Strategy Under Uncertainty. By: Hugh Courtney and Others

How can we be certain of the future when we aren't even certain who is behind problems and issues of the present?

“There is no reason for any individual to have a computer in their home,” Ken Olsen, then president of Digital Equipment Corporation (1977) said.  Ken’s statement, now quite humorous, reflects the relationship between strategy and uncertainty.  How are businesses to know what products and services will become popular in the future?  How will the world change (with time), causing an effect on what is demanded by the market?

In Strategy Under Uncertainty, the author discusses four levels of uncertainty that a majority of businesses find themselves following strategically.  The first uncertainty is ‘Clear-Enough Future,’ which is the idea that there is one outcome, or one ‘future,’ that the company foresees.  That future is not without uncertainty but its level of uncertainty is still ‘clear enough’ for the company to proceed.  Next is ‘Alternate Futures.’  Within this level of uncertainty, there are limited, discrete handfuls of futures predicted by a company for decisions they make in the present.  Third is ‘A Range of Futures,’ implying an unlimited amount of variations that could result from company choices made.  Lastly, and the most rare stance of uncertainty company’s take, is ‘True Ambiguity,’ which states that nothing can be predicted in the future and therefore uncertainty dominates the decision-making process organizations must take.

Next, the author discusses ‘strategic postures.’  Each company must decide, with the level of uncertainty they have in mind, what approach and intention they have in implementing themselves into the market for the future.  Three strategic postures are suggested.  ‘Shaping’ the future means that companies create demand in an industry and also shape how industries will be operated.  ‘Adapting’ to the future is for companies that want to find opportunities in existing markets and quickly capitalize on them. ‘Reserving’ the right to play is for the organization or individual who believes in investing in something to the extent that they can remain in the industry in the future but is hesitant to involve themselves in heavy commitment.

How companies or personnel might enact these postures, the author suggests, is by choosing from three actions.  1) Place big bets and make large commitments. 2) Play the options game, which allows you to invest in such a way that you maximize best-case scenarios and minimize worst-case scenarios.  3) The most conservative action is the ‘no-regrets move,’ which results in a positive pay off no matter what happens.