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Interview Transcript with Vaughn Tan, Author of The Uncertainty Mindset

Susan Stibal: Today Vaughn Tan will share learnings from internationally renowned cutting-edge restaurant, R and D teams on how to prepare for uncertainty and respond to it with grace and innovation. Vaughn is a London based strategy consultant, author, and professor. Vaughn's book, The Uncertainty Mindset, is about how uncertainty can be used to drive innovation and adaptability. Vaughn is also an Assistant Professor of Strategy and Entrepreneurship at University College London, School of Management. So Vaughn, I'll turn it over to you. 

Vaughn Tan: Thanks very much for having me and thanks also for everyone who's here. Thanks for joining me today. I just want to say a few things about myself, just as context.

I was born and raised in Singapore, but these days, as Susan said, I'm a strategy professor at UCL school of management. I teach courses in how design thinking can update and. Conventional approaches to strategy and management. So I used to live in London, but at this very moment in Corona time, I'm physically located in a very rural part of France in a mountainous and volcanic region called the of van.

And this is basically my apology in advance. If there are any internet connectivity problems that develop along the way. So, in any case, my focus as a consultant or researcher, and as an author is I try and understand how to design organizations that are more innovative. And more resilient to uncertainty.

And these organizations include businesses, nonprofits, teams, communities. I'm particularly interested as I think the book's title and what I've just said may suggest in the role that uncertainty plays in making businesses better at doing innovation work. And I think that's maybe a little bit counterintuitive. And I'm going to unpack that a little bit more in the rest of this talk.

I got here by quite a circuitous path. Quite literally a decade ago, late in 2010, I found myself in a basement kitchen of a restaurant in Washington, DC. And I was just dodging kitchen porters while watching a team of R and D chefs come up with a menu of new dishes for a restaurant. And the owner and the head chef of that restaurant group is the Spanish chef Jose Andres, who you may know because of his philanthropic disaster relief activities.

There's an arrow pointing at Jose, right there. This is Jose's philanthropic side project, you know, which eventually turned into a huge one. If you're in the US, I think he's quite famous there. People know about him. It's called World Central Kitchen. And what they do is they create field kitchens for emergency food relief during natural and, and other disasters.

The thing that many people don't know is that World Central Kitchen is able to spin up these field kitchens to produce hundreds of thousands of meals a day very quickly because, it's how they organized. Right. So they use a very unusual way of thinking about how to design their teams, to be able to go from a very small, permanent team, to a large operation in any particular disaster setting that they choose to go into because of how they're organized. 

And how they're organized is actually about what I call The Uncertainty Mindset. Because Jose's way of thinking about how his teams get organized for his for-profit organization. Think food group is actually the same way that he infused into what World Central Kitchen does, So, I'm going to come back to this in a little bit. 

I wanted to say also a little bit about how I came to study culinary innovation. It was all by accident. I did my PhD at Harvard Business School. And when I went in, I was interested in understanding how to organize innovation teams. And this focus for me was because of my experiences before starting the PhD. I'd just come from working at Google in California. And while I was there, I worked on some really unusual teams doing quite interesting innovation work.

We were basically trying to develop parameters for new problems to solve. So, the first team I was on at Google back in 2005 at the very dawn of ad tech, as we know it today was trying to create an automated ad unit targeting engine. It didn't work then, although some of the machine learning foundations have been baked into the rest of Google AdWords and Ad Sense. 

But I was also on the launch team for street view, which is one of the rare hardware business units at Google while working at earth and maps. And I also worked on Google's Space flight program, which was actually in partnership with the XPRISE foundation, where we tried to put a Lunar Lander on the moon, an unmanned Lander. And I also worked on structured data. I worked with the Pure Research Group on a new structured data storage and management product, which while it was still externally available was called Fusion Tables. And it's now used exclusively internally to run the data layers for earth and map. 

I sort of burned out a little bit at Google and I left just before the 2008 global financial crisis to make furniture. I went to work at a wood studio in an art foundation in Colorado. And the strange thing is when I got there, I found again, something that felt a lot, like all the really interesting teams I worked with at Google.

It was an interesting network of people who came together to try and develop new techniques for working with materials. I guess the thread that connected all those bits of my former life before academia was that I was exposed to this wide range of teams and businesses that were all pretty good at coming up with new problems to solve and solving them well.

