Tag Archives: scenario planning

Crafting Non Predictive Strategy, Part III: Acknowledge the Nature of the Problem

Despite formidable developments in business strategy over the last fifty years, organizations keep being disrupted by events they should have seen coming, but didn’t, or by events they saw coming but were unable to avoid or take advantage of. In 1971, NCR was surprised by the rapid rise of electronic cash registers and lost its leadership of the market. In 2007, Nokia was unable to react to the launch of the iPhone, an event the Finnish firm dismissed as minor, and is now struggling to survive. In 2011, the Arab uprising came as a complete surprise to everybody, not just business and governments but the people involved as well. And the list goes on:  if strategy is about addressing the key challenges an organization face, then the general lack of preparedness (if not prevention of) the economic and political crises that the world has been facing since 2008 is a massive failure of strategy. Hence it’s no surprise that in a survey conducted in 2011 by consulting firm Booz, fully 53% of senior executives did not think their company’s strategy would be successful. Houston, we have a problem…with strategy. Continue reading

Crafting Non-Predictive Strategy, Part I: Deep Understanding Beats Prediction

As Milo and I have argued before, the environments and issues businesses deal with are more complex than traditional strategy models admit.   Business issues today display high levels of uncertainty, they can behave non-linearly, and they can be vulnerable to “Black swans”, i.e. low-probability but high impact events that disrupt even the best formulated strategies.  The added difficulty for strategists and managers is that nonlinear environments often appear linear for an extended time period (think US house prices).  As a result, some conclude that what seems to be an essentially linear pattern (prices fluctuate a bit around a ‘long term trend’ but always rise), are linear in reality – before a radical change occurs that completely disrupts previously assumed patterns (e.g. prices fall dramatically).  In short, people often assume an environment is linear and predictable when in fact the continuity we observe is only a particular case of limited duration.  To make matters worse, with many nonlinear systems change is not nicely spread over the years:  most of the cumulative change occurs in one, single – often dramatic – occurrence.  In the language of engineering, some things don’t “fail gracefully” (e.g. a bridge that breaks suddenly instead of bending slowly).

Not a “graceful failure”.

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