Types of Uncertainty
In looking to the future managers have to deal with uncertainty. Indeed, the processes involved largely aim to identify these uncertainties and manage their impact on the organization. In this context, there are (using the terminology of Kees van der Heijden) three main types of uncertainty:
- Risks – where historical evidence of similar events allows us to estimate the probabilities of future outcomes.
- Structural uncertainties – where the event is unique enough not to offer evidence of such probabilities.
- Unknowables – where we cannot even imagine the event.
Managers are well used to handling 'ordinary' risks and regularly come into contact with such risks and, indeed, this is one aspect of entrepreneurial activity managers are supposed to even relish. Where no probable pattern of outcomes can be derived from previous experience the decisions involved become much more a matter of judgement; and this is the area where scenario planning can make a major contribution.
Unknowables are, by definition, unknown, so nothing can be done about them in advance; except develop the ability to react rapidly to them.
Read more about this topic: Long Range Planning
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