And so, when I decided to do a PhD about organization, my main question was something I think you all are interested in too, right? How do you organize companies and teams, so that they're good at coming up with new ideas so that they're innovative companies. So, it was pretty early in my doctoral research and I was casting around for a research project to like really work on, to write a dissertation about.

And if you know anything about Singaporeans, you know, that we're really interested in food. So, this is one of my favorite dishes from Singapore. It's called Bak Chor Mee which basically means pork mince noodle. And it is a kind of innovation in itself. Like every stall that makes this, usually the people who make this dish only make one thing. And everyone develops their own kind of interesting take on what this dish should be.

And the ones who are really good have made it very distinctive. But anyway, we're very interested in food. And so, Jose who I didn't know at the time was giving a lecture at Harvard during which he mentioned, how his innovation team, the Think Food Tank was not only how he made his restaurants innovative, but also how he made them really effective.

And so, I went to his office hours and more or less as a joke, I asked him if he would let me come observe the Think Food Tank for my PhD research. And he said, yes. So. I'm just saying, be careful what you wish for. This is how I fell into studying this really strange world of high-end cutting edge culinary innovation teams.

I eventually spent a lot of time at some of the best known of them. And what I realized along the way after having come away from tech was that innovation work is more or less the same work across industries. Even if the output and the input look very different. So having worked in both hardware and software tech and with startups after Google, I knew from the inside how tech innovation feels.

And I quickly saw that while the type of new product may be different. The process of coming up with good new ideas and executing them well is really similar even in food. So, innovation work, I think has enough similarities across industries that we can learn from looking at how innovation work is done at the frontiers of food.

And then apply those learnings more generally to other businesses in other kinds of industries. So, while I was at these R and D teams in high end cuisine, what I was doing was I was watching really good innovation organizations doing high level innovation work. Whether the innovation was creating a new experience of dining by adding cross modal sensory stimuli.

So, what you see on the screen now is a dish at the Fat Duck called the Sound of the Sea. Where the seafood that you eat is made more intensely marine by hearing the sound of waves lapping at the shore that come out of the iPod that you're plugged into at the same time. 

Another kind of innovation that people work on is Material Innovation. In this case, they're discovering how to cook a new type of material, incredibly old clams, 200 years old at a restaurant that I will call Amaya. And these require developing a new cooking protocol that are unlike the cooking protocols used for other types of shellfish. 

Other kinds of innovation are developing new media products. And this is Nathan Myhrvold's most expensive cookbook in the world. He was only able to do this by developing a novel vertically integrated business model for content creation and publication. And he has then used that same business model to produce series of books after that, that would not be publishable, and they are very successful. But they wouldn't be publishable under conventional business models in publishing.

Other innovations that I see in there that have analogies to other industries are new approaches to narrative storytelling. Instead of telling it in the form of a movie or play. Restaurants like the Fat Duck, when it reopened in 2016, use individual dishes in a meal, as the elements of story, they have to figure out how to do that.

And some of them are like IO2020 right. Developing an influential conference and a global multidisciplinary network, like a restaurant called Noma in Copenhagen did with a Mad Symposium, at this point almost 10 years ago. Or as we began creating a novel operational model for field kitchens that are meant to serve disaster relief situations like Jose did at World Central Kitchen.

Anyway, I ended up spending almost a decade and embedded in these world-renowned R and D teams, in an industry where basically the state of the art is changing frequently and unpredictably. It sounds a lot like high tech. It sounds a lot like media today as well. And these are the connections that I'm hoping that you all will see that I try and draw from outside of this domain of high cuisine into other industries that I also feel like I know and have worked in before. 

So, some of the places that I was at the Fat Duck in the UK, one of the first pioneering culinary innovation restaurants in the world. A restaurant that I call Amaya that I claim is in South America. I'm under NDA, so I can't say where they are. A restaurant that at this point is quite famous called Noma, which is in Copenhagen and Denmark, and the mad organization, which is the conference and thought leadership organization that they set up in Copenhagen. The Cooking Lab, which is Nathan Myhrvold, he's the ex-CTO of Microsoft. His organization, which is in Bellevue, Washington, which produce really interesting media around food and cooking and technology.

