Navigating the Fiscal Cliff: A Job for Collaborative Innovation

By: Doug Collins

The practice of collaborative innovation brings the wisdom of the crowds to bear on the unknown: unpredictable scenarios where expert intuition leads people astray. The fiscal cliff that today confronts the U.S. and world economies qualifies. In this article innovation architect Doug Collins explores how practitioners can help their organizations navigate this Black Swan event. The message? Act now: collaborative innovation was made for this scenario.

The author Nassim Nicholas Taleb popularized the phrase Black Swan. The Black Swan describes events that have the elements of rarity, extreme impact, and retrospective predictability (i.e., the observer enjoys no foresight). The September 11 attacks serve as an example: we continue to feel their effects to this day.

Today, we approach another Black Swan event: the fiscal cliff in the U.S. If the U.S. Congress and President do nothing while the former convenes in November, then the provisions of the Budget Control Act of 2011 take effect on January 1. The act imposes across-the-board budget cuts and tax increases which experts anticipate would return the world’s largest economy to recession. The Digital Age connects us: all other countries would suffer the negative effects.

The fiscal cliff meets the Black Swan criteria. In terms of rarity, the U.S. has never held this large a gun to its collective head. In terms of extreme impact, its effect is national recession and global economic malaise. In terms of unpredictability, the defining races for the November 6 elections remain too close to forecast. Their outcomes—and how the U.S. Congress approaches each element of the complex Budget Control Act during the eight days they convene—determines what happens January 1.

The Wisdom of Your Crowd

People who practice collaborative innovation benefit from what James Surowiecki calls The Wisdom of the Crowds. A diverse group of people, forming their opinions independently of one another, often supply more valid answers as a group than expert opinion. The behavioral economist Daniel Kahneman finds that the crowd trumps expert intuition in unpredictable environments, in which no valid data exists to help one anticipate the outcome. Black Swan events such as the fiscal cliff qualify.

Let’s explore how you might pursue your practice to this Black Swan event to help your organization prepare by applying the blueprint for collaborative innovation (figure 1).

Figure 1: the blueprint for collaborative innovation

Applying the Blueprint

We start with intent: specifically, what implications might the fiscal cliff have for your plans for 2013 and onwards? The provisions of the Budget Control Act of 2011 cover a lot of ground: they mandate sweeping cuts in defense and non-defense spending. They rescind most tax cuts that the U.S. Congress has passed since 2001. As a result, organizations in certain industries (e.g., defense contracting, healthcare providers) may want to explore how specific aspects of the act may affect their intent. The financial services industry (e.g., banks, brokerages, insurance companies) has already begun to feel the effects of the event. Their customers seek their advice on how they might hedge their bets ahead of January.

Figure 2 shows some example lines of enquiry that you may want to pursue with your community. Please note that enquiries need not be inherently negative. Some organizations thrive by identifying discrete opportunities in an otherwise gloomy landscape.

Figure 2: mapping intent to enquiry

Next, we move to forum: Who do we invite to engage on the critical question? Two points of guidance…

• Research from Daniel Kahneman indicates that expert intuition often leads people astray in unpredictable environments. Cast the net widely, way beyond the usual suspects.
• Research from James Surowiecki indicates that the practitioner should seek diversity of participation and find a way to capture individual insights from community members before they have a chance to compare notes.

For example, in pursuing the enquiry around providing quality service, you would want to invite everyone in the organization who falls on the value chain of delivering that value to customers. You would also want to arrange for each person to contribute their thinking individually, ahead of commenting on their colleagues’ ideas (figure 3).

Figure 3: the forum — inviting diverse perspective

Lastly, with respect to process: timing matters in this case. The U.S. holds its elections November 6. The U.S. Congress is in session for two weeks in November, including the last week. You will need to move quickly.

Figure 4 shows one example of lining your process with the timing of the fiscal cliff. Common sense suggests that you will want to be prepared to trial or implement the ideas your community has for helping the organization navigate the event before it occurs—before January 1.

Figure 4: mapping your practice to the milestones of the fiscal cliff

Act Now

Practitioners observe to me that they struggle at times to engage people in collaborative innovation within their organizations. Yes, people seek innovation. They sense they live in the Digital Age and the world of the social business. And, yet, a sense of loss weighs on them: loss of authority, loss of control. Times were seemingly easier when they could push, not pull.

My observation? Expressing leadership in helping organizations navigate times of crisis—or in anticipation of times of crisis as is the case today—represents the best opportunity to help the organization grow and become more dynamic. Collaborative innovation was tailor made for scenarios in which uncertainty reigns.

If you are not applying the practice of collaborative innovation to Black Swan events such as the fiscal cliff in the U.S., then you are foregoing opportunities for leadership and growth through your practice of collaborative innovation. Act now. Today.

By Doug Collins