Much of the time, executives use analogies to generate strategic alternatives. The best strategists know both power and peril of such side by side comparisons.
How Strategists Really Think
Tapping the Power of Analogy
by Giovanni Gavetti and Jan T. Rivkin
Much of the time, executives employ analogies to generate strategic selections. The best strategists know the power and peril of such reviews.
How Strategists Really Think
Tapping the Power of Example
by Giovanni Gavetti and Jan W. Rivkin
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Strategy is around choice. The heart of a company's strategy is what it chooses to do and not do. The quality of the thinking that switches into such selections is a crucial driver of the quality and success of your company's technique. Most of the time, commanders are so immersed in the speciп¬Ѓcs of strategyвЂ”the ideas, the numbers, the plansвЂ”that they will don't take a step back and examine how they think about strategic alternatives. But professionals can gain a great deal by understanding their particular reasoning operations. In particular, reasoning by example plays a role in proper decision making that may be large yet largely forgotten. Faced with a new problem or opportunity, senior managers typically think back to some comparable situation they may have seen or heard about, pull lessons coming from it, and apply those lessons to the current situation. However managers rarely realize that they're reasoning by simply analogy. Because of this, they are not able to make use of observations that psychologists, cognitive scientists, and political scientists include generated about the power and the pitfalls of analogy. Managers who give consideration
to their personal analogical thinking will make better strategic decisions and fewer mistakes.
The moment Analogies Happen to be Powerful
We now have explained the notion of analogical reasoning to executives in charge of strategy in several industries, and virtually every one of them, after reп¬‚ecting, could point out times when she or he relied intensely on analogie. A few popular examples reп¬‚ect how prevalent analogical reasoning is: вЂў Throughout the mid-1990s, Intel got resisted featuring cheap microprocessors for inexpensive PCs. During a 1997 training workshop, however , Intel's top management team learned a lesson about the steel market from Harvard Business School professor Clayton Christensen: In the 1970s, upstart minimills established themselves in the steel business by making cheap concrete-reinforcing bars called rebar. Founded players just like U. S i9000. Steel ceded the low end of the business to them, but deeply regretted that decision when the minimills crept in to higher-end products. Intel's CEO at the
harvard business review вЂў the spring 2005
Just how Strategists Think
Giovanni Gavetti ([email protected] edu) is a great assistant professor and Jan W. Rivkin ([email protected] edu) is an associate professor inside the Strategy Device of Harvard Business College in Boston.
time, Andy Grove, grabbed on the stainlesss steel analogy, talking about cheap Personal computers as " digital rebar. вЂќ The lesson was clear, Grove argued: " If we shed the low end today, we could lose the high end another day. вЂќ Intel soon began to promote its lowend Celeron processor more aggressively to makers and buyers of inexpensive PCs. вЂў Starting in the early 1970s, Circuit City thrived selling off consumer electronics in superstores. A wide selection, professional revenue help, and a policy of not haggling with clients distinguished the stores. In 93, Circuit Metropolis surprised traders by launching that it might open CarMax, a chain of used-car shops. The company contended that the used-car industry with the 1990s lose interest a close similarity to the consumer electronics retailing environment of the 1970s. Mom-and-pop sellers with suspect reputations focused the industry, leaving customers nervous when they purchased and п¬Ѓnanced complex, big-ticket, sturdy goods. Outlet City's managers felt that its success method from...