Introduction
The global business environment is making an abrupt turn after a few decades of relative stability. COVID was only a practice run compared to what is coming down the chute. We are now entering an era of macro-instability encompassing geopolitics, economics, finance, trade, the potential for acute inflation, and an unprecedented technology leap, such as the rapid adoption of AI and automation. The risk/opportunity profile is entirely different from the last several decades. There is plenty of evidence now that business leaders have to amp up resilience, foresight, adaptability and learning agility for the foreseeable future.
Leaders experience ambiguity and uncertainty when the external environment throws unexpected curves. Both stem from volatility caused by the accelerating pace of change and the resulting disruptions. Complexity is also part of the puzzle because there are many interconnected pieces due to the level of interdependence technology has made possible. As a result, old business patterns lose relevance, and the new ones are difficult to discern.
When changes pile up on each other, familiar patterns are no longer recognizable, and new ones are difficult to distinguish. People accustomed to understanding the market's undercurrents lose the ability to read what is happening. They develop different theories and put forward contradictory ideas. They are at a loss for how to react, and often, inertia sets in: they give up because they cannot figure it all out.
Business leaders are used to scanning the horizon for new competitors, reviewing their operations to uncover inefficiencies, and seeking ways to improve organizational performance. However, the emerging level of turbulence in the business environment is unfamiliar territory. Climate shocks increasingly impact business, and geopolitical conflicts spring out of control. In the last year, a record number of national elections in the Western world and Asia saw most incumbents replaced with more radical actors. AI and other novel technologies engender another significant layer of uncertainty. We are not going away from chaos; we are going towards it.
This article will demonstrate how leaders can foster the trust they need with their team members to help them stay focused, motivated, and resilient through unprecedented turbulence. It is about interpreting an unpredictable business environment and shaping responses that create new value-creation pathways. It requires climbing above the chaos and sharpening the acuity to find sufficient clarity to take purposeful action. It maps out how to articulate and test new assumptions to base new strategic initiatives, thereby reinforcing the trust and confidence of your team.
Leaders must find ways to immunize their organizations against the overreactions or inertia that defeat efforts to navigate a new order of volatility. In this context, learning agility, the ability to learn quickly and apply that learning to perform effectively in new and challenging situations, becomes a key asset. Fixed mindsets shaped by experience prevent exploring new options or seeing new market patterns. A ‘tabula rasa’ approach is needed to define the new assumptions that will lead to shaping a winning strategy.
Ambiguity isn't just a buzzword; it’s a pressing issue that can undermine even the most strategic organizations. As you read this article, you’ll come across practical strategies to help you and your teams cope with these challenges and thrive in the face of them. You’ll learn how to identify when ambiguity is impacting your business, how to identify and communicate necessary changes effectively, and how to foster a culture that embraces new ways of thinking. By equipping yourself with these tools, you can transform uncertainty from a source of anxiety into an opportunity for growth and innovation.
What are the signs of increasing ambiguity and uncertainty?
The market has become increasingly volatile. Discontinuity makes it challenging to see established patterns and recognize new ones. A generally accelerated pace of change becomes the norm. Everything seems to be changing at once. The rules of games that have worked in the past no longer apply. The challenges are increasingly complex and interdependent. Unexpected crises and failures to meet targets become the norm for organizations. Conflicting perspectives emerge because points of reference have disappeared. It doesn’t feel normal: the fundamentals on which the business has been based have become irrelevant. For many, it feels stressful and exhausting. In these circumstances, tensions are typically high. Decision-makers sense the need to act but are at a loss to agree on what to do.
When faced with uncertainty or frequently shifting priorities, people often feel stuck and have little to show for their efforts. After a while, a sense of helplessness sets in and eventually turns into apathy and disengagement.
Still, leaders must act in the face of ambiguity. They must orchestrate the search for answers, but bringing a sense of order in chaos requires a thoughtful approach. They must implement a process where people work together to pierce through the ambiguity they are experiencing and make meaning from what they detect is happening. This proactive role of leaders is crucial in maintaining a sense of control and direction in the face of uncertainty.
Giving up on well-anchored beliefs is difficult when no clear alternative exists. Leaders involved in the process must be finely tuned to know when to assert themselves on choices or let things ride until the different perspectives are forged into a consensus.
