Working with the unknown unknown

4 June 2012

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Back in the early days of the Iraq war, Donald Rumsfeld was mocked from all sides for telling a press conference, “There are known knowns; there are things we know we know. There are known unknowns; that is to say we know there are some things we do not know.

"But there are also unknown unknowns -- there are things we do not know we do not know."

There are certainly plenty of people who want to mock or condemn the former US secretary of defense. But with these comments he hit the nail squarely on the head: in business, and in life more broadly, there are plenty of times when we are at the mercy of unknown unknowns, when we cannot clearly assess the environment we are working in or even guess what may be missing from our assessment.

History may judge that Rumsfeld's problem was that he acted as if he knew his unknown unknowns (and, after a decade-long war that he projected would be over in months, history seems to me to be making its judgement clear).

But, he is not alone in his hubris, in his pride before fickle gods. Who, at the start of 2011, would guess that within 18 months Japan would go from producing a third of its electricity from nuclear power to none today? Conversely, last summer, as Germany dropped its plans for a new programme of nuclear investment after the Fukushima accident, who would expect that there would still be work around the world in the nuclear power sector?

Going back further, who, for much of the 20th century, would have imagined that Detroit's automotive industry would ever stop churning out cars, and jobs, and wealth? Or that North America's consumers would again be looking to Atlantic and Gulf Coast ports for inflows of goods, rather than the China-facing West Coast?

This month's special regional report, built on a year's worth of reporting on North America in our sister magazine, OCH, demonstrates the difficulties businesses face in today's rapidly changing world.

It also offers a solution, of sorts: the businesses that seem to be doing best in the tricky environment of North America in 2011 and 2012 are those that have refused to take their traditional customers for granted.

It is often tempting to think that the good times will always roll, or that the investment in finding new customers for new niche activities is not worth it. But in a world filled with unknown unknowns, it is the only way to build a business with foundations broad enough to survive.