Disruption in Manufacturing: Managing Unexpected Risks
July 13, 2020
Navigating in a “VUCA” world
Unexpected risks are all around us in today’s volatile, uncertain, complex, and ambiguous world (dubbed “VUCA” by the US Army War College). Manufacturers face challenges from powerful forces as technology, social, environmental, economic, and market trends converge, testing the mettle of even the strongest companies.
At the same time, manufacturing companies have an unprecedented opportunity to innovate and evolve. New customers, markets, materials, and technologies await exploration and provide unlimited opportunities for expansion and growth.
By managing strategic risk—the uncertainties and untapped opportunities that directly impact a company’s identified strategic goals—organizations can navigate disruption in manufacturing while supporting business goals and both creating and protecting value. Whether they continue to generate value for stakeholders depends on how well they prepare for and react to strategic risks.
Understanding strategic risk management
Managing strategic risk effectively is much more than protecting value by avoiding potential downsides. Strategic risk can actually help create value by taking advantage of uncertainty and volatility to maximize gains and improve competitive positioning.
Strategic risk forces organizations to react because it:
Attacks the foundation of competitive advantage and execution of business plans
Challenges the logic of strategic choices that creates a competitive sustainable advantage
Threatens an organization’s position relative to competitors
Undermines a firm’s ability to achieve or maintain exceptional performance