in: Behavior, Character, Podcast

• Last updated: October 1, 2021

Podcast #630: The Strategy Paradox

To be a great success in business, you need to have a compelling vision, create a well-thought-out strategy to achieve that vision, and then fully commit to that strategy with action and resources.

That’s also the recipe for being a great failure in business.

That’s what my guest argues in his book The Strategy Paradox: Why Committing to Success Leads to Failure. His name is Michael Raynor and we begin our discussion by describing the strategy paradox: the fact that the same sound strategy can lead to both success and failure. We discuss how the outcome then depends less on the strategy itself, than on the idea you decide to bet on, using the example of the way Sony employed the right strategy in backing Betamax in the VCR wars, but still lost out to VHS. Raynor then explains the limitations of forecasting and adaption, the approaches companies typically use to navigate the tension between needing to commit to something, and being uncertain they’ve committed to the right thing. He then unpacks two more effective ways of developing strategic flexibility: separating the management of commitment from the management of uncertainty, and acquiring a portfolio of assets that will increase your optionality. We end our conversation with whether the strategy paradox can be applied not only to making decisions in business, but to making decisions in our personal lives as well.

If reading this in an email, click the title of the post to listen to the show.

Show Highlights

  • What is the strategy paradox? 
  • Why we use VHS tapes instead of Betamax
  • Can you tell the difference luck and strategy as paths to success?
  • How do you manage uncertainty?
  • The value of separating responsibilities in an organization 
  • How do you balance options vs. commitment?
  • Why are markets so dominated by huge corporations?
  • Using the strategy paradox with non-business decisions 

Resources/People/Articles Mentioned in Podcast

The stratgy paradox by Michael Raynor, book cover.

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Read the Transcript

Brett McKay: Brett McKay here and welcome to another edition of The Art of Manliness podcast. To be a great success in business, you need to have a compelling vision, create a well thought-out strategy to achieve that vision and then fully commit to that strategy with action and resources. That’s also the recipe for being a great failure in business. That’s what my guest argues in his book, The Strategy Paradox: Why Committing to Success Leads to Failure. His name is Michael Raynor, and we begin our discussion by describing the strategy paradox. The fact that the same, sound strategy, can lead to both success and failure. We discuss how the outcome then depends less on the strategy itself than on the idea you decide to bet on, using the example of the way Sony employed the right strategy in backing Betamax in the VCR wars, but still lost out to VHS.

Raynor then explains the limitations of forecasting and adaptation, the approaches companies typically use to navigate the tension between needing to commit to something and being uncertain they’ve committed to the right thing. He then unpacks two more effective ways of developing strategic flexibility, separating the management of commitment from the management of uncertainty and acquiring a portfolio of assets that will increase your optionality. We end our conversation with whether the strategy paradox can be applied not only to making decisions in business, but to making decisions in our personal lives as well. After the show is over, check out our show notes at

Alright. Michael Raynor, welcome to the show.

Michael Raynor: Thanks. Pleasure to be here.

Brett McKay: So tell us a bit about your background, ’cause you are… I don’t know. You’re a business strategy guy. You think about business strategy as your career. What got you thinking about that and doing that?

Michael Raynor: That’s a good question. I don’t know that I’ve ever reflected on how I ended up there. I suppose my, the honest answer, since you’ve caught me flat-footed is, ’cause I didn’t wanna go to law school. [chuckle]

Brett McKay: I went to law school.

Michael Raynor: Okay. Well, you’re a braver man than I am. I did my undergrad in philosophy, not a lot of call for court philosophers. So I had to go get a job. Ended up working for a small consulting firm doing, of all things, statistical process control work, which my reading of Heidegger and Nietzsche prepared me for quite well, you might expect. Ended up, as I said, didn’t wanna go to law school, ended up taking an MBA and just started down that path as a consequence, spent a couple of years with Deloitte as a consultant, thought that I would have fun answering my own questions instead of the client’s questions. So went and did a doctorate in business, in business policy, and then to my shock and amazement, because a doctorate is kind of a union card to go be a business school prof, I ended up back in Deloitte, and have been there ever since, doing a variety of thing. But in general, I’d say it’s straddling the interstices of research and practice, which has been an enormous privilege and a lot of fun.

