03/27/2018

How to Confront Uncertainty in Your Strategy

Embrace probability to bolster your future business strategies

"Predictions are difficult, especially about the future,” quipped Yogi Berra (and, before him, physicist Nils Bohr). This rings especially true for those trying to run a strategy process. Uncertainty is not only everywhere in and around strategy—it is the very reason we need strategy. Without uncertainty, we would just need a plan to go from A to B.

In running a business, there are many elements that you just can’t control—the fate of the economy, political events, your competitors’ actions. Yet uncertainty is rarely accounted for in a clear and robust way in the strategy room. Even proper planning for different eventualities is often missing from the discussion. Instead, we typically prepare for one version of the future, often without understanding how likely that version is to become reality.

Strategy requires confronting uncertainty head-on by embracing the notion of probability. In our new book, Strategy Beyond the Hockey Stick: People, Probabilities, and Big Moves to Beat the Odds (John Wiley & Sons, February 2018), we focus on the importance of calibrating the odds of a strategy succeeding, by building in explicit trigger points to reexamine decisions as we learn more and by applying the probabilistic approach to how we evaluate performance afterward. By understanding the chances your strategy has of succeeding before you start to execute it, and knowing how those odds change based on specific actions you take, you can tackle uncertainty with hard empirics, not guesswork or wishful thinking.

Please select this link to read the complete article from McKinsey & Company.