A plea for uncertainty:
Everybody complains about uncertainty,
but it might be a good thing to have
Bolko von Oetinger
Dr Bolko von Oetinger, senior
vice president of the Boston
Consulting Group in Munich led
the German operations for 11
years and served on the ®rm's
management and executive
committee. He headed BCG's
worldwide marketing operations
for three years and in 1998
founded the ®rm's Strategy
Institute, where BCG has
concentrated its research with
academic and scienti®c
institutions about the nature of
strategy. As director of the
Strategy Institute he is closely
involved in BCG's innovation
process.
DOI 10.1108/02756660410516038 VOL. 25 NO. 1 2004, pp. 57-59, ã Emerald Group Publishing Limited, ISSN 0275-6668
N
ot a day goes by without a new remark about uncertainty. Here is a quote from a
well-known business journal:
It is one of the most melancholy re¯ections of the present day, that while wealth and capital have
been rapidly increasing, while science and art have been working the most surprising miracles in aid
of the human family, and while morality, intelligence, and civilization have been rapidly extending on
all hands; ± that at this time, the great material interests of the higher and middle classes, and the
physical condition of the labouring and industrial classes, are more and more marked by characters
of uncertainty and insecurity.
The quote is from The Economist, June 1843.
There is no life without uncertainty. And maybe life today is as uncertain as it always has been:
Yes, there has been a tech hype and counter hype, but the rest of the economy? Volatility in the
S&P 500 is no higher today than in the past. Uncertainty is simply a key characteristic of any
economic activity! Then again, business has to reduce uncertainty, otherwise we cannot do
any reasonable planning or make investments, and we cannot commit to our customers that
we are in business for the long haul.
In the summer of 2001, the editors of Business Week asked in a cover article entitled ``The
boom and the bust'' why, in spite of all the information we had about the new economy, we
made such fools of ourselves. The authors reached the conclusion that there is no lack of
information, just a dearth of good judgment for interpreting that information. We could ``see''
what happened, but we failed to understand the real meaning.
The more complex our economic systems become, the higher the demands made on strategic
judgment will be. But the last three years have shown that many managers lack these powers
of judgment. The endless drive for ``more'' and concentration on short-term optimization ±
viewed until recently as the epitomes of rational business ± have proven inadequate. Managers
eagerly pick up every new tool that comes along in the literature on management and think
they have a strategy. They do benchmarking and overlook the fact that there is no strategic
advantage when all players are following the same direction. They prioritize their actions accord-
ing to shareholder value and forget that running a business means more than pleasing analysts
on a daily basis. The value of a company is more than what is valued by a stock exchange.
There is no tool that can switch off uncertainty in business. The aim of strategic thinking is thus
not to achieve certainty but to prepare us for uncertain times.
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 `` Volatility in the S&P 500 is no higher today than in the
past. Uncertainty is simply a key characteristic of any
economic activity!
''
Be prepared
Careful preparation is an indispensable step to dealing with uncertainty. It was the biologist
Louis Pasteur who once said that ``chance favors the prepared mind''. The best and most
sophisticated way to prepare for chance is to develop scenarios ± that is, to think through
various future paths for the company.
The Prussian military philosopher Carl von Clausewitz believed the consideration of diverse
scenarios to be the apex of strategy. The mind of the commander, trained by scenarios,
provides him with a ``re¯ective eye'': while advancing according to plan, he is very sensitive to
weak signals whose importance he has learned from analyzing his scenarios. Thus he ``sees''
more than his counterpart, and he derives a more accurate meaning from these ``strange''
signals because he has superior judgment. This is the chance to be more prudent than com-
petition. Strategy is thus, in Clausewitz's own words, nothing more and nothing less than the
search for ``new paths of prudence''. There are no tools of strategic prudence, but there is an
art of careful preparation. Developing scenarios does not lead to clear, irrevocable solutions,
however. These are just as rare in business as they are in life.
We are all striving for clear answers, and thus we believe that what is not right has to be
wrong. Furthermore, understanding economics as nearly a natural science, with the formulation
of irrefutable laws, has fostered the illusion that there is always a ``right'' strategy. Experience
proves this is not the case, which is why a dialectic deliberation of opposites is so rewarding.
Scenarios do not deal with a world of certainties but with a world of probable developments.
Only after this place of possibilities has been carefully explored can scenarios successfully be
used to cross current business boundaries and venture into unknown territory.
Modern industry scenarios tell a lot about future developments and options. They have certain
characteristics in common: most of them have life cycles pointing to a dead end. When industry
consolidates, prices fall, margins fade away, customers become disloyal, products tend to
become commodities. In short, everything points to a crisis, but there are always ways out, and
one can discover them well in advance, leading to new business models. I am convinced that
we will see a major shift towards new business models in most industries not only because of
a kind of ``end game'' in many industries but also because of disruptive technologies and
disruptive innovations in general.
The development of scenarios is necessary analytical preparation. Whether and how a strategy
is realized is ultimately decided by something else.