Brett McKay: Well, you said you wanted to answer your own questions, that’s why you went to go get your PhD. What were the questions that you had as… You went into this world of business as a philosophy guy, what were the questions that you came up with, as you started getting into this world?

Michael Raynor: So I think not uncommonly, I went in with the idea that I was going to address a particular question and ended up doing something really quite different. But when I was, as a consultant back in the… And I’ll date myself here, in the mid ’90s, that was the first wave of technological convergence, and that was when the internet, it was clearly gonna be a thing. And a lot of the major corporations that I was consulting with were looking at and trying to understand what that was gonna mean for their business. And so there was a flurry of diversification back in the day, when phone companies, remember them? Were buying cable companies, remember them? And movie studios and so forth, were all trying to figure out how they were going to have to reinvent their business.

And so that’s what I thought I was going to tackle. And just as an aside, as it turns out, they were all right. They were just 20 years too soon, and being early is in many ways worse than being wrong. So anyway, I ended up going into the doctoral program and ended up focusing on diversification, but much more generally. So rather than looking at diversification in the face of technological uncertainty, just diversification as a general management phenomenon.

Brett McKay: Right. So, I think that leads… That idea that those companies you were seeing, those technology companies, phone companies, cable companies, trying to get ahead on the internet boom that was happening in the ’90s, didn’t really work out for them, as they were too early, I think it’s a nice segue to what we’re gonna talk about today. You published a book, a couple of years ago called The Strategy Paradox. So what is the strategy paradox?

Michael Raynor: Yeah. So that title was born of the observation that when you read the liturgical texts of the strategy field, Pankaj Ghemawat, Michael Porter and Company, the clear advice is that it’s absolutely crucial to be committed to a particular market position, a particular quality cost positioning, devote yourself to serving a particular market segment, and that it is the commitment to those specific positions that allows you to differentiate yourself from your competition and hence succeed. And they’re not wrong. You look at the companies that when… They hardly needed my validation, but for what it’s worth, they’re not wrong. When you look at the companies that have been successful, that is very often a hallmark of their success.

But what occurred to me is that when I looked at the companies that had been catastrophic failures, they often exhibited many of the same characteristics. They were committed to specific technologies, specific market positions, specific market segments, specific value propositions. They just happened to choose the wrong ones. And so that doesn’t help a lot if the advice for good strategy is, place the right bets. So the question becomes, how do you figure out what kinds of bets to make, when it is deeply impossible to know in advance with any real certainty what the right bet is going to be?

Brett McKay: Alright. So just to clarify, so the recap of the strategy paradox is, you can follow all the advice on developing sound strategy, but you can still fail anyway.

Michael Raynor: Yeah, exactly. So the characteristics that define both successful and failed strategies, seem to be the same characteristics, which is a bit of a paradox, it seemed to me.

Brett McKay: Why do you think most business books, these guys that you talk about, these liturgical texts, why do you think they miss that idea of the strategy paradox?

Michael Raynor: Well, in fairness to them, they didn’t miss it. It just wasn’t their focus. So there’re… You can read Competitive Strategy by Michael Porter and there’s a part I think… I can’t remember precisely, so call me a liar for a chapter… But something like chapter 14, it’s sort of back in there somewhere… And it’s very much an “Oh, and by the way” kind of situation. And then Pankaj Ghemawat’s book, which I think is a fantastic book, I mean, I’m not… I hope to add to our understanding, not take down anybody else. So Pankaj Ghemawat’s concept of strategy as commitment, I think, is extraordinarily powerful because it’s that commitment over time is what makes your particular position in the marketplace very difficult for others to copy.

And they say “There’s only two things you can’t compress: Water and time.” And so when your strategic position is born of commitment over time, it’s almost impenetrable. The problem is you have to commit to the right thing, and that’s the difficulty. And so my hope… I mean, nobody can talk about everything, so my hope was to pick up that particular thread of the conversation and say a little bit more about it.

Brett McKay: You have to commit for a strategy to be good, but the problem is, you’re uncertain about whether you picked the right strategy or not.

