This is the fifth post in a thread about strategic thinking. It is targeted to university students, and meant to introduce a framework for using strategic thinking to get ahead. The tools so far have focused on re-shaping what we think and what we do about the future. But they leave out a key strategic challenge – how we connect to others in the adventure. That is next!
During the time I was a student, I put a high priority on who I was connected with. This was in part a matter of my own identity – I wanted to be accepted in the groups that I identified with. The thought did not occur to me back then that this was a bit limiting. Why? Dave Logan brings this out in his TED talk about his tribal leadership model. It is worth tacking a look at Dave’s TED talk. He clarifies why not all groups are equally dynamic or even healthy. Going beyond Dave’s idea, once you are in a less than great group, research suggests that it is likely that the group will impact on your attitude – for better for worse.
These are serious concerns, but there is more. Steve Johnson first turned me on to the question, “where do great ideas come from?” He has a nice video about this that I highly recommend watching. To be honest, before listening to Steve, I had not considered the question at all. I had no idea. I imagined an eccentric genius emerging from a basement with a glow in his eye, or Sir Isaac Newton sitting alone under a tree staring at an apple. Great ideas come from really, really smart people. Right? In fact, the answer is that great ideas evolve out of certain types of social exchanges. Even the greatest minds develop ideas based on their exchanges with others — not just their individual force of brain power. And that includes exchanges with people who lived in the past (via books, etc.) and the present (via that time honored artifact of the cafe society, conversation). It is counter-intuitive, but genius is perhaps best understood as a form of conversation.
Matt Ridley takes the idea of “exchange” further. He argues that “ideas have sex” (an alarming thought). They do this through exchanges between people who share them and when they have sex, they create something new and better than the individual parents. Ridley goes further. He argues that the ability of mankind to make exchanges between different groups or tribes makes us special. It is our ultimate creativity enhancer. Exchange trumps all else. So if exchange trumps all else, we should be thinking strategically about how we do those exchanges.
These are heady thoughts about the value added from connecting with people. BTW, heady thoughts that I would never have come up with on my own. In that respect, they illustrate what Steve, Matt and others are talking about. And when I thought about it, I began to see that we swim in a sea of social exchanges. When we read a book or watch TV or play a video game, social exchanges provide the foundation for what we are doing. The author wrote the book fur us, the producers, director and actors collaborate to tell you the story on TV, and the designers and programmers developed the computer game. Indeed, the game probably introduces you to digital characters that you are encouraged to interact with. And internet multiplies the possibilities for exchange in ways that we are just beginning to figure out. Indeed, figuring that out may be the defining characteristic of the 21st century.
So how to look at this from a strategic point of view? Perhaps we should start by realizing how vulnerable we are in the realm of exchanges. We cannot live without them. And yet, not all exchanges have equal value. They can be both incredibly empowering and equally destructive. Can we maximize the gain? To do that, we could use some tools — sort of an exchange toolbox.
Where do we start? We might start by asking what motivates these exchanges in the first place? Why do people do it? If we can answer that, we have identified the fuel that makes the engine roar. Well, boiling it all down, Adam Smith, Bentham et al probably got it right. The answer is most likely self-interest. People are profoundly self-interested. We are hard wired to be that way. And it is most likely that we structure our exchanges to advance our own interests.
It is a rational way to look at the world. Right? But we know now that it is not 100% correct. Dan Kahneman brings out that perceived self-interest is not the same thing as rational self-interest. And we act as much on perceived self-interest as we do rational self-interest. Malcolm Gladwell brings this out in his book “David and Goliath” and in his recent Google talk. His point is that we all want to connect with institutions that we perceive are great and mighty — in a word, prestigious. We do this even when it is not really in our interest — for example when we could have gotten more form joining a less prestigious source. This is useful from a strategic point of view. Promoting quality exchanges means engaging emotions, not just intellect.
So, how do we engage these emotions? Dan Pink offers some ideas in his book “Drive” (and it confirms what Gladwell was saying) . People get motivated by things that appear to be bigger than they are. What are these things? Money and power? In fact, these things appear to be great only when you don’t have them. There are much bigger things out there. And they are connecting to great purposes, achieving mastery and/or achieving autonomy. Yes, we have seen these categories before.
