The Principles Of The Consulting Craft

Business is a war between problems and solutions. As a business owner, imagination is the best weapon to bring in this war. Imagination is the most crucial ingredient to success. In this episode, Martin Reeves, the co-author of The Imagination Machine: How to Spark New Ideas and Create Your Company’s Future, shares his insights on the principles of the consulting craft. Martin argues that the skill needed for improving problem-solving is the skill of abstraction or drilling down. This skill has been at the forefront of his mind since he started his career. Find the true value of imagination in this talk with Martin Reeves and Michael Zipursky by tuning in to this episode!

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In this episode, I am very excited to have Martin Reeves joining us. Martin, welcome.

Thank you very much, Michael.

Martin, you have been with the Boston Consulting Group, also known as BCG, for several years. You are also the Chair of the BCG Henderson Institute, which is a thing dedicated to exploring and developing valuable insights. You are a regular contributor to Harvard Business Review, MIT SMR, Fortune and other publications. Your book is The Imagination Machine: How to Spark New Ideas and Create Your Company’s Future.

I thought where we could start by going back a little bit into your past because you spent many years in the world of consulting. One thing that got my attention is that you spent a bunch of that time not in one place. You have been to countries like Japan, Russia, India, the UK and the US. I’m wondering what stands out to you as some of the big differences or similarities. When you think about professional services and the work you did as a consultant, what sticks with you from the experience of working in all these different places around the world?

First is commonalities. I joined BCG because of a romantic notion to me, which is the idea that it is possible to change the world through ideas. I have always thought about ideas as being the ultimate technology. A few millivolts in the right part of your brain at the right time enable you to change how you think, communicate and how others think and change the world. That was the romantic notion that propelled me into consulting. That has been true of Japan, London, Eastern Europe, the East Coast, the West Coast of the US and various other places. I’m not saying it is easy but that dream has always been motivating and applicable for me and also for clients.

At a superficial level, I didn’t see a lot of differences in the different places where I worked. It is much the same clients with the same problems. At a deeper level, culture starts to influence things. I remember being rather disappointed when I first went to Japan that things were not more different. My first offsite showed that, at a deeper level, things were different.

One of the things we did in Japan was a project, which means offsite. The idea was you take a simulated crisis and put executives through it. They become extremely emotional and engaged. It is almost like a psychological test. It is a test of emotional as much as logical ones. That was rather different. It was like the baptism of the fire school of management training in Japan. Every place I have been had one of those.

I’m selfishly asking because I have always enjoyed traveling and learning about different people, cultures and religions. Is there anything that stands out for you in terms of maybe you had to walk on eggshells or something you have to be careful of or something that sticks with you as a real faux pas?

I studied physiology in Japanese. I had a certain level of proficiency in Japanese but consulting in Japanese is an entirely different thing. I had been in BCG Japan for a while. After many apprenticeships, I was leading a Japanese assignment for a Japanese client, having written the slides in Japanese and I was presenting in Japanese.

Before I went into the room, the partner for the project leafed through the deck and pulled out the last page, which was the conclusion slide. I found it rather mystifying but I went with it. We had this presentation. These people were from Osaka, the client. I spoke standard Tokyo, Japanese or at least a foreign version of that. There was some cultural mismatch, which probably even a Tokyo White would fill between Tokyo and Osaka. We got through that.

Competitive advantage is a way of looking at any situation more insightfully than knowing the specifics of a situation. Essentially, you are abstracting to the most important question. Click To Tweet

At the end of the presentation, the CEO said, “That was remarkable for a foreigner, Mr. Reeves. We can understand what you are saying. It made sense. It was insightful. You have created a great contribution. If I may point out one thing, you didn’t press through to the logical implication of your analysis, which is that we should exit this business.” Inside, I was fuming because this was the slide that the partner had pulled from the deck.

After the meeting, I remember costing the partner and saying, “This is why I didn’t want you to remove the last slide from the deck.” He said, “No, an eagle never shows its claws. The client is thinking that you are a little bit silly and not having reached a conclusion and instead, self-discovering their conclusion is far better than you looking clever in having the conclusion.” This was a huge cultural lesson that I initially thought was specific to Japan but this logic of self-discovery turns out to be consulting universal. There are many moments like that.

