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In a recent HBR article we argued that in an uncertain and rapidly changing world, companies need to adopt strategies predicated on radical optionality, in which they continuously develop new options that could form the basis of future success — depending on what unpredicted state of the world they will find themselves in. But companies struggle to realize radical optionality because creating options is expensive: It entails costly and risky exploration, increases complexity, and can lead to excessive redundancy. Encroaching resource limitations, especially an increasing cost of capital, only makes the challenge harder.

In addition to breaking a series of traditional trade-offs in strategy, as described in our article, this will also require a new approach to thinking about, communicating, and leading strategies. Fundamentally, we have to accept that strategy is no longer a single, unchanging roadmap, but rather a portfolio of possibilities that requires an altogether new playbook. To succeed in this new world of radical optionality, managers and leaders must embrace:

Incompatibility and misalignment of ideas

Companies and individuals work on multiple initiatives and tasks simultaneously. The assumption is usually that although these activities may be very different, they are fundamentally consistent with one strategy and view of the future.

However, organizations developing options for multiple possible future states of the world may need to simultaneously pursue non-complementary or even incompatible options. For example, NVIDIA sells its graphics cards to consumers, but it is also building up a cloud-based subscription service that can be used to access graphics power remotely and stream games or other software to (non-NVIDIA-powered) devices. In this case, solving one problem — for example, reducing streaming latency — could improve the attractiveness of NVIDIA’s cloud-based offering, but potentially reduce that of its traditional hardware business (by cannibalizing its direct sales).

Enhancing optionality requires recognizing the potential benefits of such incompatible options. These include higher resilience, due to diversified future income sources, as well as the ability to create a foothold in a plausible future that relies heavily on centralized computing. Moreover, NVIDIA’s move sets it up to benefit from a broader set of possible future innovations, as its cloud offerings will be improved not only by breakthroughs in hardware, but also by improvements in streaming software, among other advances.

Author(s)
  • Martin Reeves

    Chairman, BCG Henderson Institute

  • Mihnea Moldoveanu

    Professor and Vice Dean of Learning and Innovation at Rotman School of Management, University of Toronto

  • Adam Job

    Director, Strategy Lab

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