It was a snowy, winter night in 1994 at the Leadership Centre of the Canadian Imperial Bank of Commerce (CIBC) north of Toronto. A small group of executives had been working for many hours trying to solve an organizational crisis that was becoming more worrisome each day. The commercial part of the bank, serving roughly seventy-five thousand small to medium-sized businesses, was in need of serious redesign if the bank were to remain competitive and viable in this important sector. Several years of complacency had led to products falling out of touch with changing client needs. Add to this the growing ineffectiveness of the group's middle management to set meaningful performance standards and motivate staff, and prospects for a simple fix seemed dim. The bank's competitors were charging forward with newly found creativity and energy, and had started to make inroads into some of the CIBC's oldest and most secure client accounts.
At a critical juncture in the discussion, the vice president of leadership and learning, Hubert Saint-Onge, jumped to the white board and drew a simple diagram like the one in Figure 1.1. "Our problem," he began, "is striking a balance between Alignment on the one hand and Autonomy on the other. Some of our best staff are out of control . . . behaving like cowboys. They need to be reined in. Others have become too comfortable and passive. They act as if they expect the bank to tell them what to do at every moment; they're afraid to make decisions or take even the smallest risk. Well, that won't work. We need an approach that moves staff into the upper right quadrant [pointing to the 2 × 2 model]."
When he finished talking, there was a noticeable sense of relief among those in the room. Something important and profound had changed. The debate for the last while had raged over how to motivate loan officers to take more initiative without the bank losing control of assessing quality and riskiness of applicants. The Gordian knot was cut. A simple 2 × 2 framework intervention at the pivotal moment had reframed the crisis, allowing the group to move beyond the place where only moments before they had felt paralyzed.
Although the facts of the case described above are specific to the financial industry, the method that Saint-Onge applied had little to do with banking. Rather, it is both universal and highly transferable. We call this approach 2 × 2 Thinking. A complex situation is modeled as a set of dueling interests. The hunt for a single correct solution is supplanted by the search for understanding, perspective, and insight. The game is in effect redefined:
Tension becomes a good thing. Instead of trying to eliminate tension, we let it lead us to important topics and questions.
Conflicting goals are seized upon, becoming useful markers that set the parameters for our search (in the example, these are Alignment and Autonomy).
In place of a single right answer, a set of plausible options is created by considering high and low cases of the two conflicting needs.
The four options may be illuminating or not. Generally, if the two axes are well defined, the options will be rich in explanatory or provocative power. If this not the case, it is usually worth redefining one or both of the axes and trying again.
In the bank example, introduction of the 2 × 2 matrix did several things. By naming the two issues, the group acknowledged a core dilemma that had been getting in the way of progress. The matrix provided a common and acceptable vocabulary that allowed the group to talk through an issue that had become rather sensitive. Perhaps most important, once group members had bought into the validity of the matrix as a model of their situation, they were able to move on to considering alternative solutions.
Deciding on which of the options to embrace presents a different set of challenges. It often appears that the upper right quadrant, High-High, is the preferable choice; however, the decision is rarely so simple because each solution is accompanied by a set of costs and benefits. Sometimes the costs and risks associated with the ideal solution are simply too great. For example, the banking planning group was reluctant to hand front-line staff free rein; however, they did indeed want these staff members to be fully aligned with the business vision. By recognizing that the autonomy gap represented a barrier to succeeding, they began to construct a path that involved things like adjusting risk management mechanisms to define authority limits in a way that reflected performance. The upper right quadrant option, High Performance, became the aspirational solution they would work toward.
2 × 2 Thinking is remarkably flexible on a number of levels. The scope of issue scales easily from personal decisions to large strategic conundrums. If you have any doubt about this, scan the three chapters of 2 × 2 frameworks in Part Three of this book. The approach is as applicable in a retail business setting as it is to designing a supply chain or addressing global trade-offs regarding the environment. The mode of application is equally effective when applied within a group setting or by an individual working alone. And the basic approach is just as powerful for analysis as it is for generating new ideas.