How do leaders rise above ambiguity to find new ways?
When rapid, fundamental changes occur in the business environment, the complexity of the resulting pile-up is such that most people have trouble taking stock of what is happening. They struggle to assess the potential implications of emerging risks and opportunities. When people cannot make sense of what is happening and are unsure of which way to turn, they experience confusion, frustration, anxiety and even fear. They become more cautious and self-protective, which is not a state of mind to take an objective view of the situation and work collaboratively to find creative ways to deal with complex challenges.
The inability to overcome obstacles and find quick answers can lead to ‘entrenchment’ in existing beliefs and habits, leading to team polarization fuelled by different perspectives on the challenges encountered. The difficulty finding answers and returning to better performance leads to people getting stuck. Inertia sets in: people give up finding ways to succeed because they can’t see how to proceed. Subgroup entrenchment can also develop where people cluster around different opinions on what is happening. Some might blame the organization for an inadequate market/product fit, while others attribute the strains to flighty customers making unrealistic demands. This environment is not conducive to working together to decipher what is happening and figuring out creative ways to reset.
This is when leaders must help team members overcome the propensity to entrench by getting them to recognize the prevalent ambiguity and then embrace the associated challenges instead of denying them. At that point, it is helpful to distinguish between “ambiguity” and “uncertainty.” While ambiguity refers to the velocity with which multiple changes in the market render it opaque and difficult to interpret, uncertainty is the mental state of those experiencing frustration with those changes. Although the ambiguity challenge is to pierce through the fog created by new patterns, uncertainty is best tackled by taking a constructive approach to dealing with these challenges. This attitude can be readily cultivated by the leaders involved.
What is the key challenge leaders must address?
Leaders must openly admit that the organization has lost track of what is happening in the market. They must clarify that the organization has to break free from inertia to take purposeful action, including setting up a series of experiments based on hypotheses emerging in discussions. To free people from self-imposed restraints, they point out the importance of seeking opportunities in places they might never have thought to consider in the past.
Leaders describe the difficult challenge of creating customer value in a fast-transforming market. Maintaining clear communication is crucial to this work, as it helps align the team and manage expectations even when the path forward is uncertain. Finally, leaders commit to making informed decisions by gathering as much relevant data as possible and leveraging the expertise of their team members to evaluate potential outcomes and risks.
The best way to understand market dynamics is to connect with customers and discover what is happening in their context. The status quo may no longer be relevant. As they become more familiar with the extent to which the market is reconfiguring, teams realize that a fundamental remake of how the company creates value for its existing or potential new customers may be in order.
Most importantly, leaders emphasize that they expect themselves and everyone else involved to espouse learning agility as a key principle moving forward. This includes adopting flexible mindsets, being open to change, and being willing to pivot as new information becomes available. Everyone must accept that new thinking is to be brought to bear. As it sinks in, this realization causes employees to respond to uncertainty by becoming more creative and proactive instead of overstressing and paralyzing.
The lack of reliable information makes interpreting market changes and predicting outcomes challenging. This creates a loss of confidence that soon translates into the collective fear of making wrong choices. Not unlike the proverbial deer in the headlights, a state of paralysis envelopes the organization. At this point, trust in the leadership may start to be questioned.
This is when leaders must intervene with an approach to bring greater clarity. When they experience uncertainty, team members crave stability, which starts with trust. Leaders who build and sustain trust in the face of disruption create a steady environment where their teams feel seen, supported, and ready to tackle challenges together. In this kind of tumultuous environment, leaders need everyone around them committed to forging the right way forward. Leaders who build and sustain trust in the face of disruption create a steady environment where their teams feel seen, supported, and ready to tackle challenges together.
What should leaders avoid?
When leaders are under pressure and sense the need to provide clear direction to their teams, they can either push harder with the market approach they have been pursuing or launch an exercise to understand the new market dynamics and gradually shape a new approach to reaching customers more effectively. More action-oriented leaders often opt for ‘staying the course’ because they cannot justify spending time trying to identify new market dynamics and the required solutions. The pressure to provide clear direction and perform makes them narrow their focus to make things work. All they see is that time is of the essence when there is a pressing need to turn things around. Their idea of sitting around in meetings to discuss what has happened in the market is not their idea of time well spent.
