Investing with Cynefin: The cliff

In the Cynefin framework there is a cliff between the Obvious and Chaotic domains. Systems fall down this from the ordered domain down into the Chaotic domain. This is eloquently summarised by Mark Twain…

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.

Retail businesses on the high street are currently thrashing around at the bottom of this cliff. After years of pulling levers to control shoppers and extract profits, the bricks and mortar retailers now resemble Dr Who randomly playing with the controls of the Tardis as it bounces around reality. The reason is that the internet has changed the fitness landscape of business and new apex predators have emerged that are disrupting existing players.

When organisations find themselves inside the OODA loop of an Apex Predator in an unfamiliar fitness landscape, they have to act, sense and respond. As a result, investments in the chaotic domain may result in disrupting the investment process in all of the other domains. Although investments in the chaotic domain should ideally be small, there are occasions when all the resources of the organisation will need to be focused on them.

Ideally organisations should avoid the cliff all together, and if necessary they will need to invest all of their resources to keep themselves away from it. Organisations can use metrics to detect the presence of the cliff. In particular they can use churn metrics. An organisation would typically have three sets of customer metrics…. Number of customers, customer activity and customer revenue. The trend is more important than the actual value for investment decision making.

In the example above the metrics may initially appear healthy. Every week sees a 10% increase (Green). However looking at the churn number indicates a problem occurred in week 4. At this point, the organisation needs to act as it heads towards the cliff / lands at the bottom of it. The action required is normally to gather information. Why has churn just jumped up? Which customer need is not being met, or possibly which customer need is being better met by a competitor’s product or service? The research will either involve data analysis or user experience research (to understand user needs/jobs to be done).

Many organisations wallowing at the bottom of the cliff have no data analysis or user experience research capability. For these organisations, the ‘act’ is simple, to acquire these capabilities.

Modern organisations wishing to avoid the cliff need to invest in data analysis and user experience research capabilities before they find themselves being disrupted by another organisation’s OODA loop.