Boards across the world are currently tackling the huge uncertainty created by the current crisis. In light of this, Inclusive Boards have taken a look at different ways executives can adapt to crises to implement successful strategies. We devised a tri-level framework to understand the different tiers of uncertainty organisations may face and how executives can navigate them.
Level one: linear future
At this level, there is a stable future in which organisations can make strategic decisions. In this ideal situation, institutional policies such as governmental laws can be expected to remain the same for the long term. On top of this, the macroeconomic environment can also be relied upon to remain stable for at least the medium run. The post-war Keynesian settlement of the 50s and 60s or the post-cold war settlement of 1990s and 2000s are two such analogous periods of time. In such periods, senior leaders can rely on the classical tools of market research, Michael Porter’s five-forces framework and value chain analysis to determine the best course of action. This does not mean there is an absence of risk, rather, certain important factors can be relied upon to stay stable enough to more clearly predict outcomes.
Level two: variable futures
At level two there are more variable futures, in which competitors and government’s possible actions can affect the operating field of your organisation. In this scenario, a robust valuation process ought to be implemented to assess the most likely risks to the organisation. This is particularly relevant to organisations looking to make investment decisions in order to grow in new markets. In this scenario, organisations should think about putting together a set of possible outcomes and determine the likelihood of each direction. There should be a limited number of alternative scenarios in order to avoid the complexity of more than five or six which could obstruct successful decision making.
Level three: true precarity
At level three the strategic direction of the organisation is severely hindered by the near-total uncertainty of the future. This could be a charity Board determining a fundraising or expansion decision in a highly volatile market. It could also be related to the current scenario where an exogenous shock in the form of a natural disease, disrupts relied-upon market dynamics and institutional frameworks. In the current case, labour has been forced to remain at home whilst the end of social distancing measures seems distant and economic challenges, even if only brief, seem probable. In such situations, an organisation’s strategy ought to decipher the underlying trends as they emerge and react to them as effectively as possible. This could be as simple as Twitter’s directive to allow staff to work from home for as long as they wish, or a university’s decision to move all taught classes online for the next year.
When faced with this type of precarity, the organisations that work hardest to understand a probable future based on an analysis of current trends will be best placed to emerge from it when a new normal is implemented. There is therefore great opportunity in uncertainty and all organisations should remind themselves of this in these difficult times.
Inclusive Boards provides governance review services to help organisations better prepare for future uncertainty. If you are interested in finding out more, please contact us with the details at the bottom of this page.