Episode 24: Martin Reeves on BCG’s Idea Machine

Transcript: Martin Reeves and Bob Buday

Bob Buday: Martin, great to have you on our show. You have been with Boston Consulting Group since 1989 — 34 years – and you’ve seen the firm grow strongly. Thought leadership has been at the center, going back to George Stalk’s concept of time-based competition, and even going back before that, with founder Bruce Henderson and some of the concepts that he and his colleagues created in the 1960s. So it seems to us that BCG has a culture of thought leadership, meaning that it has values, beliefs and behaviors that reward people like yourself and your colleagues to create big and groundbreaking ideas on strategy and other management topics. Do you agree that BCG has a culture of thought leadership? And if so, how has BCG built such a culture, and how has it maintained that culture?

Martin Reeves: Yes, I do, actually. And I think it’s a fascinating study in the institutionalization of culture that BCG was born with.

The firm was created in 1963. And as your listeners will know, the business of competitive strategy is actually quite a young one. I think the earliest reference I can find is something like 1959.

So Bruce Henderson created BCG at the very time when competitive strategy was being formulated. He was part of a community of “pracademics”; there was no distinction between theoreticians and practitioners at the time. Along with building a consulting firm, he participated in the creation of the ideas of competitive strategy. He wrote about and originated many ideas with his colleagues, like the experience curve and the portfolio matrix.

I think the second phase of [BCG’s] history is when we replicated that culture, although not in a systematic way. Initially, it was people like George Stalk and Tom Hout who wrote a very influential idea called “Time-Based Competition.”

And then, for instance, came Philip Evans and Tom Wurster, with [the book] “Blown to Bits.” It was about digitization and the digital revolution. In more recent years — and this is the part of the story I’m part of — we said, “Well, hang on, let’s not be just fortuitously that way; let’s be systematically and deliberately that way.”

As the firm grows in scope and size, you have to protect the origins and structure all of this thought leadership. That’s when we began to build structures and incentives and career paths [for thought leadership]. We thought explicitly about the elements of culture that we want to protect.

The world never gives you pre-made, fully baked topics. You have to see them. That requires curiosity because they never present themselves in a fully articulated form.

So coming to the core of your question: What is a culture of thought leadership? It probably varies according to the type of thought leadership. But thought leadership in strategy, I think, is partly about external focus. You can’t be focused [internally] if you want to be talking about things that are going on in the world.

I think it’s also about curiosity. The world never gives you pre-made, fully baked topics. You have to see them. That requires curiosity because they never present themselves in a fully articulated form. I think it’s also about a culture of individual initiative, because usually a groundbreaking idea seems ridiculous at the time. It goes against conventional thinking, or it creates a new category or new vocabulary.

You’ve got to have some sort of culture that blesses individual initiative. You know, celebrating a legacy can be a form of rigidity. But it can also be a means of reminding yourself what you stand for.

The last thing I’ll say on this is that John Clarkeson, one of our former CEOs, thought the firm needed what he called a values statement. It was a statement of what we stood for. That’s subsequently gone through many iterations. But the original version had two very important sections. One was on expanding the art of the possible, which essentially said we’re not about merely practicing the possible or being useful — we’re about expanding the art of the possible.

We start with the perspective that the goal is not simply to apply best practice but rather to invent it. Each client is unique and there’s seldom only one solution. We believe breakthrough ideas often result from teams seeking to creatively solve real client challenges. We seek to extend the art and science of management by generalizing from our experience.

So that’s an explicit statement about what we stand for. And then the other relevant section of this document … is a paragraph discussing how we see competitive advantage for our clients. Our approach is to consider the business as a whole — the competitive system and its dynamics. We identify market positions and capabilities that enable clients to deliver superior results in a sustainable manner. Objectivity is crucial. Valid data, rigorous analysis, external perspectives, root causes, and explicit logic serves as the foundations for objective decision-making.

