Analogy: The New Way to Spot Strategic Opportunities

Last Updated Jul 29, 2011 3:47 PM EDT

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."

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(Photo by Flickr user nffcnnr, CC 2.0)
  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.