94 - Looking beyond dead ends

28-08-2023

decision-making

More than a decade ago I was at a company offsite where I was introduced to the phrase ‘The Genius of the AND and the Tyranny of the OR.’ I believe it was from Jim Collins’ Built to Last.

Unable to grasp its meaning, my callow self had wondered how. How is one supposed to maintain quality and hit higher levels of productivity?

As recently as in 2021, I was leading a fledgling but promising business unit that was building a smart writing assistant for scientists. We were in the weeds building an online editor and a Microsoft Word plug-in at the same time. As we doubled down on hiring, I was hoping for a quick reprieve. But exactly the opposite happened. Senior engineers had to eke out time onboarding new recruits and fixing their mistakes. Where we were hoping to bring new hands on deck, we ended up with fewer than before.

How is one supposed to do well in the short term and excel in the long term?

These are legit questions, and I don’t believe there’s one answer that delivers in all contexts. But there’s a way of thinking–a mental discipline, if you may—that decodes the how. It’s called integrative thinking.

Modern knowledge work is set up to reward simplification. Executives are time-strapped and context-swamped. They have limited bandwidth for complexity. No wonder PowerPoint presentations are the currency of choice, executive summaries are encouraged, and early consensus means a well-earned power nap.

Integrative thinking suggests something that goes against this modern organizational grain. It says: Don’t simplify. Don’t reduce complexity. Don’t ignore dimensions.

Instead: Be hungry for opposing viewpoints. Treat them as signals to uncover hidden forces at play. Reject uncomfortable trade-offs and look for creative solutions.

Again: how?

Roger Martin—author of The Opposable Mind: How Successful Leaders Win through Integrative Thinking, ex-Dean of Rotman School of Management, and the man credited with the term–defines integrative thinking as a process of synthesis of opposing ideas to produce a creative solution better than any of the individual options. Contrasted with conventional thinkers who pick a side in a fight between equally unsatisfactory choices, integrative thinkers reject poor trade-offs and work to generate new and better options by choosing no one given option.

The piece that follows draws from the archives of a consumer-goods behemoth to the evolution of a business model for open-source software to the birth of a luxury hotel chain. It lays out the best integrative thinking. And from these examples and the work of Martin, I show you how to be an integrative thinker.

A Sharp story and why it may resonate with you

Issy Sharp, the founder of Four Seasons Hotels and Resorts, one of the largest and most successful chains of luxury hotels worldwide, wasn’t always a man with a vision. In the early 1960s, he was in a fix.

Sharp’s debut project was a roadside motel on the fringes of Toronto. The motel was intimate, basic. It offered comfort to those on the road, yet didn’t generate enough revenue to house restaurants or gyms in its complex.

Another of Sharp’s early projects was a convention hotel downtown. The hotel was large but had a cold efficiency to it. It had all the amenities but lacked a personal touch for travel-weary businesspeople.

These two models for lodging were the only ones on the menu at the time. Sharp wasn’t impressed. He had an appetite for a different kind of hotel experience. What was it? And what can we learn from his choices?

Before we dive in, consider how most choices are presented to you at work. If you’ve been in a leadership position, chances are that those choices tend to appear as either-or choices. Choose A, and you have run the ground with B. If B, then that’s the end of the road for A.

Build or buy

Hire or outsource

Grow or pivot

Cut costs or invest in innovation

And so on…

Each option represents a certain opportunity. But accepting that opportunity as is also means having to let go of all else. In that sense, a hard choice doesn’t solve a problem. It trades one version of reality for another equal and opposite one.

Making such a choice between options as presented means you’re picking between two binary states of the world. Most leaders do that, accepting the downside as the cost of doing business and the binary nature of the decision as the burden of leadership. Those that do also get the same results as everyone else.

A 2010 Harvard Business Review article reports a study of the strategic approaches adopted by 4700 listed companies in the wake of three global recessions across 1980-2002. The researchers bucketed the companies based on how they reacted to the recession. Prevention-focused companies cut costs. Promotion-focused companies responded aggressively. How did each fare?

Both sets of companies suffered. The pessimistic organizations adopted centralization, strict cuts and let a ‘siege mentality’ prevail. The optimists were caught wrong-footed by their denial of the magnitude of the crisis.

