Optionality and digital transformation
This is one of my x24 posts, revisiting, reflecting and expanding on some of the topics from my 2022 book.
In Chapter 3 of Multiplied, I described the importance of test and learn approaches in digital transformation:
“The attitude we have towards failure, and the way we manage risk and uncertainty is also key if we are going to see more radical change to how teams meet changing needs and future challenges.”
In a number of places the book refers to agile approaches, and describes how an important component of design as a multiplier is learning by doing.
To expand on this point, something I’ve been increasingly thinking about is the importance of starting. By that, I mean how we move beyond research, strategy and making plans, to being able to make ideas real. We can prioritise all the time in the world to speculate, or to try to plan and predict what might happen with confidence. But my belief is that the type of confidence we need to make progress comes through what happens when ideas eventually come into contact with the real world.
There’s a book that has shaped my ideas here: Nassim Nicholas Taleb’s Antifragile: Things That Gain from Disorder. This book has actually influenced my thinking in a number of ways. Back in 2014 I first shared Taleb’s “big trucks” analogy as a way of thinking about user research and confidence/risk. But the specific idea I want to focus on here is the idea of having ‘optionality’.
This is my interpretation of optionality when applied to digital transformation:
Optionality is about learning and adaptation. It’s how we are able to respond and capitalise on unknown future events.
Some key elements of working in this way are:
- Intentional risk taking. How we’re able to take managed risks, where the potential reward is greater than the risk and cost of starting work. This is about gaining the benefits of taking opportunistic actions, versus the choice of continuing to plan and speculate.
- The flexibility to adapt. How we’re able to explore multiple opportunities, finding and growing connections and relationships, as well as understanding interdependencies. Instead of having to accurately predict the future, we can learn through reacting and responding to feedback. This is an approach to being strategic with uncertainty.
- Limiting our exposure and the cost of failure. How we’re able to manage the impact of being wrong, and any negative outcomes of our work. This also reflects how exploring one set of ideas might reveal or enable us to see other options and ways towards reaching our goals.
- Starting small. How we can make small investments in “higher-risk-higher-reward” situations. In a digital transformation context, this is about finding ways to build confidence in strategic areas for change. For example, new technologies or ways of working. This is an approach that can help realise more significant, longer term transformation ambitions, but by only having to commit to taking a first step to get started.
On that last point, another of Nassim Nicholas Taleb’s ideas is ‘asymmetry’. This is the idea of having more to gain than lose in experimenting. Taleb’s framing of optionality is also closely linked to his concept of ‘antifragility’. This refers to “systems that gain from disorder or volatility”. This is a compelling idea in design, whereby a strategy with optionality doesn’t just help us to navigate uncertainty, it can thrive on it. I particularly like this point. That, aligned with some level of significant ambition, work in areas of extreme uncertainty has the potential to deliver something of far greater value, and can be capable of supporting much more significant progress and change.
The type of small teams we might commission to start work here will be moving fast, with the ability to build and test ideas rapidly. This becomes a way of increasing our confidence exponentially because it’s a type of disruption in how it breaks away from existing team, programme and organisational models or ways of working.
To summarise: we can support innovation by commissioning experimental work where the ‘option’ is to expand or continue work that demonstrates value, without more significant initial investment. We can build confidence through ideas that survive and thrive through this process, and we can challenge what our organisations are capable of in the process.
Putting optionality into practice
So where can you start? As indicated, organisations need a clearly stated ambition, purpose, or vision that everyone can understand and align around. But then, there’s a need to take more intuitive first steps.
As a relevant example, the need for most organisations to start and experiment is especially prevalent to how we realise the potential and value of emerging technologies. This is especially the case with how we might start to work effectively with Large Language Models and Generative AI (GenAI). We don’t need industrial scale solutions to start with here, we need small experiments. We need to start to find the patterns, applications and use-cases to invest further in. We also need approaches that will support good design decisions in how our human systems make the best use of these technologies.
The danger here is fixed paths. We can have a bold ambition for transformation. A clear point and articulation of what we’re working towards. But we need to be able to adapt and respond to opportunities and learning as we find the best and most appropritate ways to get there.
Optionality means you find the best opportunities to start with, as quickly as possible. Call this discovery, a design sprint, accelerator or exemplar work. But give teams a brief to create a real thing or a proof of concept. It has to be something that enables learning through the hands-on exploration of new types of products and service models. This can then be a process of prototyping or piloting against real scenerios, problems and user needs.
Optionality not only means that you start. It’s also the way we open up opportunities. It’s the exploration of finding and following our strongest options. The path we need to take is revealed via smaller steps and experiments. This is still design thinking and it incorporates the idea I often talk about of focusing on both the horizon and the next steps.
Where I’m advocating for taking intuitive steps, there are also ways of prioritising these types of these of initiatives.
The greatest error is not to move
To finish by focusing back on Multiplied. I quoted these words from the international pandemic response (and watch the video if you’ve not seen this before). This is from a World Health Organisation (WHO) press conference in March 2020:
“Perfection is the enemy of the good when it comes to emergency management. Speed trumps perfection. And the problem in society we have at the moment, is that everyone is afraid of making a mistake, everyone is afraid of the consequence of error. But the greatest error is not to move. The greatest error is to be paralysed by the fear of failure. That’s the single biggest lesson I’ve learnt.”
Dr Michael J Ryan, Executive Director, WHO
I still believe the mindset of a bias towards action Dr Ryan describes here is something we should continue to learn from in how we respond to change. Optionality and how we get better at starting digital transformation work is key to this.
For more exposure to Nassim Nicholas Taleb’s work, I recommend you explore the ideas in Antifragile as well as his other books such as The Black Swan:The Impact of the Highly Improbable. Specifically on the topic of optionality, the Jon Barnes book, Democracy Squared, also does a good job of unpacking these ideas in a government context.
This is my blog where I’ve been writing for 20 years. You can follow all of my posts by subscribing to this RSS feed. You can also find me on Bluesky and LinkedIn.