Go granular and adopt ‘strategy under uncertainty’ approach advises McKinsey

Energy and materials companies should ‘act and adjust’ as part of a ‘strategy under uncertainty approach’ during the energy transition, according to a McKinsey paper.

In the face of uncertainty, a blanket ‘wait and see’ standpoint can feel comforting but carries risks, it notes, advising instead more granular scenario-based methods of strategy formulation.

“Based on our work – and that of our colleagues – with leading energy and materials companies, we have codified a rich process for strategy development and capital reallocation that companies can use to respond more effectively to the forces of cyclicality, market complexity, and regulatory change, as well as trends such as material substitution and commoditisation,” it states.

“The payoff in getting this right is two-fold: first, the resulting strategy should be more robust across a range of future scenarios; second, it is more likely to be recognised as value creating by capital markets, which, in turn, translates into multiple expansions and higher valuation.”

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