Reflections on strategy amid change.

How do you develop strategy in a business environment characterized by rapid change and considerable uncertainty about the future? That’s a question that many executives in fast-changing industries face.

In their article “Beyond Forecasting: Creating New Strategic Narratives,” Sarah Kaplan of the Rotman School of Management at the University of Toronto and Wanda Orlikowski of the MIT Sloan School of Management offer a fascinating answer to the question, and it’s one that involves creating a story that links a company’s past, present and future. Kaplan and Orlikowski painstakingly followed the process of strategy development at a high-tech company whose industry was experiencing great turmoil. Managers knew their industry was changing, but it was very hard to discern the future. The researchers discovered that, to develop innovative new strategies amid such uncertainty, managers needed to craft narratives that linked elements of the company’s past and present with a new vision for the future — a process Kaplan and Orlikowski describe as rethinking the past, reconsidering present concerns and reimagining the future. Kaplan and Orlikowski conclude that creating new strategic narratives is central to strategy innovation. They write: “The more intensively managers reimagined the future, rethought the past, and reconsidered present concerns, the more their projects produced strategies that represented radical departures for the organization.”

Kaplan and Orlikowski’s article is one of several in this issue of MIT Sloan Management Review that address the topic of setting strategy in the midst of change. In “The Opportunity Paradox,” Christopher B. Bingham of the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill, Nathan R. Furr of Brigham Young University and Kathleen M. Eisenhardt of Stanford University take issue with the popular view that planning is of little use in rapidly changing business environments — and that companies are better off letting their strategies evolve as they learn about the market through experimentation. In reality, Bingham, Furr and Eisenhardt argue, the relationship between flexibility and strategic focus is more complex. Read their article to learn when to be focused — and when it’s better to be flexible.

Then, in “How Strategic Is Your Board?,” Didier Cossin of IMD and Estelle Metayer of Competia look at the varying roles corporate boards can play in strategy development. In particular, the authors discuss how the board’s role may need to change if the company’s business context changes. According to Cossin and Metayer, boards should generally increase their involvement in strategy as the complexity of the company’s business environment increases.

In their article “Creating More Accurate Acquisition Valuations,” Han Smit of Erasmus University Rotterdam and Dan Lovallo of the University of Sydney explore a different aspect of strategy in times of uncertainty: how to evaluate potential acquisitions or investments. In an intriguing article that brings together corporate finance and behavioral economics, Smit and Lovallo set out to, in effect, help save corporate executives from themselves — or at least from their own cognitive biases. To that end, Smit and Lovallo have created checklists to assist executives in recognizing and adjusting for biases when evaluating potential acquisitions in “hot” deal markets or “cold” ones. Any executive who has ever overpaid for an acquisition in boom times — or realized, in hindsight, that an important opportunity was missed during a downturn — should find Smit and Lovallo’s article well worth reading.

Martha E. Mangelsdorf
Editorial Director
MIT Sloan Management Review