That’s what we said many years ago, and it was what we stood for. And that, in a sense, defines the mental part of the culture of thought leadership.

Balancing Innovation and Commercial Impact

 Bob: Do those positioning statements ever become important during the debate about such things, as when one camp says, “Well, should we really research this issue? You know, it’s too speculative.” And then other camps say, “Well look at the positioning statement. Remember what we’re all about.”

Martin: Oh, yes, absolutely. All the time. I think about these things almost every day because, essentially, I am in the business of thought leadership. My job is to help lead the BCG Henderson Institute in its thought leadership endeavors. I think about the question of what is interesting and what is relevant every day. I have to remind myself of these rules of thumb — of these value statements — to get my bearings, because it’s very easy to lose them.

For instance, in pursuing commercial impact [from thought leadership], you may forget that you need innovation to make the commercial impact sustainable. Or another trap is that you may fall in love with your own idea, but not check it for relevance to clients or relevance to the world.

I think thought leadership is, in a sense, a lonely profession. One has to use these rules of thumb and statements about what you stand for to keep your bearings and have a semblance of objectivity.

The Futility of Chasing Trends

 Bob: I also imagine it comes in handy when you go down a path and you say, “Well, here’s our findings so far,” and you look at what competitors have written and think, “Well, we’re not really seeing anything different. And so we have to either work harder or abandon this topic. …”

Martin: For sure. Chasing trends is the shortcut, and not a very good shortcut, in thought leadership and indeed in strategy. It may seem like a sensible thing to say, “Well, how’s reality changing? Let us chase the trends we see in the world. If we’re chasing what’s changing, that must be relevant.”

Well, the thing about a trend is that it is a particular framing of what is going on in the world. By the time we call it a trend, it’s a well-established framing; it’s so many other people’s way of seeing the world. There isn’t very much original about chasing a trend.

And often that trend is a topic; it’s not really a way of thinking about something. It is simply the name of a topic. For example, applying lazy trend thinking, we might say, “Well, everybody’s talking about AI. Let’s write something about AI.” Well, if you’re one of the hundreds of people writing about AI and you have no specific, unique perspective, I think that you shouldn’t bother because you’re not really going to add much to the stock of knowledge or the perspectives for your clients.

I always think not about topics, but rather treatments — not about the trends, but about creating trends or spotting the next emerging trend. I’d rather ask myself this question every day: “Well, people are talking about that. But what’s really going on?”

Asking such questions is a great part of the mental discipline of thought leadership. For many years I used to pin to my computer a pair of complementary questions. One of them was, “What is this an example of?” – i.e,, “What’s really going on here?” Since I’m a very abstract thinker, I have to push myself also in the opposite direction, which is “What is an example of that?” I would use those questions every day. And that kept me in touch with this spirit of observation – of reframing and getting to the essence of things, but also being concrete enough about the words and prescriptions that one chooses.

Early Career: Choosing BCG, and Thought Leadership

Bob: Let’s take a step back in your career at BCG. Did you join BCG with the role of thought leadership in mind?

Martin: In a way I did. Here’s an amusing personal story. My roommate at university, a guy named Steve, once told me the following. He said, “As a friend, I have to tell you something. You’re a clever chap, but you’ll never be successful in life unless you change your personality.” And I said, “What do you mean, Steve?” Steve, who is now a geologist, said, “Well, you’re a butterfly. You’re interested in everything, and people who are interested in everything and fly from one thing to another are never successful in life. So you’ve got to change that.”

I was trying to distinguish between the different consulting firms. In one of the interviews, somebody said something to me, which has been a sort of a North Star for my career. I was having trouble decoding what consultants actually do, because it’s a very unusual profession. The interviewer said, “Look, we use the technology of ideas to change the world. That’s what we do.”

He was right. I was interested in problem solving. I wasn’t interested in a particular domain. I didn’t want to be in the pharmaceutical business or any particular business. I wanted to be in the general business of problem-solving. I discovered consulting and thought, “Well, maybe this is it.” And I discovered BCG.

