Strategy and Uncertainty

Strategy has always been developed and executed in an uncertain environment, and chance has always played a role in success.  Yet many planning processes are based on the assumption of a stable, predictable environment and the role of chance is suppressed. 

We have developed some case studies that show how the unexpected is often a source of opportunity which some companies can systematically turn to advantage.  We believe most businesses can benefit from accepting uncertainty as a reality and developing strategy as an iterative, multi-move process of weighing the right move in a set of shifting probabilities.  

Core to the ability to do this are six features:

  1. Working hard to develop a very clear high level intent, and a shared context amongst a broad group of leaders;
  2. Distributing decision rights down and across the organisation so that the people with the best information make the calls, framed by their understanding of the context;
  3. Managers have clear commitments, not simply to ‘delivering the numbers’, but to co-operating with each other, and are ready to shift priorities and resources as the situation changes;
  4. Rather than following the traditional planning approach of learn-think-act, planning in uncertainty means being prepared to experiment and probe reality:  act-learn-think;
  5. Rather than using planning to predict the future, planning is used to prepare minds, setting out a base case of probabilities and considering how to deal with the ‘tails’ of less likely events at the ends of the bell curve;
  6. The review process is not so much about ‘how we are doing’ as about adjusting to the current reality.  The effects of actions already taken are carefully watched, and decisions are made to optimise the future outcomes based on the current reality, rather than trying to ‘get back on track’.

We are struck that most of these features are neither new nor surprising, and indeed there are well developed techniques and methodologies for putting them into practice.  However, it remains rare to find them in practice.

We believe that there are reasons for this which have deep roots in human psychology and decision biases, such as over-confidence, the availability bias, anchoring, the confirmation bias, the affect heuristic and so on.  We are currently investigating which kinds of intervention are most likely to counter these so that we can offer managers a solution which has a real chance of success.

Our goal with this project is to provide practical, pragmatic advice to business leaders for ways to increase the potential upside from chance events, while avoiding excessive risk taking.