Strategic Management for the Twenty-First Century

Strategy historically was in the purview of the military. It has come to denote a high-level plan to achieve one or more goals under conditions of uncertainty. Following the industrial revolution and subsequent rise of scientific management in the twentieth century, the use of quantitative tools for optimization (e.g., linear programming) became popular first in the military during World War II and later in industry. While useful for short-term closed problems (e.g., production and distribution planning and process control), they were found inadequate for longer term strategic planning where risk and uncertainty prevail. In the latter half of the twentieth century, various qualitative approaches for analyzing the external environment, the industry, and the firm were introduced including SWOT analysis, scenario planning, five forces model, industrial organization model, resource-based model, contingency theory, stakeholder model, balanced scorecard, blue ocean, and sustainability. The early years of the twenty-first century have already been full of perils and uncertainty on many fronts including the global economy, terrorism, and environmental concerns. New rigorous quantitative approaches that build on numerous disciplines including economics, optimization, scenario planning and risk management and advancements in science and technology are needed. Risk-Constrained Optimization™ (RCO) is one such approach that warrants further investigation. Rather than seek optimal solutions, RCO seeks to avoid catastrophe and functions more as a filter to locate robust solutions in safe regions by testing them against various kinds of risk.