Strategy is supposed to help you today to prepare for the future. But how to prepare for an uncertain future, especially one that is so extremely uncertain as Brexit?
Events come in various degrees of uncertainty. There are those happening repeatedly where the main questions are when and where. Examples are fires, accidents and customer complaints. While individual events can’t be predicted, we can use statistics and risk management to predict and mitigate them. With its emphasis on analysis and planning, traditional strategy is not too bad in handling such events.
There are also events that are totally unexpected and unpredictable. Think tsunami, stock market crash or 9/11. These are what Nassim Nicholas Taleb calls ‘black swans’. They take us by complete surprise and have major consequences that cannot be foreseen in anyway. They are the ‘unknown unknowns’ that are basically outside the scope of strategy because there is no way to really prepare for them, except for being aware that always ‘something’ can happen.
And then there are those events that we know that and when they will happen, but of which both the outcome and the consequences are uncertain. Let me call them planned uncertainty. They are planned because there is a specific date or time window at which you know something will happen. And they are uncertain because they are outside your control and you don’t know what will happen and what the effect will be (remember the Y2K problem and the wild speculations around it?)
This is Brexit. We know exactly when something will happen: today (January 15, 2019) and March 29, 2019. But we don’t know what it’s going to be and we don’t know at all what the consequences will be – for the UK, Europe and the rest of the world. We might have some ideas, but given the event is unprecedented, those ideas might be completely wrong. Maybe Brexit is going to be a disaster for your business, maybe you will hardly notice the effect, or maybe there is an unexpected upside that is going to make your business flourish unlike ever before. You just don’t know.
The question then is how you can prepare for planned uncertainty like Brexit. Admittedly, if you still need to prepare today, it is obviously a bit late. But the point is that you can prepare for events like Brexit that might happen in the future – other government decisions, elections, new regulations, etc. Given our world is increasingly volatile, uncertain, complex and ambiguous (VUCA), it is quite likely we will experience more of such extremely uncertain events. This makes it also pretty smart to actually prepare yourself for that.
But how? Traditional strategic planning obviously doesn’t work since we can’t make any planning for something we don’t know and that we can’t really influence. But there are five possible strategies that can work:
- Wait and see. Just don’t do anything and respond once the fog has lifted and things have become a bit clearer. Even though it might look foolish, doing nothing is sometimes the wisest thing to do because you don’t waste any resources and don’t make the wrong move.
- Bet your company. Gamble and put all your confidence and resources on one possible outcome. The most likely outcomes are that you either win big time (if you are lucky) or lose big time (if you are unlucky).
- Spread your risk. Put your eggs in different baskets and prepare for multiple scenarios. In this way you are protecting yourself against the downside but given that you are dividing your attention and resources, it can be a costly strategy.
- Increase your independence. Instead of focussing on Brexit specifically (or the other planned uncertain event you are concerned about), you can also focus your energy on making your organization less dependent on external circumstances. In this way you make that Brexit (or the other event) just becomes less of an issue for you.
- Become more adaptive. Another more generic strategy is to spend your resources on improving the adaptability (agility, flexibility) of your organization. This will make that, whatever happens, you have made sure that you can change with the change: that you can always quickly adapt to the new circumstances.
All five strategies are viable options. Which one is best for you depends largely on your current situation, your willingness to take risk and your aspirations. Personally, I see most value in strategies 1 and 5. Strategy 2 is quite risky (because you never know what it is going to be), strategy 3 is quite costly (because there are so many alternative scenarios to prepare for), and strategy 4 might not be possible (because of our increasingly connected world).
Strategies 1 and 5 though, are always possible and are an especially effective choice when combined. Strategy 1 will make sure you don’t change more than you should. Basically, you don’t want to change because keeping the status quo is easiest and most efficient. But when you need to make a change, strategy 5 prepares you for uncertainty in general and will make sure you can always quickly adapt to the changed business landscape.
This post was published earlier here on my forbes.com page.
Image credit: Getty