It is conceivable that company leadership on both sides saw the choices before them as either-or. Tighten belt or go on the offensive. They kept the responses separate and spent their energies on picking the least-worst one.

In the throes of such zero-sum choices that will have far-reaching consequences, we ask ourselves, _What should I do? _Should I go for the warm intimacy but no frills of highway motels OR the cold efficiency and scale of city convention hotels?

The examples hereafter show that asking a different question might be better for the health of the businesses we run and for our own development as business leaders. That question is, How should I think?

The four stages of integrative thinking

In the 1960s, while the smaller motels focused on providing basic accommodation at affordable prices and the much larger convention hotels offered luxury for a premium, Sharp wanted to offer a different kind of hotel experience—’to combine the best of the small hotel with the best of the large hotel.’

Rather than choose one of the two existing models and accept the shortcomings of it, Sharp wanted to have his cake and eat it too. But Sharp’s not alone in his appetite. He shares his place on a list of business leaders who share a common distaste for unpleasant trade-offs and use integrative thinking to turn businesses around. A few of them are…

Bob Young - sell free open-source software as one of many suppliers in the market OR sell proprietary software as one of few players at 90% margins;

A G Lafley - cut costs and fight cut-price competitors OR innovate and differentiate brand from cut-price players and charge a premium for it; and

K.V. Kamath (ICICI Bank) - Stay an efficient but undercapitalized Indian bank and forget about competing globally OR become a global bank and somehow find the capital to make that leap

Each of these pioneers, whether consciously or not, followed a process that can be broken down into four distinct stages.

Stage 1: Salience—what all matters?

Martin describes the process of taking a wide view of the problem to identify hidden factors as salience. It is the first stage of integrative thinking. It picks out the hidden forces that dictate play in the market but haven’t been spelled out by the players.

Four Seasons’ Sharp found out that his frequently traveling customers longed for the familiarity of the life they had left behind: the warmth of home, the convenience of office. So, in Sharp’s words, ‘we decided to redefine luxury as service—a support system to fill in for the one left behind at home and the office.’

Linux could handle enterprise applications better than proprietary OS did, but B2B enterprises/corporations _didn’t trust the many sellers _selling it. Young found the point of salience in corporate buying habits. Big corporations bought for a cycle of 10 years, so they didn’t trust the average Joe enterprise Linux software seller even if they were free to install Linux OS on as many computers as they wished at zero additional cost per seat.

With P&G reeling from dipping market shares for seven of its 10 biggest brands and a stock that had dropped 50% in two quarters, A.G. Lafley realized that the market had changed enough to deem relevance of historical strategies useless. They could no longer simply cut costs to fight low-cost store brands; they also needed to innovate to ward off premium private labels.

Salience answers the question of what all matters to a creative solution that has been overlooked by most others. Salience doesn’t help solve the either-or business problem. It clarifies what the true problem to be solved is.

Stage 2: Causality—how are they related?

Causality explores the relationships between salient factors. Room occupancy dictates profitability, food and beverages sales affect revenue. These relationships are linear and can be shown on a spreadsheet. Yet, there are subtler relationships in play that don’t show up.

In hospitality, how a customer feels while experiencing your service dictates how much they’re willing to pay for it. And how different that experience is from competing establishments decides the size of that premium. More rooms mean less warmth, less personal touch. The loop between profitability and size was a balancing one, not a reinforcing one. (Perhaps) Only Sharp saw this relational loop.

At the time, hospitality turnover was high. Staff had a short shelf life and were fungible. Four Seasons hospitality, just like anywhere else, meant sticking to the rule book. To switch to a practice of offering customers personal care and warmth—to remember their names, their birthdays, their quirks—hotel staff first had to care enough. _And to care, the staff themselves had to feel cared for. _This was no management principle on a memo that would turn things around. It took active steps: no more automatic layoffs during downturns, more staff training, internal promotions for career progression, hiring for attitude over experience, etc.

Others who saw subtle, nonlinear causal relationships…

Bob Young saw that to make money selling Linux software to corporations, you had to be the #1 brand in a fragmented marketplace.

A.G. Lafley took the left-of-field view that inhouse R&D was not the only or best path to innovation for a company of P&G’s size and that innovation was only the means to commercialization, not an end in itself.

