What development strategy is effective in the era of uncertainty. The experience of Tisel Technics.

There are four sources of uncertainty. First, the multiplicity of variables: the outcome of a situation can be affected by a mass of factors, the development and appearance of each of them is difficult to predict. Second, the interconnectedness of these factors: changes in any of them trigger a domino effect. Third, the difficulty in predicting which one of the factors will prove stable: what will change and what will remain the same? Fourth, difficulty in estimating the time during which each factor will stabilize (that is to say, market saturation will occur).

New Strategies

Today it is obvious that it is no longer possible to project today onto tomorrow. But giving up plans for the future does not seem reasonable either – you need to find a way to strategize differently. Are there any alternative approaches to corporate strategy? Yes, of course there are. Scenario-based planning has been gaining popularity for some 50 years. It proposes to look beyond one vision of the future and consider several possible options (scenarios) and take them into account when allocating funds. Scenarios are formed as a combination of predetermined elements (for example, geography) and key uncertainties (market volume). Monte Carlo simulation comes from mathematics and uses a random variables generator (the best-known example is roulette, hence the name), statistics and multiple probabilities. By performing thousands of calculations, this modeling allows you to see the range of the most likely outcomes of a company’s action.

Real Options Method

In the 1980s, the Real Options Method (ROV) was recognized as a method used mainly for the evaluation of investment projects, but also useful in strategic matters. A real option is a right (but not an obligation) to make a specific business decision, allowing its holder to defer a choice until sufficient information is available. It helps to better understand what development opportunities the company has at a particular moment and the choices based on these opportunities. All three approaches consider flexibility an essential part of strategic planning – but none of them has yet become universally accepted. Less than a quarter of companies use them to evaluate investments, and fewer still use them to form strategies.