I was trying to distinguish between the different consulting firms. In one of the interviews, somebody said something to me, which has been a sort of a North Star for my career. I was having trouble decoding what consultants actually do, because it’s a very unusual profession. The interviewer said, “Look, we use the technology of ideas to change the world. That’s what we do.”

That idea was very attractive. It is precisely the reason why I joined BCG. The thing I try to do every day is to harness this frisky technology of ideas. It really is the ultimate technology, if you think about it. A few millivolts of electricity in the right part of the brain at the right time can change things: how you think, how you communicate, how you act, and how a whole organization acts.

The language of ideas is a very powerful thing. That was the BCG I hoped I was joining. I discovered that, to some extent, it was the company I was joining. Although I did other things for many years, I was sort of hoping that that would play a bigger and bigger role. And eventually it did.

Bob: Now, when you joined BCG in 1989, the BCG Henderson Institute wasn’t there.

Martin: It wasn’t. And it’s strange that the strategy practice of BCG and Henderson Institute were not there from the beginning. But if you think about it, it’s understandable. BCG was a strategy company; everything we did was strategy. Nobody said [within BCG at the time] that we need a specific organization for that because BCG was that organization.

But there was a point in BCG’s evolution where we figured out that only around 17% of what we did was strategy. It turned out that there were many [BCG] consultants who had never done a strategy project. That was incomprehensible to the first and second generation of BCG.

We thought we’d better do something about that. So we said, “Let’s have a practice group for strategy. And while we’re at it, why don’t we have an institute to carry on Bruce Henderson’s heritage of evolving the art of strategy?”

The Mechanics of the BCG Henderson Institute

Bob: Let’s talk about the Institute — the mechanics of it, how many studies a year you do, how you choose study topics, the people involved in them, and so on. First, how is thought leadership at BCG different since the Institute was instituted?

Martin: Well, firstly, the Institute was built as something else. It was the Strategy Institute created by one of my predecessors, a German partner. On the occasion of BCG’s 50th anniversary, we created the Henderson Institute from it. We wanted to shape upstream research and ideas not just on strategy, but on all elements of BCG’s diverse offering.

The BCG Henderson Institute has a number of components. It’s got a Strategy Lab, where we think about strategy. I’m a strategist, so I’m very involved with that. Apart from that, we’ve got a Technology and Business Lab in Paris, which thinks about the strategic and organizational implications of technology. We have a social impact lab, led by another guy who thinks about things like sustainability, sustainable business model innovation, and so on.

We have a Fellows Program. We offer our established thought leaders three years and a budget and some resources to pursue anything they’re passionate about. The idea is that what our established thought leaders are passionate about is probably on average going to be more interesting than anything any committee could tell them to do. They have a great deal of freedom and time to develop the next big thing that they think the firm needs.

Bob: They don’t have to be billable?

Martin: They are allowed to focus 30% of their time for three years on evolving the art, not commercializing the art.

And we have a Center for Macroeconomics unit that’s focused on the microeconomic implications of macro developments. If inflation is rising, what does that mean for firms?

Then we have a small support unit, which does our marketing. We find that the marketing needed for thought leadership is not like general marketing. You need specific knowledge of channels, channel relationships, and so on.

And then we have a governance board. We decided it would be healthy to create a body for us to report to, to keep us honest. So we have something called the Innovation Sounding Board.

All of that is about 75 people in total. Within that, at any time, there are usually a dozen research fellows, a few economists and a lot of “ambassadors.” Ambassadors are younger consultants who are excellent thinkers and intellectually curious and who join us for one or two years, and then rotate back to the consulting staff. We call them ambassadors because they’re ambassadors from the consulting business. They take the ideas and culture back into the business.

Where the Institute is Situated Within BCG

Bob: Who does all of this report to? I have a theory that thought leadership research should not report to marketing in a firm if the entity is going to influence the practices of the firm.