Michael Raynor: Absolutely. That’s the hard part. So in the book, for example, I spend a lot of time talking about Betamax. That really is going back to the antediluvian era, but Sony was a particularly compelling example to my mind of a company that seemed to do everything right, and sometimes had fantastic success and sometimes had fantastic failure, and it’s not like they did anything different when they succeeded versus when they failed, except for the fact that they guessed wrong. So sometimes they guessed right, sometimes they guessed wrong, and that was the part that I found a bit frustrating. And what could we do about that? How could we try and address that problem?

Brett McKay: Well, let’s walk-through that case study ’cause I think that it could really highlight the strategy paradox in action with the Betamax story. So for those who are young, too young to remember Betamax, they came up with the first version of what, a VHS tape… VHS was a competitor, but they had their own version of that, and it seemed really promising, but why didn’t it… Why did we use VHS tapes and not Betamax?

Michael Raynor: Yeah, so post-facto there’s a… And not surprisingly, the universe is sometimes inexplicable, but it’s very rarely capricious. So when we look back, we can explain what happened and say, “Here’s why they ended up on the wrong end of that bet.” And it had to do with what I tried to describe in the book, is a whole number of uncertainties that simply broke against them instead of for them. The most important of those was the movie studios making libraries of movies available to be released as a video recording. So then there was a battle between the expenses associated with releasing movies in two formats, Beta and VHS.

Back in the day, in the late ’70s, early ’80s, people would go into VHS shop, video rental stores, and they had to determine whether or not the movie they wanted was available in the format they had. And that was at a time when video rental stores were kinda mom and pop operations. The movie studios would charge $50, $60, and this is 40 years ago, for each of the tapes they would then rent out, and mom and pop video rental places don’t have a huge amount of capital. So they basically had to pick, and so they would go with whichever one had the greater market penetration. And for reasons that, again I go into, that are somewhat involved, VHS ended up with a small advantage just when the movies were starting to be made available, and as a consequence of that, the snowball rolled down one side of the mountain instead of the other, and Sony got swamped.

Brett McKay: And one of the advantages of VHS was, I guess, cheaper. They sacrificed quality a bit. Betamax was super high quality, the video. VHS was like, “Well, we’re not gonna do that,” and that was one of those factors that tilted towards their favor.

Michael Raynor: Absolutely. Yeah, and the big thing was that Sony had made the bet that the device was going to be used to record shows on television and then watch them. So it was basically a time-shifting device. And the reason they had made that bet is that they looked at it and said, “The movie studios are never going to put movies on tape. They’ll just never do it.” And so they were devoting themselves to a higher quality, and as a consequence, higher cost, and hence higher priced device, and for the first four, five, I can’t remember exactly, six years of the VCR wars, Betamax had, not only a commanding lead, but also had more profits than everybody else put together. They were, if you will, the Apple of the VCR race. Higher quality, higher cost, higher price, vastly more profitable, better brand cache. Anybody who looked at this in 1978 would have said Sony is gonna win.

Brett McKay: And what do you think… Do you think that things could’ve turned out differently for Sony with the Betamax, if they did something, one thing different, or was it sort of just that was… They picked a sound strategy, it looked good on paper, they committed to it and they just happened to pick the wrong one?

Michael Raynor: Yeah, at the the risk of being somewhat self-serving, they could have taken… They understood the forks in the road that they were facing, and they felt, “We have to pick” because that’s kind of what good strategy looks like, as opposed to thinking about, “Well, how can we hedge our bets in a way such that if it goes in the other direction, we still have a viable strategy?” So the two big things that they were betting on is that it didn’t make sense to license the technology because they were focusing on the profitability rather than the network effects of market share.

And the reason they looked at that, by the way, is that the movie studios had made it very clear… I mean they even took Sony to court in order to have the VCR declared illegal because they said “This is going to promote piracy of our intellectual property.” And so they thought, “Well, there’s no chance that Hollywood movies are gonna be available on VCR, so we don’t have to worry about that.” But they understood that, well, you know, if it went that way, that would necessitate a completely different approach to the market, so none of that was news to them. It’s just that they felt compelled to back one horse rather than finding a way to have a… If you will, have a plan B, and making the incremental investments in advance so that when and as that happened, they were in a position to respond in a timely way.

