STRATEGY UNDER UNCERTAINTY

The importance of strategizing under uncertainty has been revealed in today’s volatile and competitive market, where the environment is changing rapidly. In order to survive, every organization needs to prepare for the uncertainty which lies ahead so that it can maintain its market share and also protect itself from the competitors. Apart from that, even proper strategizing can also give a view of the expected future and the company can mould itself to be the foremost player in the new domain which evolves thereafter.

"Anyone who tells you they have a 5- or 10-year plan is probably crazy."
-- Lewis E. Platt
former Hewlett-Packard chief executive officer (CEO)

The view of having a photo printer at every home, has paid off successfully with the printer segment of HP performing outstandingly and other firms such as cannon and Samsung following suite.

“Competitive strategy under uncertainty involves a trade-off between acting early and acting later after the uncertainty is resolved, and another trade-off between focusing resources on one scenario and spreading resources on several scenarios, thus maintaining flexibility. “ (Wang Qiyang, n.d. , P 22)

These situations can be broadly classified as below into the strategies which the corporate follows.

Betting Big – In some scenarios, if the organization is confident and has an optimistic look about a possible future, than the firm can bet outright on that uncertainty, which may further lead to either a huge profitable investment or a huge loss. Hence although this optimistic view can have huge gains but there is a high risk involved. Properly informed betting, with proper innovation, market research, expert opinions, foreseeable trends and outlook can combinedly make the proper ingredient of betting large.

Hedging – Some firms believing in hedging strategy, which can be viewed as a defensive strategy of venturing into various possible alternatives. This strategy acts as a mere survival strategy and can help the firm to adapt to the various possibilities, thus reducing the uncertainty. It is generally used if the future becomes very foggy and it is difficult to look for distinct outcomes of the future.
But also it has its downside of not being able to fully concentrate on a view, but to diversify resources among various outlooks.

Wait and see – Such firms are exposed to the highest uncertainty on the account of not preparing for the future. Every successful business idea has its own life cycle which can come to its mature stage where after the firm needs to shift to new business and move along the new trends. There is a very high risk of getting extinct if the organization doesn’t evolves.

The Darwin’s theory of evolution holds perfectly for the business firms as well, i.e. in order to survive a firm has to change and gel itself with the future trends.
In order to cope with turbulence environments and improve corporate efficiency, the firm needs to be innovative, top management should be willing to take a calculated risk and the firm should properly evaluate the current market orientation, proper market research about the newer customer demands, track its competitors accurately, integrating the corporate planning department with new product development activities and creating cross functional committees.
Innovation represents the most effective means to deal with turbulence in external environments.

The higher uncertainty requires more flexible strategies by the organization. The process of strategic planning and management actually is not only the process to match the company's competencies with the customers' needs profitably and over the competitors, but also the process to integrate all related methods and tactics such as marketing audit, SWOT analysis, cost leadership, diversification, focus, globalization, penetration, game and bet, entrepreneurship, etc. to adapt to and effect the changing environment.

“Corporate planning and strategizing as an organizational activity rather than an activity of a small group of corporate planners”

The responsibility of strategizing shouldn’t be an activity of just a few corporate planners but should be an activity of the whole firm and should be shared across every individual of the firm. Innovation should be encouraged in the organization at all levels of hierarchy.

Current trends reflect such initiatives. “Stop Talking, Start Doing” which has been the most recent mottos of IBM with the IBM innovation station becoming the buzzword to rethink the core processes of the organization and has been adapted as one of the objectives across the firm encouraging participation of every individual employee towards innovation, by giving valuable ideas to the top management and encouraging communication across the tiers of the organization.

An example of a possible “Strategy under uncertainty” in the current telecommunication market in INDIA

TRAI has given permission to Internet service providers to provide Internet telephony in India. It has allowed National Long Distance operator to connect it to ISPs through public Internet for unrestricted Internet telephony. Although this may come as a shock to the current telephone and mobile service providers in India, but this has been predicted by these organizations as the next level of telecommunication in India. It can be easily foreseen that in the coming few years the communication between ISP and phone across India is feasible. Hence these firms such as reliance, Airtel, Tata Indicom and BSNL has also actively tried to venture into public internet and have become major players in the segment of internet service providers (ISP) in view of the future uncertainty.

Finally to conclude, strategy under uncertainty involves a trade-off between acting early or later after the uncertainty is resolved, and between focusing and investing on one scenario or spreading resources on several scenarios, thus maintaining flexibility. The trade-offs takes into consideration the nature of uncertainty, industry economics, intensity of competition, and the position of a firm relative to its competitors.

References:
1. Courtney, H., Kirkland, J., and Viguerie, P. (1997,November) Strtegy Under Uncertainty, HBR
2. Wernerfelt, B. and Karnani, A. (1987) COMPETITIVE STRATEGY UNDER UNCERTAINTY, Strategic Management Joumal, Vol.
3. Lynn, Gary S.; Akgun, Ali E.. Engineering Management Journal, Sep98, Vol. 10 Issue 3, p11, 7p