Strategy Under Uncertainty

Four Levels of Uncertainty Clear enough future //One straight line// A single forecast is enough to determine strategy e.g. Stragey against a low cost entrant

Alternate futures //lines of probability// A few discrete outcomes Game Theory Real Options eg capacity strategies for chemical companies

A range of futures //X and Y graph// A arnge of possible outcomes Scenario Planning, Technology forecasting e.g. enetring emerging markets

True ambiguity //Lines in all directions// No basis for a forecast Pattern Recognition. Russia after the collapse of communism

!!Postures and Moves

• Shapoe the future
• Adapt the future
• "reserve the right to play"

!!Portfolio of actions

• No regrets move - positive payoff in any scenario
• Options - Significant payoff is some outcomes, small losses if negative
• Big bets - focused strategies with huge potential payoffs

!!Steps

• Identify the nature of residual uncertainty
• Chose a strategic posture
• Build a portfolio of actions
• Actively manage strategy