20/20 Foresight: Crafting Strategy in an Uncertain World [Hardcover]

Hugh Courtney (Author)

Book Description

Publication Date: October 1, 2001

In the midst of a changing economy, most executives continue to use a strategy toolkit designed for yesterday's more stable marketplace. As a result, strategies emerge that neither manage the risks nor take advantage of the opportunities that arise in highly uncertain times. Now, McKinsey & Company consultant Hugh Courtney argues that managers must move beyond the outdated "all-or-nothing" view of strategy in which future events are either certain or uncertain. Instead, he suggests a simple-yet powerful-alternative: Understand the level of uncertainty you are facing in a given situation, and you will make better, more informed strategic choices.Based on an international review of the key strategy problems faced by over one hundred leading companies, Courtney reveals how executives can develop 20/20 foresight - a view of the future that separates what can be known from what can't. While executives with 20/20 foresight can rarely develop perfect forecasts of the future, says Courtney, they can isolate the "residual uncertainty" they face and use this insight to create competitive advantage in today's turbulent markets. Unveiling a revolutionary framework for diagnosing to which of the four levels of residual uncertainty a specific strategy choice corresponds, "20/20 Foresight" shows how readers can leverage this knowledge to answer three key strategic questions: Shape or adapt to uncertainty? Make strategic commitments now or later? and Follow a focused or diversified strategy?"20/20 Foresight" also shows strategists how to tailor every aspect of the decision-making process - from formulation to implementation - to the level of uncertainty faced, describes the strategic-planning processes readers can use to monitor, update, and revise strategies as necessary in volatile markets, and includes a toolkit for identifying, developing, and testing new strategy options - complete with guidelines for applying the right tool to the right situation at the right time. A comprehensive approach to strategy development under all possible levels of uncertainty and across all kinds of industries, this is the essential guide for making tough strategic choices in a changing world. Hugh Courtney is an Associate Principal with the Global Strategy Practice at McKinsey & Company in Washington D.C.

Editorial Reviews

From Publishers Weekly

In this intriguing, clearly reasoned book, McKinsey consultant Courtney argues convincingly that managers can approach uncertainty systematically. Most managers, he says, either ignore potential problems or try to map out them out in painful detail. The better approach, Courtney contends, is to classify risk (e.g., a relatively clear future, a range of possibilities or true ambiguity) and hone a strategy based on a checklist he provides for each category. This appealing approach could become an integral part of the manager's toolkit.

Copyright 2001 Cahners Business Information, Inc.

Review

Tackling uncertainty is tough, but Courtney brings his target down to earth with a solid thump. -- Entrepeneur, December 2001

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Product Details

• Hardcover: 240 pages
• Publisher: Harvard Business Review Press; 1 edition (October 1, 2001)
• Language: English
• ISBN-10: 1578512662
• ISBN-13: 978-1578512669
• Product Dimensions: 9.6 x 6.3 x 0.9 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 4.2 out of 5 stars  See all reviews (13 customer reviews)
• Amazon Best Sellers Rank: #507,877 in Books (See Top 100 in Books)

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29 of 31 people found the following review helpful:

4.0 out of 5 stars good handbook, but nothing new here, January 20, 2002

By A Customer

This review is from: 20/20 Foresight: Crafting Strategy in an Uncertain World (Hardcover)

This is a nice reference work - a handbook for thinking about uncertainty. But it's not much more than that. It's nice to have under one cover a guidebook to most of the different tools that are available for dealing with uncertainty, including scenario planning, game theory, statistical forecasting/simulation, real options, etc. As such, it's a helpful guide for top corporate officers who never got MBA training (or who didn't pay attention in class). Also, it's a helpful, applied text to illustrate why all that quantitative stuff in the MBA curriculum is actually useful.

