![]() Options-modest initial investments (pilot trials, limited joint ventures, technology licensing) that enable you to ramp up or scale back your investment later as the market evolves.Big bets-major commitments (capital investments, mergers or acquisitions) that will generate large payoffs in some scenarios and large losses in others.Use one or more of these moves depending on your strategic posture: Some pharmaceutical companies reserve the right to play in gene-therapy applications by buying small biotech firms with relevant expertise.ģ. ![]() Reserving the right to play-making incremental investments to stay in the game without committing to a new strategy prematurely.Many telecommunications service resellers pursue competitive advantage through pricing and effective execution rather than product innovation. Adapting-choosing where and how to compete within the current industry structure.Hewlett-Packard shifted photo processing from stores to homes by offering high-quality, low-cost photo printers. Shaping-driving your industry toward a new structure of your devising and creating new opportunities.Strategic postures clarify your strategic intent. Use: Technology forecasting and scenario planning to develop 4–5 possible scenarios Example:Ī consumer-goods company considering entering the Indian market develops multiple scenarios characterized by different variables, such as customer-penetration rates and latent-demand level.Ģ. The company evaluates the inherent risks and returns for each scenario, using game theory to identify probable market winners and losers for each. ![]() A limited number of competitor moves are likely. Its decision whether to build a plant will hinge on rivals’ decisions. Use: Option valuation models and game theory to establish relative probabilities of each outcome and gauge alternative strategies’ risks and returns Example:Ī pulp and paper company cannot observe or predict its competitors’ plans for expanding capacity-which could strongly affect industry prices and profitability. If you envision: Only a few future scenarios Apply appropriate analytic tools to identify strategic options. The Idea in Practice Confronting Uncertaintyġ. Its moves? Make big-bet investments in product development, complemented by more conservative pilot experiments to speed customer acceptance.Īs companies like FedEx and Microsoft have discovered, using the right tools to read the future enables you to avoid disastrous strategic investments while exploiting fresh opportunities. Mondex’s strategy? Shape its industry’s future by establishing what it hoped would become universal electronic-cash standards. Armed with the right kind of information, select an appropriate strategy-and execute it through savvy moves.įor example, using scenario planning, financial-services provider Mondex International determined that the advent of electronic cash transactions could create a range of possible futures. A wide range of possible scenarios? Consider scenario planning. Instead, use analytic tools based on the level of uncertainty facing your company: Are you facing only two or three alternative futures? Then use tools such as decision analysis. Apply the old tools, and you risk formulating strategies that neither defend your company against threats nor leverage the opportunities uncertainty can provide. But today we’re operating amid unprecedented uncertainty. Are you using traditional analytic tools-market research, value chain analysis, assessments of rivals-to inform your strategy? Those tools work in stable business environments.
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