Traditional strategic-planning, decision-making, and financial planning approaches can work well in stable, predictable environments. These approaches assume that a good analysis will allow the future to be forecast with enough accuracy to point to the best strategy.
In 1994, a group of McKinsey partners met to discuss the prevailing strategy development approaches then taught and used. They concluded that those methods had fallen behind the times, which were now characterized by rapid economic and technological change, and worked poorly for most business situations.
Following the 1994 meeting, the group launched McKinsey’s Strategy Theory Initiative (STI), a research effort to develop an approach to strategy that could handle uncertainty and tackle both the threats and opportunities that it gave rise to. In several articles and in his book, 20/20 Foresight: Crafting Strategy in an Uncertain World, Hugh Courtney sets out the procedure that resulted from this research effort. In that book, as we describe in this article, Courtney looks at the limitations of traditional strategy and decision-making tools, details four levels of “residual uncertainty”-the core of the framework, describes tools and processes for each level of uncertainty, and explains the importance of answering three questions: Shape or adapt? Now or later? Focus or diversify?
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