THE BLOG
01/25/2011 10:35 am ET Updated May 25, 2011

Overcoming Ambiguity: Three Steps That Every Business Can Take

Confused what to think about China? So are a lot of world and business leaders.

Consider Chinese President Hu Jintao's recent state visit to Washington. In a speech before American business executives, President Hu said China was a military threat to no nation. But his words came just one week after the country's military unveiled its most potent, offensive weapon, the new J-20 stealth fighter.

Talk about mixed signals.

To many in business and politics, China represents a beguiling dilemma: it's both a land of opportunity and risk. Consider the upside of investing there: China has a rapidly expanding middle class with an increasing appetite for Western goods, and a growing business community that is hungry for professional services and sophisticated technology. On the downside, China has a mixed record when it comes to protecting intellectual property, and a bureaucracy that is as difficult to understand as it is to avoid.

Some business leaders simply can't handle this kind of gamble. To them, the ambiguities add too much stress or create too many distractions. Yet others thrive amid ambiguity. How? By learning to manage in environments where uncertainty and confusion are the norm. Your company may never do business in China, but chances are you face similar dilemmas in the markets in which you compete. Are you wary of some potential business partners because they could be competitors, too? Do certain customers put you off by their overwhelming demands? These are but a few of the quandaries that leaders face today. Dealing with them effectively, thus, is one of the most important skills you can develop.

So where to begin? Start by thinking about the way you form your decisions.

When entering a new market, making an acquisition or developing a new product amid uncertainty, business leaders typically ask themselves, "What don't we know?" Because hard questions demand hard answers, business leaders typically embark on a fact-finding mission for nuts and bolts information. They set out to determine the size of an opportunity, the strength of their competition and more. The information they gather helps them cope with ambiguity and often forms the foundation of their strategic thinking. But just as in personal relationships, hard facts aren't all that matter.

To make better informed decisions, leaders must also take into account softer things, too. What are these? They are the more difficult understandings to come by such as the biases that some people hold or the misconceptions that others cling to. For example, leaders tend to overweight the opinions of those in their organizations who are popular or successful--sometimes at great cost. They also tend to discount threats from unsuspecting places or findings from little known sources. When making a decision where known ambiguity exists, leaders must carefully evaluate how they form their opinions, including the information they use, the sources they trust and the revelations they discount. Doing so will help leaders separate fact from fiction, and increase the likelihood of their success.

Next, leaders must develop realistic expectations about opportunities and challenges. In environments where uncertainty cannot be eliminated, this is very difficult but not impossible. The key is understanding your true differentiation and weaknesses. Suppose your company successfully penetrates a new market for the first time. At first blush, you might be tempted to think your product was priced appropriately or marketed effectively. You could also conclude that its feature set was superior to the competition. But unless you probe deeper, you won't fully understand why. Before you establish broader expectations, find out what really made you a success in the first place. Was it a sales partner with under-appreciated capabilities? A temporary regulatory or financial incentive that doesn't exist elsewhere?

In market segments and geographies where uncertainty and confusion prevail, leaders can forget to probe the hidden reasons why they are successful--and why they are not. When they forget, they tend to form unrealistic expectations about their true potential.

The final key to prevailing in ambiguous circumstances is staying on course despite distractions or uncertainties. This can be achieved by developing tight alignment between where you want to go, how you plan on getting there and the steps you will take along the way. In many organizations, there are significant gaps between management's vision and employees' ability to execute. These are only exacerbated in environments where a partner one day can become a competitor the next, or where a new law can disrupt months of work in an instant. To ensure that these and other developments do not negatively impact you, make sure there are no gaps between your plans, people and processes.

Following these three steps won't guarantee you will prevail in ambiguous circumstances. But it can help you avoid the missteps that trip up many others--in China, and just about anywhere else you dream of going.

Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco, and the author of Doing Both: How Cisco Captures Today's Profits and Drives Tomorrow's Growth. Author proceeds from sales of Doing Both go to charity. Follow Inder on Twitter at @indersidhu.