If you are a business owner, uncertainty is your constant companion; just like death and taxes, its presence is simply unavoidable. Therefore, if you want to be successful, you have to learn how to handle uncertainty in business while still moving forward.
Humans, as a rule, tend to be risk-averse - in the prehistoric past, risk meant a real prospect of bodily danger or even death. Yet while we have gradually become more comfortable taking risks in life - thanks mainly to the development of civilisation, agriculture, and commerce - these hardwired patterns remain in our brains. This is why coping with uncertainty remains a problem for business owners and managers, and why risk management remains so important.
As a leader, you are exposed to a higher magnitude of risk. The decisions you make in times of uncertainty can impact on the future of your company, as well as those of your subordinates. Luckily, though, there are several steps you can take to mitigate risk, which we have detailed below: this is how to manage uncertainty in business.
1. Differentiate between External and Internal Factors
In most business environments, uncertainty usually stems from external factors. This doesn't mean that your organisation's internal workings are free of risk (far from it, in fact), but it is safe to say that there is far more unpredictability outside of your firm than on the inside.
Take, for example, the political climate, changing consumer behaviour, scarcity of resources, or the rise of digital currencies; these are all external factors that can contribute to the level of uncertainty facing your business. In the majority of these instances, you do not have much control over these forces.
Conversely, the internal machinations of your business are a whole different ball game - here you have a certain degree of control. Granted, humans are unpredictable and can contribute heavily to uncertainty inside your business, but you can still influence any risk through applying high hiring standards, better training, and positive company culture. That is just the HR side of your business, too; there are many other areas like production, marketing, compliance, where you can actively reduce risk and uncertainty.
2. Use SWOT to Identify your Strengths & Weaknesses
As we have already explained, there are many complex internal and external dynamics at play in business, and even the most subtle changes can create pressure on your organisation. If the systems and processes you have in place inside your firm have weak points, they could collapse during times of uncertainty.
As we have already established, it's difficult to control variables from the external environment. You can control the way your organisation reacts to these changes, though. SWOT analysis is a highly effective management tool that you can use to identify the unique strengths and weaknesses of your organisation.
Standing for Strength, Weakness, Opportunities, and Threats, SWOT aims to create a graphic map of these four aspects of your business.
Of these four, strengths and weaknesses are internal factors that you can control. They could be things like strong management, brand loyalty, and goodwill (strengths), or poor customer relations, low employee morale and weak distribution (weaknesses).
Opportunities are usually positive changes in the external environment that give you new avenues for growth and expansion. These can include changes in regulations, government stimulus, and increased consumer demand, among others.
Threats are the opposite of opportunities, in that they can cause your business to decline. Some common external threats include increased compliance, new competitors, recession, and changes in consumer tastes.
3. Focus on the People in your Organisation
When adversity hits, you want employees that you can depend on, and in times of change and uncertainty, humans need some reassurance. This is why it is essential to invest in your workforce and ensure that morale levels are always positive.
Numerous studies have shown that individuals in stable jobs perform better than those living under the fear of lay-offs, so ensure that you maintain good communication channels with all employees in your organisation. If you treat them well, they will stick with you in times of uncertainty.
4. Understand that Diversification is Critical
Of course, you cannot plan for every eventuality in business. If you have a good grasp of your company's fundamental strengths and weaknesses, though, you can create contingency plans to handle the most common threats that may arise.
One thing you should avoid at all costs is putting all your eggs in one basket - diversification is key to survival in business. This applies to multiple levels of your organisation, too.
In terms of products or services, for instance, try to have more than just one or two in your portfolio. Have multiple supply chains in place - or at least alternatives - in case your primary vendor suddenly goes offline. Try to make sure that you have customers from different regions and demographics, as well - the list of ways in which you can diversify is potentially endless and will help to preserve your business during times of doubt.
5. Build Goodwill
A positive reputation can go a long way in shoring up your business when the going gets rough. Vendors, financial institutions, and clients: they will all respond positively if you have a reliable and trustworthy brand.
This is something that you cannot create overnight, or buy your way into. It takes years to develop goodwill among the diverse array of groups that your organisation interacts with, which is why having a long-term brand strategy and a positive ethos is vital if you want a sustainable business enterprise.
6. Learn to React Positively to Failure
Success does not come easy in business. With so much risk around, you are bound to fail at least several times when uncertainty rears its ugly head. Ultimately, the best thing you can do is to learn from your mistakes.
Identify what you got wrong in the run-up to that particular failure. Was it the method, the personnel, or just dumb luck? Often we indulge in knee-jerk reactions that can do more harm in the long term.
Essentially, even the best-laid plans of mice and men can go awry, but as long as you manage to extract some positive wisdom from your failures, your business can continue to grow and evolve into a successful venture.
What advice would you give for dealing with uncertainty in business? Let us know your thoughts in the comment section below.