And if I might, that’s one of the things, I hope, the strategy paradox contributes, which is, it’s not enough to run the war gaming in your head and say, “If they do this, then we’ll do that.” It’s about actually spending real money, time and effort to prepare yourself and be positioned to actually respond in a fundamentally different way when circumstances require.

Brett McKay: Gotcha. I think someone can hear this about the strategy paradox, and it sounds like, “Well, successful companies are successful just because they’ve lucked out and picked the right strategy.” Is that sometimes the case of a lot of companies that we hold up is like, “Wow, this guy… This is led by a visionary CEO.” Actually it might have just been they just got lucky… They had a good strategy and they lucked out and they picked the right one.

Michael Raynor: Yeah, I would agree with that, but I’d say it’s slightly less, elbow it’s not quite so sharpened, because it’s… I think very often, it’s very difficult to tell the difference between luck and skill. So in fact, my last book, The Three Rules: How Exceptional Companies Think, was a way to try and figure out which companies in fact had delivered a level of performance such that you could conclude it was a function of something special about them as opposed to simply just getting lucky. So most of the time, I can’t tell the difference between luck and skill when it comes to looking at the results that a given company has delivered. The simple way to think about it is that if you held a coin flipping contest, somebody’s gonna flip 10 in a row, if you got 50 people in the room, somebody’s gonna flip 10 heads in a row.

And if you ask them what makes them so special, they’ll give you an explanation about how to flip heads with a fair coin, but that’s just variation in a process, going all the way back to my first job, out of undergrad, right? And so it’s important to be very humble when we start holding up a particular company or particular outcome and saying, “Hey, this is special, we need to explain this.” Very often what you’ve got is simply a tail in a process that is irretrievably variable and random, and really, you’re just explaining a random outcome, not something that warrants explanation.

Brett McKay: So another… Some people might be listening to this, okay, well, a solution to strategy paradox is you gotta commit, that’s one part, if in order for a sound strategy to exist, you have to go all and do it, commit, but you have to reduce the uncertainty, so what you can do is just forecast better, get more information, get better idea what’s gonna happen, but you argue in the book that forecasting, predicting the future, it’s a lot harder than people think it is.

Michael Raynor: Yeah, exactly. I subscribe to folks like Philip Tetlock on that one who have studied attempts to forecast various things, there’s another one that I like about called The Fortune Sellers, Will Sherden’s book, and there they make the argument that really the only thing we’ve gotten better at predicting is the weather, and even then after about five days we’re out of ideas. And some of that kinda makes sense, especially in business, because in business you’re trying to forecast the activities and behaviors of people for whom is it is in their vested interest to be unpredictable to you, because if they are… I understand that if you can figure out how to predict my actions, then you’ve got it all over me, I’m cooked. So I’m gonna do everything I can to make sure that you can’t predict what I can do, and as soon as you demonstrate that you’re able to anticipate how I behave, well, then I’m gonna change the way I’d behave.

So in a sense, it’s almost built into the system that it’s going to be extraordinarily difficult to understand how others in a system are going to act under a certain set of circumstances. However much you might think you understand their incentives, and as a consequence think you can say with certainty how they’re going to act, the fact of the matter is, I think as a practical matter, there are just too many degrees of freedom. And the accuracy required to do the kinds of things companies need to do in order to be successful, I think is fundamentally, I’ll say impossible.

Brett McKay: Right, and not only do each individual person have a lot of freedom, but the system is complex, so they can interact in different ways that you can never… You’d need a bajillion super computers to predict every single…

Michael Raynor: Yeah, exactly, what they refer to as the Laplacian fallacy, so the French philosopher, Laplace said “If you gave me the position and momentum of everything in the universe, I’d be able to tell you the position of every atom to the end of all time.” He said it more eloquently and in French, so that wasn’t a quotation. But at the risk of getting a little bit esoteric, just quantum physics I suppose would tell us that that’s just not true.

Brett McKay: So another response to make up for the uncertainty that exists with business strategy, is adapting quickly, so you see that your strategy you’re committed to is not working ’cause the circumstances have changed or the circumstances weren’t what you thought they were, so what you gonna do is just adapt on the fly. Then you also argue that what’s easier said than done, why is that?

