Black Swans and Outsourcing

Ever heard of a “black swan event?” If you haven’t, here’s a quick definition: it’s a surprise event that has a major impact, and those involved eventually try to rationalize using hindsight.

So what does a black swan event have to do with managed services outsourcing? Turns out, quite a bit.

The Observer Matters

In Nassim Taleb’s book Black Swan: The Impact of the Highly Improbably, Taleb states that, “a Black Swan surprise for a turkey is not a Black Swan surprise for the butcher.” Simply put: we all have blind spots. We have to identify areas of vulnerability in order to, “turn the Black Swans white.”

Using outsourced MSPs reduces your number of blind spots. Chances are, those seemingly unlikely events you encounter are events an MSP with many clients has encountered before. Those events are our white swans.

The Bell Curve

Many of us manage risk from the bell curve perspective, meaning: we know what’s more likely to occur, so we guard against those things. We play the odds, so to speak. If it’s likely to occur, we’ll defend against it.

One major disadvantage with today’s bell curve is the vast number of data points we’re measuring and the sheer amount of data we consume. We’re left with a bloated bell curve and think we should be managing everything in the middle. Because again: we’re playing the odds. And? The middle of the bell curve is large! It begs us to pay attention to it.

But real risk– the kind of risk that destabilizes organizations– comes from the outliers. Real risk comes from the things we didn’t see coming. Real damage rarely comes from the middle. Much like in football, where the blind side is the worst side for a quarterback to get hit from, we too are most disrupted from the unlikely.

Think Zebras, Not Horses

In medicine, doctors are taught to, “Think horses, not zebras.” This means if someone comes in with a cough, diagnose the likely (a cold) instead of the exotic (like tracheobronchopathia osteochondroplastic or TPO, which is a rare cause of chronic cough).

The caution in medicine is that, “The striking and the novel stay longer in the mind,” (Rhetorica ad Herennium). That’s great for medicine, but in mitigating and reducing risk, we actually need to focus on the zebra. The novel. The striking. Risk in our industry mostly comes in the form of the zebra; most of the usual and common risks have been mitigated for us.

Let’s do the math. Let’s say that horses (or common risk) comprise 95% of the population, while zebras (unseen risk) comprise 5%. If we reduce the unseen risk by 1%, have we only improved our situation by that same 1%? No! We’ve reduced our risk by 20%! Spending time identifying outliers produces exponential risk reduction, while focusing on the common yields only incremental reduction. This is a major component of the value MSPs bring to an organization: exponential reduction of risk.

Black swan events are different for everyone. But they have two things in common: 1) significant impact to your business and, 2) your black swan was a white swan to someone else.

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