Deloitte Consulting's Michael Raynor, coauthor of best-selling The Innovator's Solution, identifies why committing to success leads corporations to failure - and what to do about it.

The Strategy Paradox addresses crucial management conundrum

Everything we know about strategy is true ... but dangerously incomplete. The very behaviours and characteristics that maximize a company's probability of achieving notable success -- such as a compelling vision, bold leadership and decisive action -- also maximize its probability of total failure. In a new book released today by best-selling author Michael E. Raynor, Deloitte Consulting LLP and The Distinguished Fellow, Deloitte Research, The Strategy Paradox, presents a provocative look at the perils of strategy's conventional wisdom -- and what business leaders can do about it.

"Business leaders feel compelled -- in fact, are exhorted to make choices and set firm strategies today for their companies based on assumptions about a tomorrow that they cannot predict. In other words, guessing is the secret to success, but only when you guess right," said Michael Raynor. "The collision between the need for commitment to a future direction despite uncertainty leads to the disturbing, and until now, ignored kinship between strategies that succeed and those that fail: This is the strategy paradox."

The Strategy Paradox offers a way out, one that allows companies to achieve the returns they seek at a level of risk they can tolerate. The key is to separate the management of commitments from the management of uncertainty using an organizational principle Raynor calls "Requisite Uncertainty." Based on the commonsense notion that senior leadership should be focused on the long term while operating management attends to shorter-term priorities, "Requisite Uncertainty" has some rather counter-intuitive implications, among them:

-- The Board of Directors should not be involved in strategy-making, but instead on defining the strategic risk profile of the firm, taking into consideration the risk preferences of carefully-defined constituencies

-- The CEO should not make strategic choices, but rather should focus on building "strategic options" thereby creating the ability to pursue alternative strategies that could be useful depending on how the future unfolds

-- Senior Management should not be concerned with short-term results, but should focus efforts on hedging the outcomes expected from a chosen strategy

-- Line Managers should be focused exclusively on short-term results, with no concern for long-term strategic questions.

Raynor provides a practical toolkit for implementing these prescriptions, the cornerstone of which is "Strategic Flexibility," a framework that combines tried and true management techniques in ways that create a fundamentally new approach to managing uncertainty. The four phases of "Strategic Flexibility" are:

-- Anticipate: building scenarios of the future

-- Formulate: creating optimal strategies for each of those futures

-- Accumulate: determining what strategic options are required

-- Operate: managing portfolios of options

Raynor supports his thesis with what is perhaps the largest study of the relationship between strategy, performance, and firm survival that has ever been done: the equivalent of more than 150,000 survey responses from companies representing every economic sector. He demonstrates that the types of strategies systematically associated with success are also systematically associated with failure. He brings his assertions to life with vivid case studies featuring companies such as Sony, Microsoft and Johnson & Johnson.

Raynor is the coauthor, with Clayton M. Christensen, of the bestselling The Innovator's Solution. Raynor has a doctorate from the Harvard Business School and is an adjunct professor at the Richard Ivey School of Business in London, Canada. He lives in Misissauga, Canada.

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