You can identify a strategic thinking narrative for any historical person or event and find useful lessons within that narrative. There are conventional accounts of what happened and why, but there are insights to be gathered from reexamining evidence to craft alternative narratives of cause and effect.

Let’s imagine that we could time-transport Christopher Columbus from the 15th century into the contemporary milieu with his X-factor of drive intact. Would he be successful? This conjecture might help us understand factors that are relevant to our situation. Context influences the answer. Moreover, it raises more questions: Would he have acquired a different knowledge of technologies that are cutting edge for our times (for example, advanced materials, mapping, management, navigation, and artificial intelligence)? What is the nature of his network with other innovators?

We can’t predict what would happen to Columbus in the modern day, but we can identify some forces that might shape the search for opportunity.

The blue oceans of opportunity today are not the same as in Columbus’s time. The technologies are different. But the Columbuses of today are just as curious, observant, and thoughtful.

I’ve heard people criticize Columbus for not knowing where he was going, not knowing where he was when he got there, and not knowing where he had been when he returned to Europe. From a perspective of strategy, this is unfair and ignores the role of ambiguity and emergence.

Students of strategy should recognize that an expeditionary mindset is valuable. The world is one of complex and emergent systems that seldom bend to the elitist notion of a strong-willed visionary genius. Paul Graham, a venture capitalist, writes, “Neither Bill Gates nor Mark Zuckerberg knew at first how big their companies were going to get. All they knew was that they were onto something.”[i] We don’t know when Christopher Columbus realized that he was “onto something.” Although he was probably a narcissist and possibly delusional, he learned and adapted to changing situations.

The Christopher Columbus strategic thinking narrative reinforces the importance of a sharp mind in touch with the situation. Columbus discovered an insight that any other competitor could have exploited. He persevered and maintained his focus on gaining strategic resources.

One of the most empowering aspects of competent strategic thinking is the realization that ordinary people can do great things. Your challenge is to sense the details of your situation and craft an effective response.

.…The above is an excerpt from Chapter 3 of How to Think Strategically, available at all major booksellers. The book’s big idea is that strategic thinking is an individual competency that can be recognized and developed. As individuals steadily improve their capacity to think strategically, the organization gains potential to craft strategy that is good, powerful, effective, clever, and nuanced.

“Get your hands on this book as soon as possible! It’s practical. It’s insightful. It’s accessible to all. Githens has the courage and experience dismantle strategy and challenge long-held orthodoxies.” Mazy Gillis

Note: I originally published this article on LinkedIn.

The most important, critical activity of strategy making is that of diagnosing the situation. A mistake in diagnosis will lead to poor strategy and results. This article describes three shortcomings that get in the way of good strategic diagnosis. I found them in Daniel Kahneman’s closing remarks in his book, Thinking Fast and Slow.

Anchoring – We’ve all experienced anchoring when in bargaining over price. Someone offers a price, and the agreement settles someplace near that price. Anchoring is common in establishing project due dates and budgets; those initial anchors may be totally infeasible! The mind gives disproportionate weight to the first information it receives, regardless of the realism of that information.

Here’s an example from earlier in my career. My employer had experienced two very good years of growth, and the prior year our sales were up 35% over the previous year. The CEO entered into a planning meeting and said this, “We grew 35% last year, so our target growth for this year is 35%.” Anchors like this are intuitive, and ignore relevant factors like industry growth rate, competitive responses, and the state of the economy.

Here’s another example. At the time of Wal-Mart’s founding, the conventional wisdom was that a full-line department store needed a population base of at least 100,000. Sam Walton was able to buck this conventional wisdom by redefining the business as a network of stores with an integrated supply chain. Related to conventional wisdom is the concept of a “best practice,” which leads to thoughtless copying of others. Seldom does a good strategy arise from copying the practices of others.

Narrow framing – Humans put boundaries on problems, whether they recognize it or not. When a person frames narrowly, they bring their attention to an isolated part of a situation. When people narrow frame, they tend to look at their own situation fail to appreciate their interactions with others. Narrow framing is the opposite of holding a big picture.

As an example, Kahneman described the experience of his colleague Richard Thaler, who was meeting with a group top managers of 25 divisions of a large company.

He asked them to consider a risky option in which, with equal probabilities, they could lose a large amount of the capital they controlled or earn double that amount. None of the executives was swilling to take such a dangerous gamble. Thaler then turned to the CEO, who was also present, and asked for his opinion. Without hesitation, the CEO answered, “I would like all of them to accept their risks.”

The CEO’s broader frame allowed him to make a decision that implicitly understood that the gains would cancel out the losses and shareholders would do better. The division managers naturally had a risk-adverse mindset; the problem came when each narrow framed on their own condition instead of elevating their perspective.

Many incumbent organizations have stagnated. This is because localized decisions lead to conservative decisions. Opportunities are missed.

By contrast, competent strategic thinkers are aware of the difference between narrow and broad framing and strive to continually analyzed decisions through risk policy that benefits the whole. Strategy itself can be thought of a centralization of certain policies that create impact across the entire organizational system.

Excessive coherence – The idea that strategy is a plan is another way to say that the various elements of a strategy “make sense.” Coherence is the characteristic of a story that indicates that it “hangs together” in the memory so that it seems natural and logical. Excessive coherence is when a person reads too much into a situation, finding causes and relationships where none exist. Excessive coherence explains the halo effect where jump to conclusion that a particular person has extraordinary powers because of their affiliations or past successes.