Michael Raynor: Yeah, yeah, absolutely. Well, it’s… I mean just like… I’m not saying forecasting is useful, I’m saying there are limits to what we can do with it, and similarly with adaptation, it’s extraordinarily useful, and there are limits to what we can do with it, and so when you reach those limits, that’s where strategic flexibility comes in. And the reason an adaptation is so challenging is that, in a sense, it’s a consequence of the need to be committed, it’s kind of like saying, I’ve got an aircraft carrier and I need to make it faster and more nimble and… Okay, that’s great. I can make it faster and more nimble, but I have to get rid of the planes in the flight deck. Well, okay, but now it’s not an aircraft carrier anymore, right, so there are deep trade-offs in terms of what you’re able to do, so if you have…

So if you’re in the medical devices business and it takes five years of discovery just to figure out how to get the technology to work and another five years of testing before you can get the FDA approval and another two or three years of working with key opinion leaders in the medical profession before you can get meaningful distribution, you’ve got a 10 to 12 year runway before you get to market. You get eight years into that and you’ve lost a lot of degrees of freedom with respect to what that product can look like, what its features will be, what your business model looks like, you have to make all those choices way in advance. So it’s very difficult just to kind of bob and weave your way through an ever-changing landscape.

Brett McKay: Right, so yeah, that’s a good point, ’cause I think sometimes we forget that in the business world, you have to… In order to… If you’re doing big stuff, building cars, creating drugs, that takes… It’s not just, you can do this in a year, it’s gonna take… It’s gonna be a several year process and things could change.

Michael Raynor: Yeah, not everything is an app, you know. [chuckle]

Brett McKay: Right, right. Yeah, so it’s more like these larger business who are doing big things, it’s like in order to turn, it’s like a cruise ship, it’s gonna take a really long time… You’re not in a jet boat ’cause you’re on a big honking thing.

Michael Raynor: Yes, absolutely. So to the extent you can break those trade-offs, then I’m all for it. If you, as I said, forecasting, useful, and like everything has its limits; and adaptability, useful, has its limits, and when you reach those limits, that’s when you are subject to the strategy paradox and then you need a different toolkit.

Brett McKay: Oh, let’s talk about that different toolkit, and one part of this toolkit is you call it requisite uncertainty, and I think this is where you say that companies, organizations, they need to separate who manages commitment and who manages uncertainty. So what does that look like?

Michael Raynor: Yes, and then I’m borrowing there from a fellow named Elliott Jaques, and that’s his term, and I’ve tried to translate that into an organizational framework. So there’s kind of two parts to coping with the strategy paradox. One is, if you will, the strategic dimension, and the other’s the organizational dimension. So requisite uncertainty speaks to the organizational half of that equation. And the view there is that… And we’ll go all the way back to Sony for a minute… If you’ve got somebody who’s running the Beta division, and you have decided, “Alright, here’s our best guess on what we think the world looks like,” and so we’ve got someone running the Beta division and they commit to a very particular strategy. That strategy is a high quality device with higher prices to compensate for the higher cost. We believe that the value proposition to consumers is that it’s high quality recording of broadcast television, and that’s our bet. And so you build the model accordingly, and you’ve got somebody whose job it is to make that strategy as successful as they can make it.

But go up a layer or two in the hierarchy, and you’ve got somebody who’s responsible, in my model, for thinking about what kinds of uncertainties in the marketplace might cause that strategy to come off the rails. What could invalidate it? And then those are all the things we talked about before. So what if it became more about watching rented VCR tapes and what would that mean for your relationship with movie studios? What would that mean for the importance of network effects, and as a consequence, the need to grab market share quickly as opposed to reaping the profitability of a highly differentiated device in what was largely a niche application?

