The Brexit turmoil rumbles on and businesses continue to grapple with an uncertain future. Trading agreements, political unrest and lack of leadership mean it’s extremely difficult for business leaders to predict where and how business can take place, what barriers there may be, and how the decisions of other businesses may impact their own.
Business resilience is being put to the test and strategies are under constant review.
This, however, is nothing new or unique! With businesses and commerce increasingly operating on an international and global scale, they are dependent on and influenced by wider geo-political and economic events. And these large-scale events do seem to be happening more regularly.
So how should executives and business owners deal with an increasing level of uncertainty?
And is uncertainty necessarily a bad thing?
The traditional approach to strategy requires precise predictions. The assumption is that by applying some well-proven analytical tools, we can predict the future with enough certainty to create a clear strategy. This assumption often leads executives into complacency, and in times like these, is a risky approach to take.
Decision-making biases also lead to the pursuit of inappropriate strategies. Executives are prone to standing in front of their boards, shareholders and ‘troops’ with confidence, pushing for their chosen strategy. As the strategic choices are made, the points that support it are given more validity while the points that will weaken the arguments are dismissed or downplayed. It’s a common theme (see my previous article on biases in strategic decision making.)
Dealing with levels of uncertainty
When uncertainty gets very complex there are a number of different typical responses:
- Panic – favoured by the press
- Keep calm and carry on as usual – favoured by a surprising number of politicians and business organisations
- Do more research and analysis – favoured by procrastinators
- Get more advice – favoured by advisers
None, of which really help; what is called for is more structured and considered approach.
A structured approach to uncertainty
Courtney, Kirkland and Viguerie suggested a four-level (uncertainty) framework in their Harvard Business Review article in 1997.
Level 1: A clear enough future
Level 2: Alternative futures
Level 3: A range of futures
Level 4: True ambiguity
In Level 1 the process of determining the strategic response is relatively straight forward using the traditional strategy development approaches.
For Levels 2 to 4 the process is fundamentally about creating order out of an increasing level of chaos; in effect trying to bring the level of uncertainty down from Level 4 to 3 to 2.
Level 4 tends to be transitional in nature and can offer great opportunities as well as threats.
Here are some recommendations when facing the highest level of uncertainty:
- Catalogue what you know and what you don’t know
- Develop some possible and probable scenarios to gain some strategic perspectives – understand circumstances, implications and the likelihood of each
- Identify some indicators that can show which scenarios are becoming more or less likely as the future unfolds
- Plan for the most likely outcomes and consider your contingencies if they don’t pan out
- Identify particular high level risks and implement early warning systems
- Identify trigger points for some particular courses of action in line with the strategy or to stop and review whether the chosen course of action is still appropriate
- Align your team around your wishes for how to deal with uncertainty i.e. the strategy you are planning
- Strengthen the resilience of your team and ensure they are part of your intelligence gathering and early warning systems
Remember to also be on the look-out for opportunities – don’t focus exclusively on the negatives and risks.
Choosing a strategy
Depending on the size and influence of your organisation, you may choose Shaper or Adapter strategies… or both.
Shapers aim to influence the direction that the future will go.
Adapters aim to be agile and flexible enough to handle different scenarios – but with limited resources Adapters may have to back a limited range of outcomes.
Leadership plays an important role too. How do you transition your people through change in a positive and successful way? This is the perfect time to develop your teams in a way that pushes their boundaries of achievement and ambition, without alienating them in the process. A team that is resilient, agile and on alert for the opportunities that present themselves during times of change will be your greatest asset.
A mini case story
I was working with the senior management team in a medium size business a little while ago. They were faced with some very significant uncertainties in the markets they were operating in. We applied many of the principles above to understand their situation, create scenarios and build their future strategy.
The strategy they arrived at in the end was very interesting. For all the complex scenarios considered, including a “status quo” scenario, the predominant strategic response of the business was to avoid a future that was determined by external factors largely beyond their control. Therefore they needed to reduce dependency on their current customer segment and start to leverage their core expertise into new market sectors and geographic regions.
This changed the whole focus of the senior team from one of defensive strategies to one of proactively growing into new markets and sectors. Yes – we still came up with a number of scenarios and strategies to protect, grow and even prosper in their existing market, but the mood was now galvanised into one of optimism, opportunities and enthusiasm.
Chronic uncertainty means that the strategies you relied on before won’t necessarily serve you well going forward. If you approach uncertainty as a continuous state of being however, the opportunities to change and grow become embedded into company culture whilst individual behaviours adjust and develop, leaving stagnation, complacency and resistance behind.
What strategies have you adopted that have worked well in these recent times of uncertainty? How are you engaging your staff in the process? Please let us know, we’d love to hear.