Most people are familiar with the concept of groupthink where an entire group convinces themselves of the correctness of a strategy. Group social norms – a kind of social coherence – provides reinforcement to the story.

Overconfidence is one of the biggest flaws in strategic thinking. Excessive coherence, that is, belief in the story, leads to overconfidence.

Instead, competent strategic thinkers look for disconfirming evidence and alternative explanations for those signals that are ignored by others.

What are shortcomings should we be aware of?

“What is a brilliant strategy? an executive asked of me. Thinking quickly, I used the gemstone analogy and said a brilliant strategy is recognized by contrasting its results with other strategies.  It noticeably shines and stands out.

I followed that brief definition with an example. I mentioned the Oakland A’s professional baseball team of the early 2000s. It was an organization with limited resources that was able to consistently get better results than its rivals; its brilliance was manifested in the contrast with conventional baseball strategy. The book Moneyball explains this well.

Unpacking the Analogy

Afterwards, I wondered to myself: The gemstone-to-strategy analogy seems reasonable. I wonder if it is a strong or weak analogy? Did I get the details right? So, I did what all of us do. I went to Google and typed in “What makes a diamond brilliant?”  I learned that brightness and contrast are two basic factors that drive the brilliance of a diamond.

• Brightness in a diamond refers to the light projected through the crown of the diamond. It is achieved by cutting the diamond so light entering from the sides is reflected upward. A diamond cutter sets the angles in the stone to maximize the light moving through the crown. That’s a straightforward task, but it entails tradeoffs of weight (carats) which affects the marketability of the diamond. In other words, you could have a diamond that is cut to maximize the objective measure of weight (“Oh look at this 1-carat diamond!) or to a more subjective parameter (“Wow, that diamond really sparkles!”).
• Contrast in a diamond has to do with the placement of bright facets next to darker facets. We make something dull seem brighter by placing it next to something dark. Consider the contrast of a chess board.

I also learned that I hadn’t asked the right question, the idea of “sparkle” is also relevant. It’s not enough for a diamond to look good in a display case or in a jewelry store, it needs to dazzle out in the real world. As the diamond moves around, it catches light on all its facets; some reflect white, others reflect colors. The interactions are the phenomena that cause sparkle. The descriptors of fire and scintillation help us to understand sparkle.

• Fire in a diamond refers to the prism effect: splitting a beam of light into flashes of spectral colors.
• Scintillation is how the diamond sparkles when it moves. It is a dynamic quality, but is designed by considering size, number, and symmetry of facets

Brilliant Strategy

Diamonds are cut from raw materials; they are deliberately designed. The diamond cutter must consider a number of variables when cutting a diamond. They include the original shape of the rough stone, location of internal flaws, the preservation of carat weight, and popularity of certain shapes among consumers.

Likewise, strategy is a design that is fashioned from resources and insights. The analogy holds up: A raw stone is analogous to resources, the cut is the action, and the competitive element is the fact that a customer can make a choice.

If a diamond can be deliberately designed for brilliance, so can a strategy. Here is how the sub-elements of brightness and contrast would be expressed for strategy:

• Brightness in strategy is the way that the firm leverages resources to achieve focus.  The Moneyball strategy practiced by the Oakland A’s baseball team was focused: the team would acquire players who were undervalued by the market for their abilities to get on base, and trade or sell those players who were overvalued.
• Contrast in strategy is making decisions on what you are not going to do. The A’s were willing to accept mediocre (or worse) defensive capabilities from a player to gain the advantages of the player’s bat. The book devotes an entire chapter to highlight the experience of Scott Hatteberg – an able hitter – as the team placed him in the unfamiliar position of first base.  In order to maximize offense, the team was willing to accept his weak defense.

Now, what about sparkle? These qualities are more elusive and subjective. It seems that large stones have more opportunity to design for sparkle, so the idea of sparkle might be something that is true for grander strategy.

• Fire in strategy is increased by having more facets to the strategy. The movie Moneyball didn’t show the fire that the book described. The movie suggested that a wunderkid (Jonah Hill’s character) with a computer was whispering into Billy Beane’s (played by Brad Pitt) ear. That depiction was more Hollywood than the actual story, where the key facets were that the ballclub’s owners gave its General Managers more power than other clubs, the experiences and skills of GM Billy Beane, and the rise of fantasy baseball leagues (which create a cadre of unconventional thinkers who could communicate through the internet).
• Scintillation in strategy is a dynamic quality. A scintillating strategy is one that is practiced in small and coordinated ways across the entire organization. For Oakland, there were a number of other important behind-the-scenes people who made a significant different. As an example, Scott Hatteberg was extremely uncomfortable playing first base, so the coach Ron Washington encouraged him, allowing him to gain confidence. Scintillation, then, is something akin to what many people call strategy execution: the aligned actions of people in middle management to support (or at least cope with) the discomfort and impositions of the strategy.

Was I Right?

My initial remark that a brilliant strategy is one that has contrast was correct. However, I’ve since learned that I missed the ideas of brightness, fire, and scintillation.

I’m looking for more examples of brilliant strategy. Also, what would you change about this analogy?