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Three things you must do to conquer complexity

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"You keep telling me the world is changing," you say. "You've told me over and over and over. Now tell me what I should do about it."

OK. Ask, as they say, and you shall receive.

For that bit of information, let's bring in Rita McGrath. The Columbia Business School professor says too many organizations are trying to solve today's complex problems with outdated methods. In short, they're trying to predict their way out of an unpredictable situation.

"One of the dilemmas we all face," McGrath said at the 2012 DigitalNow Conference in Orlando, "is that we are trying to grapple with truly complex systems by using tools and frameworks that were designed for more simple, more linear systems."

So what do we need to do? Three things, says McGrath:

1. Forecast differently
Spend less time on lagging indicators like yesterday's numbers and outcomes. Spend more time on leading indicators like data that offer clues about what the future holds.

"Leading indicators are the hardest to find," McGrath said. "The problem is that they are subjective; they're not facts yet. But they also give us some distant early warnings about things that might happen."

Here's an exercise we can try: Imagine a future event -- something that's either good or bad for your organization. Now imagine what would have to happen first in order for that event to take place. Ask yourself: "Can I see the signs that will tell me if that is happening now?"

2. Take on intelligent risk
McGrath channeled political scientist Aaron Wildavsky for this one. Most organizations today invest in prevention -- that is, trying to keep bad things from happening to them. McGrath said we need to invest more resources in what Wildavsky called "resilience," a trait that will help us "mount the appropriate response" when something goes wrong.

That point of view requires an eye toward innovation. Don't be afraid to try new things. If they work, great. If they don't, respond accordingly and try again.

"Start making small bets on things that are not part of your core business," McGrath said. "Then ask yourself: Who are your truth-tellers -- the people who are able to look at the future and articulate cases where things are going to be much different than it is today?"

And if the people in power aren't truth-tellers, watch out: This could be a difficult exercise.

3. Allocate your resources differently
Sure, we need to focus on our core businesses. But in this crazy environment, McGrath said it's critical that we also devote some time and energy to innovation -- identifying opportunities, thinking of things we'll want to invest in, figuring out how to ramp them up and make them scalable.

That means we'll also have to spend some time on what she calls "disengagement" -- figuring out what we should stop doing so that we'll have the time and resources to devote to innovation.

And here's the most important thing: Your superstars need to be innovators.

"Average organizations put their best people on problems," McGrath said. "Exceptional organizations put their best people on opportunities."

McGrath's keynote was so good, I can't possibly do it justice here. Do yourself a favor and watch her presentation its entirety on the DigitalNow Live site. (Scroll down to "Friday General Session" and click on "Play Session.") You''ll have to register, but it's free to do so.

You can thank me later.

Don't miss the MACPA's Innovation Summit on June 27
We agree with Rita -- innovation is critical going forward. You'll want to join us for the MACPA's Innovation Summit on June 27 at Martin's West in Baltimore. It'll feature details on the trends and issues that impact the CPA profession, as well as ideas from inspiring leaders across three tracks -- Tax / Accounting, Government / Health Care, and Industry / Innovation. Find out more here:

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