Strategy under uncertainty.
At the heart of the traditional approach to strategy lies the assumption that by applying a set of powerful analytic tools, executives can predict the future of any business accurately enough to allow them to choose a clear strategic direction. But what happens when the environment is so uncertain that no amount of analysis will allow us to predict the future? What makes for a good strategy in highly uncertain business environments? The authors, consultants at McKinsey & Company, argue that uncertainty requires a new way of thinking about strategy. All too often, they say, executives take a binary view: either they underestimate uncertainty to come up with the forecasts required by their companies' planning or capital-budging processes, or they overestimate it, abandon all analysis, and go with their gut instinct. The authors outline a new approach that begins by making a crucial distinction among four discrete levels of uncertainty that any company might face. They then explain how a set of generic strategies--shaping the market, adapting to it, or reserving the right to play at a later time--can be used in each of the four levels. And they illustrate how these strategies can be implemented through a combination of three basic types of actions: big bets, options, and no-regrets moves. The framework can help managers determine which analytic tools can inform decision making under uncertainty--and which cannot. At a broader level, it offers executives a discipline for thinking rigorously and systematically about uncertainty and its implications for strategy.
Courtney
H
H
McKinsey and Company, Washington, DC, USA.
Kirkland
J
J
Viguerie
P
P
D002201:Capital Expenditures; D003132:Commerce / Q000191:economics / Q000458:organization & administration; D004465:Economic Competition / Q000458:organization & administration*; D005544:Forecasting; D007449:Investments / Q000145:classification* / Q000191:economics; D007857:Leadership; D009936:Organizational Innovation; D010934:Planning Techniques; D013597:Systems Analysis; D014481:United States