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About the author: Natan Por
Nathan Poor is an associate professor at the INSEAD business school. His research focuses on innovation and technology strategy, and how new and established companies adapt to technological changes and enter new markets. Co-author of the book “The Positive Side of Uncertainty”
Have you noticed the influx of companies that are becoming flexible and easy to move? To the many calls for change? As we enter an era of uncertainty, companies are desperately looking for tools to help them keep up. The problem is that most of our existing frameworks, developed in a more stable era, do not perform well in dynamic conditions. This does not mean that the old frameworks and the tools that accompanied them are completely irrelevant. We will always need to understand the structure of the industry or use our resources to gain an advantage over others, but as the world changes rapidly, we need different tools.
My research focuses on the connections between uncertainty and opportunity, and the ways in which we can leverage uncertainty to be able to identify an opportunity and realize it. I found that there are indeed better working frameworks than exist that can guide an organization in times of uncertainty, and they have three common characteristics.
Individual coping with uncertainty
We train people in professions such as marketing, finance and management so that they can lead organizations, but few receive training in dealing with uncertainty. While we may all call for innovation, transformation and change, many shy away from the slightest hint of risk and fall into behavioral traps that limit the ability of organizations to grow and adapt. If we trust managers to deal well with uncertainty, they will be able to increase the ability of the entire organization to create new sources of growth.
The prestigious fashion groups Louis Vuitton, Moët Hennessy and SMCP are already doing this. Daniel Lunde, CEO of SMCP, attributed the company’s ability to triple its revenue in a crowded market to the skill of uncertainty or the ability of team members to face uncertainty with creativity and enthusiasm.
There is clear evidence from various fields that people can learn to deal with uncertainty, but how do you prepare for it? The method is still under development. According to a study we did, it consists of four main practices. The first is a reframing of uncertainty: instead of treating it as a source of loss, see it as a gateway to new possibilities. The second is preparation for uncertainty through self-knowledge. The third is breaking down the actions to deal with uncertainty into small steps and adopting cognitive flexibility. The fourth is emotional and cognitive coping with disappointment and change. These are all skills that can be learned.
An organization’s ability to experiment
More than a decade ago, experts predicted that organizations would be forced to get rid of familiar bureaucratic structures in favor of non-hierarchical alternatives, which would allow them to behave like a flock of seagulls or a colony of ants, thus responding to new opportunities instinctively. We are now in the midst of a major experiment in non-hierarchical forms of organization. Some parts of this experiment will succeed and others will fail. But the basic goal is correct, and that is to create an organization that is able to experiment in order to discover and encourage growth opportunities.
To achieve this, several essential components are required. First, companies should encourage people to use their natural intelligence to solve problems they care about personally. This will almost always produce much better results than top-down work. Second, companies need to move from long planning-based cycles to short experiments aimed at testing and learning. Third, they must create the organizational structures that allow people to experiment. Managers are still important to ask the big questions and point out the most important problems to solve, but an organization that is ready for the age of uncertainty is an organization that is built for experiences and adapts to changes.
Note that Amazon rarely announces flexible working, but it emphasizes that the key to the organization’s success is being experimental. During his time as CEO, Jeff Bezos claimed that “one of the things we’ve done at Amazon is to reduce the cost of doing experiments… If you can increase your number of experiments from 100 to 1,000, you will dramatically increase the innovations you produce.”
Strategy is a creative exercise
I think of strategizing stable environments like building a castle or playing chess. Strategizing in dynamic environments is more like surfing, where you try to be flexible and ready to catch the waves of opportunity. But there is a difference: in environments of uncertainty we don’t just ride the waves, we create them.
The concept of strategy as creation deals with the representation and definition of new markets. For example, the case of Mercedes-Benz. For decades the company has struggled to gain access to the lucrative aftermarket for sales and repairs. She recently created a new type of venture, a cross between a corporate venture and a start-up, to launch RepairSmith, the first to offer instant repair services on a large scale. In a very short time, RepairSmith has provided more than 100,000 on-site repairs, with incredible profit margins and high scores in customer loyalty surveys.
These ideas are just a sampling of the approaches that are evolving to complement strategies common in more stable markets. In an age of uncertainty, the right tools are essential for companies that want to be at the forefront of their industry.
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