Week 5 Flashcards
Risk & Uncertainty:
Future under perfect information:
o Known distribution
o Unknown drawn
o Prediction is possible
• Future under imperfect information
o Unknown distribution
o Unknown draw
o Prediction is difficult, experience helps
3 types of uncertainty
o State uncertainty
Inability to predict how environment might be changing
o Effect uncertainty
Inability to predict impact of environment on the organization
o Response uncertainty
Inability to formulate response actions and/or to predict what the likely consequences of those response choices
Characteristics of environmental uncertainty:
o Munificence
Amount of information available related to an organization’s domain
o Complexity
Strength, number and interrelatedness of the specific and general forces an organization has to manage
o Dynamism
How much and how quickly forces in the environment change over time
different sources of uncertainty:
Market:
Customer
Market size
Channels
Competitors
Organization:
capabilities & talents
learning skills
financial strength
strategies
Product(ion):
cost
technology
materials
design
Regulation:
government
federal/regional
standards
industry rules
Financial:
Cost & availability
expected roi
How to deal with risk?
• Identify the key risks that you face
o Threats and opportunities
o External vs internal incidents
o Scenario planning tools
• Asses risk,
o Impact
o probability
o controllability
• identify key risk indicators
o warning
o easy to monitor
o provide guidance on what action is needed
• Tracking the kri4 ways to mitigate risk?
accept
transfer
reduce
eliminate
4 ways to mitigate risk?
accept
transfer
reduce
eliminate
• Generic strategies for managing risks:
o Partnering
o Networking
o Strategic options
Contingency planning
Course of action
o Compartmentalizing riskdew2006 • Mainstream strategic management for what to do next boil down to
try harder to predict better
move faster to adapt better
matrix:
emphasis on prediction
emphasis on control
EOP = low, EOC = low
adaptive (positioning) (move faster)
EOP = high, EOC = low
planning (positioning) (predict harder)
EOP = low, EOC = high
transformative (construction) (turn current means into co-created goals)
EOP = high, EOC = high
visionary (construction) (predictive control)
read dew2006 matrix explaination
read dew2006 matrix explaination
- Prediction and control are tied together, that they are co-extensive
- Four key approaches for strategic managers:
o They can assume the environment is beyond their control and predictable, investing in predictive techniques that allow them to position favourably for the future? we call these planning strategies.
o They can assume the environment is unpredictable, shorten their planning horizons, and invest in flexible strategies that effectively res pond to changes in the environment? we call these adaptive strategies.
o They can assume the environment is predictable but malleable and impose their vision of the future, shaping the environment to achieve their desired outcomes? we call these visionary strategies.
o 4. They can assume future environmental factors are largely non-existent, and seek to create them through cooperation and goal creation with others to imagine possible futures extending from current means? we call these transformative strategies
unbundeling sources of uncertainty for emerging technologies:
o Technology: A key source of uncertainty for an emerging technology is rooted in the process of scientific discovery and technological problem solving under conditions of incomplete knowledge
o Application: Another important source of uncertainty underlying a technology’s emergence is associated with a lack of information about possible applications where the new technology can be successfully deployed
o User: Within a given market application, user uncertainty results from a lack of information regarding users’ preferences and the way users will adopt an emerging technology
o Ecosystem: Ecosystem uncertainty is rooted in whether and how the set of actors and the associated activities in the ecosystem can contribute to the technology’s value proposition.
o Business model: Business model uncertainty stems from the question of how firms’ appropriate value for their products, or the “profit equation,” which will be used to commercialize an emerging technology
Managing of uncertainties
o Sensing involves the “filtering of technological, market, and competitive information from both inside and outside the enterprise, making sense of it, and figuring out implications for action”
o Seizing requires taking actions such as the commitment and allocation of resources and organizational efforts toward emerging opportunities and the timing of such actions.
o a real-options approach provides firms the choice to both explore and abandon opportunities related to the emerging technologies. A challenge in the real-options approach is how uncertainty is incorporated in the analysis because it is difficult to understand the underlying factors behind the option
o In addition to real-options reasoning, experimentation through the deliberate testing of hypotheses is another way that managers can allocate resources under uncertainty
o a real-options approach provides firms the choice to both explore and abandon opportunities related to the emerging technologies. A challenge in the real-options approach is how uncertainty is incorporated in the analysis because it is difficult to understand the underlying factors behind the option
o In addition to real-options reasoning, experimentation through the deliberate testing of hypotheses is another way that managers can allocate resources under uncertainty
