Chapter 3

Ten Questions to Ask Your Mental Models

Most strategic models are not universally applicable across contexts and over time. We believe that each model has a certain “half-life” and its utility declines gradually over time as it is replaced by a newer generation of models. For example, as technology has evolved and banks have increasingly mechanized customer transactions through automatic teller machines or over the Internet, the definition of what constitutes a customer experience has evolved dramatically. The appropriate strategic model of competing on service quality or on distribution strength has also evolved in parallel. However, not every firm has aligned itself with this evolution at the same pace. While some have pioneered new business models to capitalize on the pace of technology, others have been insensitive to the half-life of the old business model and are trapped in their legacy systems.

These principles of legacy are entrenched at various levels inside organizations. At one end, they are a part of the mental makeup of individuals. For example, we worked with two successive divisional heads within the same large enterprise. The second one headed the division after the first one retired. However, because of somewhat different sets of experiences, they believed in two mutually opposing business models of sales enhancement. The first believed in what marketers traditionally refer to as consumer pull and preferred to invest divisional resources into brand building and customer centricity. In sharp contrast, his successor had immense faith in what is referred to as a push strategy and believed that developing strong relationships with the distribution network was the only way to maintaining a strong presence in the market. The two individuals were part of the same organization, faced the same reality in the marketplace, and had similar higher order objectives, but they went about achieving them by deploying two very different mental models of sales generation.

Alternatively, mental models may be entrenched not at just the individual but at the organizational level. For example, many organizations—including several that are household names—are, or at least claim to be, committed to “innovation.” There is a belief inside these organizations that innovation is the engine that drives growth and helps keep competition at bay. Of course, there is nothing wrong is pursuing innovation as a tactic or even as a sustained strategy. However, over time, innovation often turns into a standard, unmoving mental model that is deployed to address a wide class of business problems. The adoption of innovation as almost a platform for solving all business problems itself is not innovative at all. It precludes management from asking questions about the financial returns on innovation and examining whether alternative strategies unrelated to innovation might be more profitable.

These models also reside within larger professional communities. For example, the marketing community often promotes concepts such as customer centricity or long-term customer relationships as mental models or platforms to sustain revenue and margin growth over time. And finally, some business models transcend organizational and professional boundaries. For example, the current move toward evaluating all organizational activities in terms of “equity” or incremental financial value is a mental model that seems to transcend functional silos.

There is fundamentally nothing wrong in using mental models to address strategic problems. These problems tend to be complex and have many interdependent moving parts. If one starts from scratch to begin addressing each problem one might find most of them to be intractable. Mental models bring certain efficiency to the decision-making process and provide useful heuristics. They have implicit cause-and-effect relationships built inside them that help managers map out the consequences of certain actions and evaluate the quality of the outcomes. Mental models also serve as sorting devices that help managers categorize the issues in terms of their relative importance. Finally, such models provide cues for the selection of metrics that can serve as indicators of strategic progress.

However, we find that the simplicity these mental models bring to the table sometimes comes at an extremely high cost. In order to break through the constraints imposed by these models, it is important for managers to pause and think about the set of assumptions that drive their beliefs in them. In order to get started, we have come up with a set of 10 questions that every manager should ask of these models before they become entrenched in the decision-making process.