Turbulence and strategy

N°206b – Synopsis (8p.) – Uncertainty
Turbulence and strategy
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Devising relevant strategies in a turbulent context is a tricky job for business leaders, as traditional points of reference for making strategic decisions may no longer be valid. How to take a fresh look at strategy in this new market context?

The September 11 terrorist attacks, the 2008 financial crash, the 2011 Euro crisis—profound systemic shocks in recent years have rocked markets and considerably shaken consumer demand. In addition to being forced to deal with shorter economic cycles, a faster pace of technological innovation and competition intensified by market liberalization, business leaders are now acutely aware of the uncertain environment in which their organizations operate. Yet, they must continue to make investment decisions and commit resources in this precarious context.

How does one develop relevant strategies in an increasingly complex world? Strategic planning is understandably a difficult and often frustrating exercise, even for the most seasoned managers. Depending on experience to cope in a fast-changing world is a double-edged sword. After being one of the early pioneers of digital photography, Polaroid made a huge mistake when it decided that there was no future in the business and dropped out of the game, even though the brand would have been well positioned for success in this emerging market. Even the most sophisticated strategic modeling systems can produce disappointing results when the level of uncertainty is high. For example, in the late nineties, many analysts announced the dawn of a new economy—until their predictions were proven wrong by the bursting of the Internet bubble in 2000.

Does this mean that companies should abandon strategic planning altogether and focus on adapting to the changing needs of the market as quickly as possible, as some Asian companies tend to do? Not so fast, respond the experts, who recommend finding a happy medium. Strategic choices are built upon a combination of practical market realities and free will. One of the main duties of business leaders is to identify different strategic options, assess their relevance and measure their potential viability. How then can one avoid being overwhelmed by the ambient complexity? Rather than invent an entirely new strategic thinking model, the experts advise returning to the fundamentals of strategy. Although these principles may appear very basic, they are nonetheless seen by the specialists to be the best bulwark against dispersion and indecision.

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