At this point, common mistakes leaders make under pressure include making hasty decisions without sufficient understanding of the situation, which leads to adverse outcomes and further erosion of trust in the leadership. Leaders may also fall into the trap of micromanaging their teams, stemming from a lack of confidence or fear of losing control, which can hinder teams and further erode trust. They may not give sufficient attention to team members' stress levels, leading to burnout and impaired judgment. Another mistake is failing to communicate effectively; under stress, leaders might withdraw or convey mixed messages, resulting in confusion and anxiety among team members. Lastly, leaders might ignore feedback or advice from others, relying solely on their judgment instead of leveraging team insights. The ‘push harder’ approach leads nowhere when dealing with ambiguity.
How can team members embed market 'inquiry' in their work?
The alternative to the “push harder” option is to engage everyone who actively interacts with the market to gather evidence on what could shed light on relevant market dynamics or patterns. It isn't easy to succeed in a highly ambiguous context that conceals the entry points to reach customers. The idea is to gather evidence leading to insights on meeting customers' needs in the context of abruptly changing market conditions.
When team members experience high uncertainty, they question whether they can succeed under these challenging conditions. They can start seeing themselves as victims of the difficult market conditions. Leaders are key in helping them recover the agency they need to succeed. Team members must be confident that their best days are ahead of them, not behind them. Collaborating with others to break through with customers will help them regain their confidence and enthusiasm.
Leaders must reassure team members that everyone is valued and that they play an essential role in overcoming the difficulties being experienced. Empathy enhances leaders' effectiveness in fostering stronger team connections and high morale. While showing a sense of urgency, it is essential that leaders remain calm and composed to maintain an environment of open communication and collaboration. In the end, the people on the front lines will best be able to detect market changes. The collaboration required is only possible when a high level of trust permeates the organization through significant change.
When the definition of the issues encountered is unclear, the focus must be on figuring out the obstacles they encounter. The challenge is identifying newly emerging market conditions despite the changes' complexity. Leaders in this situation must walk a narrow line between taking the time to craft new strategies and taking action before a competitor finds new ways to penetrate the market.
The main task is to identify possible future outcomes resulting from the changes. Even though, at face value, all ambiguity first appears to be the same, the intensity of the changes it masks differs considerably. Low-ambiguity environments are easier to manage. One can readily discern two or three possible pathways forward in some markets. In more opaque contexts, the complexity of the change makes it difficult to predict potential outcomes. The denser the ambiguity, the more difficult it is to define possible pathways forward and the greater the uncertainty experienced. For instance, the possibility that a competitor could open a new manufacturing facility close by would be an example of a low-ambiguity development. At the mid-point of the spectrum from low- to high-ambiguity, the two or three outcomes can be readily identified and are best dealt with through scenario planning encompassing each outcome.
A complex environment with high levels of volatility points to a wide range of possibilities. Scenarios describing how to deal with alternative future outcomes must be identified. In this case, the analysis should focus on the trigger events indicating that the market is moving toward one of the possible outcomes identified. Attention must be paid to the likely paths the market might take to reach the alternative futures to determine which possible trigger points to monitor closely. Unlike in more stable times, leaders must keep assessing market developments. The ongoing testing of possible scenarios allows leaders to determine the robustness of alternative strategies and evaluate the risk of pursuing status quo strategies.
The following steps for leaders are to create a plan for communicating with employees and executing it moving forward. Even though a plan is identified, curiosity and flexibility must remain at the forefront as markets continue to evolve. Leaders must always be prepared to question the current understanding of market dynamics—not to be uncertain about what is being done but not to be so confident that how things are now planned is the way of the future.
Tools and processes that serve to read through ambiguity
The key challenge with an ambiguous business environment is that it entails venturing beyond what can readily be grasped. Leaders must learn to navigate through the fog of an ambiguous business environment with no available statistics or clear answers. They must interpret inferences to flesh out emerging patterns they can observe. Without understanding the patterns and cause-effect chains in a business environment, it is hard to formulate a strategy grounded in the reality of the market. Although it is difficult to interpret the perceptible signals through the fog, the following tools and processes can help judge and surmise how to take advantage of signs revealing the underlying forces shaping markets.
