Engineer Your Own Luck

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Strategy & Business Model | 1

Engineer Your Own Luck

By Mark J. Greeven, Howard Yu, and Jialu Shan | MIT Sloan Management Review | June 05, 2024

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Prediction is hard. The longer the time range — six months, three years, a decade — the less reliable any forecasting becomes. And yet, some companies prosper through extreme uncertainties.

The authors’ ongoing research shows that increased unpredictability and rapidly changing conditions demand that executives strategize at a higher level. Rather than focus solely on products and markets, leaders must develop the ability to discover and act on a company’s options — what is known as optionality — and to scale new initiatives quickly. That will position them to rapidly adjust to unforeseen market shifts.

All successful companies studied by the authors have pursued a particular path to growth. They have modularized internal capabilities into plug-and-play, mix-and-match services that partners and clients can build on to grow new market segments.

Put another way, the top-performing companies, ranked by a composite score the authors call the future readiness indicator, grow by sharing their capabilities with partners that will develop new markets.  Consequently, these companies can easily participate in multiple ecosystems, are resilient during difficult times, and are well positioned to capture unexpected upswings and opportunities. By treating capabilities as modular digital services, they can maximize their options for growth and scale quickly. That is how they engineer their own luck.

If attaining optionality and speed is important, why don’t more companies do it? Because it requires grappling with four distinct challenges: (1) identifying core capabilities, (2) codifying relevant process knowledge, (3) breaking down complex, monolithic systems into loosely coupled modules, and (4) exposing interfaces to these modules so that others can harness them to develop new products and services. Overcoming these interrelated challenges requires leaders to be willing to make a long-term commitment and investment.

That commitment, in turn, requires courage, because the early stage of these initiatives are time consuming, can be resource intensive, and may not yield obvious payback aside from some internal productivity gains.

3 key takeaways from the article

1. Prediction is hard. The longer the time range — six months, three years, a decade — the less reliable any forecasting becomes. And yet, some companies prosper through extreme uncertainties.  
2. Increased unpredictability and rapidly changing conditions demand that executives strategize at a higher level. Rather than focus solely on products and markets, leaders must develop the ability to discover and act on a company’s options — what is known as optionality — and to scale new initiatives quickly. That will position them to rapidly adjust to unforeseen market shifts.
3. All successful companies studied by the authors have pursued a particular path to growth. They have modularized internal capabilities into plug-and-play, mix-and-match services that partners and clients can build on to grow new market segments.  Consequently, these companies can easily participate in multiple ecosystems, are resilient during difficult times, and are well positioned to capture unexpected upswings and opportunities.

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Topics:  Creativity, Strategy, Business Model, Innovation