Building New Strategies with Lessons of the Past

At last month’s Cannes Lions festival, I had the privilege of participating in a session with advertising legend Chuck Porter on “building new strategies for creative excellence.”  The session was organized by the Berlin School of Creative Leadership around the contrast between strategic insights drawn from the successful creative work of his agency, Crispin Porter + Bogusky, and more orthodox strategic approaches associated with Harvard Business School Professor Michael E. Porter (no relation).  In preparation, my Berlin School colleague, Professor Paul Verdin, and I had drafted a White Paper on the topic.

The session and paper yielded several conclusions about new priorities for building strategy for creative excellence.  For example, while acknowledging the greater need for flexibility and speed in decision-making today, we identified the persisting importance of making adaptive commitments to brand values and strategic priorities.  Likewise, we identified other crucial principles: serving communities of participation, building trust through storytelling, and finally recognizing accumulative value creation rather than pursuing competitive advantage for strategic success.  Overall, we proposed a fundamental shift from the traditional, largely adversarial orientation focused on competitors to an emphasis on value creation through the engagement of customers.

In doing so, the White Paper picked up on several currents of thought about the evolution of strategy.  Customer-centricity, involving better understanding and engagement of customers as well as enhancing capabilities for serving customers, is one such stream.  Another is the transformation of traditional value chain and scale economies by digital technologies and an information economy whose creation, distribution, and transaction costs have an entirely different structure.  Perhaps best-known, to use the title of Rita Gunther McGrath’s 2013 book, is “the end of competitive advantage.”  Rather than achieving a long-term, stable and sustainable market position in a well-defined industry, following Michael Porter, the new world of strategy is marked by developing a portfolio of transient advantages able to capture shifting “connections between customers and solutions.”

At same time as the Cannes festival, another debate around innovation and disruption began roiling.  Jill Lepore, a professor of history at Harvard (in the Faculty of Arts and Science, not Business School), published a withering piece on the contemporary “gospel of innovation” in The New Yorker.  “The Disruption Machine” took on the prevailing model of disruptive innovation associated with Clayton Christensen, another Harvard Business School faculty member.  His theory contends that while an incumbent firm seeks to maintain its market advantage through sustaining, or incremental, technological innovations, it is often overtaken by new entrants whose disruptive innovations, typically offered at lower-cost and with lower-performing technologies, end up remaking the market and leading to the failure of the incumbent firm.  Lepore alleged the theory, which she extracted primarily from Christensen’s groundbreaking 1997 The Innovator’s Dilemma, mistakenly explained the emergence of new technologies and the dynamics of firms.  In doing so, she also personalized the critique by questioning the integrity of his research and his claims about the theory’s ability to predict market failures.  In a Bloomberg BusinessWeek interview, Christensen responded briefly and quizzically both about the personal nature of the attack and the lack of actual difference in their questioning of innovation.

Much commentary and side-taking has ensued.   Many pieces noted how “disruption,” in particular, had become an overused shorthand for innovation-driven (some would say, -fixated) entrepreneurs and businesses.  On Vox.com, for instance, Timothy B. Lee’s post was tellingly titled, “Disruption is a dumb buzzword.  It’s also an important concept.”  Kevin Roose similarly wrote on nymag.com that, “for actual disruption to work best,‘disruption’ has got to go.”   Some comments took on the larger state of innovation in both business and management studies.  In the Financial Times, Andrew Hill thus made the case for a more measured use of the theory of disruption, citing its relevance to analyzing corporate failures like Kodak and Blackberry. 

While Christensen has understandably been at the heart of many of these discussions, Michael Porter’s place has also been important.  On Forbes.com, Stephen Denning wrote that Lepore had been “the assistant to the assistant of Porter” and he then cast her attack in terms of the conflicting views of Porter and Christensen.  Specifically, this meant distinguishing the strategic goals of maximizing shareholder value and creating and maintaining customers.  The recent imbroglio around disruption is a “symptom,” in Denning’s word, of a more far-reaching debate around core assumptions of contemporary management and business.