Stage 3: Architecture—in what order should I start thinking of them?

Any decision on org strategy has a number of ‘moving parts.’ Where does one start? And in what order should you look?

It is much easier to look at the parts in isolation (whether sequentially or in parallel) than in unison. Yet, integrative thinkers resist that urge because they know the whole is much more than the sum of its parts.

Architecture considers the problem as a whole and suggests the order in which you should think about things.

At Four Seasons, Sharp did not simply outsource decision-making and execution to various departments: property size, service standards, HR policy, etc. In fact, he did not break down the task of setting up shop. He rolled it up into one organizing principle from which all decisions flowed.

Everyone was guided by ‘the Golden Rule: to deal with others—partners, customers, coworkers, everyone—as we would want them to deal with us.’_ _Issy Sharp first made the Golden Rule and then made it the bedrock of everything anyone ever did at Four Seasons. To ensure that this rule became a credo, Sharp did away with the Customer Service department altogether. Everyone at Four Seasons was in charge of customer service.

Similarly,

Young stole a march over competing Linux suppliers in a crowded market by offering Linux for absolutely free. He made it clear he was willing to let go of the $15 per CD-ROM by making the Red Hat version of Linux available for free download on the Internet. This one move made Red Hat the market leader and brought it to the attention of corporate buyers.

Lafley believed P&G’s innovation engine should run equally on the fuel of external innovation partners not on company payroll and that the company should utilize its superior distribution to grab market share at both ends of the price spectrum.

Final Stage: Resolution—when is it all done?

Resolution takes the tension of the hard choices and produces a creative solution otherwise impossible. It is knowing that you have arrived at your destination.

Issy Sharp rejected the two proven paths to hospitality success—small motels with modest amenities OR large downtown hotels with everything but warmth—and charted a new one: medium-sized luxury hotels that combined the best amenities with personalized service. Four Seasons till date continues to dominate global best hotel lists.

Bob Young found a way to look past the existing proprietary software model of fencing the source code and selling regular upgrades (the only one Microsoft that sold Windows at $209 a pop in the late 1990s) AND the so-called free software model that offered both software and source code at low costs (one of many suppliers of Linux-based OS that sold a Slackware CD-ROM at $15). By 2000, Red Hat held over half the global market for Linux systems.

A.G. Lafley turned a slow corporate behemoth into an agile and consumer-centric organization in the early 2000s by choosing neither and both of the options presented to him. He did so by putting in place a new innovation pathway that helped it counter both discount and premium brands.

What does conventional thinking look like?

Remember the 2010 study of prevention- and promotion-focused companies? They typify how most of us view the world–black or white, bullish or bearish. People tend to lean to one side.

Back in 2017-2019, I was leading a young business unit that pitched short-form videos and infographics to scientific publishers and research institutions to help communicate research findings wider. I was in regular conversations with sales people who were having customer conversations across the US, UK, EU, and East Asia almost every day.

Depending on who was in conversation with the customer, there used to be a certain flavor in the assessment of the opportunity they reported back. It took me some time to notice it but once I recognized it, the pattern was clear. The glass half-full people tended to extract positive points of salience and stitch them up in an uplifting narrative. The half-empty folks focused on the spanners in the wheel and painted a sobering picture.

It felt like there was a default tendency that led to unconscious cherry-picking of customer feedback. The radars picked up what they were set up to pick up. The rest was lost. There was a predictable slant in the processing of the signal.

The Opposable Mind describes this slant as a factory setting. Dan and Chip Heath in their book _Decisive _point to the same as mindsets. Both sets of authors converge on what the slant means: no one perspective captures reality. To approach reality would mean to unify clashing mindsets.

Despite being able to pick up the slant, I lacked the toolkit to look beyond the reported model of reality. Neither did I spot the bias in my own assessments. In the end I picked a side. I did not—could not—unify. I fielded lost leads to an access problem. Only if we had more sales bandwidth; only if we could be closer to our customers; and so on…

How easy it is to concede ground to a default setting.

Issy Sharp could have continued to separately build small motels and grand convention hotels; Bob Young could have persisted with selling Linux software as one of myriad suppliers in the fragmented open source market, or switched to selling proprietary software, Microsoft style. And A.G. Lafley, whose predecessor was fired after 18 months on the job, could’ve simply gone the opposite way and imposed strict price costs and pulled back on R&D.

