Strategy Under Uncertainty

In an environment of high uncertainty, business leaders instinctively put the brakes on investments, R&D and Marketing expenditures, recruitment, and may even come to the point of inaction. A defensive withdrawal into one’s own shell under danger is understandable. However, although such defensive maneouvers have worked well in previous crises, they may create adverse effects in the short term and be harmful in the long term. In an environment where things are already slowing down, braking down can make things worse. Moreover, when things start to improve, it can leave the company at a disadvantage compared to its competitors.

In a global event like COVID-19, it is not valid to take a position by looking at previous experiences. Since this is a breaking point, and not a straight line, it is not easy to extend the present into the future. The future can develop in more than one way in such situations. The positive side is that there are opportunities for those who know how to take advantage of every crisis. The more the discontinuity is different from the previous ones, the greater the opportunity. Underestimating the uncertainty and the wishful thinking that "this too will pass and we will continue our business with the old model" may leave the company with an invalid strategy that cannot protect from threats and take advantage of opportunities. Making decisions intuitively is also not very appropriate in such situations.

In an environment of uncertainty, we suggest that companies do two things at the same time. The first is to read the trends correctly and try to extend them into the future. We can call this the "Today-Out" approach. The second is to work on possible future scenarios, to decide at what point they want to see the company within these scenarios, and to carry out studies that will lead them to the desired future from today. We can call this the "Future-In" approach.

It is important to read the trends affecting the world and your industry correctly in the today-out approach. Trying to understand trends is based on a good observation and keeping track of what is happening. The weakening of globalization in favor of local and near sourcing due to the troubles experienced during the peak period of the COVID-19 epidemic, production in locations near the market, alternative supply at the cost of efficiency and even higher costs, rise of local agricultural production and food chain can be listed as some of the prominent topics.

Working remotely is a trend that emerges in the face of obligations and seems to be permanent. It was observed in most companies that working remotely did not reduce productivity significantly. On the other hand, employees also prefer WFH and there is a potential to save money for the company. Remote work can completely change talent management because it means the concept of “talent” and "place" are diverging from each other. Companies can now recruit people from wherever they want for many white collar jobs. The second and third order effects of this trend should also be expected to be very serious. Increasing importance of trust and transparency in corporate culture, and changing leadership roles are internal effects. Third degree and social effects are also noteworthy! Changing profile of the cities, shrinking offices, huge office buildings becoming unnecessary impacting the real estate market, reduced mobility of people...

Significant changes can also be expected in the structure of companies. The number of salaried employees will decrease. Consultancy and outsourcing will increase on the basis of need and subject. Likewise, project-based work will increase. Another permanent trend is contactless economy. e-Commerce, logistics services, automation, robotic applications will increase. Virtual and digital will replace the physical wherever possible. New business models will develop. Business model innovation will be one of the keys to success. Is your company ready for these?

The Future-In approach is based on the assumption that tomorrow will be different from today. More than one scenario is foreseen for the future. Within the framework of these scenarios, a consensus is provided on the point the company wants to reach. The innovation gap between the point the company wants to reach and extending today into the future is estimated. Finally, the Future-In strategy is knitted with steps and projects to fill this innovation gap.

Three keywords are important in strategy under uncertainty. Optionality, Agility, and Durability. Optionality is about not putting all your eggs in the same basket and creating variety. Agility is about setting up dynamic and fast decision-making mechanisms. Being a resilient company is an issue in itself. The transition to the future has accelerated. The strategy of optimizing the current may have been working until now. The necessity of today is a Future-In / Today-Out Double Transformation Strategy to be a resilient and future-ready company.