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Strategy under uncertainty
The tools of traditional strategy—market research, value chain analysis, discounted cash flow analysis—assume a predictable course of events. But how do managers formulate strategy in a world of uncertainty? The authors present a framework for assessing the level of uncertainty that managers face and for tailoring an appropriate strategic response. Companies can attempt to shape their industries, to adapt to whatever conditions they anticipate, or to preserve their options to act in the future. Southwest Airlines, FedEx, Gateway, Microsoft, and other companies have successfully applied these principles in fast-changing conditions.
The take-away: Executives often underestimate uncertainty in order to formulate strategic plans. Other executives, paralyzed by uncertainty, abandon disciplined analysis altogether. Neither approach makes sense. Even in the most uncertain conditions, managers usually have a basis for action and must develop the tools needed for implementation.
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