Leveraging Flexibility: Win the Race with Dynamic Decision by Jochen Gerber, Hanjo Arms, Mathias Wiecher, Christian Danner

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the DDM process, the well known and greatly authorized advanced tools concerning state of affairs development turn into out of date.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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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 ÚÜÓÝÏݲÒÏÜϘ×ËØËÑÏ×ÏØÞáÓÖÖÌÏßØËÌÖÏÞÙÞËÕÏÐßÖÖËÎàËØÞËÑÏÙÐË˫̈ÚÓÞÝÞÙÚ̈ˬÓÐÓÞ ÓÝØÙÞÐßÖÖãËáËÜÏÙÐÞÒÏßØÍÏÜÞËÓØÞÓÏÝÚÜÏÝÏØÞÓØÞÒÏÍÙ×ÚËØãÏØàÓÜÙØ×ÏØÞ˛ ÏÎÏʨØÏßØÍÏÜÞËÓØÞãÙÜÜÓÝÕËÝËÚÙÞÏØÞÓËÖÎÏàÓËÞÓÙØÐÜÙ×ËØÏâÚÏÍÞÏÎ ÎÏàÏÖÙÚ×ÏØÞÓØÍÙØÔßØÍÞÓÙØáÓÞÒËÝÚÏÍÓʨÍÚÜÙÌËÌÓÖÓÞã˛ ØÞÒÓÝÝÏØÝÏÞÒÏÞÏÜ×ÓÞÝÏÖÐ ÍÙØàÏãÝØÏÓÞÒÏÜØÏÑËÞÓàÏØÙÜÚÙÝÓÞÓàÏÍÙØØÙÞËÞÓÙØ˛ ÙÎÙßÌÞÞÒÏÜÏáËÝØÏàÏÜËÞÓ×ÏËÞáÒÓÍÒÍÙ×ÚËØÓÏÝÎÓÎØÙÞÒËàÏÞÙÎÏËÖ áÓÞÒÜÓÝÕÝÙÜßØÍÏÜÞËÓØÞÓÏݲßÞÙßÜÌßÝÓØÏÝÝÏØàÓÜÙØ×ÏØÞÝËÜÏ×ÙÜÏßØÍÏÜÞËÓØÞÒËØ ÏàÏܘÞÒÙßÑÒØÙÞÏàÏÜãÜÓÝÕÙÜßØÍÏÜÞËÓØÞãÓÝÞÒÜÏËÞÏØÓØÑ˛ÙÎËã˪ÝÏâÞÏÜØËÖÜÏÛßÓÜÏ̋ ˛ÏÜÌÏÜÏÞËÖ˛˜
ÏàÏÜËÑÓØÑÖÏâÓÌÓÖÓÞ㘠͒͑˛͒͑͑͘˹͚͙͔͕͓͖͕͔͓͔̋̋͗̋͗̋͘ ͔̎˜ ̸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˛ØÖãÓØËØÓÎÏËÖÍËÝϘÞÒÙßÑÒ˜ÓÝÓÞÚÙÝÝÓÌÖÏÞÙ ËÍÍÏÝÝÞÒÓÝÕØÙáÖÏÎÑÏÓØÐßÖÖ˛ÒÓÝ×ÏËØÝÞÒËÞÓØÎÓàÓÎßËÖ×ËØËÑÏÜÝáÒÙ×ßÝÞ×ËÕÏ ÎÏÍÓÝÓÙØÝËÜÏÞãÚÓÍËÖÖãÓÖÖ̋ÏÛßÓÚÚÏÎÞÙßØÎÏÜÝÞËØÎÞÒÏÐßÖÖÝÚÏÍÞÜß×ÙÐßØÍÏÜÞËÓØÞã ÐËÍÞÙÜݲÏÞÏâËÍÞÖãÞÒÓÝÌÜÏËÎÞÒÙÐÕØÙáÖÏÎÑÏÓÝØÏÍÏÝÝËÜãÓØÙÜÎÏÜÞÙÎÏÞÏÜ×ÓØÏ ÍÙÜÜÏÍÞÖãÞÒÏàËÖßÏÙÐÏØÞÜÏÚÜÏØÏßÜÓËÖʮÏâÓÌÓÖÓÞãËØÎÓ×ÚÜÙàÏÞÒÏÛßËÖÓÞãÙÐÎÏÍÓ̋ ÝÓÙØݲ Defining different types of uncertainty ÒÏÜÏËÜÏ×ËØãÎÓʥÏÜÏØÞÞãÚÏÝÙÐßØÍÏÜÞËÓØÞã˛àÏÜãÍÙ×ÚËØãÓÝÐË×ÓÖÓËÜáÓÞÒ ÓØÞÏÜØËÖÙÚÏÜËÞÓÙØËÖÜÓÝÕݲÒÏØÓÞÌÏÍÙ×ÏÝØÏÍÏÝÝËÜãÞÙËÍÍÏÖÏÜËÞÏÚÜÙÎßÍÞÓÙؘ ÓØàÏÝÞ×ÏØÞÝÓØËßÞÙ×ËÞÓÙØÞÏÍÒØÙÖÙÑãËÜÏÜÏÛßÓÜÏβÒÙßÖÎ×ËØËÑÏ×ÏØÞÙÚÞÞÙ ×ËÕÏØÙÍÒËØÑÏÝÞÙÚÜÙÎßÍÞÓÙؘÞÒÏÓ××ÏÎÓËÞÏÍÙÝÞÓÝ×ÓØÓ×ËÖ˞ÌßÞËÝËÜÏÝßÖÞ ×ËÜÕÏÞ̋ÜÏÖËÞÏÎÜÓÝÕݘÓØÚËÜÞÓÍßÖËÜÞÒÏÚÙÝÝÓÌÓÖÓÞãÙÐÖÙÝÓØÑÍßÝÞÙ×ÏÜݘáÙßÖÎ ÓØÍÜÏËÝÏÏÓÞÒÏÜÌÏÍËßÝÏÞÒÏÍÙ×ÚËØãÓÝØÙÖÙØÑÏÜÍËÚËÌÖÏÙÐÎÏÖÓàÏÜÓØÑÙØÞÓ×ÏÙÜ ÌÏÍËßÝÏÙÐËÎÜÙÚÓØÚÜÙÎßÍÞÛßËÖÓÞã˛
ÓÕÏáÓÝϘÏâÞÏÜØËÖÍÒËØÑÏݘÝßÍÒËÝØÏáÞËâ ÖËáÝÙÜÏØàÓÜÙØ×ÏØÞËÖÜÏÑßÖËÞÓÙØÝÙÜËÑÖÙÌËÖÏÍÙØÙ×ÓÍÍÜÓÝÓݘÍËØÍËßÝÏÏàÏØÞÒÏ ÌÏÝÞÙÐÝÞÜËÞÏÑÓÏÝÞÙÐËÖÖËÚËÜÞÜËÚÓÎÖã˛ ÒÏØÌßÓÖÎÓØÑËØÏáÐËÍÞÙÜã˜ÐÙÜÏâË×ÚÖϘËÍÙ×ÚËØãÏâÚÙÝÏÝÓÞÝÏÖÐÞÙàËÜÓ̋ ÙßÝÜÓÝÕÝÜÏÖËÞÏÎÞÙÞÒÏØÏáÚÜÙÎßÍÞÓÙØÝÓÞÏ˛ÒÏÝÏÍÙßÖÎÓØÍÖßÎÏÞÒÏÐÙÖÖÙáÓØÑ˝ š 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×ÏÞÒÙνÓÝÍÙßØÞÏÎËÝÒÖÙá 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×ÏÞÒÙνãØË×ÓÍÏÍÓÝÓÙØËØËÑÏ×ÏØÞ ²Shows the potential deviations in a strategy’s value when the assumptions change FlexValue ˾ÓÝÍÙßØÞÏÎÚÜÏÝÏØÞàËÖßÏÙÐÐßÞßÜÏÍËÝÒʮÙáÝÙÐÝÞÜËÞÏÑÓÍËÖÞÏÜØËÞÓàÏÝ ˾ÎÎÓÞÓÙØËÖàËÖßÏÓØÒÏÜÏØÞÓØÞÒÏËÖÞÏÜØËÞÓàÏÍÙßÜÝÏÝÙÐËÍÞÓÙØÓØàÓÏáÙÐ  ÝÚÏÍÓʨÍßØÍÏÜÞËÓØÞÓÏÝÙÐÍËÝÒʮÙáÚËÜË×ÏÞÏÜÝ ˾ÜÙÌËÌÓÖÓÞÓÏÝËÜÏÍËÖÍßÖËÞÏÎ ˾ËÖÍßÖËÞÓÙØ×ÏÞÒÙνãØË×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×ÏÞÒÙνãØË×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.

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