How uncertainty can generate opportunities and boost performance

Traditionally, uncertainty has a bad reputation. It is something to be endured, increasing risk and thus impairing performance. As a result, there are any number of practices and methods which seek to minimise uncertainty (plans, predictions and processes, for example). And yet, in certain conditions and contexts, an increase in uncertainty can actually improve performance. So how exactly could uncertainty turn out to be your greatest ally?

In an article published a few months ago, entitled When is more uncertainty better?, Griffin and Grote offer some answers. The following is a summary of the main points made in their study, which I urge you to read in full. Theirs is a refreshing argument, transcending principled positivism to investigate the benefits of uncertainty.

Why individuals choose uncertainty

While the prevailing logic holds that uncertainty is something inflicted upon us, and thus something to be minimised, Griffin and Grote draw upon numerous studies in the fields of management and neurosciences to suggest that, in some cases, individuals deliberately put themselves in situations which generate or increase uncertainty.

Uncertainty and pleasure

At the individual level, we do not all have the same appetite for uncertainty (and that appetite may well vary over time). When it is perceived as an opportunity to learn or to obtain gratification in the medium term, uncertainty becomes desirable. This is the pleasure paradox, when uncertainty creates a positive feeling. For example, expectation of a gift and the uncertainty that goes with it can sometimes provide more pleasure than the gift itself. In another domain, studies have shown that women are more attracted to men whose feelings towards them are not easily discernible than they are to men whose feelings are perfectly clear.

In other words, it is entirely possible to appreciate situations where uncertainty is very high. Reducing uncertainty may thus not necessarily improve our perception of a situation.

Uncertainty and learning

At the individual level, studies have shown that our memory capacity increases in situations involving uncertainty. Uncertainty may thus induce a state of vigilance conducive to learning.

At the organisational level, uncertainty is valued when it serves to trigger learning mechanisms. This is particularly true in entrepreneurial contexts. Research on the theme of effectuation has shown that the ability to capitalise on surprise and uncertainty is a key development factor for entrepreneurial initiatives.

This also applies more broadly to exploratory processes whereby individuals build new activities, for example the launch of a new business model within a big company.

In both cases, uncertainty is not a problem to be endured, it is utilised to drive development.

A dynamic process for regulating uncertainty

How do individuals choose whether to reduce or increase the degree of uncertainty they deal with? How is uncertainty regulated? The authors propose a 4-step model which forms a sort of feedback loop:

1. Awareness of exogenous uncertainty (linked to factors that the individual does not control, e.g. rivals, clients, technologies).
2. Awareness of endogenous uncertainty (connected to individual experience) with reference to a preferred level of uncertainty.
3. Choosing between exploratory activities, which increase uncertainty, and operational activities which reduce it.
4. Taking action which will influence the levels of endogenous and exogenous uncertainty.

According to this model, individuals work to reduce or increase uncertainty in a deliberate, iterative manner, on the basis of their personal preferences (e.g. individual tolerance for ambiguity or openness to new experiences), but also based on the perceived efficacy of reducing or increasing uncertainty.

Generally speaking, individuals decide to increase uncertainty by engaging in exploratory activities (making contacts outside the organisation, for example) when they feel that the current level of uncertainty falls below their preferred threshold. By the same token, they prioritise operational activities (following the predefined rules, for example) in order to reduce uncertainty when they feel that uncertainty levels are higher than they would like them to be.

The actions they take will then have an impact on the level of uncertainty encountered, increasing or reducing this risk. Actions have consequences, and the new level of uncertainty – and the results achieved – will feed into a new assessment of uncertainty which may lead individuals to make different choices over time.

This is why we see successive cycles of exploration and operation, a phenomenon which can be observed in many new companies. The decision to engage in exploratory activities at the outset is an example of embracing uncertainty as a force for development. But once a certain stage of development has been reached, the impact of exploratory activities declines and operational activities become more important to performance.

What practices should be nurtured in order to make uncertainty a development factor?

Uncertainty thus has a certain number of advantages. It is a source of pleasure for some, and also serves to trigger learning mechanisms at both the individual and collective levels. Uncertainty is not always something imposed from the outside, it is something we choose and construct. As such, if individuals regulate their uncertainty levels and uncertainty proves to be a performance driver, then it is in the interest of organisations to ensure that this regulation is as effective as possible, i.e. consistent with their organisational goals.

The article concludes with some suggestions for concrete actions:

• Encouraging exposure to uncertainty. The more individuals are exposed to uncertainty, the more opportunities they have to trigger learning processes. This may take the form of informal exchanges with entities outside the company, or more formal methods of communication focusing on market trends.
• Presenting uncertainty as an opportunity to learn. The more we associate uncertainty with risk, the more likely it is to be perceived as a threat, inducing paralysis through fear. Associating uncertainty with learning is something that can be expressed in words, but also in actions, for example in the form of shared and recorded post-mortem analyses.
• Providing a psychological safety net. Activities which increase uncertainty may create value, but they also require the expression of new ideas, new concerns and perhaps new criticisms. Developing a corporate culture where opposing views can be expressed is a crucial factor.

In short, in order to make uncertainty a development factor, we need to change our frame of reference and upend our mental models.

This article was first published in French on Prof. Benyayer’s blog.

This post gives the views of its author, not the position of ESCP Business School.

Author: Louis-David Benyayer

https://www.louisdavidbenyayer.com

Louis-David Benyayer is an alumna and affiliate professor of entrepreneurship at ESCP Business School, where he is scientific co-director of the MSc in Big Data and Business Analytics. His current research interests focus on open business models, data driven strategies and organizational ambidexterity. Over the past 15 years, Louis-David has developed a strategy consulting activity for corporations and SMEs.

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