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Rogue waves that upend entire industries and break businesses, like pandemics and financial crises, occur more frequently than ever. In Rogue Waves, author Jonathan Brill shares the five-step ROGUE framework that helps turn major systemic threats into outsized opportunities.

The first step is the Reality Test, used to deeply understand your present state. The Organize Your Forces step helps you model the forces that keep your current system stable. Step three is to Generate Your Futures through simulations to identify potential opportunities and threats. Step four is Uncouple Opportunities from Threats to identify where and how to intervene. The fifth step is Experiment, where you build an experiments portfolio to maximize your odds of success

Top 20 insights

  1. As the world moves faster and becomes more connected, Rogue Waves are no longer edge cases. External events of large magnitude like wars, financial crises and large natural disasters have severely affected large companies every seven years on average. American business leaders respond to radical external change nearly 45% of the time.
  2. In an increasingly volatile world, resilience is the new growth strategy. Resilient organizations have more redundancies than what Six Sigma advocates find acceptable. But today's organizational mandate is not just about performance. It's also about surviving and recovering from unexpected systemic shocks.
  3. Any business or economy is just a combination of games with different rules, different winning probabilities, and different payouts. In a casino, while individual players win or lose, the house always wins the night because it places systemic controls on the flow of information. Similarly, a business can beat randomness and win by placing systemic controls around the unknown.
  4. All business risks can be slotted into the FOES framework: Financial, Operations, External and Strategic Risks. Financial, External and Strategic risks combined have accounted for significant, sustained value loss of over 20% in 92% of occurrences over 20 years. Therefore senior managers look out for Financial, External and Strategic Risks, while mid-level managers primarily focus on Operational Risks. While the above approach works in regular times, it can sink an organization when rogue waves hit. When change is rapid, junior people on the ground will see it first. Organizations must teach them what to look for, create effective mechanisms to process their warnings and give them the confidence that they will be heard.
  5. Rogue waves can have four types of characteristics. First, they can be Static, with constant probability or Dynamic, with varying probabilities. Second, they are Symmetric or Asymmetric based on whether they affect all parties equally or unequally. Third, they are either Synchronous or Asynchronous, based on whether they impact all parties simultaneously or at different times. Finally, their impact can be Sustained or Temporary. Covid-19 was a dynamic, symmetrical synchronous wave as its probability changed over time, and its impact was on every business in the category within the same time frame. In contrast, the rapidly growing cyberattacks on companies are static, asymmetric and asynchronous.
  6. Three things are required to spot the next rogue wave before your competitor does. First, be familiar with today's prominent economic, technological and social undercurrents. Second, pay special attention to events that cause two or more undercurrents to interact. Finally, build awareness throughout your organization so that everyone can scan the horizon for critical indicators.
  7. To build systemic intuition about the threats and opportunities created by rogue waves, think through the impact of the different types of rogue waves on the four FOES of your organization. Ask how they can impact you and create new opportunities for your organization to create outsized value.
  8. Demographics are one of the top 10 undercurrents that will shape the next wave. As birth rates decline in highly developed countries, the percentage of working-age people with advanced degrees will fall. California alone will have a shortage of 1 million college graduates by 2030. By 2030, the only major country with a labor surplus will be India, and the surplus will barely cover California's projected shortage alone. This means that companies must emphasize talent over tax considerations while making locational decisions. Wealth, production and power are reorganizing from Europe to Asia. In 2019, 121 companies in the Global Fortune 500 were from the United States, while 129 were from China (includes 10 Taiwanese firms). By 2035, 2.1 billion people will be earning the global equivalent of $35000 per year, and 87% of this growth will be in Asia.
  9. Use the ROGUE method to prepare for rogue waves and build organizational resilience. ROGUE is a set of mental models that help you identify systemic risks and opportunities and potentially shape them in your favor. ROGUE consists of five stages Reality Test, Organize your Forces, Generate Possible Futures, Unbundle your Risks and Experiment. Step 1 of ROGUE is Reality Testing. Many organizations put great effort into collecting data about the past to forecast the future, but far less into modeling the present. But if your model of the present is wrong, your model of the future will mostly be wrong as well. Reality Testing helps you clearly understand your present state to avoid making decisions based on wrong information.
