Strategy under uncertainty

Found my way from the futuramb blog post about strategic planning in the fashion industry to this McKinsey quarterly article about strategy under uncertainty which calls out two kinds of firms: shapers and adapters.  I've been thinking about corporate strategy from an uncertainty perspective since I read  Michael Raynor's excellent book, The Strategy Paradox- in which the roles of managing uncertainty at all levels of the corporation are examined.  Raynor's examples of firms who succeeded by creating options for success under many possible futures are powerful. I previously posted about them here.

In the current economic environment, Hugh Courtney wisely points out that not every firm is going to be able to get out in front of the significant uncertainty and financial turmoil that 2009 will bring.  Some of them will of necessity just be trying to survive.   They'll pursue "bold M&A plays, R&D that others can’t finance, and entry into new markets."  How can we identify the firms who can pursue a strategy of shaping the future rather than just adapting to it?  These are some of their characteristics:

  • very healthy balance sheets, potentially with lots of fully-depreciated assets
  • business models that generate a lot of cash and don’t have much debt
  • typical industries: high tech, service businesses, energy, utilities, and telecom

A very useful insight here is that these companies can re-shape their industry without re-shaping the macro environment- that will always be adaptive.  However, the adapter firms will rely primarily on adapting to the macro environment and hoping to ride it out.

I think startups probably fit into the shaper category as well.  Taking chances that many competitors can't, these firms are constantly investing, with every day, in re-shaping their industries.  A salute, then to the firms, large and small, who use 2009 to create something new and bold, take a chance, and harnessing the silver lining of the year's dark clouds.