Strategic Resilience: Committing to "I Don't Know... Yet"

Reviewing Michael Raynor's latest book ('The Strategy Paradox'--just released today), Guy Kawasaki blogs ten questions. The following tidbits caught my eye as principles I've been talking about for years now. (I don't have a PhD from the Harvard Business School however; Raynor does). In essence: scenario thinking can engender corporate agility and strategic resilience under a wide range of (by definition unpredictable) future conditions.

Apple continued along the path that it had blazed with the Apple II and the Macintosh... Like a broken clock, a strategy that never changes gets it right sometimes, though statistically it is wrong more often than not... By contrast, Microsoft built a series of strategic options that positioned the company for success under a variety of different outcomes. Microsoft had what turned out to be a better strategy only because it didn’t commit itself to a single strategy.

...the same strategies that have the highest probability of extreme success also have the highest probability of extreme failure... To produce success, vision, commitment, and focus must be linked to an accurate view of what lies ahead, and nobody can adequately predict the future. If you can guess right on a regular basis, my hat’s off to you... and can I buy your stock? But no one—no one—has any legitimate claim to an ability to make predictions relevant to true strategic planning. [emphasis added]

Or, as I've said many times (and blogged earlier this month), nobody has actually been to the future--though many would like to believe that some expert has... and that his/her prescience will guarantee success. Said experts, of course, are loathe to dissuade such illusions.

The question in Kawasaki's piece that deserves perhaps the most pondering is this one:

Question: Why can’t companies predict the future better?

Answer: Companies might be able to predict the future better than they can now, but for me the question is whether they will ever be able to predict the relevant future accurately enough for the purposes of strategic planning, and so avoid, or at least mitigate, the strategy paradox. I don’t think that’s going to happen anytime soon for some deep, structural reasons.

For example, randomness. Prediction requires the identification of a pattern that repeats, because a pattern is what allows you to use what has happened to infer what will happen next. Randomness is the enemy of pattern-based prediction because randomness means that there is no pattern, no way to use the past to predict the future.

In A New Kind of Science, Stephen Wolfram identifies three sources of randomness, the first two of which are relevant here. First, any system must have boundaries that define it, since any system without boundaries would be the universe itself. Second, no system is entirely closed. Therefore, every system is subject to exogenous, and necessarily unpredictable, shocks that introduce randomness into the system. And if you keep on expanding the boundaries to encompass the various externalities, you will need a theory of everything to have a theory of anything. [emphasis added]

This is one reason that much traditional "Michael Porter style" strategic planning has fallen short: it requires crisp definitions of industry boundaries in order to yield meaningful insights. Define things too narrowly and you get whacked from outside ('best car in it's class' syndrome). Industries resist bounding (arguably more now than in the past). For example, what industry does the iPhone occupy? Yet if one defines boundaries too broadly one gets un-actionable mush.  What's left? A need for divergent scenarios that empower management teams to think systemically across and around boundaries--recognizing but not being hemmed in by them. The goal: strategic resilience whatever may come. Much more good stuff to ponder on Kawasaki's blog. H/T: JH.

Comments

[CA]

Apple was not positioned to be a mass market product. It was classier, pricey and was perceived as a high end product. It had its niche. Microsoft, on the other hand wanted to be on every desktop. And you can see their differences in strategy in their pricing, for example. But, yes, Apple lost its way while Microsoft surged forward.

If you can predict success, you take the fun out of the game. It is because you cannot predict success, you make an educated gamble. If you are able to convince the markets that your direction is the right one, well, you succeed. I suppose this is why you want to listen to what the industry leaders are thinking. If the majority of us buy into the industry leaders' thinking, I am sure we will end up there. And if the majority disagrees, we all will head in another direction.

History is written by those who win and not necessarily by those who are right.

I must say your blog has piped up my curiosity. I must read that book now.

[Mary-Louise Boyd]

I work for Guy Kawasaki, and I would like to thank you for your comments about Guy and his blog!

Mary-Louise

Online Assistant

http://blog.guykawasaki.com/
Mary-Louise@garage.com

[TMLutas]

Apple's strategy today is not Apple's strategy of yesterday. Apple actually is quite schizophrenic strategically these days but you really only see it if you look deeply into the technology.

The most visible clue is the switch between PPC and x86 chips. Apple secretly created a parallel set of technology based on x86 and held that development secret in the face of demands for x86 versions of their applications and OS until Intel switched out of their very hot netburst architecture into a speedy, but cool architecture.

Apple has put in the flexibility into its technology that they are able to switch horses in a way they never could before. Their actual strategy is to pick and choose areas they want to enter and choose the best available entrant and give it a bit of Apple polish, eventually integrating it into the Apple ecosystem.

Safari? It's the best KHTML variant browser around. OpenDirectory? It's the best LDAP implementation, and so on and so on. What's different now is that there's an entire ecosystem of code that's very competent engineering-wise but generally aggressively ugly and poorly planned from a user experience perspective. Apple can make bets on these software technologies, incorporate them into programs all the while leaving a way out if Apple falters. Even OS X itself would be able to be replaced if Apple injected its frameworks into GNUstep. This leaves Apple's "proprietary" technology only proprietary in its polish, its artistic vision, its insistence on an excellent user experience. This is something that other technology companies have failed to do, consistently, for decades and is a viable strategy no matter the twists and turns of their industry.

Apple's multiplatform compilers mean there's no hardware lock-in. Apple's picking OSS technology to base its own offerings on means there's no lock in. Is this the same proprietary technology of the Apple II and 1984 Macintosh? Not in the least.

The idea of "strategic resilience" is quite good. Pointing to today's Apple as an exemplar of how not to do it? not so much.