Strategy-Making in Uncertain Times

Dr. Hugh Courtney is a teaching fellow at the Robert H. Smith School of Business at the University of Maryland and a strategy consultant to corporations. Now affiliated with Decision Strategies International Inc. in West Conshohocken, Pa., he is a former McKinsey & Company consultant and the author of 20/20 Foresight, which offers an approach to making strategy amid uncertainty.

CIO Insight:Has Sept. 11 changed the way companies do strategy?

Hugh Courtney:Yes and no. First of all, business strategists didn’t face a certain world on Sept. 10 and then an uncertain world on Sept. 12. In fact, business strategists always face fundamental uncertainties, including those of national security and the effects those have on the macroeconomy. But I do think that because Sept. 11 was such a horrific, shocking event here in the U.S. and around the world, it certainly has created a greater awareness and perception of the uncertainties that businesses face.

What we’re seeing is two reactions to this increase in perceived uncertainty since Sept. 11. One is a fortunate and very positive reaction, and one is a bit unfortunate. The unfortunate one is a sense that the world is so uncertain, so scary, the uncertainty is so impenetrable that we’re seeing a bit of almost withdrawal from strategic analysis: Why do any of it, because you can’t predict the future anyway? It’s a waste of time. And this also leads to decision paralysis, where companies and individuals are afraid to make commitments because of all the uncertainties that they perceive.

A second, and I would say more fortunate response, and I think this is a majority response within corporate America today, at least from what I see, is just a much more systematic, serious approach to uncertainty when making future decisions, much more emphasis on trying to analyze what can and can’t be known and then tailoring strategy to deal with uncertainties that no one could know ahead of time and that even the most prescient forecaster just can’t get right.

This more serious approach, I think, is very positive, because the traditional, stereotypical or prototypical strategic planning toolkit in place in most companies doesn’t really address uncertainty very well at all, and in some ways actually almost pretends that the world is forecastable. And that if you do a Five Forces Analysis of the industry, you’ll know exactly how it’s going to play out, and all you have to do is figure out what the most profitable position is and make your commitment.

As I said, the fortunate response to the uncertainties of Sept. 11 is that people are getting much more serious about looking at tools that better address the reality of uncertainty in their business environments, tools like scenario planning, real options analysis, game theory and so on.