The New Psychology of Strategic Leadership by Giovanni Gavetti, Harvard Business Review, July-August 2011

The author is an associate professor at Harvard, clearly junior to the Harvard strategy doyen, Michael Porter. In this article he makes the potentially career limiting step of producing an ‘interpretation of the competitive game that differs from Porter’s’. His basic contention is that Porter’s thinking, particularly his early ‘five forces’ framework, is based too much on economic logic and rational thinking and does not sufficiently address the psychology of strategy. He suggests that a good strategist must be able to analyse the thought processes of those competing in the same market.

The essential thrust of the article is that there are, in most markets, superior opportunities that most CEOs, thinking in the conventional terms encouraged by Porter and his like, do not normally see. This is because such opportunities require a mental leap and may be in conflict with the image and comfort zones of everyone concerned - Board, Employees, Analysts, Shareholders. And the solution to this problem is to use a technique called ‘Associative Thinking’ which is - surprise, surprise - a major element of Mr Gavetti’s MBA Course.

Associative Thinking is the process of bringing together two separate strands of business life and developing them into a new opportunity; the example which he quotes at length is Merrill Lynch’s move to become a ‘financial supermarket’ after seeing the way in which the retail market was developing. Another less convincing example is Yahoo seeing itself as a media rather than a technology company in the early part of this century. I would like to have seen more and better examples, particularly as both these companies have fallen from grace in recent years. Maybe Apple’s insight that it could be in the music business would have been more convincing.

When assessing articles on strategy, I like to defer to MTP’s own specialist in this area, Chris Goodwin who is, to say the least, not easily impressed with new strategy concepts. However Chris agrees that the author’s fundamental point is valid, that opportunities are often missed because of a rational rather than intuitive approach. Chris’s main concern about the article is that it does not emphasise enough the need for sustainable competitive advantage; it is one thing to have the idea, you also have to be able to prevent others copying it. The example of South West Airlines is quoted in the article but there is no reference to how they created an operating system that others could not copy.

The article is worth reading for strategy specialists, particularly for those who are interested in the psychological aspects; it is however rather wordy and unnecessarily long so this review will probably be enough for most.

Click here to read the article in full:

http://hbr.org/product/the-new-psychology-of-strategic-leadership/an/R1107K-PDF-ENG