So almost a complete 180. And so that person looks at that and says, “Alright, if that were to happen, how would that Betamax strategy have to pivot and what assets would we need to have in place in order to be able to respond?” And it becomes that layer of the hierarchy’s responsibility to develop relationships with alternative suppliers, to explore how you might actually license your technology as opposed to building them all yourself, to think about how you would relate with movie studios, and cetera, and so on. You can’t leave that to the person running the Beta strategy, ’cause there’s only 26 hours in the day, just like for the rest of us, and so you want them focused, you want them committed to a particular strategy, as opposed to thinking about all the other stuff they might have to do if the world turns out differently. So it’s that separation of responsibilities that I think makes it possible. It’s expensive, it’s complicated, it’s hard, but it’s possible.

Brett McKay: And it sounds like too, that prevents… I don’t know… Some cost [23:41] ____. If you combine the decision-making or the commitment in the person managing uncertainty, because you’re all… It’s hard to be like, look at other ideas when you’re focused on committing to this one strategy you picked. So if you’re in charge of the Betamax thing, but you’re also in charge of looking at other solutions, you’re probably not gonna pay much attention to the other solutions ’cause you’re so focused on making this one thing work that you got.

Michael Raynor: You know, that’s a really great observation. I had never thought of that before. Despite the fact that I spend a lot of time thinking about cognitive biases, I actually… That’s not in the book, and I don’t know that I’ve bumped into that before. I think that’s an excellent point. Somebody committed… And I’ll say it back to you to see if I got it right. Someone running the Betamax division will have a certain view of the world and their ability to interpret conflicting data will be colored by the fact that they’ve just spent the last three years, hammer and tongs, making the existing strategy work. They’re going to be necessarily handicapped when it comes to understanding and correctly interpreting the viability and the plausibility of alternative outcomes.

Brett McKay: No, yeah, that’s what I was thinking. When you were talking about that, that’s one thing that came to my mind. So that’s one solution, so that you do this, you separate who manages commitment, who manages uncertainty. Do a lot of companies do that, or no? What do you think?

Michael Raynor: I think it’s… I’d love to say that everybody read my book and thought it was brilliant. Sadly, I can’t make that claim. [chuckle] I do think that it’s not uncommon in organizations for there to be kind of a de facto… To de facto kind of make those sorts of separation. So the notion that somebody’s worrying about operations and somebody else is worried about strategy is not… That’s not a particular breakthrough. So I think you see inklings of that, hints of that in most organizations, but I don’t think it’s something that is explicitly pursued.

I think that in… And I see this in my consulting work and in working with clients in a variety of organizations, indeed, it’s why consultants can be valuable to their clients, is that it’s only too common for the urgent to push out the important, to use a cliche, and what that translates into as often as not is that the urgent is executing on the current strategy, and the important is thinking about the uncertainty, and that’s what can get overlooked.

Brett McKay: You know, what came to mind who does this, the military has separation between commitment and uncertainty. It made me think of World War II. So you had Eisenhower who’s overseeing the European operation, and he only thought about the big picture stuff. Like that’s the only thing he… He didn’t even think about the battles… I mean, he thought… He told what you needed to do, but he didn’t think about logistics. He let other people take care of that stuff and the commitment part, but then he was still busy thinking about, “Well, how will this play out in the long term?” He was thinking about allieships he had to make and managing people, so he always stayed high level. He never got down in that commitment part.

Michael Raynor: Yeah, I think that’s a good point. And that works when you have soldiers in the field who are really good at their jobs, and it makes me think that a few years ago I read Shelby Foote’s The Civil War Narrative, and it goes into great detail on the relationship between Lincoln and McClellan. So Lincoln unfortunately had to pay attention to the details ’cause McClellan wouldn’t go do anything.

Brett McKay: Alright. So requisite uncertainty is one way you can manage the strategy paradox. The other part is strategic flexibility. What does that look like?

Michael Raynor: Well, so we’ve touched on that a little bit. So strategic flexibility has the two components, one of which we’ve touched on, which is requisite uncertainty. And the other is the assembling a portfolio of assets and capabilities that allow you to change your strategy much more quickly than you would have been able to otherwise. So that’s some of what I was alluding to before in my counterfactual on Sony example. But indeed it’s what I spent a fair bit of time studying with the companies that I examined for my doctoral thesis, is that they actually go out and start purchasing other companies that have capabilities and assets and operations in potentially adjacent fields. So going all the way back to where we started the conversation, when you think about technological and media convergence, you had phone companies buying media businesses. So this was back many years, BC, what was then known as BCE, now Bell Canada. So BCE got into the media business and they purchased a satellite TV capability. Now, did they think there were any clear synergies between long distance services and satellite TV? Not particularly.

