Customer Reviews

20/20 Foresight: Crafting Strategy in an Uncertain World

5 star:		(7)
4 star:		(4)
3 star:		(0)
2 star:		(2)
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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.

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.

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.

This book may be one of the most interesting pieces of work to come out of McKinsey. Hugh Courtney recognizes that traditional strategy approaches do not work well in conditions of significant uncertainty. Traditional tools such as Porter's Five Forces, market research, SWOT analysis, and NPV valuation models work only in "level 1 uncertainty". Courtney rightly critiques those who see uncertainty in binary terms, instead outlining four levels of uncertainty each of which require different strategic approaches. Level 2 uncertainty (several distinct possible futures), in addition to the traditional tools, can be tackled with scenario planning, game theory, and decision-tree real-options valuation (ROV) techniques. Companies dealing with level 3 uncertainty face a range of futures and need to use additional tools such as system dynamics models in addition to those of level 2. Companies facing confusing level 4 uncertainty, where there is true ambiguity, can use analogies and reference cases and "management flight simulators" to help make sense of deep uncertainty. In a sharp break with the usual approach, the growing number of companies facing level 4 uncertainty need to think backwards from hypothetical futures to what you would have to believe about the future to support a particular strategy. In addition to the levels of uncertainty framework, Courtney outlines the alternatives of "shape or adapt" to uncertainty, make strategic commitments now or later, and follow a focused or a diversified strategy. The details of this book may be familiar in many ways, but the overall framework potentially could be highly enlightening for planners who want to use the right tools for the job.

"If you want to make better strategy choices under uncertainty, then you have to understand the uncertainty you are facing. .... you must embrace uncertainty, ... get to know it." This is the basic thesis of the book, which suggests that:
* there are four basic levels of 'residual uncertainty', which the author defines as 'the uncertainty left after the best available analysis to separate the unknown from the unknowable', each of which requires a different strategic response
* strategy under uncertainty requires arriving at the best possible answers to five basic questions:
- shape or adapt (eg seek to shape a market or adapt to an existing market)
- Now or later
- focus or diversify - for example a strategic portfolio
- should we use new tools and Frameworks - the author explores scenarios, game theory and systems dynamics among others
- new strategic planning and decision making processes - should we challenge a traditional planning cycle or set of decision processes?

* Management should operate with a four step process:
- Define the strategic issue and the level of residual uncertainty
- Frame possible solutions
- Analyze possible solutions and make strategy choices
- Monitor and update strategy choices over time

* The appropriate approach is issue related, not organization related. Organizations in stable environments may encounter major strategic issues involving high residual uncertainty, while those in very dynamic environments may have issues involving low uncertainty. The strategic process must be appropriate to the situation.

The book is concerned with how to answer the five basic questions above in the context of each level of uncertainty, and which tools are most appropriate for guiding the decision process. The tools discussed in the Appendix "The Uncertainty Toolkit" are:
scenario planning
game theory
decision analysis
systems dynamics models
management flight simulators.
In essence, what the author has done is to frame a set of known tools and principles within McKinsey's preferred structure of analytical rigour. If you still believe that 'classical' strategic planning round the business case is the only way to approach strategy, the book may help widen your options. If you are already familiar with the various tools offered, the main benefit of the book will be to provide a useful reminder that levels of uncertainty differ, and a framework for thinking about your own situation and response to it. Perhaps the most important message in the book is not to assume uncertainty until you have carried out the analysis needed to separate the knowable from the truly uncertain.

I write this review from the viewpoint of a person with little background in strategy. I can't keep up with strategy pros like previous reviewers; however I may be useful to people who try to think strategically, are literate in economics and in their business, but are not trained specifically for strategy.

On this criterion I think this is a very good book. Basically it shows up an inventory of various tools for thinking appropriately, organized around the concept of residual uncertainty - everything you cannot know even after the best available analysis.

The book helps the novice by laying out key questions - now or later, shape or adapt, focus or diversify - and several tools to answer those questions. All written in clear English, with some support cases, in reasonable detail.

Probably the book should not get five stars from a pro, but it does from an amateur like me. Also bear in mind that most amateurs will end up using an old strategy toolbox (Five Forces, an NPV for anything, etc) unless alerted to the fact that something else is available after all. It is also important to be convinced that newer tools are not simply a matter of fashion; real-option stuff, system dynamics etc do smack of fashion to me (in some cases outdated fashion, at that) and seeing them used helps me overcome prejudice. Not seeing used other things that also smack of fashion (chaos, complexity) may also say something.

I do have my own perplexities. Is some real-option reasoning just ex-post justification for half-hearted efforts? (in the wrong hands, it can be) Is it always sensical to reduce "residual" uncertainty by further research? (no) Can too little research be worse than none at all? (yes, look at the Alpha case) Is Black-Scholes right for real options? (I'd use a stochastic-discount-factor approach instead). Etc etc. But all in all, one of the most useful business books I ever read.

One thing for certain in the complex decisions on business strategy is the element of uncertainty. And it is certain that this cannot be managed or eliminated. What is important is the extent to which we are able to quantify the error in alternate scenarios and possibly arrive at decisions that are optimal. Had there been an "ideal toolkit", we could have avoided all business failures and planet earth would have been the safest place to live in for all entrepreneurs. Mankind would have awarded such a discovery with nothing less than the Nobel Prize. To expect our naked eye to have a clear picture of the universe will mean the demise of all telescopes and investments in space exploration. Strategy needs vision and this vision needs tools.

This book provides a framework to classify uncertainty into 4 basic types and links it to major strategic decisions facing the Organization. It is a one to many relationship and situational in character. To make the understanding better, lots of examples ( Detailed case studies would have been even better) are thrown in. In the end our comfort in understanding Strategy certainly improves. But the exploration of this largely unmapped terrain will continue in the coming decades as we discover new lands. This is for certain.

Highly recommended.

The phrase heard most often today from executives excusing poor performance is that 'market visibility was poor'- maybe they would have done better had they read 20/20 Foresight.

Hugh Courtney does a masterful job of creating a powerful framework that segments the different kinds of uncertainty that exists, and then provides a clear guide and useful toolkit to deal with various issues that arise in the different bands of uncertainty. The author grounds all of these tools in real business examples (rather than just providing broad generalizations- which so many business books do these days.)

I think that this is one of the most clearly written and interesting books that I have read and strongly recommend it to anyone who has a role in crafting or guiding a business' strategy

'20/20 Foresight' provides a concise guideline on business strategy tools & frameworks, based on 4 levels of 'residual uncertainty'. Courtney has repeatedly mentioned the non-dynamic nature of Michael Porter's competitive strategy framework, thus the need of utilizing various 'new' tools (such as Real-Option, & Simulation). I find that Porter's work on competitive advantage, value chain, clusters, do incorporate the 'dynamic nature' of the business world nowadays. What Courtney nicely provides is a systematic way to select the relevant 'tool' in the business decision process. A solid understanding & analysis based on 'classic' strategy framework (such as Porter's) is critical in order to utilize Courtney's 'new' tools to achieve business success.

Hugh Courtney once again explains with his unique way the types of the uncertainty that a manager might encounter and the analysis that he should perform in order to use that uncertainty for his benefit.I highly recommend it.