* Management should operate with a four step process: - Define the strategic issue and the level of residual uncertainty - Frame possible solutions - Analyze possible solutions and make strategy choices - Monitor and update strategy choices over time
* The appropriate approach is issue related, not organization related. Organizations in stable environments may encounter major strategic issues involving high residual uncertainty, while those in very dynamic environments may have issues involving low uncertainty. The strategic process must be appropriate to the situation.
The book is concerned with how to answer the five basic questions above in the context of each level of uncertainty, and which tools are most appropriate for guiding the decision process. The tools discussed in the Appendix "The Uncertainty Toolkit" are:scenario planninggame theorydecision analysissystems dynamics modelsmanagement flight simulators.In essence, what the author has done is to frame a set of known tools and principles within McKinsey's preferred structure of analytical rigour. If you still believe that 'classical' strategic planning round the business case is the only way to approach strategy, the book may help widen your options. If you are already familiar with the various tools offered, the main benefit of the book will be to provide a useful reminder that levels of uncertainty differ, and a framework for thinking about your own situation and response to it. Perhaps the most important message in the book is not to assume uncertainty until you have carried out the analysis needed to separate the knowable from the truly uncertain.
* Should we shape or adapt?
* Should we begin the process now or later?
* Should we focus or diversify?
* Which new tools and frameworks are needed?
* Which new strategic-planning and decision-making processes are needed?
Of course, Courtney fully realizes that the revelations of the STI research can only guide and inform appropriate answers to questions such as these. He agrees with Mike Hammer that searching for a "silver bullet" is a fool's errand, noting that "there [is] no easy one-size-fits-all solution that could be translated from theory into practice. Business strategists needed new theory [and, in italics] new practices if they wanted to make better strategy choices."
At the height of the Cold War, I recall someone noting that Russian historians could predict the past with absolute certainty. This book's title does not suggest that if you read this book, you can see the future. ("Man plans and then God laughs.") Rather, instead of burying uncertainties in meaningless base case forecasts or avoiding rigorous analysis of uncertainties altogether, Courtney suggests that we "embrace uncertainty, explore it,, slice it, dice it, get to know it." If we do this well? "[You] will reach a wonderful goal: 20/20 foresight." The best available information serves as the basis of the most reliable forecasts which, in turn, improve the chances of devising the soundest strategies.
After summarizing the appropriate toolkit for each level of residual uncertainty (see figures 6-1 through 6-4), and having also suggested various tools and frameworks needed to develop 20/20 foresight, Courtney offers five additional tools in the Appendix: The Uncertainty Toolkit. He briefly but brilliantly explains how to use scenario planning, game theory, decision analysis, system dynamics models, and management "flight simulators." Although this book will obviously be of substantial value to senior-level executives in larger organizations, I think it will be invaluable to others such as CEOs and other decision-makers in small companies. The challenge for all of them is to "tailor strategy to the level of uncertainty," whatever the nature and extent of their competitive marketplace may be. Here in a single volume is about all they need to begin the process. Another thought: This book would be an excellent choice as the basis of a one-day or (preferably) two-day offsite executive "retreat" for strategic planning. Reading it in advance would be required. The first two chapters would be excellent for assisting situation analysis, then on to the next five chapters which could serve as the core of the agenda. (I also recommend that Hammer's The Agenda be consulted, at least by the person who leads the group discussion. And, by the way, that person should NOT be the CEO.) The session would conclude with a review of the consensus achieved, followed by a discussion of how to communicate and collaborate effectively while using various tools, including the five recommended in the Appendix.
Courtney would be the first to point out that, over time, other sources of information and guidance may become necessary. For that reason, he includes clusters of annotated "Recommended Readings" to assist his reader's selection process. Thoughtfully, he adds to their number with other suggestions within his extensive notes.
For at least some individual executives and some organizations, this may well prove to be for them the most valuable business book published during the first decade of the 21st century.
To those who share my high regard for it, I specifically want to recommend (again) Hammer's book as well as Jim O'Toole's Leading Change, Jason Jennings' Less Is More: How Great Companies Use Productivity As a Competitive Advantage, Peter Schwartz' The Art of the Long View: Paths to Strategic Insight for Yourself and Your Company, and finally, Carla O'Dell's If Only We Knew What We Know: The Transfer of Internal Knowledge and Best Practice.
Now, McKinsey & Company consultant Hugh Courtney argues that managers must move beyond the outdated "all-or-nothing" view of strategy in which future events are either certain or uncertain. Instead, he suggests a simple-yet powerful-alternative: Understand the level of uncertainty you are facing in a given situation, and you will make better, more informed strategic choices.
Based on an international review of the key strategy problems faced by over one hundred leading companies, Courtney reveals how executives can develop 20/20 foresight--a view of the future that separates what can be known from what can't. While executives with 20/20 foresight can rarely develop perfect forecasts of the future, says Courtney, they can isolate the "residual uncertainty" they face and use this insight to create competitive advantage in today's turbulent markets.
Unveiling a revolutionary framework for diagnosing to which of the four levels of residual uncertainty a specific strategy choice corresponds, 20/20 Foresight shows how readers can leverage this knowledge to answer three key strategic questions: 1) Shape or adapt to uncertainty? 2) Make strategic commitments now or later? and 3) Follow a focused or diversified strategy?
20/20 Foresight also:· shows strategists how to tailor every aspect of the decision-making process-from formulation to implementation-to the level of uncertainty faced,· describes the strategic-planning processes readers can use to monitor, update, and revise strategies as necessary in volatile markets, and · includes a toolkit for identifying, developing, and testing new strategy options-complete with guidelines for applying the right tool to the right situation at the right time.
A comprehensive approach to strategy development under all possible levels of uncertainty and across all kinds of industries, this is the essential guide for making tough strategic choices in a changing world.
Hugh Courtney is an Associate Principal with the Global Strategy Practice at McKinsey & Company in Washington D.C.