But they had a view that said under certain circumstances, the ability to broadcast television was going to be important in its competitive battle with cable should the cable companies actually start offering phone services over their cable infrastructure, which they have since begun to do. And so Bell BCE’s strategic flexibility was born of assembling this diverse set of assets, not because there were clear synergies among them, but because there might be clear synergies among them at some point in the future should the world turn out in one way versus another. So that’s not an excuse to go buy everything you can think of, ’cause you’ll run out of money before you run out of things to buy. But it is a reason to think very carefully about where you need to place some potentially strategic bets. And it’s because they’re potentially strategic as opposed to actually strategic that we refer to it as, if you will, strategic flexibility. And that whole strategic flexibility label is intended to be a bit of an oxymoron. Strategy is about commitment, flexibility is about not being committed. So we’re gonna glue the two together.

Brett McKay: And how do you make options for yourself without overwhelming or diluting what you do? Taking away from that, the main strategy that you’ve picked?

Michael Raynor: And now what you’ve done is put your finger on what the limits of strategic flexibility are. So I went on about how commitment is great but has its limits, and the same for adaptability. You know what? Strategic flexibility, I think is terrific, and you’ll run into limits there too, which is it’s very possible to overdo it. If all of a sudden, every acquisition is justified in virtue of its option value, well, now you’ve got seemingly carte-blanche to go buy whatever you want at whatever price you want, and you can make the wrong choice. So it does require ultimately, a managerial judgment to say, “We will go this far and no further.” So you’re making a subjective call on the nature of the risks you face and the value to the organization of hedging those risks in one way versus another.

Brett McKay: Are there any companies today that you see are applying this strategic flexibility and using requisite uncertainty?

Michael Raynor: Yeah. Not highly visible companies that make the news. I think, in a lot of what we see in the most salient markets today, it really is dominated by very large and very successful companies because a lot of competition in the industries that we care about most is driven by network economics and very nearly winner-take-all outcomes. So a lot of the organizations that I have tended to work with these days, and I alluded to it earlier, are in places like smaller organizations in industries like medical devices, or transport, or manufacturing, and so forth. And I think they are doing their best to try and build the kinds of portfolios that will help them cope with a number of uncertainties, one of the most salient of which these days is climate change. Because that arguably will require in many instances, a wholesale shift in literally how they power their organizations.

Brett McKay: I imagine too the pandemic has made the strategy paradox bare in a lot of organizations. They probably weren’t even thinking about a global pandemic affecting their business.

Michael Raynor: Yeah. It’s an excellent point. I almost… I’m tempted to put the pandemic in the short run, and we’re still in the short run. It’s been six months, and not a strategic uncertainty, but really a truly transformational exogenous shock to the system. And it’s unclear as yet whether that will result in fundamental strategic changes in organizations or whether we try and right the ship and get back to where we were. I think in some cases it will be transformative, and in other cases it will be an enormously painful shock to the system, but we will in fact, go back to largely what we were before. So the jury is out… Or let me say that again. I think it’s context-specific, what the impact of the pandemic will be on different organizations.

Brett McKay: So this book is geared towards businesses and organizations. But as I was reading The Strategy Paradox, I could see the strategy paradox play out in my personal life. Like, you’re in college, and you have to make a decision about what you’re gonna do for your future. It’s like, “Well, I’m gonna go to law school.” And you have to… In order for that strategy to work, it has to… You have to commit to it. But it might end up, you go through law school and you figure out, “Man, I don’t like this at all.” And so you…

Michael Raynor: Yeah, yeah.

Brett McKay: The uncertainty was like, is your future self actually going to enjoy the practice of law? Have you thought about the strategy paradox for like individuals at all?

Michael Raynor: A little bit, yeah. Your comment reminds me of one of the many lawyer jokes that we… I’m sure you got more of them than I do. But the only people who hate law more than law students are lawyers. And in fact, law schools, when I was looking at it, one of the ways they sell themselves to you is to say, “Look, don’t think that if you go to law school, you have to be a lawyer.” A present company would demonstrate, say.

