Strategy in Times of Uncertainty

O2ibm

Visit this group Strategy under Uncertainty December 3, 2008 by Raj Sheelvant McKinsey Quarterly has published an interview with Hugh Courtney who is the author of the book ‘20/20 Foresight: Crafting Strategy in an Uncertain World’.  According to the author, risks and uncertainty always exists.  They don’t appear out of nowhere.  But our perception of risks and uncertainties changes or evolves over the period of time.  The vacillating perception of risk over time makes us feel that things have worsened or improved.  The current financial crisis, and bombing in Mumbai have shown us that corporate strategy planning session should also include strategic plans for management of risk and uncertainty.  Read his entire McKinsey Quarterly article titled ‘A fresh look at strategy under uncertainty: An interview’ This article documents Courtney’s four-part framework to help managers determine the level of uncertainty surrounding strategic decisions (see the picture above). In level one, there is a clear, single view of the future; in level two, a limited set of possible future outcomes, one of which will occur; in level three, a range of possible future outcomes; and in level four, a limitless range of possible future outcomes.   During good times, we have a tendency to believe that we are in level one or two.  It’s easy to ignore or belittle level three or four as a rare event. Courtney’s advice for the Chief Strategy Officer in the wake of this global financial turmoil is that, this is a good time to rethink planning process. In the months to come, decisions have to be made very quickly on fundamental opportunities that may drive earnings performance for the next decade or more, and organizations need to be prepared to make these decisions in real time. That requires a continuous focus on market and competitive intelligence and far more frequent conversations—daily, if necessary—among the top team about the current situation. Senior executives already may be in closer contact because of the emergency they face, but that doesn’t necessarily imply that they have the raw material and the structure to work through strategic decisions systematically. These daily conversations have to move beyond getting through that day’s crisis to more fundamental strategic issues as well, because the decisions made today may open up or close off opportunities for months and years to come.