The secret sauce - creating a future you desire from uncertainty

Petri Rikkinen • Emerging business & culture initiatives

Are you an executive struggling to find the right approach to digital, as well as identifying what your most important digital initiative should be? 

Are you uncertain about which decisions you need to make or the impact your initiatives are having due to a lack of relevant information? 

Is your digital decision-making and portfolio management in in limbo - postponed, incomplete or lacking completely?

There are ways to alleviate your pain.

Uncertainty - embrace what you can't escape

“Business leaders have been thrown into a world of uncertainty and ambiguity. Any sense of stability in the present or confidence in their ability to predict reliably the future has disappeared.” 

Proactive strategies are the secret sauce

According to Loch, DeMeyer and Pich there are no safe havens anymore. Uncertainty is pervasive and it originates from the breakdown of trust in financial institutions, the global nature of the recession, the interconnectedness of markets, geographies and companies, the rise of new industries and sudden swings in demand. Unpredictable events called black swans may destabilise an existing balance in a matter of days. It's nearly impossible to do, but they still have to be accounted for.  

Old wine in a new bottle - the 5th digital disruption

In addition to political, economic and social instability, disruptive technologies are a key driver of uncertainty. The continuum of digital disruption started as far back as 1950, but the revolution still seems to bring with it a change on a larger order of magnitude each time. And it keeps reaching new institutional levels, too. The Digital Disruption of Industry Consortium tells us the latest developments in artificial intelligence will have a deep impact on human values and existence.

Digital revolution

The secret sauce for outperforming on all metrics

Companies have three main strategic postures they can take on uncertainty: reserving the right to play, adapting or shaping. The posture defines the intent of a strategy relative to the current and future state of the operating environment.

Reserving the right to play involves taking incremental steps to maintain a position in a market through some from of competitive advantage, such as low cost structure or deep partnershis, but refraining from formulating a strategy until the operational environment has become less uncertain. 

Adapting involves reacting to opportunities the current structure of the market and its future evolutions offer. 

The most intertesting, challenging and rewarding posture to take is shaping. It also has the potential for the greatest financial rewards: shapers aim to drive their industries toward a new structure of their own devising.

Nenonen & Storbacka’s (2017) seven years of research in this area “strongly suggests that the 9% of market shapers outperform on all metrics. Increasingly the other 91% – the orthodox herd – are struggling to thrive”.

Expert judgement + data = proactive strategies

For most of its 2500-year history strategy has been one-dimensional. The first strategists, like Sun Tzu in his ‘The Art War’ focused mainly on avoiding wars and building influence as well as monopolies. The unknown and complex nature of the world, however, requires more flexibility in strategic formulation, as well as a regular review of how initiatives are progressing. 

As a result, finding one overall strategy has been replaced with three lines of strategic guidelines fit for an uncertain world:

  1. Strategy formulation is shifted to using a multi-disciplinary approach and scenario planning.
  2. Strategy process is shifted from top-down leadership model to engaging employees and stakeholders.
  3. Instead of a single strategy, focus is on an ongoing portfolio of competitive advantages by managing the strategic initiatives as a portfolio. The strategy is then seen as a set of concrete actions.

Robustness is a key criterion for evaluating alternative decisions in when operating in an environment of deep uncertainty. Compared to alternatives, a robust strategy performs relatively well across the different futures. For instance, robust strategies are often adaptive and consider a variety of risks, hedges, tradeoffs and vulnerabilities. They also evolve over time, in response to new information. 

Sounds cool - how to do this?

We are currenty engaged in researching proactive strategies for managing uncertainty. If you are interested in the topic, let me know.

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