Martin: It’s hard to pull off. One of the things I’ve learned over the years of doing this is modulating the distance from the business. Getting it just right is absolutely critical. If you’re too many steps ahead of the parade, you’re not part of the parade. If you’re half a step ahead of the parade, you’re just out of step; you’re just another part of the parade.

I think senior championship becomes very important over time, because we don’t directly produce revenue. I genuinely believe we have had a lot of value to the business, but we never produce direct revenues. So that means every time there’s a very efficiency-oriented CFO or there’s a downturn or something, people say, “Well, what can we cut?” You need the senior champions to say, “No, no, guys. Do not cut that.” In a firm like BCG, where there is little formal structure, the “papal blessing” from leadership is rather important.

We initially set up the Henderson Institute to report to the executive committee. But the executive committee was too big and had too many things to think about. So we created a subset of the executive committee — respected leaders of the firm, intellectually and operationally — called the Innovation Sounding Board. That is who we report to.

“I believe one of the most common mistakes in thought leadership is to confuse thought leadership with thought leadership marketing, which are not the same things.”

I agree, it would be disastrous if we reported to marketing because I believe one of the most common mistakes in thought leadership is to confuse it with thought leadership marketing, which are not the same things. Having insights and expressing those insights are not the same thing as optimizing the communication of those insights.

Bob: That’s music to my ears. The way I look at it is that thought leadership research has to feed marketing and selling and all that. But as or more important, it has to feed service enhancement and new service development. Otherwise, you make a lot of promises to the market, but you can’t scale your expertise.

The Interactions That Deepen Relationships

Martin: It raises another really interesting topic, which is, “What is the value of thought leadership?” Again, I won’t attempt to generalize but I do know BCG thought leadership very deeply. I’m sure there are many other species of thought leadership out there. Some people expect the main value to be the development of new product. You study something, you write about it and create an intervention around it. That’s one type of value.

In my experience, the bigger source of value in thought leadership is serving the “non-project needs” of our clients. If you have a relationship with a client – and, of course, the economics of consulting are all about relationships — if you’re chasing projects, consulting is a very unattractive business because of the proposal costs and lack of predictability and so on. If you’re in relationships, there’ll be times when there’s a specific job to be done for a specific amount of money during a specific period.

But there’ll be lots of times when your client asks, “What do you think about this? Or “I heard about this: Do you think that’s relevant to us?” or “I’m struggling with this. Could you help me frame this?”

That is a conversation, not a project or a product. Having a thought leadership [research group] can connect a firm in this way to the most senior people in [client] firms. They could probably delegate the contracting for the project to the procurement department or the division head or [someone else]. But they want to talk to you about something that’s on their mind, or they want to know what you think should be on their mind.

[A thought leadership research function] allows for a very non-transactional form of relationship that deepens relationships and broadens access.

The third source of value is in shaping agendas. Here’s a surprising statement, but it’s not an exaggeration: I’ve been doing [thought leadership content on] the strategy for business strategy for many years now.

Always the most important question is this: What is really going on here? What’s the real question?

I can’t think of a single instance where the problem that the client framed was the right framing. Always the most important question is this: What is really going on here? What’s the real question? Then of course, you have to solve for that new question.

In my mind, the most artful question is the first one, which is, “What is the real question here?” That’s a thought leadership conversation — framing the real problem.

Another value of doing thought leadership that we stumble across more occasionally is that it’s not just for consultants; it’s for clients too. I did a very interesting project in the construction industry some time ago for a civil engineering firm. Civil engineering firms hire PhDs who create very complicated structural models of bridges and buildings. You might expect that it’s a very valuable business. But it’s a commodity because, since these designs go through procurement departments, and procurement departments invite many companies to bid.

We were thinking about a strategy of de-commoditization. The strategy turned out to be a thought leadership strategy before any bidding takes place, which is getting into the business of shaping how clients think about buildings, the functionality of buildings, the intelligence of buildings, and the economics of operating buildings. So the product was the creation of a thought leadership strategy, which I was very, very involved in.

