By: Michael E Raynor
Publisher: Currency Doubleday
Price: $49.95
Reviewer: Reg Birchfield
Strategies that sometimes produce remarkable success can also lead to spectacular failure. paradox pure and simple, according to Deloitte consultant and author Michael Raynor.
The central premise of The Strategy Paradox, Raynor’s second book, is that because of the uncertainties attached to predicting the future, strategies with the greatest possibility of success also contain the greatest possibility of failure. Resolving this paradox “requires new way of thinking about strategy and uncertainty”.
The only way to successfully plan for the future, Raynor suggests, is to develop practical strategies based on multiple choices that respond to the different requirements of several possible futures, rather than on single strategic commitments. In other words, companies must hedge their strategic bets.
Raynor works for Deloitte Consulting and is Distinguished Fellow with Boston-based Deloitte Research. His earlier co-authored book, The Innovator’s Solution, was best seller for this doctorate graduate of Harvard Business School. This reasoned, cogently argued and surprisingly accessible management text promises to be equally, if not more successful.
Having articulated the nature of the paradox, Raynor suggests corporations manage this strategic uncertainty by:
•anticipating – building scenarios of the future;
•formulating – creating optimal strategies for each;
•accumulating – determining what strategic options are required;
•operating – managing portfolios of options.
Raynor believes high performing companies often have more in common with humiliated bankrupts than with companies that merely manage to survive. The traits we identify with high achievement are also the “ingredients of total collapse”. Therefore, the opposite of success is not failure but mediocrity.
To illustrate his point, Raynor explores the strategies of, among others, Sony’s Betamax VCR and MiniDisc music player. In both cases Sony never put foot wrong in terms of building successful strategy: it understood its customers, identified variable market segments, developed cutting edge products, executed flawlessly, and monitored and responded to its competitors’ counter-moves.
Yet in both cases Sony got it wrong. The company’s failures were not consequence of bad strategies but of great strategy with bad luck.
Raynor’s counter to the strategy paradox is encapsulated in his new principle which he calls “requisite uncertainty”. He then offers new management tool, called “strategic flexibility”, to implement the kinds of strategies that deliver outstanding results while minimising exposure to “the vagaries of fate”.
The strategy paradox arises from collision of commitment and uncertainty. Organisations are faced with uncertainty because they cannot predict the future. The paradox is consequence of the need to commit to strategy despite deep uncertainty about which strategy to commit to – strategic uncertainty.
If the strategy paradox is consequence of conflict between commitment and strategic uncertainty, the answer to it lies in separating the management of each, according to Raynor.
But, warns Raynor, the implications of separating the management of uncertainty from the management of commitments are more far-reaching than it seems. “Requisite uncertainty provides foundation for the widely held yet often violated belief that senior management should not be concerned with short-term results … any CEO who is compelled to intervene frequently on issues that can affect current financial results is not able to pay enough attention to strategy.”
Raynor’s four phase strategic flexibility toolkit contains elements of more established management tools such as scenario-based planning, strategic planning or real options for instance. But, he argues, strategic flexibility is not “pastiche of existing approaches”. Integrating these tools and grounding them in validated theory of organisational hierarchy “creates something that is quite different” from any of these tools on its own, or in mere combination with others.
Raynor accepts this is not the first book to point out the obvious that the future is unpredictable and that strategy making must take unpredictability into account. What’s new, he claims, is that here unpredictability is not an afterthought, “not something one considers after commitments have been made”. Uncertainty is instead placed at the core of decision making at the highest levels of the organisation.
And according to Raynor, devoting the CEO and the board to questions of strategic uncertainty is significant shift in emphasis for many organisations. “When it comes to strategy and the long term, uncertainty is the only constant, and choosing options over commitments is the most reasonable response to that certainty.”
