Emerald Management Review:
Diagnosing unforeseeable uncertainty in a new venture

Abstract:

Purpose - To detect unforeseeable uncertainty in new ventures.

Design/methodology/approach - Draws on economic theory in highlighting the importance of addressing uncertainty. Argues for a different management approach for new ventures regarding 'unknown unknowns' although decision-making project management models can help. Develops a theoretical framework for managing 'unknown unknowns' in terms of knowledge gaps (high/low) versus complexity (high/low) i.e. trial-and-error learning, selectionism, planning, and selectionism after full information. Discusses supporting management systems. Employs uncertainty models (Pich, Loch & De Meyer, 2002; Sommer & Loch, 2004) to highlight situations faced by venture capitalists (VCs). Uses Escend Technologies as a case to test theory. Reports actions by its interim CEO (Elaine Bailey - participant-observer, and a general partner of an investing VC) who was sent in to investigate Escend in 2003.

Findings - Details her approach that led to addressing Escend's overall viability. Tables problems, associated knowledge gaps, and uncertainty levels. Expands on: risk management ('unk unks') diagnoses following from Bailey's probe-and-learn approach; staff replacements; new business model development after discovering the firm had great potential; facilitation of additional $7M VC funding; and, taking the company to where she could step down (2005). Concludes 'unknown unknowns' can be diagnosed and managed through problem decomposition to subareas. Flowcharts the diagnosis process for unforeseeable uncertainty.

Research limitations/implications - Seeks testing of the diagnosis process.

Originality/value - Shows that 'unknown unknowns' can be addressed by an experienced manager via a case study that is a read in itself regarding incisive and decisive management.

Keywords:

Article Type:

Case study

Reference:

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