Much of the failure of long-term strategizing arises not from its difficulty but from confusion about how to do it. When hard strategic choices loom, executives ask their experts what the future will look like. The experts — middle management, analysts, engineers, consultants — aren’t asked to provide a comprehensive view of possible futures and their probability of occurring. They’re asked for a description of a single future or several possible futures for consideration.
With exquisite mock precision, they describe these highly specific futures, shrugging off uncertainty on the grounds that the future is ultimately unknowable. Risk is relegated to a qualitative discussion of potential problems, often resulting in an upward adjustment of the discount rate to compensate for the lack of accounting for uncertainty in the overall analysis.
But the uncertainty of the future is no excuse for less rigor or clarity. A consistent, quantitative perspective on uncertainty not only builds the best foundation for making good management decisions but also provides a platform for developing a shared understanding of trade-offs, bridging disagreement and establishing accountability.
by Peter Hopper and Carl Spetzler (adapted excerpt)