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CHAPTER 3

Big Ideas

The Four Pillars of Strategic Thinking and DICE

It is always because of one person that all of the changes that matter come about. So be that one person.

— Buckminster Fuller

YOU MIGHT NOT REMEMBER much more than the rhyme in 1492 Columbus sailed the ocean blue, but you probably know that Christopher Columbus is one of the most significant people in the history of humankind, bringing the lands that are now called the Americas to Europe’s attention. This chapter uses the Columbus strategic-thinking narrative to reveal more about the nature of strategic thinking.

Christopher Columbus was born in the Italian city-state of Genoa in 1450 or 1451. Columbus spent much of his early life on the Mediterranean Sea learning the basics of seamanship. He later ventured north and south on the “Great Ocean,” as the Atlantic was then called. He acquired the idea of finding a trade route to Asia by sailing west. He approached Portugal for sponsorship but was rejected, eventually securing three ships from Spain. In October 1492, he landed on an island in the Bahamas, believing he had reached islands off the eastern coast of Asia. He returned to Spain and secured resources to make three more trips to the west. On the second trip, his party discovered Cuba and Hispaniola. The third voyage was especially significant because he encountered the large freshwater flows of the Orinoco River in South America, signaling the presence of a continental landmass.

He held a big (transformative) idea. The fact that the Earth was round was not in dispute among educated Europeans. Columbus’s big idea of sailing west probably originated early in his sailing career.

We don’t know the source of his big idea. We do know, from studying his journals, that he was curious and had an eye for details. Imagine Columbus spending hours in conversation with fellow sailors at sea or in port, trading stories of the mundane and the fantastic. Perhaps when Columbus was in the British Isles (and possibly Iceland), he may have heard stories related to centuries-earlier Viking settlements in lands to the west. Regardless, the big idea of sailing west captured Columbus’s attention and organized his thinking and energy.

He held specialist knowledge. Columbus had practical, applied knowledge of sailing. His know-how included navigation, ship construction, and the operational details of sailing. Important, too, was his experience as a merchant trader. This knowledge was valuable for advancing the interests of the Spanish Crown and his other investors. His mapmaker experience supplemented his navigational expertise, giving him both a global perspective and knowledge of details. Finally, he understood political power and developed influencing skills.

Big ideas often originate in small details gathered over an extended period.

He spent significant time in an innovation hub, exposing him to emerging technological and social trends. The 30-year span from 1462 to 1492 was a time of considerable development in sailing and exploration. Innovations in design and construction of ships improved their performance on long trips over the stormy waters of the Great Ocean. With the ability for longer-range travel, merchants could open new markets and establish new trading business models.

Columbus’s time in Lisbon (1477 to 1485) is crucial to the narrative. Lisbon was one of the wealthiest and most cosmopolitan cities in the world. For part of that time he worked with his brother Bartholomew in a business that produced and sold maps, keeping him attuned to emerging knowledge in geography. Imagine Columbus finding himself in energetic discussions of what lay over the western horizon. This debate would have stimulated the integration of ideas, sharpened his arguments, and subsequently built his confidence to promote the idea to sponsors. It was in Lisbon that Columbus acquired a map made by Florentine thinker Paolo Dal Pozzo Toscanelli that showed a westward route across the Great Ocean to Asia. Columbus was inspired and carried a copy of the map with him on his voyage, a signal of its significance to him. Some scholars refer to Columbus’s voyage as the Toscanelli project.

He had a valuable insight. An insight reorganizes our understanding of the situation and contributes to a strategic logic. Here is my conjecture of the events of one week. Watch for the spark of insight.

It’s the year 1485. Columbus is at the mapmaking shop with his brother Bartholomew. On a Monday, the brothers complete a chart of wind patterns of the Iberian Peninsula. They talk about prevailing westerly winds, making small jokes about reasons for the wind’s directions that prohibit sailors from sailing into the sunset. That conversation sparks a memory by Bartholomew of the Toscanelli map, which Christopher had inherited from his father-in-law. The next day, Bartholomew asks Christopher if he still has his copy of Toscanelli’s map. He retrieves it from a box, and they have a lengthy discussion about traveling to Asia by sailing west. This conversation between the two brothers causes Christopher to recall years-earlier shipboard discussions and conjecture about lands to the west of the Great Ocean.