In fact, among the most important lessons of the Lepore-Christensen exchange seem precisely the value of reflecting on and wrestling with one’s own guiding principles and assumptions in business leadership.  That lesson was also a basis of the Porter vs. Porter White Paper and Cannes session.  Such questioning can include:

1. Language

Too often, as with “disruption,” we use or overuse language without fuller explanation or understanding.  Sometimes context is lacking.  For those in creative and marketing communications, for instance, Jean-Marie Dru, now the Chairman of the TBWA Worldwide advertising agency, developed the distinct concept and specific creative methodology of “disruption” at the same time as Christensen in the mid-1990s.  More generally, as I wrote in a recent post, we don’t take adequate care in our everyday usage of key words like innovation and creativity to ensure clear and effective communication of their meaning in given situations.

2.  Assumptions and Contexts

If the language around disruption or innovation would benefit from greater care and precision of usage, the assumptions underpinning that language can likewise have greater impact when more fully understood.  This is not to suggest, of course, that any discussion of innovation should revert to exploring the finer points of Christensen’s (or Porter’s) research.  It is, however, to posit the value of stepping back and assessing the larger ideas behind, or wider implications of, specific potential decisions, actions or strategies.  Some of the best commentaries on Lepore and Christensen, like John Hagel’s, are illuminating exactly because they analyze seemingly familiar ideas more acutely and pose bigger questions.

3. Beyond Prediction

One of Lepore’s major critiques in “The Disruption Machine” is how poorly Christensen’s model predicts business success or failure due to disruptive innovation.  Similarly, in the Cannes session, Chuck Porter observed how our White Paper about his agency’s creative work amounted to “backfilling” explanations for earlier strategic and creative work that may not be practically useful going forward.  Any prediction or forecasting for an increasingly uncertain future is obviously challenging.  Yet predicting the future is not the only standard or purpose for analyzing and modeling the past.  Even more, as Lepore herself allows (in quoting a recent New York Times report on innovation), “disruption is a predictable pattern across many industries” – patterns being a matter of deeper understanding and far different from concrete predictions about future performance at specific firms.

4. Models and Theories – and Learning

The distinction is essential.  As an educator who uses historical cases and models, my priority is often to connect particular examples to wider patterns.  However, the purpose in doing so is not the connections themselves but to help build individuals’ capacities for effective analysis and action.  Those capacities are enabled by learning multiple examples and experiences, models and patterns, and developing the discernment and agility to use them, as appropriate, to make sense of different situations and contexts.  Models and theories, like that of disruptive innovation, are always only potential means for conducting analyses.  Rather than ends in themselves, we should look to them to help us improve our thinking, sharpen frames of reference, and ultimately serve as aids to better understanding, decisions, and problem-solving. 

The Stories We Tell

My first reaction upon viewing Martin Scorsese’s new film, The Wolf of Wall Street, was how closely it resembled Goodfellas, the director’s masterful account of mob informant Henry Hill’s life in organized crime.  Like that historical snapshot of the American Dream colorfully run off the rails, the new film tracks the wanton greed and excessive personal behaviors of Jordan Belfort (played by Leonardo DiCaprio) during the 1990s.  Belfort made tens of millions of dollars selling “penny stocks” and manipulating the stock market through his firm, Stratton Oakmont, before being convicted of securities fraud and money laundering.

While the Goodfellas parallel, in particular, urges Scorsese’s current production to be viewed as a cautionary tale of unbridled Capitalism, what else the film says about “Wall Street” or contemporary business and markets – what more specific stories it may be telling about them – is less clearcut.  In a characteristically incisive New York Times column, Joe Nocera asks exactly that question about the film’s larger message regarding business.  Commenting on Scorsese’s relentless preoccupation with his protagonists’ sexual obsessions and drug use (rather than, say, the specifics of Belfort’s fraudulent trading activities), Nocera concludes that, “to use Stratton Oakmont to represent Wall Street doesn’t begin to get at Wall Street’s sins.”    

