By Jochen Gerber, Hanjo Arms, Mathias Wiecher, Christian Danner
What is the chance of your operations attaining the specified profitability? What position does flexibility play on your enterprise plans? have you thought of its worth in concrete phrases? with the ability to react to the unforeseen via taking a strategic switch in fact can end up to be the salvation of an organization and its leaders. Flexibility, hazard, chance and their interrelated worth are the main parts of Dynamic determination administration (DDM), a leap forward method of validating your choice making technique and making sure the specified results.
Using the DDM process, the well known and greatly authorized advanced tools concerning state of affairs development turn into out of date. Why? simply because DDM does the unthinkable: It integrates the effect of uncertainty and entrepreneurial flexibility within the strategic determination making technique and does so with precision.
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Additional resources for Leveraging Flexibility: Win the Race with Dynamic Decision Management
Not even the most experienced strategist can inﬂuence weather conditions – he can rely only on satellite observation and his own experience. This means the chief technician has only moments to decide whether to change to rain tires immediately or to wait for the next pit stop. ÒÏÝÓÞßËÞÓÙØÖÙÙÕÝÞÒÏÝË×ÏËÞÎÏÍÓÝÓÙØ×ËÕÓØÑÜÙßØÎÞËÌÖÏÝÓØÓØÎßÝÞÜÓËÖÏØÞÏÜ̋ ÚÜÓÝÏÝ˛ÒÏÜÏ˜×ËØËÑÏ×ÏØÞáÓÖÖÌÏßØËÌÖÏÞÙÞËÕÏÐßÖÖËÎàËØÞËÑÏÙÐË˫̈ÚÓÞÝÞÙÚ̈ˬÓÐÓÞ ÓÝØÙÞÐßÖÖãËáËÜÏÙÐÞÒÏßØÍÏÜÞËÓØÞÓÏÝÚÜÏÝÏØÞÓØÞÒÏÍÙ×ÚËØãÏØàÓÜÙØ×ÏØÞ˛ ÏÎÏʨØÏßØÍÏÜÞËÓØÞãÙÜÜÓÝÕËÝËÚÙÞÏØÞÓËÖÎÏàÓËÞÓÙØÐÜÙ×ËØÏâÚÏÍÞÏÎ ÎÏàÏÖÙÚ×ÏØÞÓØÍÙØÔßØÍÞÓÙØáÓÞÒËÝÚÏÍÓʨÍÚÜÙÌËÌÓÖÓÞã˛ ØÞÒÓÝÝÏØÝÏÞÒÏÞÏÜ×ÓÞÝÏÖÐ ÍÙØàÏãÝØÏÓÞÒÏÜØÏÑËÞÓàÏØÙÜÚÙÝÓÞÓàÏÍÙØØÙÞËÞÓÙØ˛ ÙÎÙßÌÞÞÒÏÜÏáËÝØÏàÏÜËÞÓ×ÏËÞáÒÓÍÒÍÙ×ÚËØÓÏÝÎÓÎØÙÞÒËàÏÞÙÎÏËÖ áÓÞÒÜÓÝÕÝÙÜßØÍÏÜÞËÓØÞÓÏÝ˛ßÞÙßÜÌßÝÓØÏÝÝÏØàÓÜÙØ×ÏØÞÝËÜÏ×ÙÜÏßØÍÏÜÞËÓØÞÒËØ ÏàÏÜ˜ÞÒÙßÑÒØÙÞÏàÏÜãÜÓÝÕÙÜßØÍÏÜÞËÓØÞãÓÝÞÒÜÏËÞÏØÓØÑ˛ÙÎËã˪ÝÏâÞÏÜØËÖÜÏÛßÓÜÏ̋ ˛ÏÜÌÏÜÏÞËÖ˛˜