Looking back, do you feel that was the right move of letting the client reach their conclusion in that scenario?

With consultants trying to solve problems, there is always the anxiety of can I solve this particular problem and am I credible to solve it? In a sense, we want the answer. We all realize, at least the veterans realize, that an even better answer is for the client to reach the answer because they will own the answer. What you want is to create impact, not merely impart a solution that may or may not be owned by the client.

A common question that comes up in the world of consulting is about the advantage versus disadvantages of cross-industry experience. Some view being narrow and deep as an advantage and others view having experience with many different industries as an advantage. How do you view this? What is your belief about that?

That is specific to me in my career in the sense that BCG studied as a generalist consulting firm. The idea was that we practice strategy and strategy. Competitive advantage was a way of looking at any situation more insightfully than knowing the specifics of a situation because you were abstracting the most important question, which is the competitive advantage in what I’m doing.

The consulting world shifted and everybody put in practice groups during the 1980s and things began to be specialized. At least in the big firm consulting than I did, it was hard to be hired and less you had industry expertise in a certain area and a little bit, not a full swing in the opposite direction, which is clients saying, “We know this industry inside out. That is a problem. Your industry-specific team has the same knowledge. That is part of the problem. Could you bring us somebody that knows nothing about us and something about other industries, please?” They are starting to ask for that.

I’m detecting a pool for that generalist perspective. It is a pendulum that slowly swings back and forth. I have always thought of myself as a specialist in problem-solving. I’m a generalist or almost agnostic with respect to the industry. Most fears were always inspired by cases where I may have the illusion that I knew something about the industry because I would be asserting based on expert knowledge rather than looking at the facts of the competitive situation and the logic of competition. I have always been able to find a path as a generalist. Sometimes I have found myself filling a little bit out in the wilderness and a minority of a generalist in a specialist world and then I have started to feel more of the mainstream again but I’m an unashamed generalist.

You mentioned, “The pendulum is swinging back in the direction of people being more open, seeking out those that have experience across industries or might consider themselves to be a bit more on the generalist side.” What do you think is the cause for that swing of going towards specialization and slowly coming back towards the direction of a more generalist approach?

It’s the disruption of historical mechanisms of success and also the blurring of industry boundaries. I’m not sure whether you would agree but I find that few industries think about themselves as industries. Something convenient for consultants was that the unit of analysis was the industry or the market and the key statistic was the market share or the relative market share. If you have blurred boundaries, it is not clear what the entertainment industry means. It is a zoo for telecom companies, film companies and digital platform companies. You can’t be simplistic. You have to look at the whole circumstances.

 

The rise of digital ecosystems and platform businesses doesn’t respect boundaries. The rise of digital disruption, which says whatever you thought your success model is prone to disruption or he might be hiring us because it has already been disrupted. What you need is new thinking, iconoclastic thinking, industry agnostic thinking and analog thinking from other industries as opposed to knowing exactly how it has always worked in the agrichemicals industry and being slightly better at it.

Is there a benefit or a difference in how a consultant might think about their positioning? Should they try to have a position that is more around being a generalist versus a specialist based on the stage of where they are at in their consulting career? What I mean by that is, is there a benefit to an earlier stage consultant to focus on specialization and as they accumulate more experience, they become more of a generalist or perhaps the other way around? How do you view that in terms of the stage of someone’s career?

The most common path, as far as I can tell, at least in BCG, is you start by accumulating a certain generality of experience. You may work in a variety of industries and you are learning the basics. In two years, you identify with a practice group and become an expert in a particular industry. That has been the most common path and will continue to be a viable path.

There always was space, historically. When strategy consulting was founded in the early ‘60s on the East Coast of America, it was a generalist profession. The strategist was not specific to a particular industry. He was an expert in logic competition. We are seeing more opportunities for generalists. A related phenomenon is an edge in consulting skillset is not the same thing. In a sense, consultants were always distinguished by having a more accelerated experience than an industry expert but may know everything about their company and segment. They won’t have done a restructuring project in time.

