The Paradox of Strategy

Today we are going to cover the so-called “Strategy Paradox,” as explored by Michael E. Raynor.

But first, we must understand the meaning of “paradox.”

A paradox can be defined as a thought, proposition, idea or argument that contradicts the general fundamental principles guiding human thinking, or defies common sense, i.e., common beliefs shared by most people.

When it comes to strategy, experts usually say that a companies see the highest returns when they focus on a single strategy, commit fully to it, and then align all resources to that strategy. When we look at successful companies, we get the impression that they have done just this. That is, staying focused and committing to a particular strategy is a key requirement for success.

In The Strategy Paradox: Why Committing to Success Leads to Failure (and What to Do about It),Michael E. Raynor explains the fundamental paradox behind this idea.

Investing in a great opportunity invariably brings with it the risk of great failure, according to Raynor, since real life in general and competitive markets in particular are fraught with unknowables and surprises. The same focus and commitment to strategy that promise higher returns on investments can also bring the greatest risk of failure.

The author asserts that in an unstable, unpredictable and changing world, a VUCA world, maintaining focus and commitment at any cost may not be the best plan. As the market is uncertain by nature, less focused strategies are more elastic and can adapt more quickly to changes.

Thus, according to Raynor, a bet on pure strategies is riskier because:

  • Some win, and win a lot
  • Others lose, and lose a lot, to the point of going broke.

From this perspective, Raynor proposes that a company be sure to have “the capacity/ competence to adopt other strategies… depending on how uncertainties are assessed.” Raynor also recommends that CEOs not focus on achieving results, but on managing uncertainty. Thus, the Chief Executive is a risk manager.

On the other hand, with hybrid strategies the return may not be as great, but neither will the loss.

The tradeoff is that most strategies are built on specific beliefs about an unpredictable future, but current strategic approaches force leaders to commit to an inflexible strategy, no matter how the future may unfold. It is this commitment to uncertainty that is the cause of the strategic paradox.

The author believes that the solution, therefore, is to invest in a “portfolio of strategies.” This alternative is complex and costly and thus available only to large corporations, as Raynor illustrates.

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