Modern life is inherently uncertain – from the moment of our birth to the unknown moment of our death. Certainty has never been more elusive than in today's tumultuous times. In recent decades we have lived through shocks such as the fall of the Berlin Wall, the collapse of the Soviet Union, the explosion of the space shuttle Challenger, the September 11th terrorist's attacks, mad cow disease, SARS, Asian financial and political crises, introduction of euro, the boom and burst of dot-coms, etc. Technology, deregulation, and other shifts in the global competitive environment continue to reshape the world in unpredictable ways (Schoemaker and Gunther, 2002).
We hate uncertainty, especially in business. Business leaders traditionally have viewed uncertainty as an enemy. Skilled management is often seen as the process of avoiding unpleasant surprises. But there will always be surprises, and the most difficult uncertainties for managers are those unimagined and those deemed to be possible but unlikely. Uncertainty is something to be nailed down and rooted out, an evil that detracts from one's ability to manage with control. Uncertainty creates obstacles for the organization in generating profits and ensuring consistent performance.
[...] Contingency planning is a crucial step for uncertainty management. Even though the company planned for contingencies during plant operation stage (the lowest possible market prices), overlooking possible contingencies during the construction phase almost ruined the project In the mid 1990s Hydro attempted to expand to the downstream market of Aluminium (Aluminium products) - to widen its product range and to explore new future possibilities. In the target market Hydro has been a strategic supplier for a number of years, and noticed the ineffectiveness of the market. [...]
[...] Even though all levels of the company are involved in the former process, main decisions are made at the top of the company. In turn the Project Uncertainty Management Process deals with concrete uncertainties within each project. Here, Business Unit managers are in charge of uncertainties analysis and monitoring, while Business Area managers are in charge of major projects approval and monitoring of their implementation. Interviews with Business Area managers supported existence of the two Uncertainty Management Processes would differentiate risk management between general and project. Project risk management would be as a subset of overall process. [...]
[...] Typical for automotive: Exogenous market, competitors (typically before for the projects) “Hard endogenous costs and time of project execution (plant construction, etc), the performance of technology, etc. endogenous capabilities of employees (very sophisticated technology needs a lot of experience to operate). Project specific: endogenous performance of new technology, endogenous capabilities of employees, transferring knowledge (due to the new plant in France, where staff had no experience of operating similar plant). Success Even though with initial delays, project was executed with no costs overruns, the new technology was proved and production efficiency achieved. Structured approach to uncertainty management, ability to manage all three types of uncertainties. [...]
[...] Other Businesses Other Businesses are defined as lying outside of Hydro's core areas of Aluminium and Oil & Energy. Hydro Agri (just over 20% of sales), which Norsk Hydro spun-off into an independent company known as Yara International ASA produces and sells ammonia and other fertilizers, including nitrate fertilizers (civil explosives), urea (glue production), and complex fertilizers. With production in Norway, Sweden and England, Hydro Polymers (Petrochemicals) is a considerable supplier of the plastic raw material PVC. The unit is integrated, processing raw materials natural gas and salt to produce PVC in Scandinavia and the UK. [...]
[...] However, the actual process of uncertainty management as opposed to the theoretical (prescriptive) one was of our interest Collective case study Exploratory study which required deep analysis of context and attention to detail led us to choose a case study as the main method for our research. Stake (1994) identifies three types of case studies: intrinsic (particular case understanding), instrumental (the case facilitates an insight into a specific issue), and collective (analysis of many cases to understand a phenomenon). In this paper we use a collective case study, meaning that the cases themselves are of secondary interest and play a supportive role, facilitating our understanding of the processes of uncertainty management. [...]
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