There is something to do with breadth, which is they will have done it at least in several parts of the industry, if not other industries. There is something to do with the skills of problem-solving and communication pyramid principle. It is a time industry of consulting when we must ask ourselves what distinguishes the consulting skillset because we are often hired for our difference, the skills that we have that our clients may not have. That is shifting.

Most executives have PowerPoint, pyramid principle and communication skills. The MB education, the broad education of how all of the different functions of business work, more clients have that. What is the edge? Problem-solving is still an edge. It is a deep art. If you are constantly solving problems day in and day out as opposed to refining the recipe, that is a skillset that the consultants still have.

This analogical thinking across industries becomes increasingly important. There is an age where simplistic analysis is no longer differentiated because we can have artificial intelligence do that or we can have advanced analytics doing that. The focus on the uniquely human element of business, the less mechanical aspects of analysis my list would be anything to do with empathy, purpose, ethics or creativity. They are played up relative to the traditional analytical toolkit.

You spoke about the logic of competition and the connection to strategy. I want to come to that in a moment. What you mentioned, I found quite fascinating around this whole idea of problem-solving. If you can become a massive problem solver, that creates a lot of value for your business and clients. For someone who wants to become a better problem solver, are there mental models or exercises? How can someone start to work towards becoming a better problem solver?

I’m going to answer your question but the things I’m going to say are simplistic. A tool is a discreet point on a landscape. The reality is it is a continuum. You create new tools. You blend tools to create the right tools for the purpose. In terms of the first steps of improving problem-solving, there is the skill of some of the basics. One of them would be the skill of abstraction or drilling down. There are two questions I find myself asking all of the time since the beginning of my career and I still ask them. I used to have them pinned to my computer when I had a PC. One is, what is that an example of? It is the generalization question or the abstraction question. Another one is, what is an example of that? It is the concretization level switch.

Sometimes you need to go down into the weeds to see the details or explain something vividly to somebody. A lot of the time, as consultants, we need to abstract and say, “What is this an example of?” Framing and reframing are incredibly important. Here is an extreme statement. Maybe this is controversial to your readers or maybe not but I have never seen a single case in my career and not what I can remember, where the client’s specification of the problem was the actual problem. It was the client’s best attempt to frame the problem but almost by definition, they were begging for a superior framing of the question.

Strategy has always been some systematic pattern of thought or action which produces superior competitive outcomes. It's deliberately broadened and deliberately pragmatic because we're in an applied profession. Click To Tweet

Another basic improvement of one skill as a problem solver is not to immediately jump into solutions but rather to say, “What is the problem? What is the right question in this situation?” To do that, you have to ask a whole bunch of other questions like, “What are we assuming we know but we don’t know? What is a fact? What are some alternative ways of viewing this situation? Do we discover anything interesting about you if we look at this through different lenses?”

In strategy, I look at things through five lenses, which was the topic of my last book, Your Strategy Needs a Strategy. I look at things as planning problems. What should we plan to do in this situation? I look at things as an adapting problem. What should we be learning in this situation? I look at things as a visioning problem. What could we create in this situation? I look at things as exercising collaboration, which is how could we collaborate with others to get to a solution in this particular situation? I look at a rejuvenation lens, which is what is broken that needs fixing to get to a solution in this particular situation?

I generally try on all of those lenses. Each of them gives different insights. I select my framing as being the most useful and pragmatic one in the circumstances. Another inevitability in consulting is you are playing at the edges and the gaps. Are you able to add more than incremental value precisely by using the framing of the client? That is good but could you make it slightly better without changing any assumption situation? It can be valuable but it is rarely absurdly valuable. Typically, in looking at things in a different way to the clients, reframing or looking between the edges to well-established ways of looking at something.

The word strategy is thrown around a lot. Many people misunderstand it. You have spent a lot of time thinking about strategy, working in with organizations and helping them with their strategy with your latest view and definition of strategy. I’m also wondering, Martin, about your view or beliefs around strategy, the role it plays and what makes it effectively changed over the years.

