Russ Roberts

Duggan on Strategic Intuition

EconTalk Episode with William Duggan
Hosted by Russ Roberts
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William Duggan, professor of management at Columbia Business School at Columbia University, talks about his latest book, Strategic Intuition. Duggan critiques traditional methods of strategy and planning and suggests that the opportunism and adaptability are more productive detailed plans. He also discusses the nature of intuition and creativity along with insights into how the brain works to better understand problem-solving.

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0:36Intro. Strategy: How do you figure out what your goal is and what activities you will engage in to achieve it. Business schools. Can strategy be taught? As taught in business schools, not same as strategic thinking. Strategic analysis, using economics concepts and data to analyze customers and situation. Do not tell you "Here's what to do." Refer to it as a creative act. Do business leaders do it the way it is taught, analytical? All good, but doesn't tell you what to do after the analysis. Next: brainstorming. Weeks of analysis, but then decision is made on what to do in an hour and a half. Modern science has actually told us a lot about what creativity is, and it can be applied. Innovators and entrepreneurs do something different.
7:10Brain science. Roger Sperry, two sides of the brain, Dan Pink podcast, Whole New Mind. Left side is supposedly analytical and logical, right side is creative and intuitive. Too simplistic, modern science focuses on intelligent memory, putting things on the shelves of your brain and storing them. Parsing, breaking down. Thoughts happen when the pieces come together. Flash of insight, creative idea when pieces come from very different parts of the brain. Look into yourself. In defense of brainstorming, others may have things in their brains that aren't in my own. Maybe best way to put those brains together is not in a brainstorming meeting. When do you typically have your best ideas? Shower, driving in traffic, when you are relaxed, when you are not necessarily thinking about the subject. Sleep and neuroscience. No preconceptions, clearing your mind, Asian martial arts. Best way to do it is to go to sleep. Getting together for a meeting is very different. Best ideas may be on something else, off center.
14:46So maybe at 3:30 you should hang out and talk football or poetry instead of a brainstorming meeting? Retreats: can't do them every week. Reverse brainstorming: Boss says you will have your best ideas outside of work, and please remember them, write them down. Once a week at 3:30 on Wednesday we'll get together and talk about them. Time management, productivity, start your day with to-do list, keep big goals in mind, prioritize. Practical: If you have a thought, don't wait for meeting to talk about it with someone. Tell people that this is the plan. Creative stimulation, based on left-right brain. Have the courage to send people home early. Books on how to write, Stephen King, may work for one person but not everyone. Disparate jump-starting techniques, though, include wiping the slate clean, stand on street corner, listen to rock music, gaze out a window. This is the hardest step, freeing your mind. Multitasking enough is like doing nothing. Parenting: TV, computers, instead want variety that can later be linked together. Serial immersion.
22:55Military issues. Definition: Creativity is a new combination but the elements came before. Written about in early military strategy. The word "strategy" in fact entered the English language in 1810, at height of success of Napoleon Bonaparte. Formal study of strategy evolved to defeat him. Sun Tzu, Art of War, strategy certainly existed, but as a modern subject it began with Prussian Carl von Clausewitz, (1780-1831), On War, coined term coup d'oeuil, strike of the eye, glance, similar to modern neuroscience of intelligent memory applied to previous elements. He had lots of history of campaigns in his memory, and also had insights on how to think about them. Lee, Civil war: alternative leadership skill--delegation to underlings because the main leader can't have all the information that is available. Hayek, price system. Eisenhower and Patton. But Lee didn't delegate overall strategy. Levels of strategy. Napoleon understood that where you fought could give you an advantage. Grant and Sherman understood how mobile war worked.
32:01What have we learned today from Clausewitz's ideas? Sometimes you don't fight, you conform your actions to the force of circumstance as you find it. Opposite of simple view that you set a goal and keep fighting. Mobile war: goal evolves, and you only set it when you see how to achieve it. Same for business. Look for opportunity to exploit before setting goal. Is there anything great innovators do that the rest of us can learn? Innovators themselves learned it. Maybe 1/3 of entrepreneurs are dyslexic, famous for seeing the whole rather than the sum of the parts. General Electric team exercise discussed in book. Imitation in entrepreneurship. Doing something completely different gets you to the top. T. S. Elliot, "Immature poets imitate. Mature poets steal." Steve Jobs, selectively took graphical user interface (GUI), though much of the wealth from that insight got captured by Bill Gates.
39:39Schumpeter, difference between invention and innovation. Ray Kroc, milk shake machine, driving around the country selling, finds out that a customer is using eight at once, McDonald's, classic flash of insight: roadside fast food. Two previous elements, Howard Johnson's plus machine. Amar Bhide. Lots of wrong ideas, too, no guarantee of success. Google combined existing elements. Henry Ford's moving assembly line based on Oldsmobile's 1901 stationary assembly line combined with Chicago stockyards where carcasses were moved along overhead rails. Have to open your mind. Best practice in an industry may not be as good as the idea from some other industry. Any insights on how to change careers, how to parent, etc.? Consulting how-to books mostly tells you how to do strategic planning. You should instead prepare for opportunity and stay open to it. Have to start with an idea, but stay open to discover. Pure networking. Start with a puzzle that interests you, e.g., I would be interested in the xyz business, nutrition business in Mexico; then you find someone who knows something about that business and ask him one question about it. Who else can I talk to? What Color is My Parachute? says to find the one company, one person you want to work for, and ask that person for a job. Worst advice! Should cast as wide a net as possible. Graduate school choices. Jomeni (sp?), competitor to Clausewitz, strategic. Alternative to strategic vision is life as a cork, bobbing around purposelessly, end up with regret. Looking for something in between, canoe, have a paddle.

