Recessions are a good time to disengage from businesses and practices that are weak and under pressure—but the volatile environment demands that managers let go of old approaches.
Leaders of many of today’s mature organizations don’t have the right mind-set or practices to help their
organizations survive. They grew up with management practices that are suited to a different age–one
with higher barriers to entry, greater transaction costs, fewer capable competitors, growing and increasingly affluent markets and less information. But today’s business environments are less predictable, more complicated and more volatile. The result is that many core businesses are themselves becoming more uncertain and in need of renewal.
Established management tools, such as net present value, are built on a foundation of assumed certainty
that it’s realistic to forecast likely cash flows into the future and discount them to today. In volatile
business environments, though, such thinking is no longer practical. As an alternative, the authors offer
practices used by successful growth companies, entrepreneurs and corporate new-business-development groups to navigate unpredictable, resource-constrained and surprising environments. In an unpredictable world, trying to be right can lead managers terribly astray. The “discovery-driven” approach outlined in this article emphasizes finding the right answers and reducing the assumption-to-knowledge ratio.