20/20 Foresight: Critical Success Strategies for New Leaders at All Levels

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," what

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.

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.

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.

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