Success in the Face of an Indiscernible Future

Rachael Garrity


When Dr. Michael E. Raynor presents his keynote presentation at the SCIP Anaheim Conference, along with Vicki Jones of SBC Communications, he will bring to the audience an all-too-rare approach -- one that both breaks theoretical new ground and offers tested and provable practical application. A director at Deloitte Research, the research division of Deloitte Consulting (soon to be come Braxton), Michael has expanded on work he began as part of his doctoral research at the Harvard Business School.


Strategic flexibility

"In the process of making decisions, managers obviously feel compelled to commit to a certain course of action," Michael explains, "and within that process there are often profound disagreements on the assumptions of what the future holds. If we knew the future, the right strategy would be easy to adopt. The fact that the future is indiscernible, that we cannot put a pin in a map, regardless of how comprehensive the information with which we're working, means that being smart isn't enough. Firms must try to “square the circle” and combine commitment with adaptability." Raynor calls this strategic flexibility.

Michael's research has focused on large, complex firms in aerospace, forestry, and telecommunications. These industries are all faced with how to make long-term commitments in the face of uncertainty, but also quite different in the uncertainties they face.

"Telecommunications companies are looking at fundamental technological changes every six months or so; in forestry the business is cyclical, but quite predictable and characterized by slow, incremental technological change. Aerospace is positioned somewhere between the other two in terms of how the marketplace shifts," he points out. "All three are capital-intensive industries demand commitment to specific strategies, so many of the most important differences in how they implement strategy can be attributed to the differences in the kind of uncertainty they face.” Raynor’s subsequent research has elaborated upon the way companies can become ‘Strategically Flexible’ in ways appropriate to the competitive and environmental demands of their industries.


Changing ways of thinking

While Michael is quick to point out that this approach is "not a silver bullet," he argues that it is a fundamental departure from many traditional ways of thinking. Particularly when there is high commitment to an issue and high uncertainty, existing frameworks can get in the way.

Michael cites as an example the financial planning process. Comparing the relative attractiveness of different opportunities by projecting cash flows many years into the future and discounting them back despite different levels and types of uncertainty ignores what every good manager intuitively knows: the future is uncertain, and a project that runs exactly on plan is as rare as hens’ teeth. “Existing planning tools make it almost impossible to build in the kind of flexibility that the best managers try to create because discounted cash flow analysis at best ignores the value of flexibility, and often penalizes it.”


Strategic flexibility applied

Strategic Flexibility can be applied to a wide variety of functions, industries and organizations. Since joining Deloitte in 2000, Michael has extended and elaborated on his earlier research to make it more actionable, more programmatic and straightforward, ergo more powerful. Gratified at the reception he has received in the marketplace, he is particularly enthusiastic about the fact that he will be joined in Anaheim by Vicki Jones, vice president of product management and development at SBC Communications.

"A firm like SBC has to make long-term commitments in the face of persistent uncertainty. Vicki's perspective is firsthand, and her ability to describe how Strategic Flexibility has helped her organization cope with some of their biggest competitive challenges will be invaluable to conference participants," Michael says.

And, with great candor, he adds that the on-the-ground experience of firms like SBC continues to inform his research and create even more refined ways for him to help his clients succeed, no matter what the industry.

For more on Strategic Flexibility, see www.dc.com/strategicflexibility .

Copyright 2003 Society of Competitive Intelligence Professionals www.scip.org