And then there are some peripheral benefits of thought leadership. For example, the millennial generation wants to join a purposeful firm. They don’t just want to join a famous firm and get paid well; they want to have a meaningful career. For some people, that means ecological or social impact credentials. But in other cases, it means intellectual growth. If you’re in the business only of practicing strategy, that is less attractive to this demographic, which is a very important demographic. It’s more important for them to be in the business of evolving strategy.

So new knowledge is the value of thought leadership. It helps that you’re not pitching to clients. You’re just having conversations with clients.

Justifying the Value of Thought Leadership

Bob: Are you ever asked to justify the value of thought leadership?

Martin: It’s quite easy to justify the economics of thought leadership because you’re never talking about hiring hundreds or thousands of people. It’s never about how many people; it’s about getting the best people for the purpose. The impact is enormous.

We find that clients want to do regular projects with people they believe have some depth of perspective, some thoughtfulness, given the sort of rapidly changing nature of technology in the world of business. The issues that are changing are the relevant ones.

Yesterday’s product is less and less relevant. A pale imitation of something that somebody already did with technology five years ago is not going to cut it in most businesses. You need a custom-made strategy.

It’s a human business. It’s about relationships. Where do those relationships come from? They come from having repeatable [client] impact from the mainstream of our business. But they also come from the inspiring conversations that we have in the thought leadership part of our business.

The Institute’s Mission Statement

Martin: Our mission statement is to inspire the next game of the thought leaders in business. The idea is there’s a vanguard of business executives who set the pace for other businesses. Part of what they think about is not just their current game, but their next game. Our job is to inspire that next game, using the technology of ideas. “Inspires” is a deliberate choice of words: It’s not merely to inform; it’s not just information. It is something to do with the excitement, the aspiration, the vision and the creativity.

That’s what we do. Any decent company that is repeatedly successful has what Bruce Henderson called a sustainable competitive advantage. That requires businesses to continuously think about the future and to think about new ideas. Those ideas are usually not within the company; they’re somewhere else, hence the value of a discussion partner.

I genuinely believe thought leadership is absolutely critical to premium consultancies and indeed any business that’s interested in the future.

Bob: And yet, there are a number of big consulting firms — and I won’t mention any names — that don’t have a thought leadership institute or a function doing primary research. I’m a big advocate for a thought leadership research function that’s doing good research. How important has it been for BCG to have this Henderson Institute to developing big ideas, as opposed to saying, “Oh, we don’t need an institute. We’ll just let the consulting practices continue to develop ideas at the coal face of the client?”

Martin: Well, it is a form of separation. In strategy, there’s a thing that’s called strategic ambidexterity. It’s the ability to explore and exploit to what’s next as well as what’s now. Separation is not the only way of doing it.

BCG began with having a lot of people as thought leaders. They were part of the business, and the CEO was a thought leader. You could call it contextual ambidexterity.

What we have now you could call a separation strategy of ambidexterity, which is your thought leadership unit and a regular business unit. Why would you want to do that? You’d want to do that if the stakes in thought leadership were so high that you wanted to bring a degree of professionalism to it. In the early days of strategy, there was more low-hanging fruit – e.g., like the experience curve and the portfolio matrix. Now that there is stiff competition in thought leadership, and that the world moves very fast, you need a greater degree of depth and professionalism, and a greater degree of dedication to do that.

The second reason why you might want to do that is you might want a non-transactional channel to clients. Transactional relationships are important. Non-transactional relationships are important too [to BCG clients]; there is no cost to the conversation. There is no immediate commercial motive to the conversation but just helping the client with the problem.

The third reason is that the consulting business has become more effectively commercial over the years. I think all the big companies have very efficient revenue engines. They worry a lot about utilization and yield and product-line economics, and so on. That’s all great. It makes the business better. And there’s a tendency for practice groups to do their job, which is to focus on the short-term commercial aspects of business.

