Management decisions under radical uncertainty

Purpose Uncertainty is part and parcel of managerial decision-making processes, yet it poses challenges managers often prefer to avoid. Research has suggested that managers can recognize heuristic cues in uncertain environments to support their decisions. However, there are times when even these heuristics and cues are absent, leaving managers to confront radical uncertainty; a state characterized by a complete lack of probabilistic and qualitative information. This form of uncertainty is especially challenging as it involves grappling with unknown unknowns – unforeseen situations that are not anticipated and whose outcomes cannot be calculated. The purpose of this paper is to understand how managers and companies can navigate this. Design/methodology/approach In this In Motion paper, we partner up with two executive vice presidents to practically contribute to this understanding by examining a specific case: ASML – an innovation giant in the semiconductor industry that thrives under conditions of radical uncertainty. Specifically, we combine field observations and reflections to answer the research question: how do firms not just innovate but thrive amidst radical uncertainty? Findings We identify three critical approaches of ASML; managing foresight relationships, a dynamic and deliberate uncertainty approach and parallel team development and explain how these help managers under radical uncertainty. We also discuss the importance of organizational capabilities to bring together these different modules into a single, cohesive system that functions as intended. We conclude with a research agenda related to these three main points and radical uncertainty with the aim to identify actionable research directions for management scholars. Originality/value The case we analyze for In Motion is of particular interest and valuable to the audience of Management Decision. ASML offers a so-called extreme case to study radical uncertainty. Such cases are valuable because they offer rare insights into the management strategies of outstanding firms, enhanced by the practical perspectives of executives, which are typically difficult to access. Yet, the scarcity of such extreme events within a single organization implies very limited opportunities to observe this. As such, it is not surprising that we have relatively few studies that incorporate practical insights from extreme contexts. We, therefore, contend that studying the case of ASML provides a unique learning opportunity for management scholars and practitioners alike.