Leadership expectations:
o Leaders can foster a culture of agility and responsiveness by implementing several key practices. Learning agility becomes imperative: First, they should encourage continuous team learning and experimentation, allowing employees to take calculated risks and learn from failures. This can be supported by providing access to training and development resources. Second, leaders should streamline decision-making processes to enable faster responses, empowering team members with the autonomy to make decisions within their areas of expertise. Third, maintaining open and transparent communication channels ensures everyone is aligned and informed about changes and priorities. Finally, recognizing and rewarding adaptability and innovative thinking can reinforce these values and motivate the team to embrace learning agility.
Opening Mindsets
o Mindsets are formed based on experiencing patterns that the mind turns into formulas that spare us from rethinking something repeatedly. Our mindsets tell us how to react with ready-made interpretations of what we see and need to manage. They can be helpful when looking at past learnings, but they become blinders that severely limit our field of vision when looking at a new phenomenon. Looking to simplify things for us, our minds often force us to make a new pattern fit into an old mindset, essentially blinding us to what is new. Mindsets are barriers to our ability to identify emerging new patterns in the market. We must be attuned to our mindsets in this context and aware of their potential limitations.
o Leaders and their team members can transcend current mindsets to face new patterns in the business environment by adopting several strategies. First, they must cultivate an attitude of openness and curiosity, encouraging themselves and their teams to question mindsets that have become obsolete and explore new perspectives. This can be achieved through fostering a culture of continuous learning and development. Second, leaders should embrace diversity, as bringing together different viewpoints and experiences can lead to more innovative solutions. Third, they can engage in scenario planning and strategic foresight exercises to anticipate and prepare for potential futures. Finally, leaders should focus on building agility within their organizations, ensuring that processes and structures are flexible enough to adapt to change swiftly.
Team Discussions
o Leaders must first listen to people with empathy, welcome different opinions, and instill the confidence that new ways can be found to succeed in the marketplace. They help people regain confidence by engaging them in discussions that give them the confidence that answers can be found. Instead of reacting, they help people embrace ambiguity and believe it is possible to make sense of what is happening. Leaders then spend time in conversations with larger groups. They form teams to explore what is happening in the market from multiple perspectives. They create project teams to assess some ideas more in-depth. They act as bridge builders to compare notes and identify ways to break the impasse.
o Leaders must create a safe space for open dialogue by fostering an inclusive and respectful environment. First, they should lead by example, listen actively, and value diverse opinions. This sets the tone for the team to feel comfortable expressing their thoughts without fear of judgment. They can openly explore questions on people's minds, such as: Are the business patterns that once guaranteed success still effective? How do we navigate a landscape where the game's rules seem to change overnight?
o These team discussions can establish clear communication guidelines, such as encouraging constructive feedback and discouraging interruptions, and help maintain a respectful atmosphere. They can also provide a venue for recognizing and rewarding contributions, especially those that challenge the status quo, and reinforce the value of open dialogue. Lastly, they offer regular opportunities for team members to share their insights and concerns through structured meetings.
Sensemaking sessions
o Sensemaking is a helpful method for tapping into the perspectives of people familiar with the business environment. Leaders act as facilitators and create sensemaking teams where participants share what they know, consider how it all comes together, and make meaning from their collective perspectives. They agree upfront to a set of ground rules that guide how the discussion unfolds: they build on one another's perceptions, complement their thinking, and sharpen their collective understanding.
o A key benefit of these discussions is that the people understand the importance of making judicious decisions when the information is unavailable to make clear-cut decisions.
Tracking signals
o In an era of greater volatility, monitoring potential disruptions and opportunities as they manifest is crucial.
o A primary source of signals comes from interactions with customers, where they experience firsthand the dilemmas their customers face in an ambiguous business environment. Are they expressing a lack of confidence in making buying decisions? Are they making choices with which your company can’t compete? Do they fear that the company is lagging as competitors are providing solutions more akin to meeting the needs of their customers?
o Understanding how competitors are making headway in the market is also essential. Have competitors found ways to create value for customers not available from your company? Where are the chinks in the armour that can be exploited when approaching customers?
o It is key to ask whether the company is ignoring an emerging avenue for potential growth that aligns with its strengths.
o The main question is whether there is clear evidence that the current strategies are no longer effective in the changing landscape of the markets where it operates.
o It is essential to ask everyone involved whether there are signs that can help find answers to the questions being asked. The signs should be collected and reported to a central point where they can be placed on a large canvas to extract pointers that can reveal patterns and potential answers to these questions.
