Our brains hate uncertainty. Most of us have experienced periods of uncertainty in our personal lives, like waiting for crucial medical test results, worrying about whether our financial resources would see us through a difficult patch and fretting about the ability of our children to succeed in their studies.
In the last two decades, uncertainty in the world around us and beyond the walls of our homes has increased exponentially, and few can claim that this has not affected them.
The global financial crisis of more than a decade ago; the Arab spring; the violent attack on the US Congress inspired by an outgoing president who would not accept the result of a democratic election; the rise of protectionism and populism; the increasing evidence of the environmental damage caused by climate change; and now a war waged by a superpower against a European country, have brought to an end the NICE (non-inflationary, continuously expansionary growth) decade.
If you are sitting at home today and feel pretty calm and unaffected by the global political and economic turmoil, you may think that this is another blip in the boom-bust economic cycle that will soon be over. Still, you would do well to note what Ronald Heifetz, a management thinker, says in an article he wrote in the Harvard Business Review in 2009.
Heifetz argues: “It would be profoundly reassuring to view the current economic crisis as simply another rough spell that we need to get through. Unfortunately, though, today’s mix of urgency, high stakes, and uncertainty will continue as the norm even after the recession ends”. This is even more true today than it was a decade ago.
Many business leaders are asking whether relying on traditional economic models will help them predict the future. What makes for a good strategy in today’s highly uncertain business environment? How can organisations prepare themselves for the challenge of anticipating and responding to unanticipated events? Do today’s risk management processes enable senior executives to set the context of events that are difficult to predict or to identify alternative strategies?
Most business leaders have been trained to formulate strategies by applying a set of powerful analytical tools. These tools are supposed to enable executives to predict the future of any business accurately enough to allow them to choose a clear strategic direction. Still, today we seem to be entering a phase of sustained and even permanent crisis of serious and unfamiliar challenges.
Strategic anticipation, navigational leadership, agility, resilience, open collaboration and predictive learning are the capabilities that today’s organisation must develop to manage in an uncertain world
Most governments engage in scenario planning to help them understand the possible risks they may face in the medium and long term.
The UK Government Office of Science conducted research in 2009 on the “dimensions of uncertainty”, which will determine the political and economic environment in which businesses will operate in the period leading up to 2050.
The top five identified uncertainties related to the balance of power and governance architecture, economic integration, governance and models, security and conflict, technology and innovation, and education and skills.
Business leaders need to rethink how they formulate strategy by first acknowledging that the boom-bust economic models based on past experiences may no longer be fit for purpose. As it becomes increasingly clear that no amount of analysis will provide a reliable set of indicators about the future, how do you determine strategy when the operating environment is uncertain and volatile?
Strategy execution needs to move beyond the methods developed in the 1980s with the adoption of total quality management. Today’s uncertainty breeds flaws in these methods. The one-size-fits-all analytic approach to evaluating strategy options is simply inadequate.
Strategic planning in times of uncertainly must be based on scenarios built on different assumptions of the level of possible future business disruption.
While traditional risk management techniques remain important in managing uncertainly, they are not enough on their own to enable senior executives to set the context of events that are difficult to anticipate or to identify alternative strategies. Risk management needs to evolve from a reactive to a proactive process to enable organisations to achieve the right adaptability level to survive in uncertain times.
The ability to manage uncertainty is predicated less on senior executives adopting distinctive management skills, as in the case of change management. Business leaders must promote a number of crucial organisation-wide capabilities that will contribute to their organisation’s strategic readiness.
Strategic anticipation, navigational leadership, agility, resilience, open collaboration and predictive learning are the capabilities that today’s organisations must develop to manage in an uncertain world.