You need really need a group of people that stands back and says, “Well, it’s really good business now. But where is it going next?”

But you need really need a group of people that stands back and says, “Well, it’s really good business now. But where is it going next?” I’ll give you a very specific example. All the revenues and consulting around large-scale change management: that is a difficult thing to do. It’s a valuable thing to do, and a frequent thing to do in business. I think all the major [consulting] firms have an offering there. We had an offering too, and we did very well with that. But if you stand back and you look at it, you say, “Well, there’s a lot of experiential basis for the things we do. But what is the evidence for what we do? In the light of the evidence we can now have in the world of big data, how optimized is that thing that we offer?”

We partnered with our transformation practice to analyze 2,000 transformations on something like 20 dimensions. We figured out what is assumed to work that actually works; what is assumed to work that work sometimes; what neglected factors are actually very important; and what seems to be important, but actually is less important than you think. [And we figured that out] for different types of transformation.

So that’s a very hard conversation — a very odd set of things to think about if you’re worrying about the next project with the next clients. That was probably the most effective collaboration with a practice group we have ever had. But we were both very self-aware about the complementarity of the contribution.

Upping the Game Through Internal Projects

 Bob: So what lightbulbs went off for them and your group?

Martin: It’s a bold thing to do on both sides in the sense that if you found the things you had treated as important or less important, you’d have to deal with it. That’s an act of courage. And we were doing fine. [So the question could have been asked] “Why do we need this?”

[The answer was] “We’ll do fine now. But what about tomorrow?” From our point of view, can we really create something that usefully guides choice because it’s not been done before? So it was a little bit risky from our perspective, but it worked out really well. And, in fact, we didn’t just do the initial project.  We did four installments of this project, where we looked at transformative acquisition, distress turnaround, proactive turnaround and reactive turnaround. We looked at a number of different variants.

And inspired by the same methodology, we then did a multi-factor study on leadership. We said, “We’ve talked about leadership and in a very vague way. But let’s look at the evidence, which we can do now [since] everything has big data. What it the value of leadership, and when does that value manifest itself?”

So sometimes these projects that you referred to are mostly external. But sometimes they’re internal, to up our own game.

Bob: Is it changing the way those practices operate — their methodologies, their approaches to client work, and so on?

Martin: Oh, absolutely, and in two ways. It either directly [changes our practices] as in the example that I gave you, which is, “Here is a better way.” It’s a totally different way of conducting a transformation project, of pitching a transformation project. It essentially says, “We have an evidence-based methodology. And here are the important factors.” It’s a very different thing than saying, “Based on experience, we’ll will judge it as we go along.”

In some ways, consulting is necessarily a conservative business because you’re dealing with very concentrated, important relationships. You don’t want to place a lot of risk on those relationships. So … we have to be quite cautious about changing things too much.

On the other hand, the saving virtue is that BCG (and probably many consulting firms) are very pragmatic. When we say that a client is interested in something, the client is right.

Most of our thought leadership marketing is actually communicating these new ideas and constructs to clients, who will then come to us for a conversation if they’re interested. And when the CCOs (the client coordinating officers, who run the relationships at BCG) see that the clients are interested, they’ll say, “Hey, give me more of that.”

BCG’s Highly Diverse Staffing of Thought Leadership Research

Bob: Let’s talk a little bit about the thought about your Strategy Lab, where you bring a diverse group of philosophers, data scientists, biologists, engineers, academics, and others to work with you and your crew. How do you get these people working together?

Martin: The problems we deal with are new. We are concerned with the next challenge, not the current one. To deal with these challenges, it’s not enough to rely on our own business knowledge.

For example, we’ve done a lot of work recently on ethics. And we’ve done work on social polarization. We do work on the long-term impacts of demographic changes globally. You need political scientists, philosophers, and ethicists to be able to get at these problems.