It is a good question because the role of strategies has become a little controversial. We see books like The End of Competitive Advantage by Rita McGrath, Execution by Bossidy or books on technology asserting that there’s something more important than strategy. This is where we need to define what we mean by strategy. Do we mean something narrow as planning or something more general?

The strategy has always been some systematic pattern of thought or action which produces superior competitive outcomes. It is deliberately broadened and pragmatic because we are in an applied profession. There is no absolute truth about treat-seeking in the world of strategy. There is getting the job done. The strategy exists for a reason which is to produce superior competitive outcomes. Anything which achieves that, we can call strategy.

Your Strategy Needs a Strategy was a summary and a culmination of all of my learnings about the different types of answers to that question. As a function of the unpredictability of the situation, the malleability, the shaping ability of a situation and the degree of distress in a situation, you can frame a strategy problem as a planning problem. Historically, how many strategy problems have been framed?

You can frame it as learning under an uncertainty problem. “Am I learning faster than my competitors?” You can frame it as a, “Am I creating something new and valuable in the world?” It’s an entrepreneurial lens. You can frame it as, “Am I collaborating with others to reframe an industry using a digital ecosystem?” You can also frame it as, “Is something broken? Do I need to fix it urgently to avoid a threat to viability?”

Those five species of strategy that I mentioned all involve different logic, analyses and skills. All of them are strategies. The key question in this particular case becomes how to diagnose the right strategy lens for the right situation and circumstances. It is not that the strategy is different according to the circumstances. The strategy paradigm is different according to the circumstances.

That goes along with one other huge change that I tried to document in the book, which is we used to be commissioned to solve pure strategy problems. I am the number three market share player. I want to become number one. The leaders are doing this and the number two player is doing that. What is my best strategy? It is a pure strategy problem. It doesn’t deal with organization and execution. I haven’t seen a pure strategy problem for several years. Strategy always comes, at least in my experience, with associated questions of organization and technology and increasingly questions, politics about sentiments, values or politics. You have to look at the whole thing.

 

What do you call the output of the strategy process to emphasize that? I call it the strategy stack by analogy with the software stack. The output of a consulting assignment, ostensibly on strategy, is the right way of thinking about the problem, the moves you need to make, the skills, the IT infrastructure and the collaborative platforms others are required. Also, communication and political strategies may be necessary to embed that strategy in a turbulent environment. I sense the pure discipline of strategy may have ceased to exist several years ago. Nevertheless, I still call myself a strategist because I believe that framing the right problem and addressing it with the right strategy paradigm is still at the heart of many business problems.

I like how you frame these things up, come up with these ideas and break down the five different types of strategy. I’m wondering, how do you come up with your ideas? How do you decide which ideas are worth moving forward with and ideas that should only be in that moment but not carried on and you are not investing more time and energy into working through them and developing them?

I’m not primarily a client consultant. I did that for a long period. I’m primarily in the business of thought leadership, which is creating ideas and constructing some tools which you will need for tomorrow’s problems, the emerging problems, the new problems and the not-yet-fully described or systematized problems. Indeed, I’m in the business of figuring out what idea to research and what I did to write about.

There are several components to that. One of them is exposure to novelty. If I expose myself to the same sources of inspiration as the clients I’m trying to help, it is unlikely that I will have anything new to say. For instance, I got much broader on the disciplines I draw upon. I spend relatively little time reading business to literature and quite a lot of time reading physics, psychology, science and military science, searching for clues as to new pathways of working.

A second element is you have to look for clues as to a problem worth solving. I collected and got a spreadsheet that I have been running for years of great questions. Often, the pointer to the unknown. It is a typical question. What is it that we don’t know well enough and should know more about? Almost by definition, we can’t describe what isn’t described voluminously or perfectly. We have to look for clues. One of the clues is the questions the client asks, the strange questions, the unanswered questions, the awkward questions and the anxiety-inducing questions. Question is a good place to start.

