointless speculation will lead to imaginary problems.

Decrease uncertainty by not dwelling on time-consuming worries that do not help you achieve your goals. Don’t be your own worst enemy.

Image credit: Shutterstock/Alena Hovorkova