And of course, Jose Andres's Think Food Group of restaurants. Ultimately, I just want to leave you with a few key takeaways from the research that I did. And the first and most foundational piece of insight is that all of these teams were innovative and resilient and adaptable. Not because they managed away the uncertainty that they faced or pretended that the uncertainty didn't exist, but because they had a different way of thinking about uncertainty. What I call the uncertainty mindset is simply explicitly treating the future as something unknown and unknowable, not as something risky.

I know this sounds like a trivial distinction, but I think it really isn't. Risk is not the same as uncertainty, even though most people confuse the two. Risk is when you don't know exactly what will happen, but you know, all the possible outcomes and how likely each possible outcome is. So if that's the case, you can do risk management through cost benefit analysis.

Real uncertainty on the other hand is when you don't know what exactly will happen and you don't know all the possible outcomes. Or you don't know how likely these known or unknown outcomes are. So just to illustrate the difference, flipping a fair coin, is truly a situation of risk. There's a 50 50 chance that you get heads or tails. And you can bet on that outcome. 

Real businesses like the ones that we all are in, rarely face this kind of risk in the real world. What they face instead is true uncertainty. And now it's actually really undeniable. The current business environment is filled with true uncertainty where we have no idea what many of the possible outcomes in the next 6 months might be, or even 12 months. And we don't know how likely each one of those outcomes are. 

So, the problem that I also, this was another insight from looking at these R and D teams, is that even though risk is not the same as true uncertainty, we've all been trained to think of not knowing only in terms of risk. And so, because of that, we think of every unknown situation as being risky.

And this is in its own way, it's kind of comforting, right? Because risk can be managed away. We can do cost benefit analysis. We can risk manage the situation. This kind of thinking is an unmistakable hallmark of the risk mindset. And it can be fatal, right? So just look for instance, at the UK and the US government responses to coronavirus this year, or thinking back to 2008 and before the Fed's reaction to complex derivatives in 2008, just to see what happens when we use risk management and a risk mindset to think about and react to situations that are truly uncertain.

The problem for businesses is that the risk mindset all starts with an organization's ability to innovate. Because innovation is by definition about not knowing exactly where you end up. When businesses over invest in managing the risk of known outcomes, they under invest in building flexible, adaptable organizations that let them change to be whatever they need. As the situation changes. 

The risk mindset also leads businesses to over optimize and try and be too efficient and profitable. And it leaves insufficient slack in the system to permit real innovative thinking. And maybe the biggest problem is that they create organizations in which all the incentives are to do what's well understood. And not to learn by failing, which is inevitable, if you're trying to do something, which is really, really innovative. 

I think the uncertainty mindset, as I said before, is simply acknowledging that you don't know enough about the future to optimize for it. And simply making this acknowledgement explicitly as a leader and as an organization changes how a business acts and how people and teams in those businesses act.

The nice thing is that it makes these people and these teams inside businesses, more flexible and more able to learn and change when they need to. I'll talk about three things after this, just to finish off, but injecting uncertainty into organizations I've found is the best way to make them resilient to uncertainty and innovative at the same time.

So, this is really the biggest, most counterintuitive thing. When I talk about this book to other people. They don't just try and say that, yes, we see that the world is uncertain. The organizations that I looked at that have been most successful, and this is not only in food, but outside of it, the ones that are most successful at dealing with uncertainty and being innovative. They actively create uncertainty inside of themselves. 

And it's this intentional creation of uncertainty inside the organization that makes them continually able to come up with new ideas that are good ideas. So how do they do it? They do it in three ways. They do it by making the roles that their employees have open ended. They do it by having open ended goals. And then they also do it by stimulating a sense of really carefully designed and calibrated desperation among their teams. And I'll say more about each one of these things in turn very quickly. 

So open ended roles are simply roles where your definition of what you do as an employee is not fully defined at the beginning. What this means is a large part of your role is quite clear and it's quite stable, but a part of your role is not. So, if you think about Google's 20% time or 3Ms 15% time, this is something like an open-ended role. It makes the role malleable and it also encourages people to, in a sense, negotiate what role they're going to play by testing things out with their colleagues.

Right? So, to try something that they think is worth doing that they're good at doing to show the results of that test to their colleagues, and if that test is shown to be useful, then that becomes part of role. The result of this is more innovative, higher performing teams where all that testing also helps team members learn what other team members are good at doing and what they like to do.

