Tools for Managing Business in an Age of Uncertainty

Managing business in an age of uncertainty requires the ability to create possibilities. This is the thesis around which all the chapters were built. The book is intended to provide tools for making it a way of managing.

I draw a sharp distinction between risk and uncertainty. With risk, we know what could happen. There are probabilities. We can assess the likelihood and the damage.

Uncertainty, as I define it here, is a situation in which there are no probabilities. We have no knowledge whatsoever of what will happen.

Risk management is essential, but it does not address uncertainty. Without knowledge of what will happen, we must build additional capabilities and courses of action, learn from reality and act as it changes.

The ability to create possibilities must become the way we manage. This is the conclusion I want to leave with you at the end of the book.

In the prologue, I returned to Plasan and Dani Ziv. I tried to understand what I had seen then but could not yet articulate. Today, I interpret the process as the building of capabilities that expanded what the company could do. The demand that developed later gave them an opportunity.

That distinction changed the strategic question for me. Alongside asking how to succeed under familiar conditions, we must ask what we need to build so that we can act even when reality changes in ways we did not anticipate.

Plasan was the starting point for the inquiry. The encounters in Italy brought us back to passion, the product and aspiration. The discussion of Jensen Huang broadened the view to the whole system and the possibilities it can open for others. Economic measurement required us to examine what justifies an investment. Working with people and AI raised the question of realization.

From all of these, I want to bring together one way of working:

Clarify what kind of company we want to build.

Formulate the principle that will bind our decisions.

Create possibilities and examine what is required to realize them.

Then decide where to invest and what to give up.

This approach requires us to return to learning. Even a decision justified today may require change tomorrow.

Purpose requires a choice and reality requires testing

The question “What do we want to be when we grow up?” needs an answer that comes at a cost. An answer that changes the allocation of time, money and attention. That requires building a missing capability or giving up an attractive activity.

Purpose is our choice. The foundational principle expresses the commitment that will guide its realization. Our claim about what prevents realization requires evidence. We must preserve this distinction even when we are convinced of our approach.

In the interpretation of Plasan I proposed, protecting people required preserving their ability to perform the mission too. This created a need to understand the vehicle as a system. Materials, design or the method of integration could be changed, and each alternative assessed against the outcome the company sought to make possible.

The principle gives the search direction. Thinking from first principles examines what is really true and what we have accepted as necessary simply because we have grown used to it. Creating possibilities examines what else we can build on that foundation.

The distinction between optimization, discovery and creating possibilities matters here. We can greatly improve an existing activity and remain within the same space. We can uncover new knowledge and still not know what to do with it. Strategic work requires asking what possibility is opening, to whom it matters and what conditions would allow it to exist.

An idea becomes a possibility for action when we build it a real foundation. We will identify the decisive bottleneck and choose a test that can change a decision. Clarify in advance what would justify continuing, changing or stopping. This takes us from agreement about an idea to learning about it.

Capability is also created between people and organizations

A possibility a company cannot realize alone may become possible through a partnership. The question is what we will contribute, what will complement it, and why participation will be worthwhile for others.

This is the connection I find between Plasan and my reading of Huang. A capability takes on added meaning when it enables another party to act. Designing for integration with a partner can expand its use. For the relationship to continue, every participant must receive value. Competitive advantage requires us to keep justifying our contribution.

The same work begins inside the company. Human intelligence interprets situations, asks questions and exercises judgment. Human capital provides knowledge and experience accumulated by people. AI can assist with analysis and the development of alternatives. Social capital enables knowledge to be revealed, assumptions to be challenged and people to act together.

Their combination must be assessed through the outcome:

Did we identify a possibility we had not seen?

Did we test an assumption we might otherwise have accepted uncritically?

Did we succeed in doing something in reality that we could not do before?

A system that offers many answers does not guarantee a good inquiry. We must provide context, demand alternative explanations, and test its proposals with people and evidence from reality. The division of work with the system also requires testing.

As tools change, we will reexamine what can be done with them. Preserve knowledge and the reasons for decisions so we can use them again. The ability to change tools without losing what has been learned is part of the organization’s ability to develop.

In my view, the scarce resource will be the ability to identify which discovery deserves attention and what can be done with it. As proposals multiply, we will need to devote more thought to choosing.

Creating possibilities requires economic discipline

Possibilities require time, money and people. Every investment temporarily limits the ability to invest elsewhere. Even a fascinating possibility must therefore justify the resources it requires.

The economic example in the book was intended to change our perspective. A profit of ten on capital of two hundred looks different from a profit of five on capital of twenty five. When the cost of capital is ten percent, the first does not cover it in that year. The second does. Reported accounting profit alone did not give us the answer.

This creates a clear responsibility for the Board and management. They must understand how the company creates value over time and how measurement and rewards affect decisions. A cut that builds a bonus today while dismantling an essential capability for tomorrow requires an economic and strategic explanation from them.

Nor is one year’s economic profit enough for judgment. A new capability may still be far from generating revenue. We will examine what we have learned, what can already be done and what evidence justifies the next investment. Justification for the future does not remove the need for oversight in the present.

Before giving up a capability, we will also examine which possibilities will disappear. How much time and money would be needed to rebuild it if we need it? The cost of not investing must enter the discussion too.

Creating possibilities and shelving them are part of the same responsibility. We will broaden the search and concentrate resources on paths worth developing. When testing removes the justification for continuing, we will decide and release resources. Preserve the knowledge and the reason for the decision. If a change in reality affects that reason, we can reexamine it.

The organization must allow a person to say that the possibility they proposed is not justified. Such a report can save money and transfer knowledge to the next effort. The quality of learning and honesty in reporting must be reflected in how people are assessed.

What will you do now with the question you brought

In the introduction, I asked you to bring a question that matters to you. After reading, listening and dialogue, it is worth returning to it. What has changed in the way you understand it? Are you still seeking the same outcome? Which assumption has lost its status as a fact?

I suggest writing yourself a brief decision. What you want to make possible, and for whom. Which principle will guide your choice. Which possibility you will test and what you need to learn about it. Whom you will involve, and when you will return to a decision. And what you will stop doing to release resources for it.

After the test, return to what you wrote. Examine what changed in your understanding and why. This record will allow you to see how your thinking develops and carry the learning into a possibility you had not imagined at the outset.

Return, too, to the managerial habit you chose at the beginning of the book. At which meeting did you ask a different question? Which assumption was tested before you committed? What action did you change because of what you learned? Choose what you want to do again and set the next date. This is how learning can become an ongoing way of managing.

This is what I meant when I invited you to be a participant in the book. I bring experience, ideas and interpretations. You bring a reality I do not know. The encounter between them, assisted by AI, may create an insight neither of us brought beforehand. You can also disagree with the text and reach a different conclusion. What matters is understanding what it rests on and examining what it makes possible.

Learning by Thinking Together

This is the way of learning on which this work is built. Its value will become clear in what you can understand and do through it. From it, you can begin writing the next chapter in your own reality.

Managing business in an age of uncertainty requires the ability to create possibilities.

With risk, there are probabilities. With uncertainty, there are no probabilities and no knowledge of what will happen. This requires ongoing work to create and test possibilities, shelve those that are not justified and build capabilities for action.

The future belongs not only to those who know how to solve problems, but to those who know how to create possibilities we have not thought of before.

In an age of uncertainty, what possibility will you start creating now, and with whom will you think about it?