Strategies that have the greatest likelihood of success are also the most likely to fail. In his best-selling and critically acclaimed book, The Strategy Paradox, Deloitte Managing Director Michael Raynor stresses the need to redefine strategy and confront uncertainty to resolve this paradox. In this episode, Michael and host Greg La Blanc discuss his views on strategic commitments, weighing risks, diversification, and assumptions.

Listen to his insight on the division of labor within the organization, which considers time horizons according to their roles. Do not miss his take on Clay Christensen's Disruptive Innovation.

Be all ears as he talks about climate change. Take note of his emphasis on how the individual choices we make on our purchases and everyday lives impact how the market responds to this crisis. Hang on till the end as he talks about the crucial roles companies and organizations play in reducing their contribution to their carbon footprint.

Episode Quotes:

Can you explain Clay Christiansen's Disruption of Innovation in light of recent disruptions we have witnessed and experienced?

Disruptive Innovation, on the other hand, is to overturn an established system with a superior solution, right? So that's the outcome of successful, disruptive innovation. You can introduce revolutionary breakthrough innovations into a market space and have a tremendously positive impact. It's not the only one by any means, and there is no ex-ante reason to have any religious fervor for one over the other. That one's not deontologically better than another. They're just different. And, which one you pursue is going to be a function of the technology. You have the business model you're pursuing and the market conditions. My concern has been that the enormous success of Clay's framework in the marketplace for ideas has essentially diluted and blurred the sharp edges of the theory that Clay developed.

And as a consequence, it's used in all sorts of contexts where it's not appropriate and undermines the power of the theory and the probability of success. You know it's become used for all sorts of things that it wasn't intended for. And that's too bad because the distinctions that it produces are powerful. I think they are predictive. I think it's enormously useful, but it is not the theory of everything.

On the organizational structure and the importance of division of labor within the organization concerning time horizons

I'm simplifying for the purpose of conversation, but if you're at the top of the house at the board, you're thinking ten years. If it's the executive management and you're thinking five to 10 years, you get this overlap with the board. Of course, you go further and further down; you've got people who are dealing with quarterly sales targets. In Jake's view and his theoretical development, and it’s, a well-functioning organization respects those kinds of divisions in the time horizons and the decisions related to each. It's just the nature of the uncertainties that you're grappling with and being clear about that. So if you're thinking about ten years from now, you've got a much different uncertainty quotient than if you're dealing with three months from now. So it was that that led me to the conclusion that is separating who's managing uncertainty, who's creating options, versus who's delivering on commitments that have been made. That is, it's very powerful to separate those. That's not an unreasonable separation of responsibilities. It seems to me, one of them is creating options. The other is exercising options based on the conditions on the field at a given point.

Many managers mistake the absence of volatility for the absence of risk. Should we view climate risk as an overhang?

When people talk about the existential nature of the threat, I believe that that is literally the case. I mean, if all we were dealing with were flood and famine and disease, we'd cope with that just fine. We'd be able to deal with that kind of standing on our heads. I mean, enormous human suffering doesn't make any mistakes, but in terms of, kind of the long-run survival of the human species, like water off a duck's back, we'll be fine. I don't think that's the case. Mass extinctions in the history of complex multicellular life on the planet have been caused in almost every case by carbon pollution, like pulses of carbon pollution. So, we are polluting the atmosphere close to four times. The rate that wiped out 96% of all species on the planet should terrify you. Certainly, it terrifies me. I look at this and say that we are changing atmospheric carbon concentrations 200,000 times faster than it has ever been changed before in the planet's history. So what do you think is that a small thing or a big thing that strikes me as a big thing? And the downside is the destruction of complex multicellular life on earth, not just disruptions in your supply chain. And that happens, by the way, on a timeframe that is now measured in decades and centuries, not tens of millennia.

Show Links:

Guest Profile

His Work

The Strategy Paradox
Deloitte's Review of the Paradox Strategy
The Innovator's Manifesto
The Innovator's Solution

The Paradox of Success in Commitments and Flexibility in Taking Risks feat. Michael Raynor

unSILOed with Greg LaBlanc