The ability to think in a 2 × 2 fashion may be universal, but it is by no means easy. Although it is applicable at the individual level for tackling a single issue, it becomes increasingly challenging and subtle as we enter the realms of leadership, strategy, and intervention. These are arenas where excellent problem-solving skills and tools can have the greatest leverage.
To understand what is required to apply 2 × 2 Thinking under these kinds of circumstances, we interviewed a number of the most talented 2 × 2 practitioners in the world. Front-line consultants like Hubert Saint-Onge and writers like Steven Covey, Paul Hersey, and Watts Wacker generously shared their stories and insights. We were interested in hearing about their frameworks, but more important, we wanted to understand how and why they designed them and what they did when applying them that increased their impact. Through the discussions, we gained a clearer picture of the deep structure underlying effective use of the seemingly innocent 2 × 2 matrix. Nested in stories like the one above, a set of master principles of practice emerged:
Struggle is a necessary condition for breakthrough. It is generally only after a group has worked hard on a problem, even gotten stuck in it, that positive change and new insights become possible.
Timing is critical. The same idea at the wrong moment isn't half as powerful. The most complex situations benefit from a 2 × 2 analysis if the timing is right. Assertions that it is too simplistic are always problems with timing and delivery.
Simplicity in methods is desirable when mapping complex and highly charged material. Some of the best frameworks have not had a single word altered in over thirty years. Their creators have in effect become their protectors, so that people can view the ideas as stable and reliable.
Ownership is essential. Groups and organizations derive the greatest value when they actively participate in development and interpretation. This includes naming the issues, the axes of the framework, and the quadrants inside it. In the banking example in this chapter, Saint-Onge chose words that would resonate with people based on a familiarity with their discussion. If they preferred different wording or believed another factor needed to be introduced, he would happily make the change.
Skin in the game. It has to matter, and participants need to be prepared to be accountable for their opinions and commitments. The process is not casual and is characterized by passion and personal investment in the outcome. Without this, tension is false, and something will go wrong. That something could be innocuous and boring, leading to dissolution of an effort, or it could be explosive and damaging, as when a key activity is dropped or someone feels betrayed and loses faith.
The intangible element, the energy of processes, is ultimately more telling than structures, tools, and matrices. Don't get hung up on the 2 × 2 form. Use it as a convenient medium and device to achieve important ends. 2 × 2 modeling brings focus and tension, often making issues clearer. It creates the context; the rest is up to you. Like the framework introduced by Peter Drucker looking at Doing the Right Job versus Doing the Job Right, if you are working on the right material and act with integrity, you are much more likely to succeed.
In 1997, Garry Kasparov fought and lost the chess match of the millennium to IBM's Deep Blue. Kasparov brought to the contest perhaps the greatest human chess mind ever to exist. Deep Blue had been modeled on masters and could evaluate 20 billion moves in the three minutes allowed per move. Kasparov could have won, he said afterward, but he played the game wrong, trying to outcompute the fastest computational game machine in history. A rematch of sorts, against Blue Junior, occurred in 2003 at the New York Athletic Club. This time Kasparov did what he thought he should have tried at the previous encounter: confuse the computer with unusual, even suboptimal and odd, moves. Although this worked spectacularly in the first game, the match ended in a 3–3 tie.
Whatever the outcome, the episode helps to illuminate the process of superior problem solving. Kasparov could never match the ever increasing processing speed of computers. Deep Blue software engineer Joe Hoane observed that chess geniuses like Kasparov "are doing some mysterious computation we can't figure out."[3] Computation, however, may not be the best way to describe this. As a master problem solver, his exceptional skill is a combination of three uniquely human aptitudes: organization, visualization, and experimentation. Taken together, they make it possible to invent and solve problems in holistic and idiosyncratic ways that are at once lateral and judgmental:
Organization. In a manner closer to what a great artist does than conventional science, we are able to deconstruct situations and rapidly reconstruct them into new perspectives, problems, and approaches. When Kasparov sees an appealing way to reframe the situation, he settles on it and models a set of possible next steps and outcomes. In a way, he is thinking both literally and metaphorically at the same time and is being guided by both perspectives. If, for a moment, the setup on the board reminds him of his favorite tragic opera aria or a touching moment spent with his mother on a mountaintop thirty years ago, he can incorporate the inspiration into the next move.
