How do we approach a problem which is inelastic to experts and siloed expertise? The problem which requires a multi-disciplinary approach in order to even identify as a problem in the first place.
Moreover, the ACAN problem demands a change in the ways in which we speak and think, what we fear, what we value, and finally the praxis of skepticism we employ.
Years ago, my team was brought in to a consumer goods company to develop its operating strategy. The challenge which lay before this number three ranked player in its business sub-vertical resided in its struggle to grow, and compete with the strong sourcing of that sub-vertical’s top operators. The top two consumer goods businesses in my client’s segment had dominated their class for two decades, through strong Walmart-styled product sourcing clout, x-factory production blocking, consolidation prowess, pervasive and exclusionary agency relationships, and a disciplined and highly efficient freight, processing, and delivery infrastructure. These players had achieved ‘best in practice’ status, and furthermore had leveraged this clout to drive lowest first cost and industry dominance by means of exclusivity with their oveseas suppliers. Such was a familiar business landscape, one which capitalized upon Chinese hegemony and played out inside American business at that time. A set of mistakes and bad crony judgment for which we are paying the piper even now. Most of the cronies who drove this strategy are now retired at their villas or deceased, leaving for us the task of resolving their messy legacy.
Cronies crave cash and revenue does not make right. Instead, flows of margin and value are king. This is why value chain analysis is a critical component of sound national, market, and business strategy.
On September 22, 480
BCE, a naval engagement occurred in the Saronic Gulf, called the Battle of Salamis. This event was part of a broader ongoing conflict between an alliance of Greek city-states under politician and general Themistocles and the Achaemenid Empire (Persia) under King Xerxes. In this naval battle, the Persian fleet greatly outnumbered the Greek fleet, and as well was equipped with superior ships. Their ‘best in class’ armada bore both the numerics and efficacy sufficient to dispatch a blue water ocean-going opponent in short order. What Themistocles elected to do, was decline to engage the Persians inside their arena of strength, fighting on the high seas. Instead, he boldly told Xerxes exactly where his fleet resided and invited him to come fight there.1
In order to compress this tale of antiquity into its moral; in short, Themistocles enticed overconfident Xerxes through a bit of sleight-of-hand disinformation (both, constituting ambiguity) to fight him inside a strait between the Greek mainland and the island of Salamis. The Persians were less skilled at the columnar-and-abreast tactics of naval engagement inside a strait (complexity), and moreover faced the reality that in this circumstance, because of the constrained engagement zone, only an equal number of ships could indeed be in actual combat at any given time. This meant that Xerxes could not take advantage of his greater numbers (novelty). Indeed, Themistocles had forced a matching of island warfare specialty ships and crews versus blue ocean warfare specialty ships and crews (asymmetry).
Xerxes in his overconfidence, had failed to spot the asymmetry, complexity, ambiguity, and novelty – the ACAN – of the battle which was about to ensue.
As a result, the Persian fleet lost several command vessels early in the conflict and became confused. In the disarray, they ended up having to retreat from their first sortie. However, anticipating this first retreat, Themistocles had an Aeginetan task group on standby (asymmetry, complexity, ambiguity and novelty all embodied inside one single strategic element), which subsequently ambushed Xerxes’ fleet and routed the armada during its exit from the straits.2
Much as in the way that the Biblical David, refused to fight with sword and shield against a tougher sword-and-shielded opponent in Goliath, instead exploiting his nearsightedness, overconfidence, and lack of mobility against him, the Greeks attained victory simply through the action of changing the playing field on the erstwhile ‘industry leader’.
In this same way, my client elected to change the playing field of their industry sub-vertical. Instead of going head-to-head against the top two companies inside their arena of strength, one of serving the customer as first priority, they elected instead to position their infrastructure to be able to respond more adeptly to the vendor industry. In this manner, they were able to respond to emergent vendor buys in much quicker fashion; physically taking possession of problem, distressed, and overstocked inventory and shipments within 24 hours.
I believe there is an innate wisdom as well, a potency within the simple ethic of refusing to do what everyone else is doing. If a naked emperor skulks somewhere inside the popular fray, you will be most sure to find it.
Vendors loved to avail themselves of this new capability and lowered inventories with abandon by means of this handy exit strategy opportunity. As the economy flagged during the endless George W Bush wars, and as the great preponderance of vendor inventory/production began to fall into these types of distressed dispositions, my client was able to cherry pick the best of this class of goods and obtain them at a fraction of the price the major competitors were paying – despite their volume buying leverage. Yes, it is true that American consumers are pampered by good service, but they love off-priced (not simply ‘discount’) merchandise even more. In our strategy, I called this method of market engagement a ‘source based value chain infrastructure’. Accordingly, my client rose from number three, to number one in its market segment, in part, because of this evolution.
Years later I would have clients in sales meetings cite this very business case back to me, framing for my team their desire to have their business employ its philosophy as means to becoming ‘best-in-class’. They would pedantically lecture me with my very own industry strategy, even citing the company (my client), fully unaware that my team had led the groundbreaking project. Then ironically question whether or not my team was capable of delivering strategy for such best practice. I would remain silent, smile, and nod accommodatingly.
Most strategists don’t even know what a value chain is, much less how to craft a strategy employing such principles. The only way to learn how to assemble, normalize, and make decisions from a value chain is to develop several species of them in the real world, and have surveyed their outcomes at a later date. Value chain principles can be topically addressed in a textbook, but cannot not fully instructed in an academic or pulp-mill publication context. It took me eight years to organically figure out what a value chain even was (through myriad successes and directly observing many business and market collapses/consolidations), and another ten years to explain its principles to the industry, major enterprise resource planning software developers, and the leading instructors at my alma mater. However, now you will find the phrase bandied about frequently by poseurs – as if a weapon. Much of skepticism and science functions in this same way. We are all humans after all, even if elite segments of professional domains fail to remember this reality.
