A company striving for success must appreciate its uncertainties

22/02/2016 Aalto University

Strategic initiatives play a key role in enabling the company’s management to take advantage of new growth opportunities identified in its operating environment. But how will a company know whether initiatives are viable, and how, on the other hand, does an understanding of the implementation possibilities affect making initiatives?

Markus Kajanto, former director of corporate strategy planning at Nokia, who has worked as a postdoctoral researcher at Aalto University, and professors of strategy Timo Vuori and Henri Schildt were looking for an answer to this question in a study, for which Kajanto interviewed managements of 37 Finnish companies. There were as many as 112 interviews.

‘When decisions about initiatives are made, the management’s ability to understand future capability requirements plays a key role,’ Kajanto summarises.

‘Capability is what the organisation can do; its possibilities to achieve. An understanding of capabilities is based on concrete matters, such as quantitative metrics and the perceived skills of individual people as well as on how the management feels it has motivated the personnel. Appreciating the unpredictability inevitably linked with a strategy aiming at future is another important factor,’ he stresses.

Two risk areas

According to the researchers, the biggest differences between the companies were indeed related to appreciation of uncertainties. Many companies have – often due to circumstances – anchored themselves so tightly to the present that it is difficult for them to see into the future.

‘That being the case, they often end up trivializing the measures required by the change and attempt to do something that is not possible. When it does not work out, they have to make corrective actions, which are also difficult to implement because the required capabilities were originally not properly identified,’ Markus Kajanto states.

On the other hand, too pessimistic a picture of one’s own capabilities is also dangerous. The necessary initiative may already be there, but if the management doubts the company’s possibilities to implement it, no action is taken.

‘We discovered in the interviews that even good plans had often not been implemented because the management had hesitated,’ Markus Kajanto says.

‘Because strategies are about something that has not been done before, the only thing we can do is to appreciate the possibility of uncertainties and surprises,’ he reminds us.

Timo Vuori also encourages companies to have a bold attitude.

‘We should not overanalyse the present situation, but set our eyes to the future while being prepared for a variety of outcomes,’ he advises companies.

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