Expecting the Unexpected: Managing the Unknown In Product Development

Expect the Unexpected
Product risk in a VUCA World
(Volatile, Uncertain, Complex, Ambiguous)
@dhavalpanchal @danielwalsh

What Are Some Risks for Your Product?
● Select a product or
service that you are
working on (or pair with
someone else as needed)
● Brainstorm a list of 3 to 6
risks that worry you
● Write each on a separate
Post-It Note
Risk Risk Risk
Risk
Risk
Risk

Sometimes Our Products Result In Ruin

Sometimes Product Result in Ruin
● Write down a few more risks that may result in ruin for
your product
Risk RiskRisk
● Develop a scenario where your product results in ruin

Balancing Business, Usage, & Technology
● Three fundamental perspectives
needed for compelling solutions
○ Business
○ Usage
○ Technology
● Use the Three-Circle Model to
identify 2 to 3 additional risks
Reference: Balancing Business+Usage+Technology To Deliver Compelling Solutions
Risk RiskRisk

Build a Continuum for Risky Decisions
CHAOTIC
Completely unpredictable
Unknowable
Obvious
Predictable
Well Known
Most
Obvious
Most
Chaotic
RiskRisk RiskRisk RiskRisk

Situational-based Approach For Risk Management
Continuum based on the Cynefin
Framework
Cynefin is a sense-making framework
used to make sense of the situation in
order to take effective action
Risks need to be managed differently
depending on their nature
Reference: HBR A Leader’s Framework for Decision Making by David Snowden & Mary Boone

Situational Approach to Product Risk
Safe-to-Fail
Limit Exposure
Analysis
Estimation
AvoidancePreparation in advance
of need
Continuum based on the Cynefin
Framework
Cynefin is a sense-making framework
used to make sense of the situation in
order to take effective action
Risks need to be managed differently
depending on their nature

Situational-based Approach For Risk Management
CHAOTIC
Completely unpredictable
Unknowable
Obvious
Predictable
Well Known
Most
Obvious
RiskRisk Risk
COMPLEX
Safe-to-Fail
Limit Exposure
Sandbox
Canary Test
COMPLICATED
Analysis
Estimation
Expert analysis
Simulation
OBVIOUS
Avoidance
Policies and Training
Error Proofing
CHAOTIC
Preparation in advance
of need
Rapid Response
Rainy Day Fund
Chaos Engineering*
Most
Chaotic
Risk RiskRisk
Reference: Chaos Engineering

Mindset
Principles for working with
complex product risks

Entropy
<- Less
Entropy
More
Entropy ->

Unintended Consequences
"When we try to pick out
anything by itself, we find it
hitched to everything else..."
- John Muir
Interventions in complex
domains will always result in
unintended consequences

Path Dependence
● “Strategy of ruin, eats away all gains” -
Warren Buffet
● Survivorship bias
● If it can go wrong, sooner or later, it will.
Ref: Nassim Taleb: https://medium.com/incerto/the-logic-of-risk-taking-107bf41029d3@dhavalpanchal @danielwalsh

Complex Risks Have Non-linear Effects
● Butterfly Effect
● Runaway cascade or snowball

Heuristics
Techniques for working with
complex product risks

When In Doubt… Assume Risk is Complex
Best-practices are only a when
things are stable, repeatable,
and well known
Need to prove that risks are
NOT complex before relying on
standard methods (e.g. RPN)
If in doubt, it’s safest to
assume the situation is
complex

Spread Your Bets
Harry Markowitz received the Nobel Prize in
Economics in 1990 for his work on Modern
Portfolio Theory (MPT).
Yet as Gerd Gigerenzer notes, when it
came to investing his own money,
Markowitz relied on a simple heuristic, the
“1/N Rule”
Reference: Macroresilience- Heuristics and Robustness in Asset Allocation: The 1/N Rule

Start from the tail: Face of the cat is less important
than size of the cat.
Take risks you can measure, not
measure risks you take

Sensitivity to risk factors
Your sensitivity to risk-factors is more important
than measurements of risk
Sandbox or quarantine: Manage for extreme
risks, rest is noise.
Every increment of upside comes with possibility
of maximum downside.

Only care about survival power
Barbell strategy: Everybody is susceptible to prediction errors - Be as
hyper-conservative and hyper-aggressive as you can be, instead of being mildly
conservative and mildly aggressive.

Simulate the Unexpected
Chaos Monkey* (2011 Netflix) - purpose is
to simulate failures in a real environment &
to check that systems continue to work.
Chaos engineering - discipline of
experimentation on a distributed system to
build confidence in the system's ability to
withstand turbulent production conditions
*Reference: https://en.wikipedia.org/wiki/Chaos_Monkey
Netflix Medium Post: ChAP - Chaos Automation Platform

Structure of Risk
● Loss of electric power
● No potable water
● No food
● No gas at gas pump
● No road
How to prevent ruin, when all
or some of above happens
(scenario), eg. Hurricane ?

Exercise: Structure of Risk - 7m
● Face all risk-item post-it notes upside down.
● Pick three (3) risk factors at random
● What could be a scenario when all these risk-items may come true?
● What else could go wrong, under this scenario?
● What does this reveal about “structure of risk” for your product?
● How does your product risk differ from other products in your group?

Risk Journal
Capture risks you want to remember & take away
from session

Conclusion: Key Take Aways
● Holistic risk assessment for product
○ Mundane and extreme - don’t underestimate ruin
○ Evaluate Business, Usage, and Technology risks
● Take a situational-based approach to characterize and mitigate risks
● Assume risks are complex until proven otherwise
● Understanding impact of risk factors (scenarios) is more important than
measuring risk factors
Feel free to contact us with any questions or follow up...
dhaval.r.panchal@gmail.com
daniel.walsh@nuCognitive.com

Expecting the Unexpected: Managing the Unknown In Product Development

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Expecting the Unexpected: Managing the Unknown In Product Development