If Dan is right, the most compelling exchanges offer a connection to at least one of the above. How? Humans have been using a tool to do this for as long as we have used language. We connect people to greatness through stories. All stories share a common structure. They all start with establishing an emotional connection to the main characters. Then they move on to the challenge that threatens these nice folks (some sort of dark force). The dark force always appears to be more powerful than the characters. There is a clash and the nice folks overcome the dark force. Then there is a celebration. Once again, the elements are (1) connect with positive emotions (2) introduce the challenge (3) overcome the challenge (4) celebrate victory. Dan Pink’s great motivators appear in the first part of the story. The challenges are the opposites of the great motivators (think matter/anti-matter). And overcoming the challenge is the moment of great creativity – it is where we find the most high quality exchanges or eurika moments. Notice that celebration only comes at the end of the story!
Now comes the fun part of our adventure — putting the above to use to position ourselves in order to make high quality exchanges. I have talked about “overcoming the challenge” as the key moment (climax) of the story. That is what it feels like. But in an exchange, we actually see something quite different. What we see is a transaction. An agreement. We either reach agreements with people or we do not. And having quality exchanges boils down to producing quality agreements. So we need to translate our emotional story map (what we feel) into a transaction map (what we actually see). Here goes! Hold onto your hat!
The transaction map has three phases – pre-transaction, transaction, and post transaction. And here is the key idea. We need different types of communication styles in each phase.This is an essential idea to make our communications more effective. And it is not immediately apparent. We need to think it through carefully to see why. Here goes!
So let us consider the pre-transaction phase. It is what we see in the first part of our story (where we establish emotional connections between the characters). In this phase, it is critical that the characters are likeable — that connections are possible and potentially rewarding. This idea obsessed Roger Fisher and Bill Ury (two very smart guys who taught at Harvard). These two smart guys were frustrated that negotiations often produced conflict. Why? It had to do with the way people saw each other across the negotiating table. Instead of seeing potential partners, folks saw — potential threats.
In other words, people were ignoring a key part of the story. They were racing to get to the story climax before they established who the characters are. In our framework, they were trying to do a transaction before they completed the pre-transactoin phase of the exchange. Ooops! Fisher and Ury wrote their great book on negotiation, “Getting to Yes” to address that issue. It was btw, published back in 1981 and it is one of the more important books of that period.
They bring out that in negotiations, one can achieve a better result by taking into account and acting on the “interests” that the parties share rather than just taking positions and demanding concessions (bargaining). Discovering complementary interests opens the door to learning and more creative exchanges. And doing it well requires a set of skills that we need to practice. Fisher and Ury laid the foundation for a huge amount of new thinking about communication, negotiation, conflict management and institution building. No student should go into the real world without some basic understanding of it. Trust me on that one.
But this is just one phase of the story. We need to move to the transaction phase. Let me emphasize once again, it presents an entirely different emotional framework and therefore has to be treated differently than the pre-transaction phase. In our story framework, we feel the threat of the “dark force”. In the real world we see the need to make a decision and act on it. There is a huge amount we could say about decision making. Most important, we are not as good at it as we think, and Chip and Dan Heath bring out why no in their book “Decisive”. It is sobering reading. The key point for us is that in this phase of the story, we are no longer focused on positive emotions. We need to act in an effective manner and so we need to learn how to set aside our emotions. Courage becomes more important than good intentions and even genius. And btw, really smart folks tend to have more difficulty than average folks. Perhaps they see too much to make timely and effective decisions.
So we are focusing on “agreements” as the building blocks of exchanges. Can we say what great agreements look like? They do share one characteristic. They are not about maintaining the status quo. They take the story to the next step. To the conclusion. For this reason, making great decisions brings into play leader/follower thinking. I don’t refer here to the so called charismatic leader. And I am not talking about the person in a position of authority (the CEO). I refer instead to the person or persons who take responsibility for the future of the group. This can be a person working at the lowest level. But it is a person who translates principles into motivated action. Leadership is fickle because it emerges most noticeably in crisis. But if we think of “crisis” as merely one type of transaction setting, we might say that the leadership makes transactions possible. And, btw, this is very important when we are trying to bring about “change” – the dark force always seems to resist the change.
