If it was easy, everyone would do it. That’s what kids are told sometimes, when they’re sick of practicing the piano or hitting backhands. The idea being that the struggle for excellence is worth it, because with enough effort you become special, or at least really good. The same applies to an efficient market in the business world: the obvious opportunities are the most contested, because they’re the easiest to see. To rise above the scrum of competitors fighting for pennies of profit, you have to, as the Apple slogan went, “think different.” This belief is central to the research and teaching of Giovanni Gavetti, an associate professor of business administration at Tuck and pioneer in the field of “behavioral strategy.”
That managers manage firms is a given. To Gavetti, managers must also “manage” their own and other’s mental processes. In the vein of Helfat and Finkelstein, Gavetti sees the manager’s mind as one of the true keys to strategic success. The paper that best lays out Gavetti’s theoretical approach is “Toward a Behavioral Theory of Strategy,” which appeared in the journal, Organization Science, in the beginning of 2012, when Gavetti was an associate professor at Harvard Business School. In it, he explores the idea that superior business opportunities are “cognitively distant.” That is, they are not found in the familiar places with familiar patterns of thought. Instead, to grasp the truly innovative ideas, managers must go beyond the bounds of rationality to a place where metaphor and associative thinking can happen. This is challenging because, as Gavetti writes, “it is necessary to deal with substantial ambiguity in order to spot [superior opportunities] and grasp their nature.” One solution, Gavetti believes, is to deploy the reasoning mechanism of analogy, something well suited to “decision-making when ambiguity and complexity are high.”
Gavetti’s favorite example of innovation by analogy is the origin story of Merrill Lynch, which he touches on in his 2005 Harvard Business Review article, “How Strategists Really Think.” Merrill Lynch, one of the biggest banks for most of the 20th century, grew out of a time, before the Great Depression, when banks were only for the rich. But Charlie Merrill had an experience that allowed him to envision something much more democratic. He had been an executive at a large grocery store, and then began to wonder why a bank couldn’t be more like a supermarket, offering a wide range of products for everyone. Merrill had performed a feat of associative thinking: he recalled a situation in his past, paid attention to select features of it, and used those patterns to understand the present.
One of Gavetti’s goals is to show managers how to use associative thinking in a disciplined, systematic way, so it can be deployed on a regular basis to find new opportunities. He is also working to understand the cognitive underpinnings of persuasion. If a strategist spots a business model that is truly cognitively distant and cannot be seen by most competitors, she will also have a hard time getting her own people to see it, and perhaps the capital market to see it. How to get critical audiences on board is therefore critical to the pursuit of strategic opportunities that are cognitively distant.
Gavetti, who won the Class of 2011 Teaching Excellence Award in 2014, introduces students to these topics in his elective course, Psychology of Strategic Leadership. “If we really want to understand and control mental processes, we must go through them firsthand,” he said. “So I create an environment where people experience their own biases, see what it’s like to control someone, and feel psychological safety.”
Read the entire series!
Part 1 - Tuck Strategists: The history of “strategy”
Part 2 - Vijay Govindarajan
Part 3 - Richard D'Aveni
Part 4 - Constance Helfat
Part 5 - Sydney Finkelstein
Part 6 - Giovanni Gavetti
Part 7 - Ron Adner
Part 8 - Andrew King
Article originally published on Tuck.edu, December 12, 2014.
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