The next morning, Wednesday, Columbus returns to examine Toscanelli’s map more closely. He notices the notation that one could get to Asia by sailing west. His thoughts are interrupted when another customer enters the shop with a request for charts showing wind patterns on the coast of western Africa. During this conversation, Columbus recalls his experiences sailing off the West African coast, where the winds blew toward the west and northwest. His customer information matches his experience that winds were out of the east.

That night Columbus awakens with the insight that will unify and integrate his history-making project. Biographer Eugene Lyon declared that it was Columbus’s most important insight: the secret to a round trip to the west of the ocean sea was to “drop down south to go westward with the trade winds, and return at a higher latitude with the westerlies.” The insight gave him a powerful advantage compared to the traditional notions of sailing into the westerly headwinds.

On Thursday, Christopher Columbus writes a letter to the court of King John II of Portugal, petitioning him for resources to make a voyage west.

He secured resources. I’ve previously explained that strategy is characterized by an interrelationship of ends, ways, and means. The means of strategy, the resources put at risk, are essential elements. Columbus had a big idea, but he needed resources. He undoubtedly found it logical to begin with a request for sponsorship from King John II of Portugal because Columbus had contacts within the Court. Columbus also smartly developed a relationship with the Spanish royalty, who eventually provided him with the resources needed for his project.

He adapted to change in the situation. Here are two examples of how adaptability contributed to Columbus’s success.

Columbus had placed an initial bet on securing the sponsorship of Portugal’s King John. When Portuguese explorer Bartolomeu Dias crossed the Cape of Good Hope, he established the potential for a southern trade route to the Indian Ocean, and eventually the Orient. Portugal now shifted toward leveraging Dias’s accomplishment.

Columbus’s initial bet on Portugal’s sponsorship had failed. Wisely, he had hedged that bet by cultivating a relationship with Spain. Columbus pivoted to Ferdinand and Isabella of Spain, who were receptive when he most needed their sponsorship.

A good strategy adapts to changing information about the situation.

Columbus pivoted again on his later voyages to the New World. He began his voyages expecting to find large and sophisticated trading centers, drawing on his experience in Europe and what he had learned from those who had been to Asia. He never found those cities, so he switched tactics, approaching trade as he had experienced it in Africa, moving from small port to small port conducting smaller deals.

These elements of the Columbus strategic-thinking narrative offer many useful lessons for strategic thinking. He was trying to advance his interests (self, family, business, and political) as well as those of his patrons.

With Columbus as an example, I’ll describe strategic thinking’s four pillars and four X-factors.

The Four Pillars of Strategic Thinking

The narrative of Christopher Columbus gives us a better understanding of the nature of strategic thinking. The four pillars model as shown in Figure 3-1 offers a complete definition of strategic thinking.

I’ll start with Pillar IV for a commonsense reason: people remember outcomes, and often neglect the causes of those outcomes. We’ll focus on the outcome that everyone wants from strategy, which is Pillar IV. We’ll then work back to Pillars I, II, and III.

Pillar IV – Success in the future. Naturally, people want to be successful, and a person will define success in a multifaceted way. How do you define success? is not a trivial question. We can identify some of Columbus’s criteria through his demands to the Spanish Crown: He would be knighted, appointed Admiral of the Ocean Sea, made the viceroy of any new lands, and awarded ten percent of any new wealth.

The phrase in the future is a landmark of strategic thinking. A competent strategic thinker seeks to understand the potential future situations and act proactively.

Figure 3-1. The four pillars of strategic thinking.

Pillar III – Identify and organize resources. Columbus combined his know-how and insight with the tangible assets provided by the Spanish Crown: ships, crew, provisions, and goods for trading. He deliberately configured those assets to maximize success.