Yet Nocera’s question touches on the more fundamental matter of how we tell meaningful stories either about specific businesses or business activities.  Typically, of course, as in the film’s preoccupation with the dissipated indulgences of DiCaprio’s Belfort, we tend to focus on individual leaders and their actions.  Consider a few of the prevailing narratives of business today: the visionary entrepreneur, the rapacious exploiter, or the small businessman at the heart of the economy.  Some corporations do acquire a collective identity that shapes their stories – Enron as the hubristic “smartest guys in the room” or Goldman Sachs as a “great vampire squid” – but they are exceptions. 

In Hollywood and, arguably, the wider popular imagination alike, there’s a further need to simplify and dramatize the activities of business like stock trading.  At one point in The Wolf of Wall Street’s occasional voiceover, in fact, DiCaprio’s Belfort begins to describe the specifics of his trading activities only to acknowledge they don’t really matter to the audience and stops.  Moreover, any connection in the film between Stratton Oakmont’s actual dealings in the 1990’s and the ethics of big Wall Street firms’ early trafficking of Collateralized Debt Obligations (CDOs) becomes speculative, at best, as the film’s story increasingly dwells on Belfort’s own spiraling out of control.  The complexity of such activities and any ethical or legal claims to be made about them, much like the operations of other financial entities like hedge funds or private equity firms, make them difficult if not impossible to render meaningfully in dramatic stories.  It should give us pause in thinking about how we characterize the activities, and differentiators, of our own businesses in the stories we tell of them.

Formal business education regularly addresses the challenge of telling business stories.  The case method thus often requires that firms, their constituent units and leaders, be analyzed closely.  Cases can obviously be structured in different ways, but the most typical approaches rely on carefully drawn narratives: decision-making cases confront the protagonist (and students) with a decision freighted with the complexity of preceding events, for example, while best practice cases present the emergence of those practices through a particular sequence of decisions and events.  Harvard Business cases often go so far as to intentionally scramble the elements of business narratives in order for students to have to make sense of them.  Dexterous re-construction of the full story becomes the touchstone for analysis and learning – while also modeling the valuable skill of producing coherent stories from the disparate facts and other pieces of information found in everyday life.

More broadly, the stories of business organizations that circulate externally cannot but help shape the wider understanding of those organizations (regardless of their accuracy).  Marketers in this way rely on narratives to construct and differentiate the status of company (or its constituent product) brands.  As media and entertainment mogul Peter Guber makes clear in his bestselling Tell to Win, the value of stories is the “emotional transportation” they offer customers or clients.  That “transportation” may lead to very different ends, of escape or transformation or even-self discovery, but it is ultimately borne on the wings of compelling stories that touch our hearts as customers, partners, or collaborators.

Internal to businesses, narratives, what some call “organizational scripts,” can spell out the distinctive and locally appropriate behaviors to be performed in various situations.  Some of these are “origin stories,” of founders’ decisions or critical events, while others capture the defining ways the business organizations manage change, solve problems or otherwise collectively behave.  Still other stories are aspirational and define the organization according to the future it envisions (for example, in Google’s case, having all the world’s information organized).  In fact, the most influential organizational stories are often those that describe where individual workers want to go together and how they aim to get there. 

At the center of such scripting and storytelling are leaders.  In their Animal Spirits, which argues that humans are hard-wired to organize information and experience into narratives, Nobel Laureates George Akerlof and Robert J. Shiller noted that, “Great leaders are foremost creators of stories.”  Creators, yes, but also evangelists, translators, exemplars and finally guardians of the organizational DNA organized into and relayed through stories.

Like all genetic influences, however, the core elements of given stories of organizations and business activities only go so far in shaping their eventual impact.  Ever-changing environmental dynamics, say, of shifting markets, require that stories be continually refined.  In his conclusion to The Leader’s Guide to Storytelling, Stephen Denning makes the crucial point that narrative elements and techniques should ultimately serve as the basis of connection and communication with employees and customers.  Rather than being self-contained and complete, in other words, stories should convey essential truths about the business they describe while still having rough edges and opening out to continuing interaction.  Although that doesn’t necessarily work in Hollywood’s scripts and productions, such openness and adaptability in meaningful storytelling about organizations and business activities are among the paramount responsibilities – and most powerful opportunities – of real leadership.