Exec teams and Boards spend a lot of time focused on risk and risk management. Rightly so in today's world. But, there's something else - different from risk, but often confused with it - that senior executives and Board members should be equally, if not more, concerned about. It's radical uncertainty.
John Kay, in a recent column in the FT (The other multiplier effect, or Keynes's view of probability - http://on.ft.com/OslEcY) touched on this topic:
Keynes believed that the financial and business environment was characterised by “radical uncertainty”. The only reasonable response to the question “what will interest rates be in 20 years’ time?” is “we simply do not know”.
I suspect that admitting "I don't know, we don't know, it can't be known" is difficult for many business leaders - particular on any topic related to their business. There's a lot that could be said about why that is, and the sometimes negative consequences. But, there's a different angle I'd like to explore. If you accept that your business is facing some degree of radical uncertainty, how does that change the way you ought to think about strategy?
A lot of strategic thinking is based on the assumption that you can forecast the future (or at least assign realistic probabilities to a known range of outcomes in the future) and then pick the actions most likely to give you what you want. But, "radical uncertainty" means you can't even know the full list of possible outcomes, much less how likely each one is. No matter how well you do your analysis, there are just going to be some key decisions where that way of thinking doesn't work .
Of course, it's not all fog and darkness either. Businesses have more data, more analytical tools, more knowledge available to them than ever before. And, our ability to model complex business ecosystems and see previously unexpected interactions and outcomes has also improved. But, most of these tools work best for "how" sorts of things: How many new customers are we going to get if we spend £x? How long will it take develop the next version of our product? Plus, they are based on extrapolation from the past, which means that they only work as long as the future looks a lot like the past. Don't assume that's going to be the case.
So, what does this mean for strategic thinking - particularly at the top team level? At minimum, since you almost certainly face some degree of "radical uncertainty", it's worth discussing as a Board how that very fact might need to modify your decision making process. Even better, consider this question: "If we can't know for certain what will result from our actions, are there still things we would want to do or be - for themselves, not for what they bring?"