Mapping Exposure
o When facing messy and poorly defined problems, it is critical to turn to mapping the interconnected set of information and understanding that gradually comes out of systematic inquiry from different sources. These maps can often help determine what is essential and what is not. It is important to distinguish between a map of how things used to be and a map of what is currently emerging without confusing the two. Giving up on well-anchored beliefs is difficult when no clear alternative exists. Leaders involved in the process must bring finesse to know when to assert themselves on choices or when to let things ride through the puts and takes being encountered.
o As they share perceptions and build on one another, they reconcile their views and form a common understanding. As groups, they can test and develop maps that give them an overview that would not be accessible to them as individuals. The collaborative conversation allows them to create a synthesis with a level of cognitive complexity no individual could master on their own. The resulting maps can help guide further inquiry and experiments. They can provide the confidence to move ahead and find out more about promising ideas.
Renewing assumptions
o Assumptions are close cousins to mindsets: while mindsets reside in the individual, assumptions are collectively adhered to as part of the company's strategic approach to the market. It is possible for people who have been in an organization for a time when company-driven assumptions merge with their mindsets. The best way to question existing assumptions is by listing current assumptions currently in practice in the company. The second step is to question the adequacy of these assumptions based on what is currently perceived in the evolving marketplace.
o It is critical to question assumptions no longer relevant to the business context. As the organization becomes clearer on the new market dynamics and introduces significant changes with a new growth strategy, explicitly outlining the new assumptions in concrete terms is the best way to debunk the old beliefs. The articulation and understanding of these new assumptions will serve as important guideposts in executing the new strategy.
Develop scenarios
o Scenario planning is used when severe market disruptions make it difficult to predict the changes taking place in the market with reasonable confidence. Based on plausible outcomes projected to emerge in the market possibly, it describes a few plausible alternative futures to explore and evaluate in terms of strategic choices.
o Scenario planning becomes a key tool when ambiguity is high. Although there is a felt need to reset business strategy and strategic plans, there is a lack of clarity on the choices that need to be made, given the level of disruption being experienced. Discussing alternative scenarios can open new possibilities that are not foreseen at the outset. These discussions increase the awareness of the dilemmas involved and give participants a view of the rationale for the new assumptions and the choices ultimately made.
Traditional analytical tools are no longer helpful when dealing with high levels of ambiguity. Leaders must abandon more conventional ways of understanding the market and turn to alternate ways of interpreting the patterns that can be observed. They must experiment with strategic initiatives to assess the validity of new hypotheses formulated through more qualitative and judgement-based means.
Conclusion
Organizations must learn to navigate the business environment they will likely encounter over the next few years. Just as the complexity and velocity of markets give them a more emergent profile, strategy must now be developed in a more emergent way. How do businesses navigate a landscape where the game's rules seem to change overnight? What is clear is that a traditional deterministic approach to strategy will not work in this environment. The new approach must be flexible enough to change constantly and adapt to new conditions. Of course, it is even more critical for leaders to pressure-test their chosen strategies in this context.
Business organizations must prepare to adapt to a fluid environment while vigilantly monitoring signals and developing strategic plans that can be adapted as conditions change. Dynamic strategy-making has to be adopted to deal with ambiguity. The same factors that create ambiguity, confusion, and complexity will open up new possibilities for innovative business approaches. Attentive monitoring and learning agility will be key to success.
As ambiguity becomes increasingly prevalent, it is essential to put in place mechanisms that will monitor the situation and lead to activities that experiment and test various possible interventions to alter the current approach to the market. Sense-making is one tool that can be particularly helpful in formulating emergent strategies. The advantage of a tool such as sense-making is that it taps into the collective wisdom of people closely involved in the changing dynamics of the marketplace.
Learning agility is fast becoming a key strategic advantage for business organizations. The capability to keep tabs on fast-moving markets and adapt strategies quickly to dynamic conditions will be the most crucial demarcating factor to compete and perform.