The Strategy Paradox: Interview with the Author

I recently had the opportunity to chat with Michael Raynor, author of the newly-published business book, The Strategy Paradox. Paul J. H. Schoemaker of the Wharton Business School called it, "A very timely book that penetrates to the core of strategy, namely how to balance commitment and flexibility in a world of increasing uncertainty.” Who am I to argue?

I’m a little late to this party - I know Guy Kawasaki and Brian Oberkirch already had a go at it - but I did have a good time stretching my mental muscles with Raynor. He is not only a Deloitte Consulting exec but also a co-author, with Clayton Christensen, of The Innovator’s Solution.

The post below paraphrases our 45-minute conversation: consider it the “best-of” from a conversation between a Big Brain (Michael) and a Li’l One (mine).

Can Google be out-Googled?

Answering NO would seem a bizarre response. While nothing lasts forever, Google’s run could last for 100 years…

The one big advantage that Google now possesses is this: not only can they change as quickly as the world changes, but they are also the agent of change that gives everyone else fits. Google is still doing what they have always done: they attack spaces in which they are not the incumbent; and they are always attacking growth areas.

The TV advertising market had a long run of double-digit growth, in its early days. The Internet is a new and potentially much larger market. Could Google grow 25% a year for 10+ years? Maybe. Wal-Mart once had similar growth; their growth was bounded by geography, capital expenses and zoning laws. Google’s a low-cost operator; and, their ‘geography’ is the Internet, which has fewer restrictions and still offers outsized growth potential.

Google will be out-Googled when they become the incumbent; it will happen only after they are done disrupting the folks that they are now going after.

Flexibility & adaptability appear to be key success traits in your book … Are there potential downsides to being too adaptive to shifting market trends? (What about “sticking to your knitting?”)

In a bid to survive and prosper organizations must change in response to competition… but if customers want us to stick to our knitting, change is a moot point… when customers become less loyal, then there is a substantial need to change.

To the extent that a company can be adaptable, it should be… but there are limits. At some point, the ability to implement incremental changes runs out: the system breaks. Yet customers have come to expect your company to deploy incremental changes.

Here’s an analogy: the Norsemen founded a village in southern Greenland that thrived for centuries, sandwiched in-between Ice Ages. As the second Ice Age bore down on the settlement, getting colder year over year, the Norse made incremental adaptations that allowed them to survive – albeit closer and closer to the brink of peril. Once the settlers realized that the cold was only going to get worse, they decided to raise stakes and return to Norway… but in the intervening years in which they’d made accommodations to stick it out in Greenland, their longboats had rotted!

I am not advocating for fast change or slow change. Companies need to be able to change as needed; adaptability must be just right. The Strategy Paradox suggests a mechanism in which the operating business is absolved of the responsibility to change. Rather, the scenario-planning and creative strategies that will allow the company to thrive over the longer-term need to come from the corporate office.

Every company for whom thriving across a 5+ year timeline is important ought to consider creating a “Strategic Options” group in the HQ.

What role has the transparency of social media played in helping companies better predict the relevant future more accurately to business climate changes?

Social Media causes more uncertainty; it actually can hinder a company’s ability to predict and plan. There are far more avenues for gathering information but, too much data can be bad.

Importantly, Social Media not only provides more data but also becomes a component in and of itself – for example, the WSJ recently recounted the media war that played out when a wanna-be whistleblower within Kaiser-Permanente raised a stink about a large-scale IT project. Because examples like these will likely happen more often, it creates a new source of uncertainty and change - at a rate that no large company could accelerate to meet (especially if they are doing things that are big and complex)!

Scenario-based planning allows you to tackle what could go wrong without being accurate about what will go wrong. Social Media needs to be considered for both its benefits and dangers.

The mythology of strategy is that it is all about vision, commitment, dogged determination – these are virtues if you survive, but if you fail, they could just as easily be reconsidered as wrong-headed obstinacy. Social Media has a way of highlighting our qualities, for good or ill.

Do you see a big difference in the qualities of risks faced by established brands vs. start-ups?

Startups rarely hedge strategic risk, but that is a lifecycle issue. When you have a 5-day versus a 5-year time horizon, it is premature to consider strategic options. Smaller startups can bear that risk enormously well; they can screw up and re-boot. Why invest big resources in considering options when Option 1 is your only option, for the near term?

Strategizing for future options starts to matter when senior management starts to care about the longer term future. “What would we do today to ensure we get to where we want to be in 5 years?” The uncertainty about the answer to such a question is now relevant, and thus worth considering.

Research suggests that small companies start out with extreme strategic positions; they stake out a spot no one occupied (or cared about) and made a smart bet… What then happens is that the start-up drifts into the middle either by being seduced by growth, or, by playing defense (me-too positions)… Now they have something to protect; they become conservative.

Wouldn’t it be better to lay out more risky moves over a longer timeframe, to retain their youth for a longer time? To do so requires thoughtful planning about the multiple ways in which their future might play out.

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