ÏàÏÜËÑÓØÑÖÏâÓÌÓÖÓÞã˜ ͒͑˛͒͑͑͘˹͚͙͔͕͓͖͕͔͓͔̋̋͗̋͗̋͘ ͔̎˜ ̸ÚÜÓØÑÏÜ̋ÏÜÖËÑÏÜÖÓØ ÏÓÎÏÖÌÏÜÑ͓͕͑͒ 35 Today we are in a better position than ever to measure risk and make its impact transparent ×ÏØÞÝËØÎÍÙØÎÓÞÓÙØÝÍËØÍÒËØÑÏÐÜÙ×ÙØÏÎËãÞÙÞÒÏØÏâÞ˜ãÏÞÍÙ×ÚËØÓÏÝËÜÏ ÞãÚÓÍËÖÖãØÙÞËÌÖÏÞÙÜÏËÍÞáÓÞÒÝÚÏÏÎËØÎËÍÍßÜËÍã˛ ÏØÏÜËÖÖã˜ÍÙ×ÚËØÓÏÝÚÙÝÝÏÝÝ×ßÍÒÙÜËÖÖÙÐÞÒÏÕØÙáÖÏÎÑÏÜÏÛßÓÜÏÎÞÙ ÎÏʨØÏÞÒÏßØÍÏÜÞËÓØÞÓÏÝÞÒÏãÐËÍÏ˛ØÖãÓØËØÓÎÏËÖÍËÝÏ˜ÞÒÙßÑÒ˜ÓÝÓÞÚÙÝÝÓÌÖÏÞÙ ËÍÍÏÝÝÞÒÓÝÕØÙáÖÏÎÑÏÓØÐßÖÖ˛ÒÓÝ×ÏËØÝÞÒËÞÓØÎÓàÓÎßËÖ×ËØËÑÏÜÝáÒÙ×ßÝÞ×ËÕÏ ÎÏÍÓÝÓÙØÝËÜÏÞãÚÓÍËÖÖãÓÖÖ̋ÏÛßÓÚÚÏÎÞÙßØÎÏÜÝÞËØÎÞÒÏÐßÖÖÝÚÏÍÞÜß×ÙÐßØÍÏÜÞËÓØÞã ÐËÍÞÙÜÝ˛ÏÞÏâËÍÞÖãÞÒÓÝÌÜÏËÎÞÒÙÐÕØÙáÖÏÎÑÏÓÝØÏÍÏÝÝËÜãÓØÙÜÎÏÜÞÙÎÏÞÏÜ×ÓØÏ ÍÙÜÜÏÍÞÖãÞÒÏàËÖßÏÙÐÏØÞÜÏÚÜÏØÏßÜÓËÖʮÏâÓÌÓÖÓÞãËØÎÓ×ÚÜÙàÏÞÒÏÛßËÖÓÞãÙÐÎÏÍÓ̋ ÝÓÙØÝ˛ Deﬁning diﬀerent types of uncertainty ÒÏÜÏËÜÏ×ËØãÎÓʥÏÜÏØÞÞãÚÏÝÙÐßØÍÏÜÞËÓØÞã˛àÏÜãÍÙ×ÚËØãÓÝÐË×ÓÖÓËÜáÓÞÒ ÓØÞÏÜØËÖÙÚÏÜËÞÓÙØËÖÜÓÝÕÝ˛ÒÏØÓÞÌÏÍÙ×ÏÝØÏÍÏÝÝËÜãÞÙËÍÍÏÖÏÜËÞÏÚÜÙÎßÍÞÓÙØ˜ ÓØàÏÝÞ×ÏØÞÝÓØËßÞÙ×ËÞÓÙØÞÏÍÒØÙÖÙÑãËÜÏÜÏÛßÓÜÏÎ˛ÒÙßÖÎ×ËØËÑÏ×ÏØÞÙÚÞÞÙ ×ËÕÏØÙÍÒËØÑÏÝÞÙÚÜÙÎßÍÞÓÙØ˜ÞÒÏÓ××ÏÎÓËÞÏÍÙÝÞÓÝ×ÓØÓ×ËÖ˞ÌßÞËÝËÜÏÝßÖÞ ×ËÜÕÏÞ̋ÜÏÖËÞÏÎÜÓÝÕÝ˜ÓØÚËÜÞÓÍßÖËÜÞÒÏÚÙÝÝÓÌÓÖÓÞãÙÐÖÙÝÓØÑÍßÝÞÙ×ÏÜÝ˜áÙßÖÎ ÓØÍÜÏËÝÏÏÓÞÒÏÜÌÏÍËßÝÏÞÒÏÍÙ×ÚËØãÓÝØÙÖÙØÑÏÜÍËÚËÌÖÏÙÐÎÏÖÓàÏÜÓØÑÙØÞÓ×ÏÙÜ ÌÏÍËßÝÏÙÐËÎÜÙÚÓØÚÜÙÎßÍÞÛßËÖÓÞã˛
ÓÕÏáÓÝÏ˜ÏâÞÏÜØËÖÍÒËØÑÏÝ˜ÝßÍÒËÝØÏáÞËâ ÖËáÝÙÜÏØàÓÜÙØ×ÏØÞËÖÜÏÑßÖËÞÓÙØÝÙÜËÑÖÙÌËÖÏÍÙØÙ×ÓÍÍÜÓÝÓÝ˜ÍËØÍËßÝÏÏàÏØÞÒÏ ÌÏÝÞÙÐÝÞÜËÞÏÑÓÏÝÞÙÐËÖÖËÚËÜÞÜËÚÓÎÖã˛ ÒÏØÌßÓÖÎÓØÑËØÏáÐËÍÞÙÜã˜ÐÙÜÏâË×ÚÖÏ˜ËÍÙ×ÚËØãÏâÚÙÝÏÝÓÞÝÏÖÐÞÙàËÜÓ̋ ÙßÝÜÓÝÕÝÜÏÖËÞÏÎÞÙÞÒÏØÏáÚÜÙÎßÍÞÓÙØÝÓÞÏ˛ÒÏÝÏÍÙßÖÎÓØÍÖßÎÏÞÒÏÐÙÖÖÙáÓØÑ˝ The initial type of operational risk related to a change in the production network is tied to uncertainties about the qualiﬁcation and experience levels of employees at the new site.