COMMENTS (7 to date)
RW writes:

This is the best podcast I have listened so far. Thank you.

Grayson Hill writes:

From "A Technique for Producing Ideas" by James Webb Young. Published sometime in the 1940s. It's a classic to the advertising world.

"With these two general principles in mind -- the principle that an idea is a new combination, and the principle that the ability to make new combinations is heightened by an ability to see relationships -- with these in mind let us now look at the actual method or procedure by which ideas are produced.

"The first of these steps is for the mind to gather its raw material.

"It [the second stage] is the process of masticating these materials, as you would food that you are preparing for digestion.

"In this third stage you make absolutely no effort of a direct nature. You drop the whole subject and put the problem out of your mind as completely as you can.

"Now if you have done your part in these three stages of the process you will almost surely experience the fourth. Out of nowhere the Idea will appear."

Donna writes:

Great podcast from one of my top five most stimulating podcasters!

You asked William Duggan about how to learn to have a creative idea.

Phil McKinney's podcasts on "Killer Innovations" are amazing work in this area. As a CxO, it's his job to help people have useful innovative ideas. He believes that when you ask the human brain a good question, you often get a good answer. Most of his podcasts end with one or more "Killer Questions".

I spent a year listening to his podcasts to create a new thinking path for myself. And now it's almost annoying how often my brain interrupts me with a new approach to something that I didn't even ask it to think about.

http://www.killerinnovations.com/blog/index.html

Thank you for your stimulating podcast! I routinely get ideas from your podcast to store away in the shelves of my brain for future innovation.

Richard Sprague writes:

Re: why Bill Gates took most of the wealth from the GUI insight, an under-reported part of history is how Microsoft was at least as interested as Apple was in the Xerox PARC innovations. In fact, MS hired a key Xerox person (Charles Simonyi, aka father of MS Word) very early, and in fact had more people working on Mac/GUI development (Excel, MS-BASIC, etc.) than Apple did during much of the Lisa/Mac project. Until the early-90's, it was impossible to build a reasonable GUI without specialised hardware -- something MS could not do without Apple's help.

I argue that a key reason, perhaps THE reason Microsoft grabbed the wealth was that Bill Gates had as much, if not more, insight about the GUI than Steve Jobs, and was therefore better able to see other innovation possibilities (such as making it available on other hardware platforms) that were perhaps more important in the long run.

Scott Anderson writes:

I enjoyed the William Dugan discussion and his ideas on strategic intuition. I listened to and understand his definition of strategy, so readily accept that idea generation must be at the center of strategy generation and found his thoughts to be very interesting. I can't help myself so must supply some comment as a non academic...

(1) Creative ideas, it seems to me, often come both with a solution to a problem as well as the problem that is being solved. This might be why it was said that definite goals may not be developed followed by a rigid process to find solutions. It is an opportunistic approach to improving one's situation. In business one needs to have a general idea of what is good and bad therefore at least a general goal. To accomodate an opportunistic approach, a business needs to be flexible. This is often explained as strategic flexibility or an options approach to strategy. The options approach is a adapted best in uncertain environments and often entails a trade-off of flexibility for efficiency.

(2) The options approach is contrasted with the concept of strategic commitment. A business that is committed to an approach to business is more focused and therefore more efficient. All actions contribute to that approach. The committed business is more suited to some environments than others. This specialized business therefore likely has more volitle results than a flexible one (might be good as an element of a porfolio).

(3)Another view of strategy is that it is a set of actions taken to optimize second order results when dynamic or competitive reactions are taken into account- I make a move; a competitor reacts; I anticipated that reaction and the reaction enhances my ability to optimize my goal achievement. This is contrasted with a tactic where I make a move that directly results in my goal achievement. A kind of game theory definition of strategy.

(4) Putting these three concepts together. Business strategy tends not to be just analysis but rather a commitment to a particular business model that defines a business by its activities, the customer it serves, the products/services that it delivers, etc. A good strategy anticipates that a competitor reaction to the business will reinforce a positive result of its commitment. Idea generation and flexibility are required to reinforce the commitment as the environment changes. The strategy is deliberate and thought through but the reinforcement of the strategy with activities and actions comes from creative ideas. It is often as much a filter of what ideas will not reinforce the strategy.

Baased on these ideas, strategic intuition is the process of comming up with ideas and then using a company's strategy to determine whether the ideas reinforce the strategy or not. Ideas that do not can be sold to other businesses whose strategy can accomodate them or can be modified to have a better strategic fit.

As example, BMW may come up with ideas-distributiion, technology, styling, etc that might better suit a pick-up truck but may find that it would better be sold through a different distribution system, to a different customer segment and be manufactured using a different production technology with a different set of parts. The idea is good but to produce and distribute that truck might dilute the BMW franchise as well as alter its economics. Alternatively BMW might develop a technology that is fuel efficient and sporty that reinforces its strategy in an environment of high fuel prices and environmental concern. This reinforces its strategy, the other can reinforce a competitor's strategy. Two ideas, a commitment, some flexibility to change and a strategy that filters out the idea that is not suitable.

I most certainly will read the book with interest and "steal" insights to improve my strategy. :)

SA

Brian writes:

Excellent interview - much food for thought here.

Thanks for doing what you do - it's appreciated.

Norak writes:

This was very good. I am a graduate who is job hunting at the moment, so I enjoyed listening to that.

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