We have a certain amount of that diversity internally. We also have some multiyear academic relationships with ecologists and philosophers and technologists and others.

Bob: What is the research process to put these experts’ thinking together?

Martin: The most important thing is having the right people at the table in the first place. A specialist or an expert is often protective of their discipline. They speak a special language. [They can have] an implicit belief that their discipline is the dominant and best way of looking at something.

That’s not very helpful for a collaborative research process. You need people who are self-confident; they’re not too paranoid and competitive. They’re curious. They may have a successful academic career, but they’re quite interested in real-world applications, too. They can communicate very well, and they can communicate with people in other disciplines. Not too much ego. They can contribute to a solution.

And in the solution, philosophical ethics may not end up being the dominant framing. It may just be a contribution. So you bring these people together, from outside the organization and from other disciplines.

I find that having fewer of these experts for longer periods of time – building multiyear relationships – is the name of the game. I think it’s very difficult to take an academic in a discipline where the bridge to business has not yet built and have it performing within three months. That is very, very hard.

I guess it’s no accident that our [academic] relationships are many fewer than when I first started, but [they can become] seven- or 10-year relationships if the project is long-term.

Clearing Out the Cobwebs Through Fast Projects

Martin: We do have some very fast projects. I’m quite keen on what I call “perspective in a week.” You have a week to write something. It’s totally possible. It cleans out the cobwebs when you do a sprint piece. It often ends up being better than the piece you spent six months on because it’s a single thought, clearly elaborated, whereas the six-month project often has many bits of this and that added onto it. This extra content makes it more complicated. Plus, it reminds us that it’s all about the articulation of those thoughts. It’s not complicated. It doesn’t have to take years and years.

We do “meteor projects” where we take a very tricky problem – for instance, the intersection of politics and business. Everything in business now is politicized. We’ve been doing a series of pieces on different aspects of where politics fits into strategy, and why taking a stance or not, which is often how these things are framed, is actually the wrong framing. It’s orthogonal to whether it’s effective or ineffective. That was harder to wrestle to the ground, and we knew it would be. That was more like a six-month exercise.

Unlike our work in the past, quite a lot of what we do nowadays is very data intensive. This evidence-based transformation project involves collecting and analyzing a lot of data. The collecting and the cleaning part is usually the hard part. If it hasn’t been done before, it’s probably because the data is not in one place or isn’t clean.

Then we have multiyear collaborations with, for instance, Professor Simon Levin. He’s an evolutionary biologist at Princeton who has a really a great skill: bringing mathematical rigor to soft problems. Essentially, that is his stock in trade. We have had a seven- or eight-year relationship with him where we put various problems through that process. But they’re all problems of nested complex adaptive systems. It’s one big, never-ending project.

Then we have the three-year version of that, which is the fellowship. There I step into my role of mentoring the fellows. There’s a certain rhythm to a three-year research project. There’s a lot of constancy of the method. But overall the timeframe comes in different units: from very fast to quite slow and deliberate.

Deciding to Research or Pass on a Topic

Martin: You have to think very hard about relevance and uniqueness. In other words, is this topic that you are attracted to something CEOs are worrying about? Or is it just you who is worrying about it, and feel the need to do external research?

Then, is it your right to say something? If there are 20 people working on that, why do we think we can break through the clutter? That’s more about the treatment of the topic than the topic itself. We worry about that. We usually have a first step, which is really important: Can we pitch this to Harvard Business Review? Is anyone actually interested? Did we get a good reaction to the first paper?

Sometimes the answer is no. It was a wrong framing, so start again. And sometimes we’ll say, “Yeah, we’ll do a second paper and a third paper, and pick off different angles. A little trick which I like to deploy is to write the umbrella piece. It basically lays out why the topic is important and shares our perspective on it. It lays out different aspects of the topic. It then naturally sets up your agenda and the expectations that you can do another slice of the topic, and then another slice.

