Strategic options: a new tool for managing in turbulent environments

The purpose of this paper is to describe a new way to manage strategic uncertainty, and more specifically to distinguish between “growth options” and “strategic options.”

Evidence adduced consists of a summary of large‐scale empirical analysis and in‐depth case studies in the context of a new theoretical framework for managing strategic risk.

Strategic options are fundamentally different from the more familiar growth options. Rather than create windows on opportunity for new growth they create the possibility of redirecting strategy in established lines of business.

To identify and manage strategic risk effectively requires a portfolio of strategic options. The different levels of the hierarchy must adopt fundamentally different roles that reflect in practice the commonsense notion that senior management must attend to long term, and hence highly uncertain, issues while operating managers tend to shorter time horizons.

This paper describes in practical terms how companies can create “strategic flexibility” without compromising the need to commit, a characteristic that defines the most successful strategies. The concept of “strategic options”, as distinct from “growth options” is new. Many are familiar with the concept of real options, but this important distinction has been overlooked. These ideas will be most valuable to strategic planners, business unit managers, corporate‐level executives, and strategic management scholars and consultants.