And what this leads to in the end, not only are the roles adaptable because they're constantly changing along the way, this also creates teams that are incredibly high functioning, where everyone knows what everyone else is good at doing. And also, is interested in doing. These teams, barely need management of the conventional sort.

So open-ended goals, I think are very similar to open-ended roles except in the context of goals. So we often think about goals as being very concrete. Want to achieve this micro growth in profits. By the end of next year. Open-ended goals for innovation are about saying how you think about abstractly, what success looks like.

So that there's lots of possible things inside success that could be successful. So open endedness just means defining goals, more abstractly and less concretely. But being very clear about what tradeoffs you are willing to make to achieve those goals so that you give the people in your organization, more freedom to come up with unanticipated, but valuable problem definitions.

And finally, uncertainty can also be injected into how you motivate teams and individuals in your organization. The conventional approach to motivation is to give people something that they want, like more money or promotion to encourage them to work better. This only really works when the things that they need to do to be successful are very clearly defined and very stable, but this doesn't work for innovation, right?

Because these incentives are usually not enough to overcome the inherent fear of failure that everyone has. And failure is necessary to do any kind of real innovation work. So, what these teams did was that they publicly and irrevocably committed to projects that were just beyond what they knew they could deliver.

And what this does is it creates desperation, right. It creates the sense that we can't simply keep doing what we're doing, that we're good at doing, in order to be able to deliver on this product. And what that does in turn is it drives the teams to abandon these comfortable, old ways of doing things.

And try new ways of doing things and generally learn new stuff. So, it creates a situation like in the gym with resistance training, where the teams and the people inside the organization gradually become better at taking on things that they don't already know to do very well. There's much more to be said about all of those things, but it's mostly in the book, which I encourage you to read. 

There wasn't space in the book for everything, so I'm continuing to think through some of the implications of not knowing every week in an email newsletter, which I also encourage you to sign up for. It is completely free. I want to open up now to a very casual conversation. 

So, Austin is curious about injecting uncertainty. Austin, do you want to say a little bit more about what you're curious about in terms of injecting uncertainty? Austin's question is structurally what programs might help inject uncertainty in a careful calibrated way into the organization? I, I think it's a really good question. So, I often make the distinction between having a program that is about injecting uncertainty and simply changing how people work. So that the way they work naturally encompasses more things that are not fully defined upfront. 

So, we can talk about injecting uncertainty into roles. For instance, by saying, let's say you're trying to hire someone new. At the moment, the default position for most hiring is to say, I'm going to define a, a job description. And then I'm going to put that out to a recruiter to find people who might be good fits.

And one way that you can simply inject uncertainty into that is to say, here is the job description. That is 80% of the job that we're hiring for the other 20%, for instance, it can be any percentage, but I think 20% is a good starting point. The other 20%, we don't know. The 80% that we do know is clearly defined. You got to do these things and we're going to hire to make sure that you can do those things. 

The other 20%, on the other hand, we want you to come in, and spend one day a week or two days, every two weeks or whatever you choose to do telling us and showing us what that other 20% should be and why it's important to us. Simply that's one program that will inject uncertainty into who you hire and what they do for you.

Right. And then along the way, if you make this explicit, it will force people to say, okay, what is this person doing in his or her 20% time, that is so valuable. Is it actually valuable? Can we help this person do something which is more valuable that we don't expect to need yet, but we actually realize that we do need now? I think programs like that inject uncertainty to how organizations work.

So, Ron Thomson asks great insight on what's needed for organizations to innovate for impact. Over the years, what are the most valuable lessons you've learned? It's a great question again, Ron. I think the biggest thing is uncertainty in an organization has this effect on organizations of making them innovative and adaptable. All the way through the organization, but for it to actually begin the most senior leaders need to be able to show one thing and they need to be talking about it constantly. And that one thing is being able to constantly talk about how they have themselves failed in the past, not hypotheticals. They have to actually say how they did fail in the past and how that failure led to their success today.

So, I want to reemphasize this point. It's that we talk a lot about success and why it's good. We don't need to talk more about that. We all know why success is a good thing. What we don't talk about is how, when you design failure correctly, you can learn from it. So not all failure is good. You can fail in ways that don't teach you anything, but you can also design work. You can design projects so that if you fail, you learn as much as if you succeed. 

