A good mindset for embracing uncertainty: "strategic flexibility"

Strategic flexibility www.wealthandrisk.nz

Some time ago I came across a "Deloitte Research Monograph" by Michael Raynor titled "Strategic Flexibility". I can't find a copy of the article online, but it was a terrific article about embracing uncertainty in a corporate setting.

The lessons are just as applicable in our own professional and personal lives. 

Noting that "accurate prediction is impossible", and that "we can predict anything but the future", we should replace the idea of "strategic commitment - a lopsided bet on a single, stubborn vision of tomorrow" with "strategic flexibility". 

Strategic flexibility enables us to "engage several paths simultaneously without diluting the resources ultimately necessary to strike boldly in a given direction". 

Raynor provides a framework of strategic flexibility that involves four phases:

Anticipate

Instead of predicting the future, we should anticipate what the future may hold. 

It's valuable to look at the possible drivers of change and range of possible futures - the "possibility space" in front of us. 

For example, in our professional lives, there's the risk - and opportunity - of automation. If we work in an organisation, it's worth looking at the demographics of the people you work with, and considering what this will mean in the years ahead. 

Formulate 

For a range of possible futures, develop an optimal strategy, and identify which elements of these strategies are "core" and "contingent".

By considering each of these futures, commonalities and differences will start to emerge. The common elements are those that are "core".

Accumulate

Since these core elements will be useful in the face of almost any future, the next step is to acquire the elements and capabilities to execute these core elements.

Acquiring capabilities to execute on some of the contingent elements can also be acquired to take advantages of opportunities that present themselves, or be used to hedge against adverse events. 

Operate

The final (but ongoing) step is to "Execute the core strategy, monitor the environment and exercise or abandon options as appropriate." 

Of course, this is applicable in a corporate setting.

But it's also applicable in our personal lives - especially our professional lives.

Sonnie Bailey

Sonnie is the founder and principal of Fairhaven Wealth.

Before founding Fairhaven Wealth, Sonnie worked in the legal and financial services industries for over a decade.

Sonnie first became involved with financial advice as a specialist financial services lawyer. For many years, he was an “adviser of advisers”, reviewing thousands of advice files prepared by hundreds of financial advisers, and providing feedback in relation to the quality and appropriateness of advice; industry best practice; risk management; and regulatory compliance. He has published work in industry publications and spoken at various financial advice conferences.

Sonnie has also worked with banks, investment management firms, insurers, and derivatives providers.

Sonnie has worked as a private client lawyer, focusing on succession, estate planning and trusts. He ran his own legal firm in Australia before relocating to New Zealand. He has also acted in independent trustee and company director positions.

Sonnie is passionate about helping people achieve their goals and manage the risks to which they are exposed.

He has written extensively on his blog, New Zealand Wealth and Risk, which can be found at www.wealthandrisk.nz.

Sonnie is married to his wonderful wife Chrissy, and has two young children, Ben and Anna.