Phenomena is another one which is I read about this thing happening that seems to not fit into any of the strategy paradigms that I know about the exploration of anomaly. Many human inventions are serendipitously discovered while pursuing something else. The telephone was an attempt to find a better telegraph. It is not an attempt to find a telephone. The telephone was serendipity.

The breadth of reading that I referred to points you in the direction of productive serendipity. There is something to do with time allocation, which is, whether it is with your team or client, being 100% efficient and 100% deployed on the well-known part of the problem leaves no space for exploration or imagination.

I do think that slack, unproductive time or exploration time, imagination time or whatever you want to call it is tremendously important. It is an active battle because the professional paradigm, especially in the US, is that you are 100% utilizing, efficient and focused all of the time, which probably makes you efficient in the short-term but may not be a good recipe for coming up with new ideas.

I have to ask about that spreadsheet you referred to that you have been doing for years. How many rows deep is it full of questions?

I have become more discriminating over time in terms of what counts as a zinger question for me. I have probably got about 100 questions and usually, 4 or 5 that I’m actively thinking about, which are things I hear people ask that I sometimes in another discipline and business situation where that is an interesting question. I have no idea what the answer is but I should think some more about that.

The Imagination Machine is not about the act of ideation. It's about the complete cycle from noticing anomalies in external world to scaling ideas and then coming up with new ideas to disrupt the odd ideas. Click To Tweet

You spend a lot of time thinking about the future and what things may look like. I’m wondering from the perspective of a consultant and probably more in the perspective of a solo consultant or a small consulting firm, not necessarily like the BCGs and others at that level, what do you think is most important for someone running a small boutique consulting firm over the next years? What are things people should probably start paying attention to, start developing their skills and their body of work or begin studying if we are thinking a little bit more into the future?

I have watched alongside consulting firms. I have some opinions about what might be universal across big and small companies. From my limited perspective, tomorrow’s problems are rapidly becoming now’s problems. Therefore, one needs to constantly redefine one’s domain. For example, several years ago something like purpose consulting on business purpose or sustainability consulting might have been future-oriented and niche enough that one could specialize in them either as an individual consultant or as a small firm.

There is a sense in which all of the things that we positioned as problems in the future have become now’s problems. One needs to evolve one’s portfolio faster. If you are in the purpose consulting business or the sustainability consulting business, you have to think more frequently about what comes next. What is the edge? What is it that people are not talking about should be talking about? In a way, it is bringing competitive discipline to the logic of consulting offerings.

When you and I spoke previously, you brought up the word resilience. I’m noting that down thinking, “When we jump on the show, I want to get your take on that word.” It is a word that seems to be coming up more in conversations. I’m wondering about the word resilience. What is the importance of it for a consultant?

I can answer that in a couple of ways. The direct answer is what I think about resilience but in a sense, this also illustrates what we have been talking about in terms of where I choose to focus and how I choose to focus. At the beginning of COVID, I had been interested in resilience for some time. It has always been an interesting conversation to have with CFOs. Interesting but rarely did it lead to some large or deep consulting assignment. It was more of intellectual interest. There is some value in that because exploratory conversations can deepen relationships and expand agendas with little direct value.

At the beginning of COVID and looking at all of the changes in the world, I made a bet that this was going to become more mainstream. Therefore, I put a lot of emphasis on it. I published a series of pieces in HBR. I edited a book on it and wrote another book on it. I put a fairly large energy into resilience. Why did I do that? I felt that it was a timely topic.

It also had the hallmark of the thing which I often pursue, which is something that is acknowledged as important but is ill-disciplined. It is not clear in the specifics. I found that a lot of companies during the early COVID crisis were talking about the resilience of their supply chains and strategies. If you say, “How do you measure that? What is that? What is that not? Which part of that is new relative to the traditional strategy process,” few companies had a playbook on resilience. They had intuitions. That was the opportunity. I call it the codification opportunity. It wasn’t the idea that resilience is important. It was getting into the specifics of, “What is it? How do you do it? What is different? What is new? How do you measure it?”

