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.
Tomorrow’s winners need to selectively embrace incompatibility in a similar manner by accepting divergent beliefs regarding the future, exploring different branches of the resulting “tree of possibilities,” and shifting attention and resources between them as the future unfolds.
A multiplicity of beliefs about the future also has implications for alignment among an organization’s stakeholders. The “everyone on board” imagery is attractive: We are all sitting in the same boat, and rowing in sync will help us get to the finish line more quickly and efficiently. But, in a world of radical uncertainty, we may not always know what our destination is — or, indeed, whether a particular boat is our best option for getting there.
As a result, achieving total alignment can no longer be the governing maxim. Against an uncertain future, firms will need to foster a diversity of perceptions (of reality) and perspectives (on the future), which, as they collide within the firm, will unlock new ideas through combinatorial innovation, improving the organization’s future viability.
Multiplicity and inconsistency of narratives
We often communicate strategies using stories as engaging and useful simplifications of a complex reality. However, if different, potentially incompatible options for the future are being pursued, we can no longer rely on a singular, unchanging strategic narrative. Instead, organizations need to share and endorse multiple and changing stories to facilitate pursuing different options and switching between them.
For example, around its highly lauded AI strategy in the past months, Microsoft has made statements highlighting the role of its software as a coach, an assistant, or an automation engine. Some of these stories prominently feature a human in the loop, while others do not. While these stories cannot all be true at the same time, in the same context, and for the same audience, Microsoft’s ability to continuously evolve its narratives and offerings in a very rapidly developing landscape enable it to stay relevant.
In such a multi-storied world, organizations need to let go of the aim to achieve full consistency and stability of the narrative — which has been seen as a sort of hallmark of integrity — and instead embrace variety and change.
Lou Gerstner provides a good example of inconsistent communication successfully deployed. When joining IBM as CEO in April 1993, he famously announced to investors and the press that “the last thing IBM needs now is a vision” and that he would instead be focused on streamlining and execution. But he did in fact drive work on a new vision: around enabling companies to leverage the internet for their businesses. He shared it publicly less than a year into his tenure and rolled out a $500 million advertising campaign around it soon after, which helped IBM become an early leader in the space.
Thinking by speaking
As much as narratives are communication devices, they are also valuable tools for formulating and testing strategies: Spelling things out — even if only for yourself — helps to structure thoughts and identify flaws in your logic. As poet and dramatist Heinrich von Kleist observed in an 1805 essay, just like l’appétit vient en mangeant — the appetite comes with eating — l’idée vient en parlant — the idea comes with speaking.
When striving for radical optionality, communicating strategic ideas to others also opens a path for improving them. Rather than coming after thinking, speaking can in fact be a mode of thinking. We can test and develop strategies by saying them out loud, registering responses, and collaborating with our audience to triage and shape ideas. In this context, telling multiple, potentially inconsistent stories can be beneficial because it creates valuable reactions that can be observed and harnessed. We can extend E. M. Forster’s famous quote from “How do I know what I think until I see what I say?” to “How do I know what I think until I see how others react to what I say?”
Thinking by speaking can be put into practice inside the firm, to “try on” and understand different beliefs. For example, executives can conduct workshops in which they put themselves in the shoes of industry mavericks — startups that are betting against the incumbents’ business models — and discuss how their ideas might succeed. This and other imagination games we have developed to facilitate such workshops is an effective way for testing ideas and updating your mindset.
Moreover, thinking by speaking can also be done in an outward-facing manner, gauging public reactions by floating a “trial balloon,” as when a politician leaks plans to the press, companies showcase prototype products or even just announce the development of an offering on a crowdfunding platform. A recent well-publicized example is Twitter CEO Elon Musk’s public discussion about Twitter Blue subscription prices with platform users.
The transition to a new culture
“The first responsibility of a leader is to define reality,” wrote Max De Pree, leadership guru and former CEO of Herman Miller. Company leaders, as “chief meaning makers,” set the tone and establish the context for what is thought or said in their organizations. Thus, they must also lead the charge on the shifts in mindset and communication practices that will unlock radical optionality. This will require that they:
- Act as examples: They must be comfortable with telling multiple stories and contradicting themselves when new narratives emerge and rise in relevance. This is not an exhortation to fabricate or distort facts and ground truths, but rather a recognition that facts can support many possible narratives that are not necessarily compatible with one another, that circumstances change and our knowledge evolves.
- Set new norms: To harness the power of saying by thinking, employees must be confident that “testing out thoughts” that are not yet fully formed and vetted with colleagues does not entail a career risk. Of course, guardrails also must be set for thinking out loud in public forums, where repercussions are greater if an idea is not well-received or ultimately not delivered upon.
- Create a safe environment: To foster and harness the collision of different perspectives, leaders need to provide spaces for playfulness and ensure that employees can feel safe to experiment with new ideas, processes, and practices.
. . .
Success in a world of radical optionality will require a culture that embraces experimentation with new and often conflicting business and operating models. To achieve this, companies will need to recognize that strategy is a portfolio rather than a road map. Managers will need to lean into multiple and conflicting narratives, while creating strategies and crafting messages in real time. The challenge for leaders will be to make the organization safe for employees to think and communicate in these new ways.