One day, Cynthia brought home a new book sponsored by her company written by one of her Partners and in this book, her client Johnson & Johnson is featured as one of the case studies. As always, I read the book and she gets to hear the summary. A win-win situation for the both of us.
I love reading strategy books but to finish one is a daunting task. “The Strategy Paradox” turns out to be the exact opposite of what I perceive a consulting book to be. It is full of interesting case studies, not too much into the methodology, and it is written with such a pose. Read the following excerpt and you will see what I mean.
Bowing to the limits of our station need not imply that we aim lower: a Macbeth or an Oedipus who accedes to the vagaries of fate can still be king, but he rules the kingdom very differently. Similarly, a strategy built on humility can still succeed; it just looks very different from a strategy built on hubris. This book has explored those differences and argued that a strategy of humility is a better and nobler way to think about the future of your company – Chapter 11 Reinventing Strategy.
In the beginning of “The Strategy Paradox”, Raynor brought out an excellent analogy. Tell me, what is the opposite of love? Some may say hatred. But the answer is indifference. Hatred and love has the same intensity of feeling towards a person but indifference has none. So, what is the opposite of success?
Failure?
The opposite of success is mediocrity. Being average is what many companies are contented with. Raynor pointed out that the ones that aim for greatest, the ones who aim for success has the same attributes as the ones who fail. It is due to the uncertainty that these companies fail. Traditionally, in order to succeed, companies formulate a strategy and commit to it. It is this commitment that forbidden them to adapt to the changes experienced. To resolve this, the author proposed Requisite Uncertainty. Simply put, the corporate office should focus on managing uncertainty while the operating managers must focus on delivering on commitments.
In chapter 2, the author has brought forth an interesting case study of Sony through its electronic formats of Betamax in video, MiniDisc in audio and illustrated how focusing too much on strategic success and not enough on strategic uncertainty can be disastrous due to bad luck.
The book has made clear that we simply cannot forecast the future. There are just too many variables. And some changes are too fast for us to react while some changes are just too slow (as illustrated by the example of the Viking) for us to adapt.
But there is a way out.
All we need is to create options. In chapter 7, the author brought in the excellent case studies of BCE and Microsoft. The former one consists of a portfolio of partial equity stakes that creates a strategically flexible corporation but lacks the formalized processes required to implement the approach versus the latter one that is able to pursue an options-based strategy far more consistently and so manage strategy uncertainty far more effectively.
The key to success is to acquire options that are related to the way a business is shaped. Take J&J as an example. There is a corporate venture capital arm, Johnson & Johnson Development Corporation (JJDC) that its primary focus is to acquire business that may benefit J&J in future. To achieve strategic flexibility, one must acquire enough stake – and not too much – in order to sell off or further invest on the options as the future unfolds. There is a price to this of course. And the 4 phases of managing a portfolio of real options are create, preserve, exercise, and abandon. In the end, it boils down to how one should exercise the option (i.e. purchase the subsidiary that will benefit the overall group) or sell off the option (i.e. abandon what is not beneficiary to the future of the company).
I personally believe that “The Strategy Paradox” is crucial to those who are into M&A business (Merger and Acquisition) as well as those who are into corporate strategy. It would have been nice if Michael Raynor elaborates on the future of Sony with the Blu-ray format war against HD DVD as that would have been a true testimony to what he preaches about.
4 replies on “The Strategy Paradox By Michael Raynor – Quite Possibly The Best Business Book I’ve Read In These Recent Months”
Sounds like quite a good book. But there are quite many strategy books around. The challenge is always…how to put strategy into action, something that lacks in the real world.
You are right Tigerfish. Some strategy books sound good but hard to apply to the real world. To pull off what is stated in “Strategy Paradox”, you really have to have an organisation that from top to bottom buy into the concept. However, if you look at some of the successful companies such as Johnson & Johnson and Microsoft – these companies do put in place a strategy, a process, and an organisation structure that supports it.
What I did not mention is that this book comes with three appendices that make the content applicable to real world. In the first appendix, the author wrote about how “strategic” diversification can create value. In the 2nd appendix, the author outlined the drivers of uncertainty in the dimension of economy, technology, environment, policy, public opinion, and walked with the readers on how to create scenarios. The last appendix, he outlined the formula in how to valuate real options.
Pretty technical stuffs but I am glad that the author included them in.
I wish I can read faster to catch up my books… hehe. My boss always presses me to read more. He reads two books in one week… Too many things with too little time. Priority… Priority… Priority… Always a hard topic.
Reading is good. You really should target to put aside more time to read.