Tipping Point Analysis INSIGHTS
A Strategic Tool in Uncertain Times
Tipping Point Analysis is the perfect tool for defining strategy during uncertain times. It helps
you consider all possible outcomes and weigh them against the probability of occurring.
That is to say, you develop your strategy based on your best assumptions of future economic conditions.
Then assess what change in assumptions would cause a change in strategy.
What is Tipping Point Analysis?
Every strategy is built on a set of assumptions about an unknown future. But with so much
uncertainty today, one set of assumptions may not be enough.
Some companies are just now considering the possibility that today’s economic climate may represent a new “normal.” Their
assumptions based on past performance may not even represent the future.
Market leaders are taking advantage of Tipping Point Analysis to help them understand where a shift in conditions dictates a shift in strategy.
They identify the conditions that drive decision-making and then explore what happens when the needle moves in one direction or another.
Tipping Point Analysis identifies the points on either side of a “best guess” projection where a strategy would take a different path.
Next, it assigns a probability to each tipping point,answering the question “What is the likelihood of each assumption coming true?”
Lastly, Tipping Point Analysis applies your company’s tolerance for risk to the equation, in essence answering the question“ How confident do you need to be before you are willing to make a significant investment?”