Law school has all manner of applicability. And so they’re really selling you based on its optionality in the same. And indeed, when I was looking at a philosophy degree, the chairman of the department said, “Look, we won’t go become a professional philosopher at least, so that’s not the odds, but here’s why it’s helpful.” So they sell you on this optionality at that stage in your career. And it’s, I guess my view of it is that the… When it comes to an individual, the strategy paradox may provide some metaphorical guidance, but it’s not clear to me that it could be taken literally, because we don’t have enough resources, and we literally can’t do two and three things at once. The portfolio approach to your life is really kind of tricky. If you think about your relationships, it’s you wanna have a healthy relationship with a significant other, it’s probably a bad idea to think about the things… Spend too much time thinking about what you’re gonna do if it fails or keep your profile alive, if you’ve been going out for six months.

Brett McKay: That’s probably not healthy.

Michael Raynor: Exactly. I’m no psychologist, I’m not gonna offer any advice on that, I’ll just tell you that from where I’m sitting, that sounds like a bad idea.

Brett McKay: Well, it’s sounds too for individuals, even really small, a small business, they have more room to adapt, they’re more able to adapt better than larger businesses or larger organizations.

Michael Raynor: That’s an excellent point, yes, and perhaps that applies to individuals too, right? So your ability to adapt and change is such that you actually don’t need the overhead that comes with trying to build strategic options. You can kind of think about what you might do, but you don’t actually take any action to prepare for it, because if it turns out you have to do it, well, then you can just go do it. You don’t have to prepare in that way.

Brett McKay: Got you.

Michael Raynor: That’s different from contingency planning, I’m not saying, “Don’t have some cash in the bank, in case you hit a rough patch.” but that’s not what we’re talking about.

Brett McKay: The big take away I got from this book was, if you are successful or if organization is successful, even on the personal level, or you fail, you might have done everything right. The decision-making process was probably the right thing to do, you shouldn’t take it so personally, or the organization shouldn’t beat themselves up, because they did everything right, they just need to have more flexibility in their system.

Michael Raynor: Yeah, I think that’s a good point. And in fact, it relates fairly directly to help people tend to talk about innovation. They’ll talk about innovation, say, “Look, it’s not like everything succeeds, you can do everything right and it doesn’t work out, and you have to be at peace with the fact that failure is an option.” And I guess what the strategy paradox prescribes with strategic flexibility in particular, is that here’s something you can do about that, so when what you committed to would have otherwise failed, you’re actually in a position to pull that out of the fire and save it.

Brett McKay: Well, Michael this has been a great conversation, where can people go to learn more about your work and other books you’ve written?

Michael Raynor: Any of the online book sellers will have the four books that I’ve done available. If you’re interested in what I’m doing these days at Deloitte, you can look me up on the Deloitte website, And yeah, so that would be the first port of call.

Brett McKay: Fantastic. Well, Michael Raynor, thanks for your time, it’s been a pleasure.

Michael Raynor: And for me as well, take care.

Brett McKay: My guest, it was Michael Raynor, he’s the author of the book, The Strategy Paradox, it’s available on, check it at our show notes at, where you can find links to resources, where you can delve deeper in this topic.

Well, that wraps up another edition of the AOM podcast, check out our website at, where you can find our podcast archives, as well as thousands of articles we’ve written over the years about pretty much anything you can think of. And if you’d like to enjoy ad free episodes of the AOM podcast, you can do so on stitcher premium, head over to, sign up, use code MANLINESS at check out for a free month trial. Once you’re signed up, download the stitcher app on Android IOS, and you can start enjoying ad free episodes of the AOM podcast. And if you haven’t done so already, I’d appreciate if you take one minute to give us a review on Apple Podcast or Stitcher, it helps out a lot. And if you’ve done that already, thank you. Please consider sharing this show with a friend or a family member who you think will get something out of it. As always, thank you for the continued support, until next time, this is Brett McKay, reminding you to not only listen to the AOM podcast, but put what you’ve heard into action.

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