My conclusion broadly is that resilience is something that strategies have been searching for a long time. Years ago, Michael Porter said, “We need a dynamic theory of strategy.” We don’t have one. It responds to the limitations of scale and efficiency. It draws a school of strategies from the early ‘60s onwards for several years. The strategy was mainly about relative market share, economies of scale and economies of learning. Dynamic capabilities are a different logic. It is about learning faster than your competitors. It was timely in that respect.

We did something which I couldn’t have done when I first joined consulting. We analyzed the public data on the response function of companies initially to COVID and we had something else. We had the COVID-induced recession, the COVID-induced recovery and the Ukraine war. I have been getting big data on all public companies on how quickly and well they coped with each of those interruptions. We may have another one, a second COVID recession.

I found some interesting things. I found out that resilience is much more than crisis management. In other words, resilience in a crisis shapes performance across an entire economic cycle, not just for the period of a crisis. That was one interesting finding. A second interesting finding was that, as a strategist, I’m not interested in how well companies did. I’m interested in how well they did relative to their competitors.

 

I found this Eaton Centre effect. The racing driver said, “If you want to overtake fourteen cars, you have a higher chance of achieving that, providing you a good driver on a rainy day than in sunny conditions.” That turns out to be quite true from the data, which is if you want to overtake your competitors in a bad time, a turbulent time is a much better chance to do that statistically than good times. That was interesting.

The majority of the differential effect across a cycle in a crisis and beyond is not on the cost or the operational side of things. It is mostly a product of differential growth. Often, when we talk about resilience, there is an assumption that we are mitigating downside risk, whereas upside differential growth is where most of the differential benefits are. It is all about growing at the times when your competitors would least likely be focused on growth.

It is associated with a set of capabilities, primarily four types of discipline. One of them is the discipline of anticipation. The other one is buffering. The immediate onslaught of a crisis is the point of acute stress. If your company is going to fail, it will fail relatively quickly. There is the value of buffering stocks and cash balances. It may be productive to have on hand in the event of a shock.

The third one is the discipline of adaptation. In retrospect, we may say, “The 2009 crisis was a single blip.” In practice, crises unfold continuously. You never know the full extent until it is over. With COVID, we thought we knew and that turned out that we needed different technology to develop the vaccines as some strains were it was effective against some strains and not others. Certain hygiene disciplines seemed to work and others did not work. It kept unfolding. It required ongoing adaptation.

The last one was a topic of my book, Imagination, which in the long run, resilience is about the ability not to adjust to circumstances but to create circumstances, to be the disruption, to be the imagination of a new way of doing things that enables you to thrive under new circumstances because crises are rarely cyclical if you look in detail. Usually, the pattern of demand changes after the crisis. You are dealing with a different pattern of demand from before the crisis.

That requires imagination to say, “How could I do well in this different world after the crisis because it is not the restoration of previous conditions?” That was the research that I carried out that resulted in the book, The Imagination Machine. I thought of The Imagination Machine because, in long time frames, the companies are indeed imagination machines. They change the world greater than any visionary, poet or politician by imagining something which is possible and causing it to be the case by implementing it and scaling it with great discipline.

The question is, “How does that work?” That is a neglected area of strategy. That is another one of these areas where I’m looking at the gap saying, “Imagination is important. There is no textbook for it. There needs to be.” I can codify that so I looked at all the latest neuroscience and examples of imaginative companies that had reshaped new domains and tried to figure out how they do that. I hopefully came up with something that approximates an answer.

One of my questions is about your book, The Imagination Machine. It sounds like there is so much value in being able to harness the power of imagination and bring it into your organization or the work that you do with clients. If there were maybe 1 or 2 things you might share from the book around how a consult might begin that process of harnessing the imagination, are there any recommendations you would have for somebody?

Firstly, let me say why this was a slightly strange book and received as a slightly strange book. The reason is that we don’t associate large organizations with imagination. If you start talking to the CEO about imagination, they will mostly talk about the absence of imagination in their organizations. Secondly, we have this image of imagination from the romantic period in the arts. We think about a poet or Steve Jobs staring at the clouds and coming up with some insight that is unexplainable. Where did they come up with that insight? Mere mortals could never replicate that.