3: Fundamental terms of the Dynamic Decision Management method Net Present Value (NPV) RiskValue ˾ÒÏÎÓʥÏÜÏØÍÏÌÏÞáÏÏØÞÒÏÎÓÝÍÙßØÞÏÎÚÜÏÝÏØÞàËÖßÏÙÐÞÒÏÐßÞßÜÏ ÍËÝÒʮÙáÝÐÜÙ×ËØÓØàÏÝÞ×ÏØÞËØÎÞÒÏË×ÙßØÞÙÐÓØàÏÝÞ×ÏØÞÙÐËÎÏʨØÏÎ ÚÙÓØÞÙÐÜÏÐÏÜÏØÍÏ̙ÌËÝÏÖÓØÏ̚ ˾ËÖßÏÎÏÚÏØÎÝÙØÎÏʨØÏÎÝÍÏØËÜÓÙÝËØÎËʮËÞ̋ÜËÞÏÎÓÝÍÙßØÞÐËÍÞÙÜ ˾ËÖÍßÖËÞÓÙØ×ÏÞÒÙÎ˝ÓÝÍÙßØÞÏÎËÝÒÖÙá ²Shows a strategy’s value based on clearly deﬁned assumptions; does not presuppose management action in terms of modifying strategy ˾ÓÝÍÙßØÞÏÎÚÜÏÝÏØÞàËÖßÏÙÐÐßÞßÜÏÍËÝÒʮÙáÝÞËÕÓØÑßØÍÏÜÞËÓØÞÓÏÝ ÓØÞÙËÍÍÙßØÞ ˾ÜÙÌËÌÓÖÓÞÓÏÝÙÐàËÖßÏÝËÜÏÍËÖÍßÖËÞÏÎ ˾ËÖßÏÎÏÚÏØÎÝÙØÝÚÏÍÓʨÍßØÍÏÜÞËÓØÞÓÏÝÙÐÍËÝÒʮÙáÚËÜË×ÏÞÏÜÝ ˾ËÖÍßÖËÞÓÙØ×ÏÞÒÙÎ˝ãØË×ÓÍÏÍÓÝÓÙØËØËÑÏ×ÏØÞ ²Shows the potential deviations in a strategy’s value when the assumptions change FlexValue ˾ÓÝÍÙßØÞÏÎÚÜÏÝÏØÞàËÖßÏÙÐÐßÞßÜÏÍËÝÒʮÙáÝÙÐÝÞÜËÞÏÑÓÍËÖÞÏÜØËÞÓàÏÝ ˾ÎÎÓÞÓÙØËÖàËÖßÏÓØÒÏÜÏØÞÓØÞÒÏËÖÞÏÜØËÞÓàÏÍÙßÜÝÏÝÙÐËÍÞÓÙØÓØàÓÏáÙÐ ÝÚÏÍÓʨÍßØÍÏÜÞËÓØÞÓÏÝÙÐÍËÝÒʮÙáÚËÜË×ÏÞÏÜÝ ˾ÜÙÌËÌÓÖÓÞÓÏÝËÜÏÍËÖÍßÖËÞÏÎ ˾ËÖÍßÖËÞÓÙØ×ÏÞÒÙÎ˝ãØË×ÓÍÏÍÓÝÓÙØËØËÑÏ×ÏØÞ ²Shows the value of strategic alternatives that are possible because of a pro-active management of the “baseline” TotalValue ˾̙ÌËÝÏÖÓØÏ̚ÚÖßÝÖÏâËÖßÏ̙ÞÒÏàËÖßÏÙÐÝÞÜËÞÏÑÓÍËÖÞÏÜØËÞÓàÏÝ̚Х ÙÞËÖËÖßÏÎÏÚÏØÎÝÙØÞÒÏÍÙÜÜÏÖËÞÓÙØÙÐàÙÖËÞÓÖÓÞÓÏÝËØÎÐßÞßÜÏ ËÖÞÏÜØËÞÓàÏÝ ˾ÜÙÌËÌÓÖÓÞÓÏÝËÜÏÍËÖÍßÖËÞÏÎ ˾ËÖÍßÖËÞÓÙØ×ÏÞÒÙÎ˝ãØË×ÓÍÏÍÓÝÓÙØËØËÑÏ×ÏØÞ ²Shows the total value of a strategic decision DDM ²A holistic process of assessing and calculating the uncertainties and ﬂexibility of strategic decisions, generating a quantitative value as the basis for decision making.
This means that capital previously tied up in ﬁxed assets can now be invested in learning about other ways to enhance speed, such as upgrading the design and construction of the rear wing – ﬂexibility in practice. For example, by making a small slit in the cockpit, airﬂow is created. This is then channeled to the rear wing while driving. As a result the aerodynamic drag is decreased on straight stretches of track. The extra speed that is gained leads to a comfortable point advantage. While some competitors remain focused on wind tunnel testing, your team’s race car is winning race after race.