The game of chess is often used as the symbol for strategy. The movement of chess pieces is a Pillar III activity, where the strategist configures chess pieces (the strategic resources) to respond to issues and create issues for the opponent. For organizations, the strategic resources include capabilities, financial assets, intellectual property, and know-how. The player wins or loses the match (Pillar IV) based on the positioning and movement of the pieces (Pillar III) according to the mental approach (Pillar II) of the player (Pillar I).

Any move of a chess piece is deliberate. This principle is an essential tool for the strategic-thinking narrative in that one can infer reasons for a past choice by asking, Why was this resource used this way? Similarly, in considering a prospective configuration of resources, the why question can provide focus and logic for strategy.

Pillar II – Using cognition. Columbus’s curiosity and other habits of mind are consistent with the concept of higher-level thinking. It’s the intelligence of recognizing things, remembering things, imagining things, and applying reasoning. Reasoning includes activities such as analysis, synthesis, and imagination. In strategic thinking, cognition is explicitly the mechanism that perceives weak signals, makes sense of those signals, and makes decisions.

We all like to believe that we’re in control of our decisions and behaviors. Science has shown that much of the mind’s cognition is in the subconscious. The argument includes an observation that the human brain evolved over thousands of years in a harsh environment much different from that of present times. The brain’s cognitive functioning, in many ways, is locked into specific patterns that work well for us most of the time yet leave us vulnerable at other times. We must not overlook the presence, when crafting strategy, of the “reptile brain” that causes people to get angry, get frustrated, withdraw, and oversimplify. The modern-day result is that people, including managers, often make decisions that are not factually grounded, not logical, and not in their self-interests. The idea of a consistently rational person is no longer accepted.

The mind prefers simplicity and certainty. It is quite adept at neglecting complexity, ambiguity, and other features of the strategic situation. Managers convince themselves that they know more than they really do, they uncritically trust conventional explanations, and they trust experts in areas where the experts are guessing. Categories and stories dominate their mental life, and then they find themselves surprised by fast-moving events.

Sometimes thinking is delusional. For example, John Nash made many original contributions to economics and game theory, resulting in him sharing a Nobel Prize in 1994. Nash also had a history of mental illness, such as believing that men who wore red ties were part of a conspiracy against him. Nash claimed that the same place in his brain that was the source of his most significant contributions to scholarship was also the source of his delusions. Insights are powerful but so is delusional thinking, and there may be a thin line between the two. Columbus wrongly insisted that the distance to Japan was about one-sixth of the actual distance. Perhaps Columbus was delusional, but maybe he was like a modern entrepreneur, Steve Jobs of Apple Computer, with a mental “reality distortion engine” that he used to influence the adoption of his ideas.

Pillar IV of strategic thinking is a focus on success in the future, and the continual change in the world around you (in general) and technology (in particular) introduces a set of challenges that will only increase the “struggle against the limitations of our intelligence.”

A competent strategic thinker doesn’t necessarily have a higher IQ than anyone else, nor is she necessarily better educated. Instead, she is more aware of what she knows and doesn’t know. She is skeptical about reliance on intuition, whether it be her own or that of others. She is resolved and determined to pursue betterment for herself and her stakeholders.

It’s tempting to conflate strategic thinking with critical thinking, creative thinking, and systems thinking. Figure 3-2 provides selected similarities and differences that will help you understand that the nature, purpose, and scope of strategic thinking are distinct. Strategic thinking is explicitly concerned with strategy, including an orientation toward the future. When appropriate, strategic thinking incorporates the other styles of thinking.

Pillar I – Individual capacity. Although Columbus needed the help of many other people, his individual experiences, insights, and effort are at the center of the story. He understood the situation, adapted to it, and formulated a reasonable approach to advance his interests and the interests of his sponsors.

The emphasis on the individual also points out an interesting challenge for organizational development. Organizational culture is the reflection of individual values and preferences. It establishes and reflects conventions, however, that can suppress the genius of the individual, leading to dullness and mediocrity.

Organizations need competent individual strategic thinkers at all levels. Everyone has the capacity to detect weak signals, to make sense of them, and to design and implement reasonable actions.

