SPOTLIGHT ON MANAGING FOR AN UNPREDICTABLEFUTURE
Most conventional wisdom about high-levelmanagement is from an era when industries were less volatile than they aretoday. This package looks at how strategy, leadership, and forecasting changewhen you can’t see what’s coming.
STRATEGY
Planned Opportunism
Vijay Govindarajan | page 050
“Planned opportunism” is the author’s termfor responding to an unpredictable future by paying attention to weaksignals—early evidence of emerging trends from which it is possible to deduceimportant changes in demography, technology, customer tastes and needs, andeconomic, environmental, regulatory, and political forces. That attention givesrise to fresh perspectives and nonlinear thinking, which help an organizationimagine and plan for various plausible futures. Planned opportunism is adiscipline that creates a “circulatory system” for new ideas; develops thecapacity to prioritize, investigate, and act on those ideas; and builds anadaptive culture that embraces continual change.
Govindarajan illustrates his thesis withseveral compelling company stories. For example, Tata Consultancy Servicesdecided to divest its fast-growing call-center operations at the height of theboom in that business, because its leaders could see that technologies weremoving to the cloud and that global enterprises would eventually demandhigher-level, more strategic outsourced services. Call centers would just getin the way of that future. And Hasbro, the toy and game maker, acted onnumerous technological and demographic shifts in the 1990s to significantlyoutpace its leading competitor, Mattel.
HBR Reprint R1605C
LEADERSHIP
“Both/And” Leadership
Wendy K. Smith, Marianne W. Lewis, andMichael L. Tushman
| page 062
Leaders face a multitude of strategicparadoxes—contradictory pressures that are too often viewed as “either/or”choices. There are innovation paradoxes, in which the pursuit of new offeringsand processes conflicts with the mandate to sustain the tried and true. Thereare globalization paradoxes, which involve tensions between local imperativesand boundary-crossing integration. And there are obligation paradoxes, when thegoal of maximizing profits for shareholders clashes with the desire to generatebenefits for a broader group of stakeholders.
The authors argue that organizationalsuccess depends on simultaneously addressing such conflicting demands, notchoosing between them. Leaders need to become comfortable with multiple truthsand inconsistency. They need to assume that resources are ample rather than scarce.And they need to embrace change instead of seeking stability.
All of this will help organizations reach astate of dynamic equilibrium, wherein paradoxes don’t impede progress—they spurit. And the way to tap the potential of paradox is to both separate and connectopposing forces: Managers must pull apart the organization’s goals and valueeach of them individually, while also finding linkages and synergies acrossgoals.
HBR Reprint R1605D
DECISION MAKING
Superforecasting
Paul J.H. Schoemaker and
Philip E. Tetlock | page 072
Organizations and individuals arenotoriously poor at judging the likelihood of uncertain events. Predictions areoften colored by the forecaster’s understanding of basic statistical arguments,susceptibility to cognitive biases, desire to influence others’ thinking, andconcerns about reputation. Indeed, predictions are often intentionally vague tomaximize wiggle room should they prove flawed. But getting judgments wrong canof course have serious consequences.
On the basis of research involving 25,000forecasters and a million predictions, the authors identified a set ofpractices that can improve companies’ prediction capability: providing trainingin the basics of statistics and biases; assembling teams of forecasters to debateand refine predictions; and tracking performance and giving rapid feedback.
To improve prediction capability, companiesshould keep real-time accounts of how their top teams make judgments, includingunderlying assumptions, data sources, external events, and so on. Keys tosuccess include requiring frequent, precise predictions and measuringprediction accuracy for comparison.
HBR Reprint R1605E
RISK MANAGEMENT
How to Hedge Your Strategic Bets
George Stalk Jr. and Ashish Iyer
| page 080
Today companies grapple constantly with theunexpected: disruptive advances in technology, the rise of new markets, suddenswings in demand, surprise moves by competitors. To cope, firms try to improvetheir forecasting and their agility, but those efforts take them only so far. Acomplementary—and perhaps more effective—approach is to use “strategicoptions.” These are small bets that allow businesses to test the waters andbuild their experience. If they fail, they’re easy to unwind, but if theysucceed, they position organizations to capitalize on valuable opportunities.
In this article, two BCG consultants detailthree kinds of strategic options: Temporary organizations, which are staffed byconsultants and contractors, help firms ramp up operations quickly and yetavoid massive layoffs if an initiative fails. Small exploratory acquisitionsallow firms to get a foothold in a new business—without the costs and headachesof large-scale deals. Disposable factories are a good solution to uncertaindemand; they can be set up (and taken down) quickly, be sited closer to demand,and provide early data on costs and capacity that informs the construction ofpermanent facilities.
Executives often resist strategic optionsbecause they seem expensive in the near term. But when a payoff is far in thefuture and risk is high, they may be the best way to go.
HBR ReprintR1605F