Roughly a quarter century ago, during the Iraq War, Secretary of Defense Donald Rumsfeld shed some light on how military leaders manage uncertainty. In what became his most memorable analysis—he even titled his memoir after it—Rumsfeld sorted military intel into categories: There are “known knowns,” things we are aware of and can plan for. There are “known unknowns,” things we know exist but can’t yet fully comprehend their impact. And there are “unknown unknowns,” the things we are unaware of and cannot predict.
Guess which category is currently driving—or, perhaps more aptly, pausing—manufacturing leaders’ business strategies? Pat yourself on the back if you checked the “unknown unknowns” box. Nothing leads more to greater uncertainty, to a deer-in-the-headlights reaction, than fear of the unknown. There is, after all, no way to easily plan for events that are unanticipated, much less inconceivable.
Not that manufacturers haven’t had plenty of experience in the inconceivable recently: the past five years have been filled with unknown unknowns, even black swan events. Manufacturing leaders were blindsided by the pandemic and its subsequent supply chain fiasco. They were caught off guard by the dramatic rise of cyber-attacks and the abrupt appearance of generative AI. And now they’re being whiplashed by geopolitical uncertainty, including the on-again, off-again cadence of American trade policy and its further disruption of long-time sourcing and supply chain connections.
Which suggests that the manufacturing sector could learn a few things from the military. The “Rumsfeld Matrix,” as that categorization of levels of uncertainty has come to be known, has long been a standard analysis by the American military. So has the concept of “VUCA”—Volatility, Uncertainty, Complexity, Ambiguity—which was first introduced by the U.S. Army War College in the 1980s, in the final years of the Cold War. The emphasis was (and continues to be) on the need for military leaders to be adaptable and comfortable with uncertainty. Business leaders picked up on the VUCA acronym during the Great Recession, and more than 15 years later its use by consultants has become clichéd.
No matter—the concepts of “unknown unknowns” and VUCA underlie the very real concerns business leaders are facing at this pivotal time in history: Natural and manmade events are outpacing our ability to thoughtfully and strategically manage current events. A recent Manufacturers Alliance report, in partnership with Roland Berger, highlights the risk and frustration that uncertainty currently brings to our factory sector. Geopolitical risk is the most consequential cause of today’s business ambiguity, stemming from both the recent shift in trade policies and the new instability of formerly stable foreign relationships. In fact, when asked about their top challenges in a spring 2025 survey, manufacturing leaders ranked managing geopolitical risk at the top. Two years ago, a survey showed 60% of such leaders found geopolitical risk highly relevant to their business planning; the most recent survey found roughly three-fourths of leaders saw it that way.
Which in turn has led to the highest economic uncertainty in the business community in well over three decades. The Global Economic Policy Uncertainty Index, based on Federal Reserve Bank of St. Louis data, has reached its highest point in 30 years of monitoring. That’s higher than the Great Recession, higher than the early years of the pandemic (which were, at the time, the historic peak). This in turn has led many manufacturers to hit the brakes: 90% of respondents in our aforementioned spring 2025 survey say that geopolitical risk is stalling their strategic development, as companies play a wait-and-see game on policy.
So how do military leaders handle uncertainty? First, they recognize that the likeliest and most dangerous future “strategic shocks” (in DoD jargon) will likely come from non-conventional sources. Historically, defense strategy was inherently reactive. In effect, military leaders lacked sufficient imagination. As the now well-known maxim goes, in the past generals were always prepared to fight the last war. The war on terrorism changed that. As one defense analyst articulated, subsequent to the 9/11 attacks, “meaningful consideration of shocks in strategy development and planning would better posture DoD for an unconventional future.”
Why shouldn’t business leaders adopt a similar perspective? Whether their next body blow stems from a pandemic, a geopolitical risk, or an alien invasion, preparation for an unconventional future is well-advised. Thoughtful evaluation of potential disruptions, no matter how unfathomable at this time, would help them hedge against uncertainty.
At this point, U.S. manufacturers have one foot in purgatory due to geopolitical risk. How they prepare for the unknown unknowns will make all the difference.
