The Strategy Paradox
Read: The Strategy Paradox: Why committing to success leads to failure (and what to do about it)
Michael Raynor spoke at the business/innovation conference (aptly titled The Overlap) in June, and we received his book as a conference favor. If given a fair hearing, I expect Raynor’s book to force business practitioners to think more deeply about formulating strategy and structuring the organization for competitive advantage. Most treatments of strategy address competitive dynamics (in the line of Porter), likewise positioning, or competency leverage (Collins). Raynor leverages insights from his research and publishing in innovation (The Innovator’s Solution), Harvard doctoral research, and the practical understand that comes from actually consulting. In the case of strategy, the consulting experience lends valuable grounding – as opposed to theory-heavy work or easy-reading strategy-lite. This book could anchor a top-notch MBA course – but it could lead a good company’s board to make much better strategic decisions.
I would not compare The Strategy Paradox with popular business books, such as The Long Tail or even Good to Great. This is a book about the perils and promises of strategy formulation, the management of strategy and commitment, and the design and execution of strategic options. Keep in mind that, regardless of what you think you know about strategy research, most of what’s published in journals and books is very loose, or even just junk research. Strategic management remains largely influenced, in the real world of corporate decision making, by Porter’s 5 Forces, SWOT, and resource allocation. Who should care? Just about every executive, business unit-level manager, and all professors or consultants focusing on business strategy and organizational dynamics. It is one of the few works on competitive strategy that guides organizational strategy as well – not directly through guidance on org design, but in terms of organizational function necessitated by requisite uncertainty. Raynor never mentions “strategic alignment,” a troublesome notion from consulting with no good research support. Rather, he demonstrates how the organizational focus implied by “alignment” results from appropriate structural intention generated by appropriate distribution of uncertainty and commitment in the hierarchy. In time for Alfred Chandler’s handoff to history with his passing in May, Raynor retrieves the effectiveness of hierarchical management, obviating the need for “alignment,” based on good theory and sound research.
For example – I know (well) of one firm that leads its market in products and share, and was able to maintain its position by good old-fashioned installed base lock-in and monopoly rents with long-term contracts. With the luxury of not having to follow their own strategies well, they jumped around from Good to Great, then acquisition mania, product integration and overhauls, a China program and off-shoring, process redesign. At the end of the day, they were just acquired – and their product line now internally competes with its new owner’s. Could the Paradox have saved this firm? If taken seriously, yes – they appear to have violated nearly everything Raynor suggests.
Raynor explains complex business scenarios with a brisk storyline. The footnotes are a fascinating secondary read – the points are backed up by his research, Harvard studies, and dozens of well-cited papers. While optional to the main points, the research is actually useful and interesting, and much of it new to business research (consider his retrieval and application of Elliott Jacques’ work on requisite organization in the principle of Requisite Uncertainty.)
A week after reading the book, in late June, I referred to Raynor’s concepts in a conference presentation about structured dialogue for decision making in the intelligent enterprise, (the book was a timely, disruptive influence). I found a significant symmetry between Requisite Uncertainty and the principles for dialogic design we have been developing. The strategic horizons for strategy vs. commitment map to our stages of strategic dialogue (where a group of stakeholders formulates strategy, scenarios, and action plans in a structured dialogue). Since I consider time horizon the most pivotal factor in group decision making, the relationship of temporal uncertainty to priority and opportunity now becomes a key organizing principle.