  10. For Reality Testing, use the four-step REAL Framework - Reconnaissance Method, Evidence Collection, Alternative Analysis and Likely Realities. The reconnaissance Method helps you decide the bounds of your question and your approach to data collection. Evaluation helps you analyze the accuracy and usefulness of your data. At the Alternative Analysis stage, you develop multiple theories and test their robustness. At the Likely Realities stage, rank your solutions by the degree of confidence. For Reconnaissance, use the Search Tree method to reduce the range of answers as quickly and easily as possible. Think of the Search Tree method as an adult version of 20 questions. Ask questions that, when correctly answered, will define the boundaries of the search area most effectively. What one detail, when known, would narrow the search space the most?
  11. When you do Reconnaissance, a lack of information about a potential customer segment might indicate an underserved market. When REI, a major US outdoor gear retailer, started researching millennials' attitudes towards wilderness creation and equipment, they were surprised by the lack of information. They rightly suspected a market gap and piloted a new-sub brand that addressed a brand new audience.
  12. Use the Chess Tournament technique to avoid cognitive biases and improve group decisions in uncertain situations. Identify four competing hypotheses and collaboratively spend 15 minutes to prove each approach. Now spend 15 minutes to prove why each solution won't work while others attempt to defend it. When a solution fails, add a new one. The Chess Tournament forces teams to argue for and against double-check assumptions.
  13. Step 2 of ROGUE is to Organize your Forces. Model the complex balance of forces that keep your current system in equilibrium. Every system has six elements: nodes, links, inputs, outputs, rates and frequencies. Nodes store inventory, and links make inventory flow across nodes. Inputs measure the potential added to the system, and outputs measure the potential subtracted. Rates measure the transfer speed between nodes, and frequencies measure how often transfers happen.
  14. Step 3 of ROGUE is to Generate your Futures. Leverage simulations to project and prepare for a range of scenarios from 100X success to massive failure. Simulations answer three key questions: Uncertainty- the likelihood of an event occurring, Impact- How significant its influence will be, and Timeline- when these uncertainties and impact will manifest. Simulations can rapidly accelerate organizational learning, identify unlikely opportunities and prevent threats. Simulations don't need to be complex or challenging programs run by Fortune 100 companies. You can realize 80% of the value can be realized with just 20% of the right effort. Use a simple paper and pencil exercise with some reconnaissance, discussions and a couple of spreadsheets. What's important is to structure the simulation and ask the right questions.
  15. When COVID-19 hit, Amazon hired an additional 175000 employees in just 90 days to handle increased demand. Amazon's leaders could act decisively to rewire links and scale the capacity of nodes because they had a comprehensive system model and detailed scenario planning. That's because Amazon employs the highest number of economics Ph.D. in the United States to run simulations and prepare for possible futures.
  16. Step 4 of ROGUE is Uncouple Your Opportunities from Threats which aims to shift the probabilities of the identified threats and opportunities in your favor. First, identify Trigger Points, the parts of the system most sensitive to change. Second, find ways to nudge the Trigger Points to shift the system to your advantage. Third, determine the best sequence and time to address your threats and opportunities. Finally, design your strategy to shift the probabilities of these events.
  17. Step 5 of ROGUE is Experiment. Create a portfolio of experiments to respond strategically to the threats and opportunities identified. A well-balanced portfolio of experiments increases the probabilities of success and minimizes the downsides of failures. Your portfolio should have three categories of experiments to serve different goals. Growth experiments are those that can enable your 100x outcome. Sustaining Experiments protect the existing value and decrease the chance of an ugly outcome. Finally, Insurance Experiments increase resilience when bad futures occur.
  18. A cross-sectoral study at 103 firms over 23 years shows that R&D investments had twice the impact on the market cap as investments intangible assets. However, returns vary based on what you optimize the portfolio of experiments for. Huawei averaged 10% annual return on R&D while Xiaomi averaged just 5-6%. Huawei sought to dominate the 5G ecosystem while Xiaomi just aimed to retain customer loyalty in a rapidly-changing market.
  19. To encourage genuinely innovative experiments and not-safe ones to incentivize smart failure. Reward employees who deliver quality experiments instead of only those whose experiments were successful. Good experiments are those that help the organization learn more about the future. Define risk bands for your team. Any reasonable experiment which falls within the upper and lower risk limit should not be penalized. Zombie projects live on for years and lock up valuable resources because teams are reluctant to admit failure. Create incentives for your team to kill their zombie projects. Offer bonuses and appreciation for those teams that cut their losses early.
  20. Companies often seek a single large solution when faced with a fundamental threat. But a big bet on a single experimental approach can lead to unintended second and third-order consequences. Instead, a well-balanced portfolio of dozens of low-impact experiments can collectively produce a high-impact outcome when probabilities add up to create decent odds of success.


