The Upside of Uncertainty
Profiting from Uncertainty: Strategies for Succeeding No Matter What the Future Brings
By Paul J.H. Schoemaker
The Free Press, 2002, $30
The times, they are uncertain. First came the downward spiral of the dotcoms. Then the recession rolled in. One year ago, the world was dealing with the events and aftershocks of Sept. 11. A few months later, the Enron scandal hit. That was eventually pushed out of the headlines by a succession of similar revelations about other corporate giants. It seems the corporate community?and the world in general?has lately had to deal with massive shake-ups.
Paul Schoemaker, an authority on decision making and scenario-based strategic management, points out how uncertainty has created billion-dollar losses for industry giants such as Cisco Systems and Nokia. He goes on to offer business leaders lessons not only to help prepare for such shake-ups but also to benefit from them. When properly harnessed, Schoemaker argues, uncertainty can create billion-dollar gains.
Obstacles create opportunities, in his view. In fact, according to the author, we need ambiguity to create profit. “Common risks lead to common returns,” he writes. “The opportunity to profit comes from uncertainty.” Careful to distinguish profiting from profiteering, he says the goal of industry decision makers should not be to capitalize on hardship or heartbreak, but to benefit from anticipating and preparing for the possibilities.
While it’s easy to say with 20/20 hindsight what Cisco or Nokia might have done to prepare for the unknown, it’s another thing altogether to figure out what to do when you’re in the midst of chaos and change. Being prepared for all possibilities is the key?but simply creating a Plan B, or even a Plan C, isn’t sufficient to capitalize on the lightning strikes that seem to occur with ever-increasing frequency in the 21st century.
So Schoemaker goes on to provide an exhaustive how-to on such topics as generating and analyzing possible business and industry scenarios that embrace uncertainty; creating and implementing a strategic vision and real options to deal with potential problems; and continuously monitoring the internal and external environment and making real-time adjustments.
Requisite reading for corporate decision makers, this book goes beyond traditional enterprise risk-management principles and theory. It addresses the less quantifiable types of risk and the upside of uncertainty. Appendices provide background on the psychology of uncertainty and related self-tests (How confident are you? How well do you deal with ambiguity?), as well as an “uncertainty toolkit” of approaches for dealing with the future.
“Customers are a critically important part of demand strategy, but demand goes far deeper and involves a greater array of forces and factors than customers alone can supply. In fact, companies that rely only on their customers can get themselves into trouble if they don’t set a context within which they hear, understand and evaluate what customers tell them.”
-From The New Law of Demand and Supply: The Revolutionary New Demand Strategy for Faster Growth and Higher Profits, by Rick Kash (Currency/Doubleday, 2002)
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SOURCE: Data from the week of July 29, 2002, compiled by Borders Group, Ann Arbor, Mich.