In Vol. 1 and Vol. 2 of this newsletter, we talked about building value by closing the gap between what you know about making your company valuable, and what you’re actually doing about it: such as putting in place the nitty-gritty mechanisms necessary to get all your people rowing in the same direction.

But here’s a horrible thought: What if you were to get everybody rowing in the same direction, only to discover that circumstances have changed such that you’re all headed straight off a cliff?

You know that happens all the time. Just look at the record companies grappling with the challenge of file-sharing software. Or the utility companies building power plants designed to run on the natural gas that’s turned pricey. Or the phone companies, competing with cable firms selling Internet phone service.

Tastes change. Technology brings surprises. New regulations follow. Disruptions, disasters, and opportunities of all sorts render your plans obsolete. Then what?

You have to change course fast. And the faster you’re going the harder it is to change in time. But you can’t afford to be timid, either, or stick with a one-size-fits-all strategy.

So what you need is a flexible plan: one that positions you to deal with a range of possible scenarios. Call it strategic flexibility.

Strategic flexibility isn’t about mere survival; or simply coping with chaos and change. It’s about positioning yourself to profit from uncertainty, to thrive by exploiting the new opportunities it presents.

This requires discipline - the discipline to operate within limits calculated to avoid betting too much, or too soon, on any one scenario, without giving up the chance to bet big later, as the situation becomes clearer.

Among the companies that have profited from strategic flexibility is one of the world’s oldest and largest insurance firms. It is strategic flexibility that has enabled this insurance giant to navigating an unpredictable economic landscape in more than 50 markets throughout the Americas, Europe, and Asia.

For instance, the bulk of its revenues have always come from its core markets in North America, Northern Europe, Australia, and New Zealand. So part of the company’s strategy has been to expand into developing markets, primarily in Latin America and Asia. Should competition in those core markets stiffen and revenues be squeezed, the company can turn to those developing markets to help make up the shortfall.

Of course, operating in multiple, diverse markets demands even greater flexibility. For instance, in some markets customers love self-service, Web-enabled direct distribution channels. In others, they don’t have access to the necessary high-bandwidth information infrastructure, or simply prefer to do business face-to-face. Instead of trying to predict which model will prevail, and betting it all on that prediction, the firm has developed both models.

Management knows when to scale up or down the firm’s investment in a given market, because it has clear criteria for expansion, and a global intranet for sharing knowledge and costs across different countries. The firm recently pulled out of Taiwan after seeing disappointing revenues from an initial small investment, while quickly deciding to expand operations in Mexico because the initial investment proved fruitful.

Disciplined decisions like that enabled the insurance giant to proceed confidently despite extreme uncertainty.

As time goes on and you get a better idea of which scenarios are more or less likely, adjust your contingent investments accordingly, committing more firmly to some while abandoning the others.

4 Steps: Getting flexible

So how do you adapt that sort of flexibility to your firm?
Here’s how:

As time goes on and you get a better idea of which scenarios are more or less likely, adjust your contingent investments accordingly, committing more firmly to some while abandoning the others.

This monthly newsletter, produced in association with the  Economist Intelligence Unit (EIU), contains practical strategies, tools and techniques to help you drive value in your organization. Subscribe or update your profile to receive future editions. The Value Habit can be found under "Insights & Ideas" subscriptions. To subscribe, simply select The Value Habit and save your profile.

Related Content:

Enterprise Value Map™
Order a copy to help accelerate the connection between action you can take and shareholder value

Straight Talk on Enterprise Value
Order the book that inspired the newsletter

Driving Enterprise Value - Upcoming Webcasts
View upcoming Webcasts

Driving Enterprise Value - Archived Webcasts
View archived Webcasts

Learn more about driving enterprise value