And in the post-transaction phase? In the old days, this was interpreted as the moment to celebrate and go back to sleep. But these days, it is more about asking what doors have been opened from the transaction. What is now possible that was not possible before? What did we learn from the adventure? What is the next adventure? So we think in terms of “cycles of innovation”. This is what got Rita Gunther McGrath excited when she wrote “The End of Competitive Advantage”. Her point is that the cycles of innovation are speeding up – old strategies to milk the cash cow as long as possible don’t work in this setting. In this faster paced world, it is not unexpected that it takes four or five or more of such cycles before people involved in new transaction fields get it right and do something great. In other words, in a fast-moving context, failed transactions are expected and can be rectified in the next go round if we learn from what we do.
We could go much further into the above, but for our purposes it is enough to see that each transaction phase has its purpose in making connections function. Neglecting any of them when you build relationships is highly dangerous. Like rushing to make an agreement without thinking through the interests of the parties. Or ignoring the learning from what we achieve. And we should see by now that connections in each phase require a different strategic posture. Pre-transaction connections are open and exploratory. Transaction connections are about efficient execution. Post- transaction connections are more analytical.
This is a lot to think about and I hesitate to add to it. But there is one more thing to keep in mind. We experience at least two different types of connections in the modern world. One type is composed of individual connections where we exchange ideas one to one with others. The second type of connection is within and between institutions. On the individual level, we seek great partnering. Great relationships. And we can get more from our relationships if we think strategically about them and practice using the above communication tools. But what about institutions?
This is a pretty complicated area and we can’t get into it in detail. But one thing is apparent. Our institutions are structured based on what worked up until now. That applies to the public and private sectors. But in the 21st century, we are likely to see new patterns of exchanges that produce a faster pace of learning and change. That suggests that the institutions we use will likely change too.
How? Well, we are just beginning to understand how the pre-transaction phase can add value. There are lots of examples of this. But our private sector institutions (corporations) are not well positioned to operate in this field. The pre-transaction phase works far more efficiently if connections are open and extend beyond the firm itself. You get a lot more idea Input. Universities (like MIT) can do a more broad range of things. And this issue is what drives folks who advocate for “open innovation” and “peer-to-peer networking solutions“. Also, post-transaction assessments work better when those assessing what happened are not just covering their butts inside a firm. Some think that big firms can be better organized to innovate faster. Some argue that client input can and should be integrated into pre and post transaction phases in order to make markets work better. Crowd funding, for example, gives consumer input into the design selection process. And others look to “innovation factories” like YCombinator that may speed things up. These and the start-up world seek to build “ecologies” around innovation. So, we can see that corporations acting on their own may not be the ultimate in terms of accelerating innovation. They are not about to disappear, but we may not need them as much as we did in the past. So what types of institutions do we need? Well, that is not 100% clear yet. And perhaps there is no single answer.
But we do understand the trend. Our institutional framework will evolve to meet what people perceive is in their best interests over time. We are waking up to the central role that exchanges play in helping us get ahead in life. So we can expect institutions that facilitate this will thrive. This means institutions are likely to adapt in ways that enhance our creativity. If this interests you, check out Csikszentmihalyi’s book “Creativity”, where he builds a social model for enhancing creative exchanges.
And there is one more trend to keep in mind. In the old days, one could get ahead by mastering a complex knowledge base (like medicine or law). We rewarded such “experts” highly. This is still the case. But there will come a time (and probably sooner than we think) when computers can do nearly everything better than we can. That includes making decisions using expertise. For example, we got over our shock long ago that a computer can defeat even the greatest grand master at chess. This means that computers will take over a significant amount of work that we now delegate to experts. But not all. As I said, computers will do nearly everything better than we do. Humans will still be better at understanding why we do things. And human expertise will focus more on that element of making transactions and decisions. This is called “freestyle thinking”. How does it work? Well, consider that while a super-computer can defeat a grand master in chess, it cannot defeat a grand master teamed up with other computers. Freestyle thinking will elbow its way into the mainstream, vastly enhancing access to expertise and empowering teams that use that expertise effectively.
We have come a long way in this post — from seeing the importance of exchanges to structuring exchanges to make them work better to thinking about institutional change. We are now in the world of platforming. A world that we will no doubt learn much more about in the 21st century.
So, is that it? Anything more to put in our strategy toolkit? Well, there is one more idea to explore. Is there something to hold all this together? We have touched on the strategic value of story telling here. Next, we will go a lot deeper into it.