Be ®t
Strategy without productivity renders you lame, and productivity without strategy leaves you
blind. Strategy, productivity and ef®ciency are intertwined. The best strategy (based on an
insightful scenario) will not help without an ef®cient organization. Over the last two to three
years, companies have increased ef®ciency mostly by laying people off, reducing overhead
(advertising, travel costs, etc.), and outsourcing. Management cannot run a company by only
laying people off. They must consider three key factors: people, processes and products.
Experience demonstrates that the key to ef®ciency dwells in the hearts and minds of a
business's crucial people. It is better to exchange weak managers than try to train them to
improve. Strong companies have not shied away from having personnel in their important layers
screened using an external assessment process. The best people in any organization will
always look at what happens to the worst managers. Caring about the best, coaching them,

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 mentoring them, and giving them feedback is very rewarding; providing the same effort to weak
employees leads to marginal improvements only.
Focusing the company on continuously improving business processes is the second step to
gaining ®tness. Good companies are relentless in cleaning up their processes: product develop-
ment (design to cost, modularity, etc.), manufacturing (cost of complexity, delivery speed,
leaner product lines, etc.), logistics and procurement (speed and quality), and sales and service
(from winning an account to servicing it).
Excellent people coupled with lean, fast, and quality-oriented business processes are the vital
prerequisites for developing new products bene®ting customers. Businesses need wave after
wave of innovative products to increase their market share.
If a company is well prepared, and if it is ®tter than its competitors ± that is, it has excellent
people, ef®cient and effective processes, and the organization works on innovative products ±
it still needs a deep human characteristic.

Be bold
Courage is not something ``in addition''; courage is, as Clausewitz once remarked, the
responsibility to act. If you are a manager, you have to act, not just react! There are impressive
examples of companies with managers doing just this and swimming against the stream.
Advertising, for example, is quite telling. During the recent economic downturn, there were a
few companies who kept their advertising investment constant (against the industry trend of
cutting advertising dramatically) and strengthened their position relative to their competitors.
Brand impact is, of course, more than just advertising; you need to have an innovative product
and a strong sales force ®rst, then good advertising. Once you have these conditions (because
you are ®t) you should ®ght against the pressure of following the lemmings.
Companies maintaining their advertising spending during the recent downturn experienced a
considerable increase in share of advertising, market share, and shareholder value. In times of
crisis, communication is better heard than in boom times when there is a lot of noise. Why, then,
are 90 percent of the companies benchmarking each other in the wrong direction?
Or take R&D. Business Week researched 2000 US high-tech companies during the last
two downswings (1985/1986 and 1990/1991). When the tech recessions ended, companies
excelling in pro®ts, growth, and value were those that had not listened to Wall Street in the down
times. These companies had pushed the accelerator, whereas the others had pushed the
brakes. These counter-cyclical companies ± Microsoft, Apple, Cisco, Compaq ± innovated by
acquiring other companies, developing products for dif®cult times, and investing in advertising.
And after the downturn their values increased signi®cantly.
Numerous studies in recent years have concluded that most mergers actually destroy value
rather than create it. The Boston Consulting Group, however, in its just-published report
entitled, ``Winning through mergers in lean times'', looked into mergers in both boom and bust
times. Deals taking place during periods of below-average economic growth had a higher
likelihood of success. Even more important: these weak-economy mergers generated consider-
ably more shareholder value on average than their strong-economy counterparts. The reason
for this does not just have to do with companies now being ``cheaper''. Focusing on business
fundamentals and high-quality PMI processes got the results up. Right now is an ideal time to
use M&A strategically to buy weaker competitors, gain share, and strengthen competitive
advantage.
Uncertainty might not be a bad thing if you can make better use of it than your competitors. The
keys are to:
1. Build scenarios for the future of your industry and your company. Invest in preparation!
Keywords: 2. Make yourself ®t: select the best people; make your processes more ef®cient and work on
innovative products.
Corporate strategy,
Uncertainty management 3. Be bold and liberate yourself from trends!

VOL. 25 NO. 1 2004

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