Dealing with Uncertainty

Posted: March 10, 2013 by Chuck Matthews in Leadership, Planning, Startup
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UC Chuck Matthews“Il n’est pas certain que tout soit incertain.” Blaise Pascal, French Mathematician

Blaise Pascal was a French mathematician, physicist, inventor, writer and more who lived in Paris in the 17th century. I first learned about him while reading a book on French history for an undergraduate class I was taking at the time. I was fascinated by his quote, “It is not certain that everything is uncertain.”  I am not sure why it resonated with me, but over a decade later, as I was researching and writing my doctoral dissertation, I was intrigued by the concepts of certainty and uncertainty and it would become the basis for my including the construct of uncertainty in my entrepreneurship research that I continue to this day.

Previously, I introduced four core entrepreneurship process areas – focus, environment, the entrepreneur, and the process. There are three elements on which entrepreneurs must focus: product/services, customers, and the competition. While it is essential to have a clear focus, a changing business, economic, legal, political, social, and technological landscape suggests that we need to continually assess the environment in which we conduct business. As entrepreneurs, how do we deal with uncertainty, ambiguity, and outside forces that might impinge on and/or distract how we do business?

Uncertainty.  Life and business are full of uncertainty. Simply stated, incomplete information, doubt, or even lack of access to information can compromise our degree of certainty about the future, actions and outcomes. For researchers and practitioners, the planning/performance equation has always been of great interest.  That is, if one plans, the performance of the business should improve. If an entrepreneur is uncertain about the future, however, how does that affect planning sophistication and ultimately performance? One of my research hypotheses was that as the entrepreneur’s perception of uncertainty in the environment increased, the more sophisticated the planning process would be. I found just the opposite.

 

Admittedly, it was a bit perplexing.  Just when business owners should be doing more planning to compensate for uncertainty, entrepreneurs were doing less.  The good news was that overall my research showed that both lifestyle and high growth ventures benefited from more sophisticated planning.  Clearly, however, as the uncertainty increased, the planning decreased. The explanation was simple – human nature.  Why engage in detailed plans when the outcome is uncertain?  Of course, the balance every entrepreneur must strive for is the benefit of planning while not succumbing to either environmental uncertainty or analysis paralysis.

Ambiguity and Outside Forces.  There is always going to be ambiguity and mixed signals in doing business.  For example, what markets are best to enter or avoid?  Can we stay ahead of our direct competition while not losing ground to our indirect competition?  What is the volatility of interest rates or lines of credit?  Will government regulations impact my business? There are key players/stakeholders and a host of outside forces, many of which are outside our control, with which we must deal on a daily basis.  For example, players/stakeholders can include communities, customers, creditors, employees/labor unions, governments, special interest groups, suppliers, trade associations, and more.  When combined with economic, political/legal, societal, and technological forces, it can lead to an overwhelming sense of distraction and loss of focus and direction.

The hard part is to not be distracted, stay the course, and engage in sufficient planning to develop clear objectives, core competencies, and market objectives.  Monitor key aspects of the environment that are important with regard to how and where you do business.  For example, increasing costs of transportation may suggest that alternative delivery options may need to be explored.  Develop meaningful metrics to assess both your progress toward objectives and goals, as well as the potential impact of changes in the environment. For example, define objectives in quantifiable terms (increase sales 10%), over a specified period of time (annually), and collect data at regular intervals (quarterly sales revenue).  Using these key variables and metrics, develop contingency plans, but stay focused.  Knowing your options ahead of time can be critical in terms of time, money, and peace of mind.

Of course, that can be easier said than done. Albert Einstien once famously opined, “As far as the laws of mathematics refer to reality, they are not certain; and as far as they are certain, they do not refer to reality.”  In our next column, we will explore how the entrepreneur balances uncertainty and reality through creativity/innovation, leadership, and communication.  Till next time, all the best for continued entrepreneurial success!

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