If you look at the neuroscience of a man’s notion, that turns out to be a fairly arbitrary way of looking at things. We don’t shy away from thinking about other complex aspects of human affairs. We don’t say, “Personal management is motivating teams.” That is complicated. We could never hope to codify that. We say, “That is worth looking at. We develop methodologies. I found that we can develop a methodology here.”

The most effective way of avoiding being disrupted is to disrupt yourself. Click To Tweet

After sparing you with the details of the research, looking at neuroscience and the examples of imagination, we figured out that you have to get six things right to have a successful cycle of imagination. My book is not about the act of ideation. It is about the complete cycle from noticing anomalies in the external world, developing ideas right through to scaling those ideas and coming up with new ideas to disrupt the odd ideas. It is a cycle of imagination.

There are six things that one needs to get right. The first thing is one needs to be seduced by an anomaly. Big companies look at averages. They don’t look at the specifics of an unusual customer transaction that may give a hint to a better way of doing things. Imagine if companies think like novelists, not like accountants. They look at the particular detail. They are focused on anomalies. I can give you a spectacular example of a company that was very driven to understand anomalies.

The next one is framing or extracting the idea. You have to ask this question that we discussed which is, “That is the anomaly but what is that an example of? What could that mean? How do I frame that anomaly? How do I flesh out what that could be in terms of a business opportunity?” A five-year-old can do that. These are the skills of counterfactual thinking of imagination. As far as I can tell, this is not part of any regular secondary education curriculum, university education curriculum or MBA curriculum. Imaginative companies train their people on counterfactual thinking. The average company comes with a more analytical skillset and struggles with counterfactual thinking.

The third thing is what I call the collision, which is colliding ideas with reality. I don’t say validation because one of the things that happen when you collide an idea with the real world is you validate did it work. Most new ideas fail the more persistent and regular value in that collision. It’s a constant mode of exploration and a way of generating new surprises. The neuroscience imagination is all based on surprise and anomaly. You generate more anomalies, which deepen your understanding of what could be.

The fourth stage is the Achilles heel of most large companies, which is the spread of ideas. An idea is like a virus. If it spreads the idea of successful, it is in two ways. It is adopted and secondly, it evolves as it goes through different types of minds. The functional silos of organizations, their territorial jealousies, metrics and special language is a great way of making sure ideas don’t propagate in companies.

The fifth stage may not sound like imagination at all but it requires a special type of imagination, which is industrializing ideas. If you think about being the Four Seasons Hotel with its legendary customer service and you were opening a branch in Shanghai with Chinese employees, how would you communicate how to replicate that successful customer service? You wouldn’t send them the 1,000-page manual because that may not be that useful. People will be confused. You wouldn’t slap them on the back and say, “It is all about the customer. Do your best.” It is because that is too vague. The codification of the system of replication and scaling is important.

Lastly, self-disruption. It is very hard to turn around a successful company. All of our evidence is another thing I have looked spent a lot of time looking at, which says, “The most effective way of avoiding being disrupted is to disrupt yourself. The earlier you do it, the better.” You have to get those six things. Would you like me to give you an example? I don’t think we have time to bring all of those to light. Should I try and bring anomaly detection to light?

Let’s do that one and we will wrap up. This is wonderful.

One example we deal with in the book and thank you for the openness of the company involved, was in semiconductor equipment manufacturer. The semiconductor manufacturer involves specialized equipment that is aseptic. Never a hair or a piece of dust in the silicone because you have ruined the wafers and automated handling, handling it in a vacuum and temperature-controlled conditions.

A company called Brooks Automation, based in the Northeast of America, is a leading company in this area of semiconductor equipment manufacturing. It is a successful company in that area. They decide they are doing well but they want to see the next wave of growth. At some point, their successful recipe is going to plateau. They are looking for the next thing. They decided on an exercise in spotting anomalies. They wanted to be surprised.

 

One of the things they did to create surprise was their second-order pattern network. In other words, they looked at who is using their patents and quoting the patents of the companies that are using their patents. Most of that network was extremely unsurprising. Electronics manufacturers were looking at better ways of making aseptic conditions for semiconductor manufacturers.

