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The Strategy Paradox. Edited by Michael Raynor

Article  in  R& D Management · June 2009

DOI: 10.1111/j.1467-9310.2009.00556.x

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Book Reviews
The Strategy Paradox. Edited by Michael Raynor.
Doubleday Business, 2007, ISBN 0385516228,
hardback, d19.26, pp. 272.
Strategy Paradox is not the first book to observe
that the future, in terms of technology and market
forces, is unpredictable and strategy-making must
take uncertainties into account. However, the
book transmits a strong message that uncertainty
must not be placed as an afterthought. Like many
other books, it advocates the separation of roles
between the management of commitments and
the management of strategic uncertainty. What is
unique is that it expands on leading theories, for
example, generic strategies (Chapter 3), forecast-
ing (Chapter 5), strategy and structure (Chapter
6), scenario planning (Chapter 9) and real options
(Chapter 10). The specificity of each concept
comes from different domains of management
and strategy, and often beyond the grasps of
one discipline. Michael Raynor successfully inte-
grates such concepts and provides new insights in
this book. What is possibly the main weakness
with this book is that it lacks original ideas.
Chapter 1 is an extensive overview that would
probably be most difficult to digest; however, it
sets the stage for the remaining chapters. It argues
that strategic commitments are based upon beliefs
about the future. Excellent strategies, however,
can fail because the conditions under which those
commitments would have been appropriate did
not materialise. The Strategy Paradox is visible
when one examines strategies whose only flaw was
that they flopped. The next chapter illustrates
Sony’s inability to build in, and cater to, the
uncertainty of the market conditions through
the case studies of Betamax and MiniDisc. De-
spite brilliantly executed strategies and product
development, the two products are examples of
the market (environment) being not quite ready
for them. Each venture failed because of insuffi-
cient attention to the salient uncertainties, accord-
ing to Raynor.
Chapter 3 reinforces Michael Porter’s Competi-
tive Strategy from the 1980s that the most profit-
R&D Management 39, 3, 2009. r 2009 The Authors. Journal compilation r 2009 Blackwell Publishing Ltd,
9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main St, Malden, MA, 02148, USA
able strategies are ‘extreme’ in nature. Successful
companies should position themselves as either
differentiated (to be radically different) or be a
cost leader (the absolute low cost provider). Either
of these would require organisations to invest
heavily in R&D and product innovation to pro-
vide the most radical but functional products, or to
add the greatest value at the lowest cost. Invest-
ment and commitment to such extreme positions,
the author argues, expose firms to the greatest risk.
Chapter 4 contends that organisational adapt-
ability is an insufficient response when environ-
mental change is too fast, or when multi-
environment change occurs. In Chapter 5 the
author argues that forecasting is not able to cater
for multi-environment uncertainty, as there are
simply too many variables in the environment.
Strategies arising from any forecast will have
certain assumptions about the future embedded
in them. A high degree of environmental uncer-
tainty, especially in the long-term, will be beyond
the limits of traditional forecasting.
Chapter 6 relates to the landmark work of
Alfred Chandler’s Strategy and Structure from
1963, but differs substantially in driving its unique
argument. Chandler argues that strategy for
growth through diversification necessitated a
change in organisational structure in order to
cope with its complexity. Raynor presents a new
dimension where the operating and functional
divisions should focus on driving commitments,
while the Board and Corporate levels must focus
on strategic uncertainty over a longer horizon.
Chapter 7 introduces Vivendi Universal, BCE
Inc. and Microsoft Inc. to illustrate how commit-
ments are implemented and monitored at differ-
ent levels of organisations. This chapter argues
that the success of an options-based corporate
strategy largely depended on the charisma and
influence of the CEO. An explicit process-based
approach, where managers at all levels can con-
tribute to managing uncertainty and capturing
opportunities is important. A point well illu-
strated by the Johnson and Johnson case pre-
sented in Chapter 8.
305
 Book Reviews
The concept of strategic flexibility combines
scenario-based planning and real options, de-
scribed in Chapters 9 and 10, respectively. While
Chapter 9 illustrates the usefulness of the sce-
nario-based approach, strategy formulation has
very different objectives in the context of requisite
uncertainty. Scenarios can reflect a set of invest-
ments that a company makes. The five-step meth-
odology for scenario creation follows quite
closely to the established literature (e.g. Shell’s
scenario-based planning). In Chapter 10, Raynor
adopts the concept of efficiency frontiers in finan-
cial investment to argue that only by creating
options based on the contingent elements would
the firm reach the ‘strategic frontier’ of strategic
investments. Finally, Chapter 11 is a concluding
chapter that perhaps could be expanded to in-
clude some useful practical implications for the
technique.
Strategy Paradox advocates that uncertainty is
at the heart of decision-making at the highest
The Venturesome Economy: How Innovation
Sustains Prosperity in a More Connected World.
Edited by Amar Bhide, Princeton University
Press: Princeton, 2008, ISBN 978-0691135175,
hardback, d24, pp. 520.
The central role of the new venture in the opera-
tion of national economies and particularly in the
global knowledge economy is well established.
The characteristic feature of a venture is that it
involves a business enterprise engaging in risk
with the expectation of gain. Interestingly, the
noun venture almost never appears without the
accompanying adjective new (old ventures are just
companies or businesses), or joint, or as a qualifier
of capital.
Could it therefore be revealing that, late in
2008, there appears to be a quest for a suitable
generic adjectival form of venture. Thus in Aus-
tralia, a major review of the national innovation
system was entitled Venturous Australia: Building
Strength in Innovation.1 This unfamiliar word can
be traced to early English as a ‘disposition to
venture, or take risks’.
Bhide uses the more familiar but nevertheless
clumsy adjective venturesome, to characterise not
only economies, but also a form of consumption
that is a crucial driver of innovation, and in
306 R&D Management 39, 3, 2009
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levels of the organisation. Scenarios are placed in
the centre of strategic planning as they are excep-
tional in defining key uncertainties that an orga-
nisation faces. Strategy development will focus on
identifying the risks a company will accept, hedge
or avoid, rather than just a determination of the
commitments a company will make. The book
makes a valuable read for practitioners and
decision-makers, as well as MBA students, as
the fundamental concepts are well grounded
with additional insights provided. The concepts
are generally applicable to companies with the
ambition to succeed. The book combines existing
concepts to create high profitability and manage
uncertainty in a strategic context – most impor-
tant in today’s economic landscape.
ADRIAN T. H. KUAH
University of Bradford, Bradford, UK
particular what he sees as the all-important
‘mid-level innovation’, namely ‘the willingness
and ability of intermediate producers and indivi-
dual consumers to take a chance on and effec-
tively use new know-how and products’.
The author organises his argument into what
he calls two books. Book 1 presents the findings
of many interviews with VC-backed businesses
about their cross-border interactions. This focus
is justified on two grounds: ‘VC-backed busi-
nesses are relatively uncomplicated players’ and
‘they provide a window on the middle level of the
innovation game in terms of both product
and knowhow’. Book 2 generalises from these
findings ‘to rebut techno-nationalist alarmism
about the erosion of the US lead in cutting-edge
science and technology’ and consequent policy
formulation.
In fact, there is also an interesting Book 3
running in parallel in which the author engages
in an extended epistemological narrative to justify
his eschewal of a narrow hypothesis-testing ap-
proach in favour of an inductive, ‘common-law
type of inquiry’ through which various theories,
facts and conjectures are assembled and tested
against common sense.
But the justification for the detailed data and
case studies presented in Book 1, fascinating and
r 2009 The Authors
Journal compilation r 2009 Blackwell Publishing Ltd