Watch CBSN Live

Analogy: The New Way to Spot Strategic Opportunities

When Charlie Merrill (the Merrill in Merrill-Lynch) envisioned banks as becoming "financial supermarkets" in the 1930s, he was describing a new strategic opportunity that no one else had imagined. Using a powerful analogy not only helped Merrill think through the idea of offering a broad menu of financial services to the middle class, but also aided him in selling the idea to others.

Traditional strategy development relies on economic analysis. The problem is that this approach yields opportunities that more than likely will also be discovered by competitors. And thus the power of strategy development tied to analogy: visionaries see opportunity where no one else is looking.

Writing in the July-August Harvard Business Review, HBS professor Giovanni Gavetti calls this looking at "cognitively distant" opportunities because they require a mental leap. "This way of thinking suggests that a crucial component of strategic leadership is the mental capacity to spot opportunities that are invisible to rivals and to manage other relevant parties' perceptions to get them on board."

Harley-Davidson and Ducati envision themselves not as motorcycle manufacturers but as providers of entertainment. Google re-imagined the Internet portal business not as a media business -- the model used by rival Yahoo -- but rather as a technology business. When you re-imagine your business, new ways to compete appear.

In addition to overcoming set ways of seeing things, the visionary has another monumental task: to convince employees and other stakeholders to buy in. Gavetti writes that former Kodak CEO George Fisher clearly envisioned the company's future in digital, but couldn't change the corporate DNA, which was bound to film.

Want to become a thinking-by-association leader? The article preaches the use of structured associative thinking, which is a process for recognizing and working around out our own cognitive biases.

For strategists, reading The New Psychology of Strategic Leadership could be a fruitful way to begin thinking "outside the box."

Related Reading

(Photo by Flickr user nffcnnr, CC 2.0)