It is not surprising at all but they were interested in only the surprising part. They found a surprise, which was that the bioscience industry was playing with its technologies. They thought, “We have no idea why that’s the case. That was a surprise.” They decided to go out and do some anthropology to figure out what was going on. What they found was that the materials handling in the bioscience industry, bioscience laboratories, was abysmal relative to the standards of the semiconductor manufacturing industry.

You had tissue samples in Tupperware containers in laboratory fridges and hand-labeled. It was all manual and not at all aseptic. It is inefficient and error-prone. That was stage one of my framework, anomaly detection. They went into stage two question, “What could this mean?” They convinced themselves this could mean the birth of an entirely new industry, which they called the biobanking industry or the biological materials handling industry.

They made an acquisition to get closer to that space. They needed distribution and relationships in the space. They developed a position in the space. It was successful. It became their new core business. They exited their previous core business and now this is their business. An example is simplification. There are all sorts of other things going on but it is a good example of the power of surprise, imagination, seeking anomalies and asking this question, “What is this an example of?” You are imagining the consequences of exploiting the anomaly. It is a successful business built around this entrepreneurial question.

Martin, I want to thank you for coming on here and sharing many thought-provoking ideas. People will find this to be incredibly valuable. I want to encourage everyone to go out and get your book, The Imagination Machine and the previous books because you have written several of them. Where would be the best place for people to go to learn more about your books, work and everything else you have going on?

We have a website for the BCG Henderson Institute. It is BCGHendersonInstitute.com. You will see the complete portfolio of our work. There are many topics that we haven’t spent time thinking about talking about. For example, the intersection of politics and strategy. That is a recent area of activity. The book itself has its website, TheImaginationMachine.org. You will find some interesting artifacts, articles and an online art gallery of acts of imagination from corporations that shaped the world. We think these first sketches of an idea changed the world, like the first sketch of the telephone. They are rather beautiful in our way.

We created an online art gallery called the Napkin Gallery after the apocryphal napkin that inventors are said to draw their first sketches on it. They often do and we collected those napkins. You can go out and buy the books. I had two which pertain to our discussion. One is the Imagination Machine and the other one is Your Strategy Needs a Strategy both from Harvard Business Press.

Martin, thanks so much for coming on.

Thanks for the great questions. The great thing about the consulting industry is you are always learning. You may have 30 or 50 years of experience but these questions are always fresh and the art is infinite. You and I have to crack that out for any consultant to crack this out or it will never happen. We are all perpetually learning.

I enjoy the conversation. Thank you.

Thank you very much. Bye-bye.

 

Important Links

• Boston Consulting Group
• BCG Henderson Institute
• The Imagination Machine: How to Spark New Ideas and Create Your Company’s Future
• Your Strategy Needs a Strategy
• The End of Competitive Advantage
• Execution
• Brooks Automation
• Napkin Gallery

 

About Martin Reeves

Martin Reeves is a managing director and senior partner in BCG’s San Francisco office, and the Chair of the BCG Henderson Institute, BCG’s vehicle for exploring ideas from beyond the world of business, which have implications for business strategy and management.

Martin’s new book, The Imagination Machine (HBR Press, 2021 June), explores how to systematically harness imagination to rejuvenate and grow mature businesses. Also, his forthcoming series of books on Inspiring the Next Game (De Gruyter, 2021) covers emerging perspectives in business such as the science of change, winning the ’20s, and evidence based transformation. He is also the co-author of Your Strategy Needs a Strategy (HBR Press, 2015).

Martin joined BCG in London in 1989 and later moved to Tokyo, where he was responsible for BCG’s business with Western clients. His consulting career has focused on strategy – with equal emphasis on idea origination and development, and application through consulting with clients on their strategy challenges.

Martin holds a triple first-class MA in natural sciences from Cambridge University and an MBA from Cranfield School of Management. To learn more about Martin’s latest research, subscribe to BHI’s newsletter, connect with him on LinkedIn or Twitter, or email BHI at [email protected]

 

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