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Objective
Uncertainty can only be reduced by committed decisions and
actions. You cant wait for uncertainty to disappear but you can
choose to create certainty of purpose and direction. You cant
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remove risk but you can think about how to create a culture and
processes to adapt to unexpected problems.
How high are levels of uncertainty in your industry?
What uncertainty surrounds a particular decision?
What are the risks in making (or not making) certain
decisions?
How could things go wrong? What would you do next?
Context
Some risk comes from outside the organisation, but most risk is
about the ability of an organisation to complete its plan. The risky
part is adapting successfully to the needs and demands of the market. The risk is dealing with competitor moves while managing to
deliver products and services that customers will buy. And keeping
your shareholders satisfied.
Strategy involves completion of goals, and the risk is the difference
between those goals and the ability of the organisation to achieve
them. So part of the risk is created by the strategy. That means
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your ability to think about the way various parts of your plan fit
together with what your company can do.
Which risks are outside your direct control?
Which risks are within your direct control?
How can you deal with changes outside your control?
How can you anticipate external changes?
Challenge
The first challenge is to look clearly at different sources of risk. As
already discussed, some are inside and some of them are outside
the organisation.
Outside the organisation
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Is there a performance/
aspiration gap?
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Success
The strategist is attempting to find a course of action that leads to
activities which bring attractive results for the organisation and
its stakeholders. You are succeeding if you can think your way
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Pitfalls
Taking on too much risk happens when you dont have the ability
to do what you set out to achieve. People may be overconfident
because of past successes or excessively high optimism in world
markets. People may take on too much because they either overestimate the ability of colleagues or underestimate the difficulty
of the task. This is made worse if a lack of openness or excessive
politeness stops people voicing concerns. Defensiveness can lead
to ignorance that increases risk.
It is just as much of a problem if ambitious projects and goals are
not attempted. The returns to the business will be low and may be
too low to keep the business safe. Shareholders may find this unacceptable and the business will not survive if excessive caution
loses market share and profit. The task of the strategist and leadership team is to reduce uncertainty in the areas that they can directly influence in order to pursue attractively difficult objectives.
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Strategists checklist
Identify the areas inside and outside your control.
Assess levels of uncertainty inside and outside the organisation.
Related ideas
Nassim Taleb, in his book The Black Swan, argues that people have
an inaccurate view of risk. This means that they take on risk that
they underestimate and avoid risk that they overestimate. This
is exacerbated by lack of information, personal fears and group
dynamics.
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Being aware of these tendencies can help you to take the kind of
actions that your competitors fear to attempt while in fact not
taking foolish risks. This is what entrepreneurs do instinctively as
they demonstrate a form of functional impulsiveness along with
superior pattern-recognition skills.
Unfortunately, many organisations find it easier to be managerial
than entrepreneurial. Managers may keep investing in continual
improvement efforts that continually fail. They may also abandon
investments in more radical innovation, even when there is more
risk in moving slowly than moving too quickly.
Yet, according to research led by Sucheta Nadkarni at Cambridge
Judge Business School, when new opportunities are appearing,
and disappearing at high speed, you will often be rewarded for
competitive aggressiveness. In such environments, strategic
urgency helps you to adapt so that you get to the future in time.
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Also by
MAX MCKEOWN
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04/08/2015 10:58
9/28/15 6:17 PM
ISBN: 9781292084404
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