As the Merriah-Webster Dictionary states, uncertainty stands for something that is doubtful or unknown; something that is uncertain. It is this lack of capability to foresee what will come next which represents the main challenge. It should be reality managing oriented to acquire acceptable stability parameters.
It is possible to refer to political uncertainty, social uncertainty, economic uncertainty and other kinds, although, in this case the text is referring to its consequences on businesses.
Decision-making and failure
Facing extremely complex or VUCA (Volatile Uncertain Complex Ambiguous) situations steps must be taken. Paralysis is not an option and, therefore, mistakes will have to be assumed, but even the slight decision must be taken in order to solve problems.
Decision-making can lead towards success or failure, but not making any at all means failures for granted. This is not the kind of failure that arises from taking the wrong step or not succeeding in businesses, from which something must be learned. My point here is the failure that grows from fearing failure. Nevertheless, as Winston Churchill pointed out, “success is walking from failure to failures with no loss of enthusiasm”.
Businesses models, plans, strategies and managing tools
Each enterprise has its own business model. It must be like living being, ready to change and adapt to needs and challenges. On the other hand, it must tackle the current VUCA scenario.
Corporate strategies must evolve and embrace that living being model. Managing tools might vary according to those corporate strategies. Above all, the leader must define the right business model and he must be in charge confronting uncertainty.
At this point, it shouldn’t be surprising to point out that, due to current upheavals, mergers, acquisitions and alliances will take a major role.
New patterns: concentration
Current needs absorbing overcapacity, leverage and the search for scale economies, generate a call for concentration as mergers, acquisitions or alliances. These might be encouraged by low rate interests, long term financing and excess liquidity among some enterprises.
Let’s see some examples:
–Automotive industry: Sergio Marchionne, the CEO of Fiat Chrysler, claims automotive industry consolidation. After putting Ferrari in New York Stock Exchange market, he will seek merging with a large car maker.
–Maritime sector: Soren Skou, the CEO of Maerks Line, advocates for mergers among shipping company owners, claiming that their supply capacity exceeds current demand for freight transportation.
Searching scale economies within the maritime freight transportation sector has ended up with gigantic sea carriers, making concentration easier for maritime freight and terminal operators. Good examples can be found in 2M Strategic Alliance (Maerks and MSC) and in Ocean Three (China Shipping Container Lines, CMA CGM and United Arab Shipping Co.). Other minor alliances are G6 and CKYHE.
–Banking sector: Barclays’ president, John MacFarlane, embraces the idea of unified investment European banks to be more competitive against American banks.
–Pharmaceutical and technological sector: the situation has been dominated throughout 2015 with the largest merger activity, as DEALOGIC states. Pfizer and Allergan, Nokia and Alcatel-Lucent are good examples.
–Contractors, hydrocarbon and commerce banking sectors: banking sector has already started a path, more movements are still needed, though.
In Europe contractor firms have already started such as the Italian Salini e Impreglio, the Swiss Holcim and the French Lagarge. Carrillion and Balfour Beatti are also planning to merge. But the question I want to arise is if this trend is a need or they are forced to act like this.