The world has become more volatile than ever, with once-in-a-lifetime events happening once a decade. Jonathan Brill calls them Rogue Waves. But organizations and management theories have been designed for stable operating environments. This book provides actionable frameworks to reduce risk, build resilience and best position your organization to take advantage of future rogue waves.

Assess your threats and opportunities

  1. Horizon scanning

    Identify the top ten economic, technological and social undercurrents that could create the next rogue wave and impact your business. These could include trends like changing demographics in the West, the rise of Asia and the impact of emerging technologies like 5G and IoT. For each of them, list the high impact changes in politics, markets and consumer behavior they could cause.

  2. Identify implications for your organization

    After you have listed the significant undercurrents relevant to your business, identify the risks and opportunities they could create. Risk can be modeled using the FOES Framework: Financial Risk, Operational Risk, External Risk and Systemic Risk. Since your junior staff is closest to ground reality, train them to keep a lookout for the right issues and install organizational mechanisms to ensure warnings are heeded.

  3. Identify response window and build an indicators dashboard

    Your response window is the period between the earliest time the changes become relevant to you and the latest time your organization can still course correct. Set up a dashboard to systematically track threats and opportunities. Review your Four FOES Dashboard every quarter and do an in-depth assessment every 12 months.

The rogue method

When a rogue wave hits, it will be the process you have installed, not your individual performance, that will drive results. To prepare your organization, you must provide your team the training they need to look out for rogue waves, the processes that will enable them to speak up and the confidence that they will be heard. The ROGUE method is a broad set of mental models to build organizational resilience to handle rogue waves.

The ROGUE framework begins with the Reality Test stage, used to deeply understand your present state. The Organize Your Forces step helps you model the forces that keep your current system stable. Step three is to Generate Your Futures through simulations to identify potential opportunities and threats. Step four is Uncouple Opportunities from Threats to identify where and how to intervene. The fifth step is Experiment, where you build an experiments portfolio to maximize your odds of success.

Step 1: reality test

Organizations often spend significant effort collecting data on the past to forecast the future but far less to understand the present. But if your present model is wrong, your future projections are likely to go wrong as well. Use the REAL framework to investigate current reality.

  1. Reconnaissance

    Decide what decisions have to be made and the degree of proof required to make them and estimate appropriate boundaries to the search. An excellent way to start reconnaissance is to identify the knowns and unknowns. Known Knowns are the things that we are aware of and understand. Equally clear are Known Unknowns, the things that we want to find out but don't have information on yet. Unknown Knowns is available information that you may have missed due to cognitive biases. Finally, there are Unknown Unknowns, which is information that we are neither aware of nor understand. An excellent way to brainstorm possible Unknown Unknowns is to consider counterfactuals or what-ifs. Unknown Unknowns could be new technology, unexpected competition, a shift in geopolitics etc. While you cannot research them, listing them down helps you expand the problem understanding.

  2. Evidence collection

    Decide on a standard of proof before you collect evidence. Many organizations rely on sources like newspapers, trade journals and industry analysts. However, high-risk decisions need a deeper dive. The best quality information usually comes from academic writing or direct source data analysis. To determine whether an information source is valuable, evaluate it across three factors:

  3. Focus — Does the data have a detailed focus on the subset relevant and limited to your question? If you want to know LA traffic patterns, data for the US is useless.
  4. Givenness — Does the information say something new that provides fresh insights into your problem?
  5. Relevance — Will the information help you generate new insights?
  6. Alternative analysis

    Take the information gathered and create multiple theories of reality. When you have to deal with complex and ambiguous data, you could be easily prone to cognitive biases. To avoid them separate information collection from analysis and systematically evaluate alternatives. Use the Chess Tournament approach to evaluate multiple theories of reality generated. Identify four competing hypotheses and spend 15 minutes trying to confirm each. In the second hour, one person spends 15 minutes to demonstrate why each solution won't work while others attempt to defend it. When a solution fails, another is added. The structured brainstorming approach biases and forces teams to second-guess conclusions and double-check assumptions. Finally, for every theory that survives, establish the impact if your theory is invalidated.