However, for companies that are up-to-snuff in having a basic capacity for strategic thinking (and it's hard to understand when a company these days is not up-to-snuff, given the expense of strategy consultants and the lack of expertise that their "green" consultants possess), the tools and approaches summarized in this book are (or should be) old hat. Contrary to what the introductory chapter implies, most of the tools from so-called "recent work" have actually been around for decades and have been taught as part of MBA and other master's degree program curricula for a long time. Serious game theory dates from the late 1970s, scenario planning became more widely known in the early to mid 1980s (a decade after developed by Royal Dutch Shell), real options analysis came into its own in the late 1980s, and forecasting/monte carlo simulation have been around for a long, long time. The book also implies that the purveyors of these tools claimed to possess " *the* solution to generating and evaluating strategies under uncertainty." Well, I don't think the creators of the tools did that... that behavior is more the territory of consultants and authors published in HBR (the publication with the fewest footnotes of any journal in the field, all the better to make old ideas seem new, which is a gripe for another forum). To my knowledge, having personally received this training and kept up with the "pop" articles in each of these tool areas, very few authors have made such claims. (To this book's credit, it is heavily footnoted.)

Nonetheless, it is helpful to have much of the literature summarized together into one book for the lay executive who hasn't thought much about these issues before or who hasn't received this kind of training. The book might also be helpful to antitrust regulators, who are sometimes too eager to see monopolies in industries that are still subject to considerable flux (the Microsoft monopoly *not* being such an instance).

One other minor flaw of the book is its straw-man attack against the typical company's "strategic-planning and decision-making toolkit", which implies that this book will somehow be revelatory to business executives. This straw-man-approach-to-strategy that the book serves up as whipping boy is more than a decade out of date. As most readers recognize, the attack is a thinly veiled criticism of Michael Porter, the intellectual champion of the "positioning school" of strategy. While the attack on Porter is spot on, the book's straw-man attack on strategy-as-practiced is not. Personally, I think the attack is just "positioning" to make the book's topics look more fresh. Criticisms about the static-ness of Porter's writings have been around for many years. Thus, the particular company that this book serves up to be the whipping boy (one of the regional Bell operating companies)--which relies only on a Five Forces or Value Chain analysis--is only reflective of a company that slept through the last decade worth of strategy and that has poorly trained planners. Strategy was, is, and continues to be more than the narrow microeconomics of Porter. Thus, to suggest that the book will suddenly open the eyes of company CEOs and analysts to the tools of dealing with residual uncertainty is, I think, overstated. As stated at the top, this is a good, concise handbook, but there's not much here that's new.

13 of 13 people found the following review helpful:

5.0 out of 5 stars Measuring Degrees of Probability Amidst Uncertainty, July 22, 2003

By 

Robert Morris (Dallas, Texas) - See all my reviews
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This review is from: 20/20 Foresight: Crafting Strategy in an Uncertain World (Hardcover)

Courtney and his McKinsey associates decided to launch within their firm the Strategy Theory Initiative (STI), a multi-year research effort whose objective was to identify, develop, and disseminate what they learned about a "better approach" to the immensely challenging complicated design/implementation process. (While reading the Preface to this book, I was reminded of one version of a Hebrew aphorism, "Man plans and then God howls with laughter.") The material is carefully organized within seven chapters. In the first, Courtney shares what he and his research associates learned about crafting strategy in an uncertain world; in the next chapter, we are introduced to what are called "The Four Levels of Residual Uncertainty." (All by itself, this chapter is well worth far more than the cost of the book.) Then on to address five separate but related questions:

* Should we shape or adapt?

* Should we begin the process now or later?

* Should we focus or diversify?

* Which new tools and frameworks are needed?

* Which new strategic-planning and decision-making processes are needed?

Of course, Courtney fully realizes that the revelations of the STI research can only guide and inform appropriate answers to questions such as these. He agrees with Mike Hammer that searching for a "silver bullet" is a fool's errand, noting that "there [is] no easy one-size-fits-all solution that could be translated from theory into practice. Business strategists needed new theory [and, in italics] new practices if they wanted to make better strategy choices."

