Tuesday, July 24, 2007

The Strategy Paradox

I have been thinking about strategy a lot lately. I believe a leader needs to have vision and set the right strategy. The best strategy that is not implemented well will still not work. Often, I turn to books to try to learn and study. My strategy thoughts are no different.

I read The Strategy Paradox – Why Committing to Success Leads to Failure (and what to do about it) by Michael E. Raynor. As the title suggests, this book is about paradox. One of my mantras is, fail often, fail fast, and fail cheap. So I do not view failure as permanent. I also think we have to fail in order to learn, grow and move forward.

I also believe that it is not necessary people that see where the market is going that thrive, it is those that adapt to it. The same would be true with strategy and implementation. Adapt to get through wrong assumptions. Change as required by circumstance.

From the book:

Success demands commitments to hard-to-copy, hard-to-reverse configurations of resources and capabilities that are aligned with the competitive conditions of a market. These commitments take time to bear fruit and so they must be based on beliefs about the future. These beliefs can turn out to be wrong. As a result, otherwise excellent strategies can fail simply because the conditions under which those commitments would have been appropriate did not materialize. Sony’s attempts to create new consumer electronics formats – Betamax in video and MiniDisc in audio – illustrate how brilliantly conceived, carefully planned, and flawlessly implemented strategies can come to grief because of the antinomy of commitment and uncertainty.

Requisite Uncertainty extends the definition of corporate context, demanding that corporate management not only set performance targets but also define the strategic uncertainty that the other layers of the organization must manage. It is therefore no great departure from established models or practice to suggest that top management does not make strategy; in reality, it rarely has. Instead, Requisite Uncertainty provides an explicit principle upon which to base the management of both sides of the strategy coin: commitment and uncertainty.


At 3:44 AM, Blogger Tim said...

Hi Jim

This is interesting. A form of trial and error? Or spreading your risk. I haven't read the book but is this a two stage process?
Ideas that you believe will fly and then socialising them and letting them percolate, perhaps with a trusted customer. So often strategy becomes the brain child of a one or perhaps two individuals and this gets locked down into "I will find a way for this to work" without listening to the wisdom around you that is often constantly fed back from a variety of sources, but the inventor is deaf to the thoughts.
I have come across a good deal of companies who have responded well and grown well by "listening" carefully to the markets they are in and certain customers in particular.
In this way you are cheap with the ones that get a poor response and a little less cheap with the response of "oh thats interesting" and expensive with " my god, if you could do that!!!"
In this way the people around you need to free to express themselves and anyone customer facing needs to have a means of feeding back the impact of shared ideas.

At 10:54 AM, Anonymous Oli said...

The major problem with ''Vision'' from a CEO level is that usually the CEO is on the 7th floor of his building and look forward and dream... oupss sorry... vision the future of his enterprise across the street with huge improvement and beleive that it could be done in a matter of days. Maybe to be near God make them beleive that they could acheive anything!!! Most of this might be true but then when project start and CEO delegate to loyals subject that just apply the vision of his management without thinking or expressing that it might not work the way the vision says.. then sh$%^$^t happen!!! Vision need to be realistic and people at the 1st floor would have been able to tell CEO that before he can see himself in his new office he should have listen and understand that you need an elevator to go the top of that new building!!!!

My opinion on vision and strategy

At 6:23 PM, Anonymous Kevin. said...

this is good feedback, I'd suggest that it is put into an email to people inside the company...
Just a thought.

At 12:53 PM, Anonymous E. Rae said...

I have a lot of time for the idea of cheap, fast experimentation -- see the M. Schrage's "Serious Play" for a good treatment of that subject. But I think Raynor is describing something quite different. As I read it, he's focusing on those elements of strategy that are necessarily commitment intensive. Sure, there's always room for some measure of "baby steps," adapting to feedback from the environment along the way. But you have to have some shape to those experiments, something that defined their boundaries, and those are the commitment bits. Raynor's project is describing how to make those commitments less risky without (and this is the critical bit) undermining the power of the commitments when made.

So, his various case studies describe the nature of the big, costly (impossible?) to reverse strategic bets that companies had to place if they wanted to make a meaningful bid for extreme success, showing that these bets were reasonable, often insightful, only to turn out horribly wrong due to uncertainty. The solution in such instances is decidedly not to fail fast, fail cheap so that one can "learn" one's way to the appropriate strategic footing, since then one is relegated to, at best, second or third place to other firms that did accept the risk of betting big but guessed right. So, the strategic challenge is to make big bets but find ways to make those bets flexible (not adaptable) -- hence Raynor's "Strategic Flexibility" framework. I really think he's on to something here.


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