As the 2010 study showed, 57% of the 4700 recession-hit companies lost market share or did not recover at all once they picked a strategic side. They prepared a response for a world where the individual parts didn’t meet each other but unfortunately lived in one where everything worked together as a whole.

Hang on a minute… How can we be sure people have a default setting?

Well, you must’ve heard of…

He who hesitates is lost

Fortune favors the brave

No guts, no glory

and of..

Look before you leap

Better be safe than sorry

_Measure twice, cut once _

But have you heard of He who hesitates but sometimes leaps wins or of Better be safe than sorry, and don’t forget to seize the day? Ludicrous, right?

Why do organizations find it hard to practice integrative thinking?

Four Seasons, Red Hat, and P&G were lucky to have leaders at their helm who could blend conflicting models of reality to design a unified strategy. But not every organization boasts such leadership. And do leaders really play such an outsized role as the examples seem to suggest?

Well, yes and no.

Imagine your leadership group is split down the middle on organic versus inorganic growth as the chosen path for business growth. In the face of this stand-off, it is risky for someone from that group to stand up and say, Both options are suboptimal. Let’s chuck both. Let’s go a third way. Going lone wolf means the pack doesn’t have your back. If the decision backfires, who will the buck stop at?

That’s why leaders/CEOs are far better placed (even they are answerable to the board) to influence the discourse such that integrative thinking becomes the norm. At the same time, without support across cadres, leaders no matter how competent will find it tough to set up a reinforcing (not balancing) loop.

At a meta level, the organization has to respond as a system. If certain parts of the system don’t pull along, there’s resistance. Resistance kills momentum. If a certain business function in the Four Seasons structure did not believe that they should be responsible for exceptional customer service, then the strategy of not having any customer service department would have failed. Culture does eat strategy.

I’ve played cross-functional roles all my career and have had several conversations with friends on the topic, and in my view organizations are not set up to solve business problems. They’re set up to solve marketing problems or operations problems or technology problems. This is the classic silo. Like a good Chesterton’s fence, the silos serve a purpose. They help define responsibilities, assess performance, and work out bonuses. But the more roles you define, the more cracks you create between those roles. If you don’t pay attention, ownership slips through those cracks.

There’s another reason why integrative thinking is hard to come by in organizations.

Opposing perspectives are unsettling to group dynamics. They point to conflicting models of reality. They carry a tension between them and that tension complicates matters. It makes a mess in our heads. It can take a long time to clean that mess up. And what’s the guarantee that an unseen future will pan out as we hope?

‘When a colleague or a superior admonishes us to quit “complicating the issue,”’ says Martin in The Opposable Mind, ‘it’s not just an impatient reminder to get on with the job—it’s also a plea to keep complexity at a tolerable level.’


The playbook for integrative thinking

When faced with unappealing choices, most tend to pick a side and reiterate the reasons behind their stance. Louder advocacy rarely persuades those who approach the issue from a different place. At best, it may extract a false consensus. This is at the heart of the deepest dilemmas in running businesses.

Uncovering new salient factors and showing new relationships among them are better at bridging rifts in thinking and bringing opposing sides onboard. Doing so doesn’t come naturally to most for a number of reasons that stack up on each other. Holding the stack together is one fundamental truth: We are inclined to accumulate experiences that reinforce the stance (world view) and tools (skills, frameworks) we start with. Our stance guides the tools we acquire and those tools in turn bring to bear a certain set of experiences.

Looking at our world view as provisional, and not final, and being open to newer perspectives allows us to nurture a curiosity for potential models of reality. Such an open mind allows us to go beyond best practices and question inherited wisdom.

If we think we have figured out the world, it is hard despite our sincerest intentions to learn anything new. So…

  • Reject existing schemas for reality. See them as simply the best model yet made, but nothing sacrosanct.
  • Serve all your core priorities, without trading one off with the other.
  • Keep the overarching goal in mind while looking at interconnected parts.
  • Design creative solutions that break the tension between unsatisfying options.
  • Embrace the mess of nonlinear relationships and complex-system behavior.

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