Michael Mankins

Mark Gottfredson

<article-ideainbrief class="article-ideainbrief">
 <h4 class="ideainbrief-title">Idea in Brief</h4>
 <div class="ideainbrief-contents">
  <h5>The Problem</h5>
  <p>Few companies use the strategic tool kit—scenario planning, Monte Carlo simulation, and real options—for strategy development under uncertainty. Most have stuck with conventional techniques for strategy-making, to the detriment of customers, shareholders, and other stakeholders.</p>
  <h5>Why It Happens</h5>
  <p>Executives complain that the tools require data that is impractical to gather and analysis that is too expensive to perform routinely. Moreover, the output can be counterintuitive and complicated to explain to senior leaders and a company’s board.</p>
  <h5>How to Fix It</h5>
  <p>Business leaders need to think of strategy-making as a continuous process that generates a living, dynamic plan. That demands a new approach and mindset for making decisions along with a new model, proposed here, for strategy development and performance monitoring.</p>
 </div>
</article-ideainbrief><p class="mag-icon-strategy-w30">In crafting strategy, companies often struggle to cope with volatility. Using the traditional strategic-planning model, managers attempt to forecast how markets will evolve and competitors will respond, and then define a multiyear plan for winning in that future state. The organization is then called upon to execute that plan. Performance is routinely monitored, ostensibly to keep everyone on track.</p>

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<p>In the traditional strategic-planning model, managers attempt to forecast how markets will evolve and competitors will respond, and then define a multiyear plan to position their company to win in this future state. That worked well when markets were more stable and the primary factors influencing future growth and profitability were easier to forecast. But the world is now changing so quickly that no business can plan for every eventuality. And fewer than a quarter of large organizations employ the most notable tools and frameworks for strategy development under uncertainty: scenario planning, Monte Carlo simulation, and real options analysis. Executives say that those tools require data that is impractical to gather and analysis that is too expensive to execute routinely and that their output can be counterintuitive and complicated to explain to senior leadership and the board.</p>
<p>In this article the authors offer a new approach and mindset for making strategic decisions, along with a new model for managing strategy development and performance monitoring. They describe what it takes to produce great results in uncertain times and propose a practical model for strategy development that they have seen succeed at several leading companies.</p>

Strategy-Making in Turbulent Times

In the traditional strategic-planning model, managers attempt to forecast how markets will evolve and competitors will respond, and then define a multiyear plan to position their company to win in this future state. That worked well when markets were more stable and the primary factors influencing future growth and profitability were easier to forecast. But the world is now changing so quickly that no business can plan for every eventuality. And fewer than a quarter of large organizations employ the most notable tools and frameworks for strategy development under uncertainty: scenario planning, Monte Carlo simulation, and real options analysis. Executives say that those tools require data that is impractical to gather and analysis that is too expensive to execute routinely and that their output can be counterintuitive and complicated to explain to senior leadership and the board. In this article the authors offer a new approach and mindset for making strategic decisions, along with a new model for managing strategy development and performance monitoring. They describe what it takes to produce great results in uncertain times and propose a practical model for strategy development that they have seen succeed at several leading companies.

Strategy-Making in Turbulent Times

Summary.

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