Discipline #1
Coalesce

To bring together from disparate parts, requires both the sciences and the arts.

In January 1922 at the Royal Theater in Madrid, Juan de la Cierva watched a performance of Don Quixote. During the performance, Cierva’s attention was drawn to a windmill on stage. He observed that the blades of the windmill flapped slightly with each rotation because they were made of flexible slivers of palm-tree wood. Cierva had been working on flight machine prototypes with blades atop the fuselage, and he had run up against one big problem: The propeller blades rolled to the right during testing. His revelation during Don Quixote was that the prototypes featured blades that couldn’t flap, limiting the aircraft to a slow forward hover, which caused the roll over. If instead the blades were made of material that allowed them to flap like the windmill, then the advancing blade could flap upward, providing some lift, while the retreating blade flapped downward, producing extra lift. Cierva’s flash of insight would prove to be the key principle in the flight of all single-main-rotor helicopters today.1

Cierva’s discovery captures the essence of insight. An insight is the combination of two or more pieces of information or data in a unique way that leads to the creation of new value. Strategic thinking, then, is the ability to generate insights that lead to competitive advantage. Using the lens of new value on the ideas, projects, initiatives, and tactics proposed each day provides a powerful filter for eliminating meaningless activities. It forces you to more closely examine why things are being proposed and pursued instead of just what is to be done.

Advanced strategic thinking requires not only the insights generated, but the ability to coalesce these insights into meaningful differentiated value. Coalesce means to bring together, and we see this skill evident in great strategies and the strategists who have devised them. Steve Jobs’s coalescing of insights from the computer, music, and telecommunications industries provided Apple much more than a single product hit. It provided Apple with the means to fuse design, integration, and convenience into a profit-chomping platform of products wrapped in a premium brand.

Strategy is often described as the big picture. Remember back to the connect-the-dots pages of your youth. Black dots were distributed throughout a page, each next to a number. By tracing a pencil in numerical order over the dots, you would create a picture. The more dots you connected, the more fully the picture would emerge. Prior to developing a strategy, the insights (black dots) must be generated and then connected in a meaningful sequence. The result is a holistic view of the current business situation and the path to achieve one’s goals and objectives. Moving forward, we’ll examine a number of different concepts and tools to enhance your ability to coalesce insights into cogent strategy.

Patterns in Strategy

A pattern is “a reliable sample of traits, acts, tendencies, or other observable characteristics of a person, group, or institution” as well as “a discernable coherent system based on the intended interrelationship of component parts.”2 Meteorologists attempt to map weather patterns, Major League Baseball pitchers attempt to identify batters’ hitting patterns, and chess players use patterns to understand their opponents’ plan of attack. Many of the technological advances we take for granted today including magnetic resonance imaging (MRIs), speech recognition software, and DNA sequencing analysis are based on the principle of pattern recognition. Every day, we communicate using specific combinations of letters and sounds, or patterns, to get our messages across.

From a business perspective, intended and unintended patterns are all around us. An intended pattern may be the human resource department’s hiring process that creates a company comprised of a consistent type of employee with certain experience and skill sets. An unintended pattern may emerge when your sales team offers an end-of-the-year discount in a last-ditch effort to hit their numbers. The unintended aspect of this pattern is that customers now hold their orders until the fourth quarter to receive the discount, which in turn delays cash flow and lowers your profit margins.

Strategy has been characterized as “. . . the pattern of decisions in a company that determines and reveals its objectives, purposes, or goals. . . .”3 This description makes practical sense as strategy is defined as how one goes about achieving their goals and objectives. The patterns of decisions your managers make regarding their strategic direction will ideally lead to the achievement of their goals and objectives. In his seminal 1971 book, The Concept of Corporate Strategy, former Harvard Business School professor Kenneth Andrews elaborates:

The pattern resulting from a series of strategic decisions will probably define the central character and image of the company. The pattern will permit the specification of particular objectives to be attained through a timed sequence of investment and implementation decisions and will govern directly the deployment or redeployment of resources to make these decisions effective.4

As strategy involves the intelligent allocation of limited resources, it’s imperative that positive patterns emerge in how those resources are allocated, and just as important, reallocated. A study of more than 200 large companies found that the reallocation of resources to faster-growing segments within a company’s portfolio of businesses was the largest single driver of revenue growth.5 Unfortunately, in many organizations the reallocation of resources generally happens only once a year, during the annual strategic planning process. Even then, how significant are the resource allocation shifts? While managers may tweak the tactics, the thoughtful redistribution of time, people, and budget from one initiative or area to another is rare. Examine your business plan from two years ago and compare it with this year’s plan. How much difference is there between the two plans? If the answer is “not much,” consider the results of another study on the effect of reallocation that demonstrates the potential size of this missed opportunity. McKinsey tracked firms’ resource allocation over a 15-year period. They found that, regardless of the industry, the firms that reallocated the most resources (on average more than 50 percent of capital) across divisions produced shareholder returns that were about 30 percent higher than those companies that reallocated the least.6

For many managers, resources stuck in dead-end projects and unproductive tactics simply stay there until the next planning process rolls around. Sometimes it’s politically dangerous to pull the plug on a lame-duck initiative, and sometimes it can be perceived that a mistake was made. No matter the cause, the strategic thinking trap of the sunk-cost effect—continuing to invest in a losing endeavor because resources have already been spent on it—can put an anvil around the effort to elevate thinking. The results can be damaging not only for companies, but also for their individual leaders. A study of CEOs with an average tenure of six years showed that those who reallocated resources the least during their first three years as CEO were much more likely to be fired in years four through six than those who reallocated more often.7

One clear indication of a lack of strategy is a random and pattern-less hodgepodge of decisions with no consistency in approach. Leaders who describe their strategic approach as opportunistic believe that every opportunity is considered a good one. These opportunistic leaders fail to create a disciplined pattern of focus on providing maximum value to the right type of customer. If you’ve ever felt like a bumper car bouncing randomly from one opportunity or project to the next with no real direction, then you understand the effect of a pattern-less approach to business. Advanced strategic thinkers recognize this pitfall and employ a pattern lens to their daily work. As Columbia Business School professor Rita McGrath notes, “Today’s gifted strategists examine the data, certainly, but they also use advanced pattern recognition, direct observation and the interpretation of weak signals in the environment to set broad themes.”8

Developing strong patterns of regular resource allocation should not be left to chance. As the research demonstrates, consistent patterns of productive allocation and reallocation are important barometers for long-term company and individual success. Andreas Kramvis, CEO of Honeywell Performance Materials and Technologies, offers some practical guidelines:

To ensure that your organization is constantly reallocating resources from weak areas to promising ones, you need a systematic operating method. Most companies have a rhythm of meetings and performance reviews but spend much of their time looking in the rearview mirror: What was last month’s performance? What was last year’s performance? I believe you need to impose an operating mechanism that reallocates resources in real time and that educates your organization and instills core capabilities.9

Inherent to identifying patterns in the...