Visualization. The metaphoric capacity to envision whole, complex situations and scenarios allows us to see a vast array of possibilities quickly. The best problem solvers naturally do this generative outpouring of options, seemingly unperturbed by the reality constraints and pressures of the moment. They are hardly unaware or insensitive. Rather, they are demonstrating a higher capacity for holding pressures and worries in abeyance while they invest themselves fully in a lateral search for best answers.
In training CIA agents, the ability to remain open to all possibilities in spite of mounting evidence is considered a prerequisite for doing investigative work. If you get it wrong at the beginning, recovery is almost impossible.
Major intelligence failures are usually caused by failures of analysis, not failures of collection. Relevant information is discounted, misinterpreted, ignored, rejected, or overlooked because it fails to fit a prevailing mental model or mind-set.[4]
Experimentation. Before committing to any path, great problem solvers conduct many mind experiments, asking a thousand what-if questions and imagining the outcomes. There is little fear in exploring and modeling possibilities, and there is even less attachment to the parade of ideas generated. It's all part of the process.
Kasparov intuitively understands his limitations and knows what humans can do better than machines, even one programmed to detect patterns and think in fuzzy fashions. The machine is necessarily rule bound, while the master problem solver makes rules. Great problem solvers define and redefine rules. An important by-product of this, perhaps the most critical differentiator between the best and the rest of us, is the ability to shift logical levels. Alfred North Whitehead first made the observation that complex problems need to be solved at a different and higher logical level from where the problem was created.[5]
It's a cold day, you're late for work, and your ten-year-old car won't start again. A same-level approach is to find the problem and fix it. But it's cold, and you're late! A different-level solution is to take a cab, or stop driving to work, or to move closer to the office.
A company receives another piece of negative feedback from another unhappy customer. A same-level approach is to apologize and try harder. A different-level solution is to examine the entire set of relevant business processes or involve customers in redesigning the solution.
Look closely at the mental strategies of Kasparov and great leaders like Gandhi and Winston Churchill, and you will see a high level of organizing, visualizing, and experimenting taking place. By searching for answers while maintaining an open mind, they pursue the most important and interesting tensions in situations, following them to a conclusion that might be the answer they were looking for—or merely the jumping-off point for further development. Embracing tension and contradiction seems to be part of the game, and often great problem solvers go out of their way to find it or even create it. Think of the Socratic method and how knowledge is teased out of the pupil. And what could be a more masterful application of contradiction and tension than Gandhi's use of nonviolence as a powerful means of protest? Faced with the choice of militantly opposing British rule in India or working through the system nonviolently, Gandhi chose neither . . . and both. His strategy of militant nonviolence changed the rules of the game to overthrow the existing order.
It is true that there are many ways to solve problems and a range of styles and approaches to choose among for different situations. However, it is a willingness and ability to see both sides of issues and rapidly and creatively tackle them that provides the common edge. The connection between 2 × 2 Thinking and great problem solving is manifested in structure and attitude. The 2 × 2 structure is decidedly open and reflective, enabling rapid iterations of organizing, envisioning, and experimenting. The attitude is exploratory and embraces tension and contradiction as central organizing principles. The process of seeking out and exploiting core tensions moves us toward the problem and ensures we are tackling real and relevant issues. Fortunately, the core meta-frameworks and methods necessary for 2 × 2 Thinking can be learned and applied. The process starts with recognizing alternative approaches, and challenging one's habitual response to problems.