Why is that important? It’s to have a plan that cuts across papers, a multi-paper approach to this thing. There has to be an arc, and you want to learn along the way, so you divide it into pieces.

I also find that client attention is very precious. You never get all the understanding, empathy and engagement that you hoped for in one shot. You get it cumulatively through a drip-feed process. You get it through repeatedly addressing and going deeper and deeper on a topic, once you’ve built credibility and reputation on it.

It doesn’t always work out. But anticipating a multiyear agenda, writing the umbrella piece and unpacking it over a period of a couple of years has [led to] some of the most powerful work we’ve done.

The Ascendancy of Absurd Ideas

 Bob: I want to talk to you about a 2021 Harvard Business Review article you co-authored titled “The Power of Anomaly.” I love that article because you put your finger on something I’ve seen as important in creating thought-leading, big ideas: identifying nascent and unlabeled trends. Two of the biggest examples of this that I’m familiar with are business reengineering and disruptive innovation. In applying anomalies to thought leadership, why is this so hard for many consulting firms and other sectors?

Martin: It’s not just consulting firms. I wrote my [most recent] book, “The Imagination Machine,” because I thought the creative side of the strategy discipline was a little neglected. It’s a very analytical discipline, and that’s legitimate.

But the ideas have to come from somewhere. There has to be some intuition, some excitement, some sociological spread of ideas.

I studied where the big ideas come from for a couple of years: how companies make a business on ideas, and how they get trapped by their own ideas. That’s where the piece about anomalies came from. It taught me something. I often hope that I’ve outdone the master strategist, Bruce Henderson. I usually discover I haven’t.

In the late 1960s, he said successful companies more often than not become prisoners of the assumptions that underpin their formerly successful business model. And I thought, “Damn, the master already said it.” But I did go deeper on that phenomenon. I found that all successful businesses are based on an act of imagination just to have the right to exist and be successful. You have to conceive of something that isn’t the case, but that could be made to be the case. That’s what a business does: It takes something that isn’t in the world and makes it a reality. In fact, if successful it makes it so pervasive that we stop noticing it.

We don’t notice our iPhones anymore. Everybody has one; it’s like water. It’s universal. But the idea of carrying around a supercomputer in your pocket — it was an absurd idea at the time. Entrepreneurs do that; that’s where companies come from.

But I found it’s very hard to escape the mental prison of your current product/business model because it’s the basis for your success. You don’t want to meddle with success. There may be no reason in the commercial results of the firm to mess with the success, until there is… by which time it is too late.

The Benefits of Alternative Mental Models

Martin: Our muscles for re-conceiving things are often poorly developed. What’s the antidote to that?

I think it’s to realize that a mental model is not a fact: It’s a choice. But we can actually look for alternative mental models. We can carry out thought experiments on alternative mental models without risking anything. Thinking doesn’t cost anything; it’s not risky.

Consider that for any trend, or reality that we think we perceive, there’s always a piece of piece of data that doesn’t fit. For example, you may be deeply convinced that your customers like things a certain way…but in reality, a certain customer doesn’t like it that way. You can either say, “Well, that’s irrelevant, that’s just one customer.” Or you can say, “Maybe that’s an underserved segment, or a hint about how customer sentiment might be changing,” and you can focus on the anomaly.

The anomaly itself doesn’t usually tell you how to think about it. But you can think about different framings that help you to understand that consumer’s reality. And then you can use counterfactual thinking: Well, what if that consumer were the mainstream? What if we wanted to satisfy that consumer? What would you have to change?

This thinking applies for physical products, and it certainly applies in thought leadership, too, because there’s a conventional wisdom for everything. We may think we know what AI is, or what a large language model is, or what AI can do and can’t do. There’s always scope for saying: What is the next thing? What’s another way of looking at this?

That’s where the thought leadership goes from being thought to thought leadership.

Bob. This has been terrific. Martin, thank you much for your time and for your wisdom.