Business – and entrepreneurship – has seldom been a stable endeavour, but the level of uncertainty and risk facing leaders of organisations today borders on the extreme. From economic downturns to geopolitical instability, war, pandemics and all manner of other, wicked disruptions, it has become an essential tool for any business professional to make decisions in the face of uncertainty.
So we sat down with René Mauer, Chair for Entrepreneurship and Innovation at ESCP, to put together a framework for doing exactly that.
When [entrepreneurs] face uncertainty, they don’t know exactly what steps to take today, in order to ensure success tomorrow.
Defining uncertainty in entrepreneurship
Uncertainty, in the context of entrepreneurship, goes beyond the mere unpredictability of external factors, such as economic fluctuations or geopolitical tensions, which run high. According to Mauer, uncertainty is deeply personal for entrepreneurs, who venture into uncharted territories, searching for novel solutions and innovations to customer pain points.
“When these people face uncertainty, they don’t know exactly what steps to take today, in order to ensure success tomorrow,” our expert explains. Unlike replicating existing business models, such as becoming a franchisee with clear brand guidelines and reduced uncertainty, entrepreneurship can often (though not always) involve navigating a blank canvas where the path to success is not predefined.
Strategies for thriving in uncertain environments
Traditional business paradigms have long stressed meticulous planning as a cornerstone of success. However, Mauer highlights that this approach assumes all variables can be anticipated and controlled. In reality, uncertainty often entails dealing with “unknown unknowns” where the full picture is unavailable to us.
“At ESCP, we incorporate arts-based approaches, teaching entrepreneurs to embrace a blank canvas and allow meaningful creations to emerge through the process,” he notes.
Another effective method Mauer highlights is “effectuation”, a principle where entrepreneurs leverage their existing means and take immediate action. This involves engaging quickly with potential stakeholders, gathering small commitments, and progressively refining your entrepreneurial ideas through feedback and iterations.
“By making small, manageable bets, entrepreneurs can test concepts with minimal resources, allowing for adjustments and learning without massive risk,” he states.
Mindset for strategic decision-making
An essential part of navigating the uncertainty landscape is adopting the right mindset. Mauer therefore advises entrepreneurs to gather relevant information if possible, and then engage in scenario planning to mitigate risks. If there is information around that helps to optimise towards a certain endpoint, we know enough about planning to make it work.
However, Mauer is quick to point out that true uncertainty is inherently different from risk. “While risks can be quantified with possible outcomes and probabilities, uncertainty is more open-ended,” he explains. This necessitates distinguishing between activities that can be planned and those that cannot, fostering a certain language around uncertainty to facilitate clearer communication with other parts of your business.
Entrepreneurs should gather as much information as possible, take the actions with the highest potential benefits, but remain somewhat adaptable.
Balancing innovation and stability
Striking a balance between pursuing innovation and maintaining stability is crucial – and very difficult indeed – for entrepreneurs in these uncertain times. Mauer cites the distinction made by famed American economist Frank Knight between risk and uncertainty, noting that true uncertainty involves situations where even potential outcomes are unclear.
“Entrepreneurs should gather as much information as possible, take the actions with the highest potential benefits, but remain somewhat adaptable,” says Mauer.
However, our expert acknowledges the difficulty of evaluating innovative ideas at the beginning – particularly when aiming for radical innovation.
“In the early stages, decisions are often made conservatively, favouring incremental innovations over radical ones due to the challenges of assessing their potential success,” he observes. Entrepreneurs must therefore balance the pursuit of groundbreaking ideas with pragmatic considerations, ensuring that their ventures remain viable and flexible.
Avoiding common pitfalls
Navigating such uncertainty requires entrepreneurs to complement traditional prediction-based tools with approaches that embrace unpredictability, Mauer says. He advises against assuming that all variables are under control – and stresses the importance of continuously reassessing the situations you’re facing.
“Be aware that you might need to switch to more predictive tools as your venture progresses and becomes more stable,” he suggests.
Turning uncertainty into opportunities
Furthermore, Mauer emphasises the importance of exploring possibilities and allowing ideas to materialise organically. Early-stage ventures often demonstrate how navigating uncertainty can lead to significant breakthroughs.
A notable example is Commonwealth Fusion Systems. CFS is a company focused on developing practical and scalable fusion energy. Fusion energy, often described as the “holy grail” of clean energy, promises to provide (in theory) a virtually limitless and environmentally friendly power source, but it comes with major scientific and engineering challenges.
Aspiring entrepreneurs can learn valuable lessons from these experiences, notes Mauer – particularly the importance of resilience, adaptability and a willingness to experiment.
Summing up, his insights underscore the complexity of navigating uncertainty in entrepreneurship. However, by embracing effectuation, fostering the right mindset, balancing innovation with stability, and avoiding common pitfalls, entrepreneurs – and business leaders of all kinds – can turn uncertainty into a catalyst for growth and success.