Figure 3-2. Strategic thinking shares some but not all characteristics with other styles of thinking.

Strategic Thinking Defined

The four pillars suggest a concise definition of strategic thinking:

Strategic thinking is the individual’s capacity for – and practice of – using cognition to identify and organize factors that increase the probability of success in the future.

The four pillars also present a simple model of strategic thinking. As described in Chapter 4, the model provides a baseline for contrasting operational thinking and strategic thinking and thus gives us a useful tool to recognize what strategic thinking is and when it applies. As a learner, your challenge is to internalize this and adapt it to your own experience. How does each pillar appear in your personal strategic-thinking narrative?

The Four X-factors of Strategic Thinking

An X-factor is a variable that has a significant impact. In Figure 3-3, I show the four X-factors of strategic thinking and their approximate relationship to the four pillars. X-factors 1 and 2 affect the crafting of strategy, whereas X-factors 3 and 4 are situational characteristics. This acronym can help you remember the four X-factors: DICE.

X-factor #1 – Drive. This X-factor is associated with a person’s motivation, energy, ambition, and courage. Some people have drive and will do the things that conventional people will not do: immerse themselves in the details longer, persevere on goals, and take risks. Others simply don’t have the energy.

Christopher Columbus’s survival of a deadly pirate attack and shipwreck in 1476 is a turning point in his narrative. Near-death experiences can provide people with a compelling sense of clarity and perspective.

In a survey of 250 CEOs of companies with revenue of $50 million or more, management consultant Grant Thornton reported that 22 percent said that they had had an experience when they believed they would die and, of those, 61 percent said that it changed their long-term perspective on life or career. The experience led 41 percent of them to say that it made them more compassionate leaders; 16 percent said that it made them more ambitious; 14 percent said that it made them less ambitious. Maybe Columbus shrugged off his brush with death, but maybe it profoundly affected him. Did surviving the attack enhance his ambition and grit, changing him from an ordinary, unremarkable, seafaring merchant to one with the drive to act on his big idea?

Figure 3-3. The four X-factors of strategic thinking.

X-factor #2 – Insight. Columbus noticed the pattern of the prevailing winds (east to west off the coast of Africa), which stood in contrast to the westerlies that prevailed on Portugal’s coast. This insight became the basis of his strategic logic, providing a solution to the problem of sailing west and returning.

Insights are the secret sauce of strategy.

Insights are the secret sauce of strategy making; they’re a proprietary kind of information that strategists use to their advantage. As I develop a strategic-thinking narrative, I always look for insights and search for their origination. Much of the power of the Moneyball strategy comes from capturing and exploiting insights. I explain insights in more detail in Chapter 9 using the example of IBM’s transformation from a product-centric to a services-centric business.

X-factor #3 – Chance. Imagine yourself in 1492 watching three small ships leave the harbor in Palos de la Frontera, Spain. You don’t expect to ever see or hear from Columbus again.

Columbus earned his place in history due to a series of fortunate events, culminating in his excellent luck of bumping into a small island of the Bahamas. Other fortunate events include these: He survived a vicious pirate attack and shipwreck. He lived in the innovation hub of Lisbon. He married the daughter of a middle-class merchant with connections to the royal court. The King and Queen of Spain changed their minds about sponsoring him. Spain’s possession of the Canary Islands was good luck because the winds there are especially favorable for the westward voyage, compared to Portugal’s Madeira Islands and the Azores. He sailed through a dangerous stretch of water at the peak time for hurricane spawning. Had his luck been bad instead of good, another adventurer would have introduced the western hemisphere to Europe.*

The presence of chance highlights a connection between Pillar III (organization of resources) and Pillar IV (success in the future). The better approach is to configure resources with the intention of favorably tilting the odds. Success is merely a possibility and is not guaranteed.