At the height of the Cold War, I recall someone noting that Russian historians could predict the past with absolute certainty. This book's title does not suggest that if you read this book, you can see the future. ("Man plans and then God laughs.") Rather, instead of burying uncertainties in meaningless base case forecasts or avoiding rigorous analysis of uncertainties altogether, Courtney suggests that we "embrace uncertainty, explore it,, slice it, dice it, get to know it." If we do this well? "[You] will reach a wonderful goal: 20/20 foresight." The best available information serves as the basis of the most reliable forecasts which, in turn, improve the chances of devising the soundest strategies.

After summarizing the appropriate toolkit for each level of residual uncertainty (see figures 6-1 through 6-4), and having also suggested various tools and frameworks needed to develop 20/20 foresight, Courtney offers five additional tools in the Appendix: The Uncertainty Toolkit. He briefly but brilliantly explains how to use scenario planning, game theory, decision analysis, system dynamics models, and management "flight simulators." Although this book will obviously be of substantial value to senior-level executives in larger organizations, I think it will be invaluable to others such as CEOs and other decision-makers in small companies. The challenge for all of them is to "tailor strategy to the level of uncertainty," whatever the nature and extent of their competitive marketplace may be. Here in a single volume is about all they need to begin the process. Another thought: This book would be an excellent choice as the basis of a one-day or (preferably) two-day offsite executive "retreat" for strategic planning. Reading it in advance would be required. The first two chapters would be excellent for assisting situation analysis, then on to the next five chapters which could serve as the core of the agenda. (I also recommend that Hammer's The Agenda be consulted, at least by the person who leads the group discussion. And, by the way, that person should NOT be the CEO.) The session would conclude with a review of the consensus achieved, followed by a discussion of how to communicate and collaborate effectively while using various tools, including the five recommended in the Appendix.

Courtney would be the first to point out that, over time, other sources of information and guidance may become necessary. For that reason, he includes clusters of annotated "Recommended Readings" to assist his reader's selection process. Thoughtfully, he adds to their number with other suggestions within his extensive notes.

For at least some individual executives and some organizations, this may well prove to be for them the most valuable business book published during the first decade of the 21st century.

To those who share my high regard for it, I specifically want to recommend (again) Hammer's book as well as Jim O'Toole's Leading Change, Jason Jennings' Less Is More: How Great Companies Use Productivity As a Competitive Advantage, Peter Schwartz' The Art of the Long View: Paths to Strategic Insight for Yourself and Your Company, and finally, Carla O'Dell's If Only We Knew What We Know: The Transfer of Internal Knowledge and Best Practice.

23 of 27 people found the following review helpful:

4.0 out of 5 stars Finally a McKinsey Book that walks the talk, October 12, 2001

By A Customer

Amazon Verified Purchase

This review is from: 20/20 Foresight: Crafting Strategy in an Uncertain World (Hardcover)

Would highly recommend this book to anybody who is looking to find strategic tools that help resolve problems under uncertain contexts.

Most books out there (Porter's Competetive Advantage, Co-opetition, Competing for the future, Decision Analysis books, and many more) talk about one tool/methodology or one way of resolving the strategic problem. This book takes a different path in that all good tools are used together and it is hoped that by viewing the well defined structured problem using these tools would help you come to conclusions in differing levels of uncertainity (obviously the problem context has levels of uncertainity or risk).

Four levels of certainity are defined and tools that would help under those circumstances are clearly listed. For most of the tools - how to use those tools is upto you to figure out. However, having said that the Appendix section does lists further reading, that would help you get started in learning about _some_ of the tools used in the book. I found the tools lists to be very useful. After reading the book I knew _exactly_ what tools to use under my circumstances.

If you have spent time reading strategy (Mintzberg, Ghemawat, Hamel, Kaplan et al, Porter, Prahalad, Day, systems engineering approaches...), you'll find good use on how to put togther all those analysis methodologies into one framework and come to conslusions.

I wish the book actually walked through some cases and used the tools listed to arrive at conclusions. Cases in differing levels of uncertainity would have been very helpful (hence 4 stars).

Finally, this is my first McKinsey book (McKinsey brand leveraged book) among others that walk the talk (others being Valuation and the McKinsey Way/McKinsey Mind).

Recommended.