  7. Likely realities

    Ensure you have explored the full range of options, given the level of proof you have. Confirm if you have subjected all possible theories to the same level of logical scrutiny. Make an honest assessment of how confident you are in your conclusions and rank them. Now you have a clear picture of your current reality.

Step 2: observe your system

Step 2 requires you to model the forces that keep your current system stable to determine what can cause the system to change or break. A system becomes unstable when there is a change in the balance of forces.

First, identify the boundaries of the system in which you are working. Every system comprises the same elements: nodes, links, inputs, outputs, rates and frequencies. Nodes are locations within a system that contain inventory. Links are pathways to move inventory from one node to another. Inputs measure how much potential is added to the system. Outputs measure how much potential is subtracted from the system. Rates are the speeds at which inventory moves from one node to another. Frequencies measure how often inventory moves between nodes.

Take the example of a distribution chain. The factory pushes new products as system inputs. Multiple warehouses are nodes that stock inventory. Vehicles are links that move products across warehouses. The mode of transport depends on both the Rate of transfer and Frequency of transfer. Finally, the seller is paid(output) when the product is delivered.

  1. Map the System — System models provide clarity and help you focus on the small changes that will have the most significant impact. Identify the nodes, links, inputs and outputs that you already understand. Place black boxes around the ones you don't. Identify which links are deterministic and which are probabilistic.
  2. Identify the system's equilibrium — There are balancing and reinforcing loops that keep your system under equilibrium. Causal loops help you predict second and third-order effects of changes. Draw directed arrows to connect the nodes based on links in the system. Sometimes causal loops can be recursive. Balancing loops slow the system down while reinforcing loops that accelerate small changes. These are represented by - and + signs, respectively. Left unchecked, a reinforcing loop can rapidly produce an exponential growth situation. Causal loops help you identify which relationships are still unknown and what indicators must be tracked to receive early warnings.
  3. Identify subsystems to investigate — Based on the previous steps, identify subsystems around black boxes and recursive loops that are important to understand. Perform direct investigations where possible, as described in the Reconnaissance section. For subsystems that you cannot directly investigate, infer what is going on by looking at the rates and frequencies throughout the system.
  4. Imagine and list possible causes of disruption — Ask what could cause the balancing and reinforcing loops to accelerate, decelerate, reverse direction or snap. Evaluate the impact of major economic, social and technological undercurrents on your system.
  5. Identify most important uncertainties — Which uncertainties are most important to understand and manage? From the above list, select disruptions that are feasible within the timeline of your concern. Then identify the system elements where you can intervene to handle the disruptions.

Step 3: generate your futures

Simulations are a risk-free way to analyze how actions affect possible scenarios and generate a range of possible futures. Simulations help us understand three key things:

  1. Uncertainty — The likelihood of an event
  2. Impact — The influence on your organization
  3. Timeline — If the uncertainties and impact are relevant within the timeline considered.

While organizations like Blackrock and Amazon use sophisticated mathematical models, simulation follows the 80/20 rule. A simple pen and paper approach supplemented by spreadsheets can get you surprisingly far if you know how to structure the simulation and ask the right questions. Here is a simple sequence to simulate futures.

  1. Build your tree of possibility
  2. The Tree of Possibility helps you expand your universe of possibilities and present a range of plausible outcomes from optimal success to disaster. Start with a clear future outcome for each iteration and work your way backward to the present. Systematically think through what possible sequence of events and actions can lead your organization to that outcome. Make sure you model three types of outcomes:

    The Good — Envision a transformational goal that leads to a 100X future. 10x goals are often not ambitious enough. It takes seven years to get a category product to scale in many fields. When we factor in the cost of capital and existing competition, a 10x improvement is barely sufficient.

    The Bad — Reframe your current goal as the minimum acceptable outcome.

    The Ugly — Imagine failure to the fullest extreme. Ask ""what is the worst that could happen"" and assess likelihood and impact. Prepare for these outcomes by determining what steps you can take now to minimize their likelihood, recover from their impact or leverage them to your advantage.

    If a threat or opportunity comes up repeatedly across multiple scenarios, it is worth focussing on.