Such elicits a key insight regarding arrogance among poseurs, and that of suit, lab-coat, and logo wearers in particular. They often imitate, but seldom innovate.
The simple reality is this, value chains are a methodology which affords the astute problem solver, the ability to see more clearly into the logical calculus of critical path, comprised inside the prosecution of what I call, the ACAN, or New World problem. And just as in the Penrose endless staircase depicted in the image at the beginning of this article, unless one introduces nodes and measures of value/risk into the decision calculus, the ACAN as well as most strategic problems, are often actually insolvent. As a result of our inability to see this, we as governing entities resort to levers of cash, revenues, derivatives, good-sounding rhetoric, and control – to our eventual demise and the suffering of those who are left out.
The ACAN Problem
The New World Problem or ACAN problem, is one which is ‘Asymmetric – Complex – Ambiguous – Novel’. These are top-shelf problems which are difficult to distinguish in the first place, much less negotiate and/or resolve. They require a different type of thinking – a mode of thought which is essential in identifying the ACAN problem. It is not simply that the ACAN problem requires a multi-disciplinary approach, and of course it does. But moreover, the ACAN problem demands that we change the ways in which we speak and think, what we fear (risk), how we measure and adjudicate value, and finally in order to break the entailed contrathetic impasse, the praxis of skepticism we employ.
Value and risk flow, just like product, cash, and margin. Always seek to become exposed to value flows and robust to flows of risk.
Your every decision and action as a business should be one which seeks to either capture value into your brand and/or displace risk to the market.
As a nation or market, never allow any entity’s margin to outrun their value nor marinate in excessive risk.
If one can systemically measure, model, and equitably leverage value and risk into a value chain – one can rule the world (but then of course that would not serve value nor risk).
The ability to distinguish which ACAN problems society faces in the first place, will be a top shelf skill in the New World. This has become most poignant in the post-Soviet/Nazi era, wherein the bad guys are not as easy to spot as they once were. Darth Vader does not exist in an embodied single person any longer. This is not your father’s bad guy. Now he comes dressed in the cloak of woke, with flowers and and army of people thinking they are doing good – all of whom have zero perception of what value and risk indeed are.
Accordingly, below (and as depicted in Exhibit 1 as well) are the features of a true ACAN problem. Specifically, an ACAN problem is one where the following supra-challenges imbue and enhance the normal challenges which we face with respect to run-of-the-mill problems, specifically in terms of a circumstance bearing the following features.
- Might serve to conceal shortages, sabotaged efforts, or flawed or incomplete processes
- May increase exposure risk inside Force Majeure events
- Can serve to hide the presence and impact of groupthink or bandwagoneering
- May serve to delude governance into perceiving a false success
- Introduces left-hand right-hand or compartmentalization ineffectiveness
- Allows for one critical failure to sabotage a full set of successes
- Clouds the ability of professionals to observe measurement, precision, and tolerance abuses
- Clouds the ability of operators to follow through, design or control process or quality
- Clouds the perception of managers in identifying and resolving complicated-ness (more dangerous than complexity) in their processes
- Tempts management to think in terms of single indices, linearity, normal curves, or averages
- Enables confidence to cover for lack of capability
- May allow politics to foster
- Allows the incompetent to survive
- Lack of discipline in language allows goals/processes to be ill defined, and critical actors to talk past each other
- Ignorance of sensitivity, feedback, or whipsaw conditions renders operators vulnerable to their own processes
- The presence of neglect or Nelsonian knowledge becomes difficult to spot and eradicate
- May introduce right-answer wrong-timing or invalid inference problems
- Serves to conflate inductive and deductive inference
- May obscure ability to evaluate soundness, logical calculus, or critical path
- Allows failures to be concealed
- Tempts players to pretend like they know what is occurring
- Neutralizes effectiveness of script or method educated professionals
- Encourages reliance on buzz-phrases and apothegm
- Serves to confuse or cause dissonance in the Peters in an organization
- Allows an appeal to authority elite class to emerge
- Allows a lack of success to come to be expected – or even be rewarded
Anti-fragility after all, is exhibited by the organization which can best identify, measure, and negotiate complexity, novelty, ambiguity, and asymmetry. By mapping flows of value and risk, one can more readily discern asymmetry, ambiguity, and complexity from the mundanity of mere product, margin, and information flow. One can more readily negotiate a novel circumstance, and run circles around the classic experts who inhabit the domain therein.
Notice how well amateurs and ‘conspiracy theorists’ performed on comprehension of critical issues relative to the best epidemiologists and public health officials during the Covid-19 pandemic. Covid-19 was an ACAN problem, which we as a society failed to recognize. We were erstwhile Xerxes, conflating the numbers of ships we possessed, and the cockiness of our captains, with actual competence in combat.
Develop this skill, and one will be the person to call, when the shit hits the fan.
The solution entailed with each New World or ACAN problem of course demands creativity, persistence, and insight. There is no one formula which results in a win. But you will find, that the individual or team who can craft a keen vision of the core ACAN problem in the first place, is the only entity which stands even a remote chance of actually solving it.
Everything else is vanity.
The Ethical Skeptic, “The ACAN Problem – When the Shit Hits the Fan”; The Ethical Skeptic, WordPress, 7 Aug 2022; Web, https://theethicalskeptic.com/2022/08/07/the-acan-problem-when-the-shit-hits-the-fan/