Traditionally, managers define static strategic plans, this approach is useful for companies that operate in stable markets, but what happens when there is uncertainty
The businesses of this new century march at a frenetic pace, with constant changes and new developments that make their walk more vertiginous every day. These conditions make the traditional way, in which companies and managers plan their strategies, be modified since the environment does not show signs of any stability, on the contrary, the signs are of greater uncertainty.
General practice
Generally, managers make decisions based on a lot of information gathered by different methods or with very little information based on their instincts.
Strategic positioning
To face the future and win, there are companies that invest millions of dollars in new developments that, although they are based on rigorous marketing studies, do not have their future assured, they are great bets with great risk. There are others that make small investments on several fronts with the aim of diversifying and thus covering the risks that the future brings, as in any investment portfolio. There are also others who decide "not to decide", that is, they simply wait to see what happens.
We can say that these are the three basic positions with which firms "face" the future.
Levels of uncertainty
There are basically four levels of uncertainty that companies and management must live with:
- Clear future: it can make forecasts with small margins of error and uncertainty is not a determining factor in decision-making. Alternate scenarios: commonly it presents a few probable futures that mutually eliminate each other and that if one or the other occurs, they will vary the strategy almost entirely. It is a future with few grays, white or black, but with several whites and several blacks. Range of potential futures: a series of possible futures is identified, not discrete, which can be defined by a limited number of variables whose result can be in a wide range of possibilities. Total confusion: virtually impossible to predict future, unlimited variables and unlimited range of possibilities.
To face each of these levels, the manager can use different tools:
- Level 1. It uses market research, cost analysis, competitor analysis, value chain analysis, Porter's forces of competitiveness, in short, the "classic" tools taught in business schools. At this level, most managers move like a fish in water and, therefore, they tend to face all situations with these tools. Level 2. The classic tools plus the typical, pessimistic, optimistic and most likely scenarios, Level 3. The classic ones plus scenario analysis, maximum 6 but eliminating the redundant ones and focusing on events that could be decisive so that they lead the variables to fall at a certain point in the range of possibilities in addition to a bit of instinct. Level 4.All of the above plus another bit of instinct plus much analysis that allows us to detect the variables that can be known, for example, variables that will determine how the market will behave over time, penetration rate…
Postures
Those who bet hard, those who bet very little on all the roulette numbers, and those who leave their chips in their pockets and wait to see how others are doing in the game.
As you can see, there is not a single move that works in all scenarios and although it is very difficult to determine precisely what the future will bring us, we cannot place ourselves at the extremes, I bet hard or I hope, in addition, the fact of simply covering ourselves does not guarantee success, what we must do is try to break down the barriers of ambiguity.