Another confirmation of the importance of chance appears in the writing of the book Moneyball. Its author, Michael Lewis, originally planned to write a magazine article on the Oakland A’s. During his reporting Lewis observed a contentious meeting on drafting players. He saw a richness of content that convinced him to write a book rather than a magazine article. Paul DePodesta of the A’s, who was present at that meeting, recalled the meeting as atypical and one of the most drama-filled of his career. Had it been a typical meeting, Michael Lewis may not have written the book. Absent the book, Hollywood wouldn’t have made the movie. Without the film, there would have been little awareness of Moneyball in popular and business culture. We can extend the role of luck even further back. Michael Lewis became a best-selling author because of his talent but also because of his good luck. As a recent college graduate, he attended a dinner party. A woman struck up a conversation with him, asking about his plans. Lewis replied that he didn’t know. The woman promptly introduced Lewis to her husband, an executive in a Wall Street trading firm, and told him to hire Lewis. Lewis was placed on a trading desk, where he observed a fraudulent system at work. He wrote of his experiences, and it became the bestselling book Liar’s Poker.

One of the first questions I ask in evaluating a strategic-thinking narrative is this: “What is the role of chance in this story? Did the strategy embrace the role of randomness and chance?”

A theme emerges: history turns on small events that are random, unpredictable, and thus non-linear. The X-factor of chance reinforces this comment from Daniel Kahneman: “Luck plays a large role in every story of success; it is almost always easy to identify a small change in the story that would have turned a remarkable achievement into a mediocre outcome.”

Chance plays a vital role in every strategy.

There’s an interesting connection between the X-factor of chance with Pillar II of cognition. Most people tend to attribute their success to their talent. They recall their hard work, and they see that hard work as a cause of the success. That’s a simple and memorable story. The story is strengthened because the same person will overlook the times that she worked hard and failed. Similarly, her mind will neglect the times that she didn’t work hard but had good fortune. She remembers (easily) that hard work leads to success. It requires more mental energy to find counterexamples to the hard-work-leads-to-success narrative.

It’s no secret and no surprise that managers are overconfident, and this overconfidence can be a reason for many disastrous strategies. People can easily believe themselves to be exceptional, can easily neglect the intentions of rivals, and can easily disregard chance events.

X-factor #4 – Emergence. Emergence is “the arising of novel and coherent structures, patterns, and properties during the process of self-organization in complex systems.” Consider two examples of emergences associated with the opening of the Americas to Europe. The first is the eventual discovery of new food crops such as corn, cocoa, and potatoes. These new crops offered Europeans many new nutritional possibilities. The second is the introduction of European diseases and enslavement, which profoundly changed the aboriginal societies of the New World.

You’ve probably heard the speculation that a tornado in North America could have been triggered by the flap of a butterfly’s wing in the Amazon rain forests. That flap established a small wind current, which was further amplified by other forces. The emergence (the tornado) is the result of causes and effects. It theoretically could be modeled.

However, the occurrence of a tornado is unpredictable. Because a butterfly might spark the emergence of a tornado doesn’t mean that a butterfly has ever caused a tornado. Moreover, it doesn’t mean that a butterfly hasn’t indirectly caused a tornado.

Those wing flaps are unnoticed weak signals. We can’t predict the emergence of a tornado (or any other given phenomenon). A strategic thinker is ready to notice the weak signals and accept the plausibility of discontinuity and disruption.

To summarize, the four X-factors provide a guiding message for strategic thinking. You should emphasize:

• Drive instead of complacency

• Insight instead of intuition

• Chance instead of certainty

• Emergence instead of master planning

Closing Thoughts: Historical Thinking and the Future

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.

A strategic thinker appreciates the value of historical thinking.

This pattern is characteristic of a strategic-thinking narrative: a curious individual scans the world around her for interesting signals. As part of the scanning, she evaluates her existing resources and emerging technology for underappreciated potential. Eventually she realizes a big idea and an insight. She experiments and organizes her resources to improve the fit of her resources to the situation.

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?

The four pillars and four X-factors of strategic thinking provide a useful model for speculating about individuals in situations that call for good strategy. The exercise offers a lens for identifying plausible new states of the world and actions to advance our interests. 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.