Strategy

Radical Optionality

A new era of competition requires a highly dynamic approach to strategy.

by

and

Adam Job

by

and

Adam Job

From the Magazine (May–June 2023) · Long read

Craig Cutler/Trunk Archive

Summary.

The next era of competition is at hand. To succeed in an environment of high uncertainty, greater short-term pressure, and tighter resource constraints, companies must become even better and more efficient at developing options for future advantage while continuing to perform in the present.

Embracing radical optionality, the authors contend, will allow firms to turn uncertainty from a disruptive threat into a potential source of advantage.

Doing so requires upending some of the core tenets of strategy. For instance, they must eliminate the gap between thinking (strategy formation) and doing (execution). They should abandon the winner-takes-all approach, which has long been central to strategy and innovation, and strive instead for flexibility. And they need to achieve “polydexterity,” the ability to exploit existing advantages in current markets while working toward multiple unknown future states.

Companies must embrace complexity, learn to search and execute on ideas simultaneously, and engage with customers on their personal journeys. Accomplishing that will require new organizational forms and work practices, deeper integration between humans and technology, and next-generation performance metrics.

Idea in Brief

The Context

The pace of change continues to accelerate as digital innovations reshape business models and shorten timescales. Climate change, geopolitical strife, and social polarization are elevating uncertainty and volatility.

The Challenge

Leaders face choices not between a few plausible future states but a multitude. This means they must execute on their current models while exploring many other options in order to secure future growth and competitive advantage.

The Solution

Embracing radical optionality will allow firms to turn uncertainty from a disruptive threat into a potential source of advantage. It requires upending the basic axioms of strategy-making, reinventing operating practices, and reimagining the organization.

In the early 1990s, the digital revolution marked a shift to a new era of competition, one that was characterized by rapid business-model innovation, the dissolution of enterprise boundaries, and a blurring of industry borders. These changes were driven by technology and facilitated by a very low cost of capital. Today we’re at another inflection point. The pace of change continues to accelerate as digital innovations such as AI reshape business models and shorten the timescales necessary and available for achieving strategic renewal. Moreover, climate change, geopolitical conflict, and social polarization are elevating uncertainty and volatility. Business leaders are facing choices not between a few plausible future states but rather a multitude, with each individual state being hard to describe ex ante and only recognizable ex post. It is no longer sufficient for firms to develop specific options that could secure advantage in a given future scenario. Rather they need to be able to adapt quickly to—and thrive in—any new reality.

A version of this article appeared in the May–June 2023 issue of Harvard Business Review.

Martin Reeves is the chairman of Boston Consulting Group’s BCG Henderson Institute in San Francisco and a coauthor of The Imagination Machine (Harvard Business Review Press, 2021).
MM

Mihnea Moldoveanu is the Marcel Desautels Professor of Integrative Thinking, a professor of economic analysis, and director of the Desautels Centre for Integrative Thinking and of Rotman Digital at the Rotman School of Management at the University of Toronto.
AJ

Adam Job is the director of the Strategy Lab at the BCG Henderson Institute.

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Radical Optionality

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