Strategy Under Uncertainty: by Hugh Courtney
The article addresses the issue of being successful in a highly uncertain business environment. Some managers prefer to play it safe by taking the wait-and-see strategy through positioning large investments until the future becomes clear and some others may prefer to invest in flexibility that allow their companies to adapt quickly as the market evolve, but the price in this s case is really high. The companies sometimes neglect the fact that a successful strategy depends on their industry position, assets, or appetite for risk necessary to make such strategies work. The paper discussed how should executive facing great uncertainty decide whether to bet big, hedge, or wait and see. Traditional strategic …show more content…
But here comes the question of how can a company determine the best strategy to adapt? Answering this question depend on knowing specific definitions and terminologies, including the four levels of Uncertainty, Postures and Moves, Portfolio of action, and the four-level framework.
Starting with the four levels of Uncertainty, to determine which level your industry is, there are few factors to consider, including current clear trends, such as market demographics, that can help define potential demand for future products or services, and there is usually a host of factors that are currently unknown but that are in fact knowable by conducting the right analysis, such as Performance attributes for current technologies. The uncertainty that remains after the best possible analysis has been done is what we call residual uncertainty. It has been found that the residual uncertainty facing most strategic-decision makers falls into one of four broad levels. The first level is a “Clear-Enough Future” where managers can develop a single forecast of the future that is precise enough for strategy development. At level 1, the residual uncertainty is irrelevant to making strategic decisions. To help generate level 1’s usefully precise prediction of the future, managers can …show more content…
A range of potential futures can be identified. That range is defined by a limited number of key variables, but the actual outcome may lie anywhere along a continuum bounded by that range. There are no natural discrete scenarios. As in level 2, some, and possibly all, elements of the strategy would change if the outcome were predictable. At one level, the analysis in level 3 is very similar to that in level 2.
The fourth level is “True Ambiguity”. Multiple dimensions of uncertainty interact to create an environment that is virtually impossible to predict. Unlike in level 3 situations, the range of potential outcomes cannot be identified, let alone scenarios within that range. It might not even be possible to identify, much less predict, all the relevant variables that will define the future. Situation analysis at level 4 is even more qualitative. Still, it is critical to avoid the urge to throw one’s hands up and act purely on gut instinct. Instead, managers need to catalog systematically what they know and what is possible to know. Even if it is impossible to develop a meaningful set of probable, or even possible, outcomes in level 4 situations, managers can gain valuable strategic
The article addresses the issue of being successful in a highly uncertain business environment. Some managers prefer to play it safe by taking the wait-and-see strategy through positioning large investments until the future becomes clear and some others may prefer to invest in flexibility that allow their companies to adapt quickly as the market evolve, but the price in this s case is really high. The companies sometimes neglect the fact that a successful strategy depends on their industry position, assets, or appetite for risk necessary to make such strategies work. The paper discussed how should executive facing great uncertainty decide whether to bet big, hedge, or wait and see. Traditional strategic …show more content…
But here comes the question of how can a company determine the best strategy to adapt? Answering this question depend on knowing specific definitions and terminologies, including the four levels of Uncertainty, Postures and Moves, Portfolio of action, and the four-level framework.
Starting with the four levels of Uncertainty, to determine which level your industry is, there are few factors to consider, including current clear trends, such as market demographics, that can help define potential demand for future products or services, and there is usually a host of factors that are currently unknown but that are in fact knowable by conducting the right analysis, such as Performance attributes for current technologies. The uncertainty that remains after the best possible analysis has been done is what we call residual uncertainty. It has been found that the residual uncertainty facing most strategic-decision makers falls into one of four broad levels. The first level is a “Clear-Enough Future” where managers can develop a single forecast of the future that is precise enough for strategy development. At level 1, the residual uncertainty is irrelevant to making strategic decisions. To help generate level 1’s usefully precise prediction of the future, managers can …show more content…
A range of potential futures can be identified. That range is defined by a limited number of key variables, but the actual outcome may lie anywhere along a continuum bounded by that range. There are no natural discrete scenarios. As in level 2, some, and possibly all, elements of the strategy would change if the outcome were predictable. At one level, the analysis in level 3 is very similar to that in level 2.
The fourth level is “True Ambiguity”. Multiple dimensions of uncertainty interact to create an environment that is virtually impossible to predict. Unlike in level 3 situations, the range of potential outcomes cannot be identified, let alone scenarios within that range. It might not even be possible to identify, much less predict, all the relevant variables that will define the future. Situation analysis at level 4 is even more qualitative. Still, it is critical to avoid the urge to throw one’s hands up and act purely on gut instinct. Instead, managers need to catalog systematically what they know and what is possible to know. Even if it is impossible to develop a meaningful set of probable, or even possible, outcomes in level 4 situations, managers can gain valuable strategic