Smart is Dumb, and..

...dumb is smart.

I was reminded of the importance of what I read about years ago in the best-selling negotiating guide, Getting to Yes, watching TURN, AMC's new drama about America's first spy ring in the American Revolution. In episode two, a Captain in the Continental army charged with creating the spy ring, serves dinner to a captured British Captain in a gesture of apparent civility between officers. At the end of the meal, the British Captain, wishing to reciprocate, gives away the exact information the the Continentals needed. The dialog:

British Captain: "Now then, to business. What is it you wish to know?"

American Captain: "Oh nothing, sir. We already know all we need to know."

BC: "Truly? You know where we mean to strike after retaking New York?"

AC: "We know you have four thousand men stationed at Throgs Neck in Brooklyn, New York, as part of your occupation force."

BC: (incredulously) "Four thousand??? (derisive snort) Try six!"

Good information is critical to success, whatever your decision-making endeavor - military, negotiations, strategy, marketing, sales... And, it requires careful planning to obtain, and validate.

Just don't let your ego get in the way.

23 Reasons Not to Talk to Strangers? Or...

...Little Red Riding Hood?

My friend and former colleague Eric Pelletier blogs in a wonderful post, Croissants and fairy tales. How storytelling makes strategy happen that

...when people in a similar context, are exposed to the same facts, they tend to arrive at the same conclusions. And so, when they're in the same organization then, they're also likely to arrive at the same conclusion about the right strategy to take the organization forward.

While he focuses on the power of getting people on board via storytelling to implement strategies, I have little doubt he'd agree about the power of creating shared conclusions on formulating a winning strategy in the first place.

In The Biggest Problem in Strategy? Mindset, I noted how the railroads in post war America missed out on growth opportunities because they saw themselves in the railroad business, not the transportation business, and how Blockbuster missed out on digital distribution, ignoring intelligence on the looming threat. While railroad efficiency made enormous strides post deregulation in 1980, it basically kept the surviving companies in the game. Rail's share of freight traffic in the US (measured in ton-miles) declined from about 75% in 1930 (A Short History of US Freight Railroads, pp3) to 28% in 2000 (Freight-Rail Bottom Line Report, pp 14). Worse, its share of freight revenues dropped to a mere 6%. Blockbuster went bankrupt in 2011, shuttering the last of its outlets in 2013. Other examples of failed strategies aren't hard to find: cell phone manufacturers Nokia and Motorola; bookstores Borders and Barnes and Noble; computer manufacturer Sun; the plethora of desktop application software firms - remember VisiCalc, Lotus 1-2-3 and Freelance Graphics and WordPerfect, all of which dominated at one time?

Storytelling works because of the evolution of the prefrontal cortex of the human brain, which helps us recognize and act on patterns. It also works, as Eric notes, because it creates a shared context, or "experience" (even if vicarious) in the tribe. 

But this pattern-recognizing ability is both a help and a hindrance, for individuals and groups. It helps tremendously when the situation is reasonably stable, but often fails us in times of significant environmental change, when we are unable to recognize new patterns. And the worst failures occur when the "tribe," and especially the decision-making leadership, is unable to jettison outdated mindsets.

The most powerful stories are the ones collectively arrived at, through shared experiences. And the most powerful of these are crises. IBM (where I worked for the better part of a decade), was able to reinvent itself in the early 1990s because the tribe members (the employees) knew there was no other choice, enabling Lou Gerstner to drive a change in the collective mindset. But it was painful, to the tune of 200,000 layoffs.

So I return to a theme readers of my blog will recognize: why not create simulated "crises" to enable decision-makers to "experience" the consequences of potential actions. Militaries, governments and airline pilots (see Chance Only Favors Prepared Minds) do this regularly. And some companies regularly incorporate scenario planning or business wargaming (among other experiential planning techniques), designed and facilitated by experts for maximum effectiveness, into strategy development.

Companies that invest in these now, incorporating the latest available intelligence on potential opportunities or threats, reap huge future returns and often avoid debilitating disasters.

The Biggest Problem in Strategy? Mindset

A question in a LinkedIn forum asks what the biggest problem people haven't yet solved in strategy?

My answer: decision-maker mindset.

In one of the most famous business articles ever, Theodore Levitt wrote about the mindset of US railroad industry in “Marketing Myopia” (Harvard Business Review, July / August 1960):

The railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today not because that need was filled by others (cars, trucks, airplanes, and even telephones) but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry incorrectly was that they were railroad oriented instead of transportation oriented; they were product oriented instead of customer oriented.

Take a more recent example, Blockbuster, which went bankrupt in 2011, closing its last stores in 2013. It didn't fail from a lack of intelligence. “The fascinating issue for me,” wrote Forbes blogger George Anderson wrote in Blockbuster Beyond the Grave “is that Wayne Huizenga and his executive team were well aware of the risks from digital distribution of media and discussed it at times.”

Given the lack of action, the Blockbuster executive mindset was clearly that not only would the near-term future be like the present, but also that they would have enough time to respond to a "real” threat, before a crisis hit. But by the time it did, it was too late.

Mindset is of course, useful. It helps us interpret the barrage of new information that bombards us daily. And it works, so long as underlying conditions remain essentially the same. But it often fails us in times of radical change (brought on by external factors such as changing market or economic conditions or new technologies, or internal decisions, such as launching new products or entering new markets). Unfortunately, senior executive decision makers, because of their long years of experience – they "know" the business, the customers, the competitors, the technology and the industry – are resistant to changing their mindsets.

So, to the question, the real challenge for strategy professionals becomes how to change decision maker mindsets. Unfortunately, most traditional “strategy” processes fail in this critical regard (we could have another whole discussion on whether most companies really practice strategy, or whether they practice planning and budgeting…). Given human nature, changing long- and deeply-held mindsets requires a crisis. As English author Samuel Johnson said, "nothing so focuses the mind as the possibility of being hanged in a fortnight."

But rather than awaiting a real crisis, forward-looking organizations find ways to create structured "crisis" experiences, where decision-makers collectively evaluate intelligence, develop new insight and assess the strategic and operational risks of changing customer needs, new forms of competition, changing technologies, new discoveries and emerging government policies.

This also means strategy professionals must change their own mindsets, from “producing” strategy documents and presentations and overseeing planning processes, to creating experiences that enable decision makers to create their own insights. Once they, and not the strategy professionals, “own” the insight, they will change their mindsets. And once their mindsets change, developing winning strategies becomes, if not easy, at least straightforward.  

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