  3. List your miracles
  4. Many futures depend on one or more ""miracles"" to occur. Determine what extraordinary things must fall in place for each modeled scenario across the Four FOES - the Financial, Operational, External and Strategic drivers. Find out what actions you can do to shift the odds in your favor and make them more likely to occur. Identify what indicators to track to know if these ""miracles"" have occurred. Finally, prepare contingency plans to respond if these don't occur.

  5. Maintain a chart with a range of possible futures
  6. For each future, estimate the likelihood of occurrence and potential opportunities or threats for your organization. Qualify each of your threats and opportunities by the degree of uncertainty, impact and the time you have to prepare. Create a ranked list of opportunities and threats. Identify the key events that can cause each future and what indicators you can track to see them coming. Finally, rank the actions you can take to shift the future to your advantage.

    Share the future scenarios with your organization inevitably generates robust discussion and feedback. It results in better planning and the ability to respond well when unplanned scenarios occur. Run scenario planning and simulation programs regularly.

Step 4: uncouple your opportunities from threats

Now it's time to identify points in the system to intervene in and shift probabilities in your favor. There are four steps to shift probabilities in your favor:

  1. Identify trigger points
  2. Trigger points are interactions where a small amount of effort can release a large amount of pent-up energy. Creating mechanisms to nudge systems at trigger points is a powerful way to shape change in your favor. The most successful businesses see these pent-up forces and prepare themselves to ride the wave when it unleashes. Use the VEGAS framework to systematically identify trigger points:

    1. Visibility — Is it easy to identify problems in the system?
    2. Effect — What mundane events can cause second-order effects that lead to failure?
    3. Gestation — What is the time gap between the action and its result?
    4. Accessibility — Do you have access to the vulnerable points to fix them?
    5. Security — How likely are critical components to fail? What self-correction or recovery mechanisms exist?
  3. Evaluate your options
  4. Make a list of interventions to mitigate threats and create opportunities. Cluster them into low, medium and high impact interventions.

  5. Build separate threat and opportunity dashboards
  6. For both dashboards, the first column lists FOES, Financial, Operational, External and Strategic events that could impact your organization. The second column identifies undercurrents that would drive these FOES risks. The remaining columns assess the impact of these issues over 3,6,12, and 24 months. The bottom of the dashboard has triggers to watch out for.

  7. Decide what actions to take.
  8. There are four actions that you can take to shift the impact of uncertainties:

    1. Accept
    2. Avoid
    3. Mitigate
    4. Experiment to fuel innovation

    For each critical threat and opportunity, analyze which approach is suitable.

Step 5: experiment

When you can't avoid, accept or mitigate risk, you need to experiment to innovate your way around the challenge. Make failure cheap so that your team carries out more small-scale experiments.

  1. Plan your experiments like an investment portfolio
  2. Experiments are investments, and organizations must adopt a portfolio approach as a strategic response to FOES of growth. Experiments fall into three categories:

    1. Growth Experiments — They enable your 100X outcome. They have a high risk of failure but promise disproportionate payoffs.
    2. Sustaining Experiments — These experiments protect your existing interests and reduce poor outcomes.
    3. Insurance Experiments — These improve organizational resilience to negative scenarios.

    Balance the efforts you spend pursuing, growing, sustaining and insurance innovations. The rapid pace of change requires us to run experiments in parallel. For each experiment, consider the timing and sequencing that will make it effective.

  3. Structure your portfolio to maximize payoffs.
  4. Shortlist experiments that you can take advantage of if they are successful. Do the experiments that will provide the most important information first, even if they are highly risky. Finally, maintain a repertoire of experiments that you can perform if external conditions change or your experiment portfolio behaves differently than expected.

  5. Create clear rules to finance experiments
  6. When you set a budget, consider each experiment's impact on the overall portfolio's long-term optionality, near-term impact, resilience and performance. Your financial goal must be to manage overall project risk instead of individual experiment risks. Create a spread of experiments with high and low impact and high and low success rates. Have clear rules for when to initiate experiments and when to stop them.

  7. Institutionalize the use of experiment portfolios
  8. Incentivize smart failure to encourage genuinely innovative experiments and not safe ones. Reward employees who deliver quality experiments instead of only those whose experiments were successful. Good experiments are those that help the organization learn more about the future. Protect team members who perform experiments within a defined risk band.

    Bigger and more frequent rogue waves are not only threats. They also contain within themselves immense opportunities. With the proper frameworks and organizational processes, you can be prepared to take advantage of the next rogue wave as Amazon did.

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