A Strategy for Thriving in Uncertainty
Uncertainty and turbulence are characteristics of most global markets. Traditional approaches to strategy comprises of analyzing trends, making forecasts and committing to only the ‘best’ course of action. These strategies are not calibrated for the high degree of instability many companies face in these days. Companies that rely on a traditional strategy process are faced with uncertainty and more often than not, find themselves playing catch-up with more agile competitors. In worse cases, these linear processes can commit a company to a single course of action, and it may be the wrong one, leading to their downfall.
In times of uncertainty, both the strategy processes and the strategy itself need to adapt and mostly change. The most effective leadership teams focus on few vital uncertainties that matter. They try to understand the possible scenarios that could develop and identify that very critical trigger point that heralds the pendulum from one scenario to another. In business parlance, they are signposts. This allows them to develop a clear and actionable portfolio of strategic actions that balance commitment with flexibility and sway the pendulum on the positive side. By handling such process shifts, a company resorts to a cycle of – ‘execute, monitor and adapt’, and over a period of time this exercise redirects the company toward the best opportunities. It is about creating a clear and coherent set of scenarios across all critical variables analytically. This helps the leadership teams address a number of key questions such as -
- What are the most probable scenarios that may emerge from the major uncertainties the company faces and what will it take to thrive in each one?
- How could the world evolve in a way that could either disrupt current course of plans or create new opportunities?
- How can the company act quickly depending on whichever future unfolds?
The companies that adapt quickly around the seemingly logical right choices are better at predicting the future. This is because its leadership has proactively prepared the company for a range of futures by doing the following:
- Defining the uncertainties faced by the company and cutting through the noise by separating them into what matters and what does not.
- Creating a wide set of probable scenarios for how the future might unfold and discussing the threats and opportunities that each of those scenarios may present.
- Devising a concrete set of strategic actionables that balance commitment towards a course of action with the flexibility to adapt and thrive amidst the various future scenarios.
- Identifying a clear set of signposts that will signal important sways in the marketplace and trigger a set of actions already foreseen during the scenario-planning process.
The goal is to encourage leadership to monitor change on a regular basis and move ahead of competitors as future stakes begin to take shape. Instead of adopting a wait-and-see approach to planning and investment, leadership should align and be ‘pre-committed’ to take specific set of already planned actions under different circumstances that may transpire.
A Strategy For Uncertainty
One of the important dilemmas that many companies struggle with is - how to balance the scope of strategic choices that arise from any scenario process with the formulation of a coherent strategy the organization can embrace. According to research, the best strategies blend three critical elements -
These are strategies like ongoing cost management or increasing operational effectiveness that will benefit the company under any and every scenario.
Options and hedges
These are strategic tactics aimed at specific scenarios, which might include a range of smaller-scale pilots, or experiments that can be ramped up or scaled down quickly, joint ventures that provide lower-cost market entry or changes to projects that might add cost but provide additional flexibility.
These are large-scale and long-term commitments that are valuable in the current scenario, and may have different payoffs depending on how uncertainties are resolved. Companies might not pull the cap until there’s more clarity around which scenario is most likely to play out. But advance planning gives them the critical flexibility to move quickly.
The object of strategy in uncertainty is not to stray far from the company’s core strengths or long-term vision. On the contrary it is those strengths and values that provide the best compass for adapting to changing circumstances.