Strategy in a World of Radical Uncertainty
11/Mar/19 11:36
In theory, if too seldom in practice, one of the benefits of painful experience is wisdom, which often takes a surprisingly simple form.
After 80 plus years of combined experience, at Britten Coyne Partners we’ve arrived at a definition of strategy that is broad enough to apply to a wide range of public, private, and non-profit sector organizations, from the smallest to the largest scale:
"Strategy is a causal theory that exploits one or more decisive asymmetries to achieve an organization's most important goals with limited resources, in the face of uncertainty, constraints, and opposition."
For the past eight years, our focus has been on the “in the face of uncertainty” part of this definition.
As our world has become more complex and connected, uncertainty has exponentially increased, and thus made strategy vastly more challenging.
For example, processes that have a social aspect tend to produce a power law distribution of outcomes, due to our human tendencies towards imitation and conformity in the face of uncertainty. Because these processes themselves heighten uncertainty, highly connected, complex social systems naturally evolve to a so-called critical state, where small changes can quickly produce very large effects.
Three recommendations are often made to manage this uncertainty.
The first is to ensure that a strategy is robust enough to achieve its goals under a wide range of possible future conditions.
The second is to build sufficient organizational and business model resiliency to ensure survival when robustness fails.
And the third is to develop the ability to effectively adapt and succeeds in a radically changed environment after resiliency has absorbed the initial shock of its arrival.
All these make sense. But all three are also based on a common underlying assumption: that an organization will have sufficient foresight to identify the range of possible futures to which its strategy must be robust; to identify critical areas where limited resources must be deployed to build resiliency, and to invest in options that can speed adaptation.
In short, all three means of managing uncertainty assume an organizational ability to detect emerging threats to a strategy’s success and an organization’s survival.
Unfortunately, both human nature and organizational culture militate against this.
Evolution has biased us towards over-optimism, overconfidence, and a tendency to seek and overweight information that confirms our biased beliefs. And too many organizational cultures and leaders reinforce these tendencies.
As a result, too many strategies and organizations fail because they are either surprised by and/or too slow to react to new threats.
In sum, another important lesson we’ve learned over the years is that achieving success and avoiding failure are not merely two sides of the same coin. They are entirely different phenomena, which in most organizations receive very different levels of attention and investment.
And too many organizations, leaders, and employees end up paying a high price for that.
After 80 plus years of combined experience, at Britten Coyne Partners we’ve arrived at a definition of strategy that is broad enough to apply to a wide range of public, private, and non-profit sector organizations, from the smallest to the largest scale:
"Strategy is a causal theory that exploits one or more decisive asymmetries to achieve an organization's most important goals with limited resources, in the face of uncertainty, constraints, and opposition."
For the past eight years, our focus has been on the “in the face of uncertainty” part of this definition.
As our world has become more complex and connected, uncertainty has exponentially increased, and thus made strategy vastly more challenging.
For example, processes that have a social aspect tend to produce a power law distribution of outcomes, due to our human tendencies towards imitation and conformity in the face of uncertainty. Because these processes themselves heighten uncertainty, highly connected, complex social systems naturally evolve to a so-called critical state, where small changes can quickly produce very large effects.
Three recommendations are often made to manage this uncertainty.
The first is to ensure that a strategy is robust enough to achieve its goals under a wide range of possible future conditions.
The second is to build sufficient organizational and business model resiliency to ensure survival when robustness fails.
And the third is to develop the ability to effectively adapt and succeeds in a radically changed environment after resiliency has absorbed the initial shock of its arrival.
All these make sense. But all three are also based on a common underlying assumption: that an organization will have sufficient foresight to identify the range of possible futures to which its strategy must be robust; to identify critical areas where limited resources must be deployed to build resiliency, and to invest in options that can speed adaptation.
In short, all three means of managing uncertainty assume an organizational ability to detect emerging threats to a strategy’s success and an organization’s survival.
Unfortunately, both human nature and organizational culture militate against this.
Evolution has biased us towards over-optimism, overconfidence, and a tendency to seek and overweight information that confirms our biased beliefs. And too many organizational cultures and leaders reinforce these tendencies.
As a result, too many strategies and organizations fail because they are either surprised by and/or too slow to react to new threats.
In sum, another important lesson we’ve learned over the years is that achieving success and avoiding failure are not merely two sides of the same coin. They are entirely different phenomena, which in most organizations receive very different levels of attention and investment.
And too many organizations, leaders, and employees end up paying a high price for that.
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