Strategy Under Uncertainty

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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
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