STRATEGY UNDER UNCERTAINTY
Reserving the right to play is a common posture in level three. Consider a telecommunications company trying to decide whether to make a $1 billion investment in broadband cable networks in the early 1990s. The decision hinged on level three uncertainties, such as the demand for interactive TV service. No amount of solid market research could precisely forecast consumer demand for services that didn’t even exist yet. However, incremental investments in broadband network trials could provide useful information and would put the company in a privileged position to expand the business in the future should that prove attractive. Reserving the right to play is a common posture for companies that face level three uncertainty
Strategy in level four’s true ambiguity
Paradoxically, though level four situations involve the greatest uncertainty, they may offer higher returns and lower risks for companies seeking to shape the market than situations in levels two or three. Recall that level four situations are transitional by nature, often emerging after major tech- nological, macroeconomic, or legislative shocks. Since no player necessarily knows the best strategy in these environments, the shaper’s role is to pro- vide a vision of an industry structure and standards that will coordinate the strategies of other players and drive the market toward a more stable and favorable outcome.
Mahathir Mohamad, Malaysia’s prime minister, is trying to shape the future of the multimedia industry in Asia’s Pacific Rim. This is truly a level four strategy problem: potential products are undefined, as are such factors as the players, the level of customer demand, and the technology standards. The Malaysian government is trying to create order out of this chaos by investing at least $15 billion to create a Multimedia Super Corridor, a 750-square- kilometer zone, south of Kuala Lumpur, that will include state-of-the-art “smart” buildings for software companies, regional headquarters for multi- national corporations, a “multimedia university,” a paperless government center called Putrajaya, and a new city called Cyberjaya. By leveraging incen- tives such as a ten-year exemption from the tax on profits, the corridor has so far received commitments from more than 40 Malaysian and foreign compa- nies, including such powerhouses as Intel, Microsoft, Nippon Telegraph and Telephone, Oracle, and Sun Microsystems. Mahathir’s shaping strategy is predicated on the notions that the corridor will create a web of relationships between content and hardware providers and that this web will generate clear industry standards and a set of complementary multimedia products and services.