Is all business uncertainty created equal?
There are times when there appears to be so much uncertainty that making informed decisions and setting strategy seem impossible.
Yet I’ve worked with clients who initially saw uncertainty as a block to strategy until I helped them take a step back and unpack the dimensions.
This process highlights areas of uncertainty for which traditional methods of setting strategy simply don't apply. The leader can then take the next step and identify the analytical tools that will help them develop strategies and create projections with what actually turns out to be a high level of certainty.
One tool I employ quite often is the McKinsey & Company's four-level framework that pinpoints how much certainty or uncertainty exists and helps leaders make sound strategic decisions based on the level relevant to their organization.
The four levels of certainty are defined as:
Here's how to get started:
Assess the level of uncertainty your organization is facing using the McKinsey & Company framework.
If you're at Level 1, then your traditional tools and approaches should work.
If your organization is at Level 4 (which is very rare), catalog what you know and what is possible to know in order to develop a set of probable outcomes. Also, recognize that Level 4 uncertainty is usually transitory.
Most often, though, leaders discover that their organizations are facing uncertainty at Level 2 or 3.
These levels require you to evaluate a set of future outcomes, explore options and set direction. In these situations, you also need to develop scenarios and identify key uncertainties. Once this work is complete, you can then determine the probability of the key uncertainties and outcomes, as well as the risks of alternatives.
Of course, uncertainty at these levels requires continual monitoring and the ability to adapt and adjust quickly and, therefore, strong leadership throughout the process.