The Uncertainty Mindset is partly about being comfortable with failure because you know that failure teaches you stuff. And this, I think almost has to come from the top down, right? So, the most senior people will mean if the most senior people say that failure is okay, they will make the people underneath them say that failure is okay, and that will percolate all the way down.

And then at that point, it'll become possible for someone who is very junior to say, I can now take a risk at doing something, which I don't know how to do yet, because the failure might teach me something if I design it correctly. So I, I think the biggest lesson is if you're a leader, your most important job, other than setting the direction of, of the organization is to constantly not shut up about how you failed in the past and how it helped you to learn.

Okay. So, Jason also asks having too much stock on hand can hide a lot of problems. Absolutely. So, I think one key thing to say about what I've been saying, in this presentation is that I don't think that uncertainty injection is good for all kinds of businesses. It's only good for businesses that really want to innovate.

So, if you are in manufacturing and the manufacturing is well understood, you've got a proper well developed stable protocol for manufacturing a thing, you should be in a situation where you're trying to maximize efficiency and reduce waste. This is not the same thing as trying to be an innovation organization that is trying to find new ways of doing things.

I absolutely agree that if you're trying to exploit, if you're trying to be efficient, having a lot of organizational slack is not necessarily a good thing, because as you point out having too much stock on hand, having too much slack can hide a lot of problems, especially problems associated with people who are simply coasting, instead of doing what they know they need to do. How they know they need to do it.

But if you are trying to build an innovation organization that is trying to do new things that have never been done before, you must have slack. Because if you don't have slack, you cannot fail. And if you don't fail, you can't learn how to do something new. Yes. And Austin makes a great point, which is failure in certain environments, which are efficiency operation environments should be mitigated as quickly as possible with a known solution. A hundred percent agree. 

And failure in uncertain environments should be designed to encourage learning and should be encouraged as well. Right? So, it's two things you should encourage failure that is designed so that when you fail, you learn something interesting and useful.

You should encourage that kind of failure, not the kind of stupid failure where you fail for no good reason. And you don't know why you failed. Let's see. So, Ron has another question, I guess, with the uncertainty mindset, like the fear of failure being foreign in most enterprises, any insight on the lessons learned from Trump maintaining the status quo?

Well, so I think one thing that I, I want to say wrapping up, which is actually relevant to Ron's question. I'm not sure that especially now any business anywhere can think of itself as being in a certain business environment. So, I wouldn't say to embrace the uncertainty mindset 100%, but at least if you are a business that is exposed to any kind of external environment, like if you are operating any kind of business where you have customers or suppliers, you need to be thinking about how to build your employees up. Your team organization up so that they're able to adapt if things suddenly change.

The organizations and the businesses that were able to pivot really fast, when the last wave of the pandemic hit us, were the ones who had people who were able to change what jobs they did at a moment's notice because they were used to developing new jobs.

Right. So, if they had open ended roles along the way, they were used to changing what they. And I think what every business needs to do is to encourage people who are employed by them, their suppliers, everyone who they work with needs to expect that things are going to be changing unpredictably in the future and to be ready for that to happen.

And a large part of that is simply not expecting that things will stay the same or that you can predict what they are and that at the very base level, Is the Uncertainty Mindset, in a nutshell. Just the moment you start to think and plan as if the future is not known and not knowable, you instantly have a leg up on everyone else who thinks, oh, I'm going to optimize. Because I can expect what the future will be. 

And I can predict it with some certainty, if you just don't even think that everything you do will be slightly different and then very different as a result. And you'll be much more adaptable. Back to you, Susan. 

Susan Stibal: Vaughn thank you very much. Those were great things to think about. Really, we appreciate you being here from France. And we want to thank our sponsors of the Inside Outside Innovation Summit. So Vaughn, hope to see you soon. 

Vaughn Tan: Thanks for having me. Hope to see you all sometime.

Brian Ardinger: That's it for another episode of Inside Outside Innovation. If you want to learn more about our team, our content, our services, check out InsideOutside.io or follow us on Twitter @theIOpodcast or @Ardinger. Until next time, go out and innovate.

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