Drawing on over two decades of business and consulting practice, we have often been dazzled by someone using a 2 × 2 matrix to solve a business problem. Sometimes it was a well-known model, familiar to all involved, like the BCG Grid, or an assessment of risk and reward. Even more frequently, it was the spontaneous creation of someone in the room, as in the opening example in this chapter.
While researching this book, we were asked a rather difficult question: Which in our opinion is the best 2 × 2 framework? As parents, this felt too much like being asked to say which of our kids we loved the most. Surprisingly, however, a small number of remarkable frameworks did come to mind, not necessarily because they were the best but because they were striking and intuitive illustrations of the three categories of 2 × 2 frameworks we explore here. In subsequent discussions and presentations, we have found retelling the story of these three frameworks to be the easiest way for people to quickly grasp the structure, breadth, and relevance of 2 × 2 modeling. After offering an example, we encourage listeners to try out the approach by thinking about their own circumstances. As readers setting out on the 2 × 2 learning journey, we invite you to do the same.
In 1965, Igor Ansoff introduced the Product-Market matrix (see Figure 1.2), and with this, he helped to launch the modern practice of business strategy.[6] The two most essential strategy levers for any business are the product or service it delivers and the markets it sells into. For each of these, there are two basic states: current and new. There are today's customers and there is the rest of the world that could become customers. We can sell more of our current offering, or we can modify it. By combining these two sets of possibilities, companies can effectively model strategic choices in a manner that is both instructive for analysis and decision making and easy to communicate to others.
The four strategy options that result from this simple analysis are stunningly clear and helpful. According to Ansoff, the easiest and first choice is to sell more of the same to existing customers. Businesses should choose Market Penetration when a new product has been received warmly and there is lots of demand left to tap. Strategy options defined in the upper left and lower right quadrants are a little harder to implement, but are absolutely the correct steps to take under appropriate conditions. For example, when a product has proven its value in one market, the most natural thing to do is introduce it elsewhere, exploiting experience and testimonials from the last market. Or a company can sell new products to satisfied and loyal customers, drawing on the trust that has been established and their understanding of the needs and preferences of the customer group. The upper right category, Diversification, should be applied with great caution, and generally only when none of the other three alternatives is available. Cost and risk tend to be higher when the product is unproven and the market unknown.
The logic of this analysis is easy to see. Consider Sony, one of the world's best-loved brands. Founded by Masaru Ibuka and Akio Morita in 1946, Sony Corporation has grown into a global supercompany by introducing a steady stream of innovative electronics products. These include the first magnetic tape and tape recorder, the transistor radio, the Trinitron TV, the Walkman, the CD, and the MiniDisc. The founders were well matched as a team. Ibuka focused company engineers on world-beating product design and development while Morita planned and led market-entry strategies that grew the company and its reputation.
In Ansoff's terms, Sony's opening strategy fits into the lower left box, perfecting products and selling them to a growing Japanese audience. Moving from tape recorder technology in 1950 to transistor radios in 1955, the company successfully expanded its portfolio by selling new products to an existing base of loyal customers. Before long, it was a well-established brand name in the domestic market. By 1960, Sony had opened its first overseas operation in New York City, entering Ansoff's lower right box, Market Development. The rest, as they say, is history, as the company's succession of leaders has continued to develop the company, remaining true to the vision and values of the founders while improvising through bumpy patches.
Probably the most controversial and rocky decision was the entry into the entertainment content business, first with music in 1988 with the acquisition of CBS Records and then movies in 1989 when Sony purchased Columbia Pictures. Compared with the string of consumer electronic products that had been their mainstay for over three decades, this move represented a departure from the familiar pattern. Entertainment value is very different from electronic products you can touch. And although moviegoers were certainly aware of the Sony name, they did not view it as an entertainment company. In Ansoff's schema, this was an upper right box, Diversification strategic approach, and as predicted, the road was rougher than with prior business projects.
Your business may be smaller than Sony's, but the same sets of forces and issues apply. What is the basis for your business's existence? If you work for a government organization or are self-employed, the question is still highly relevant. Now think about developing the business based on the current source of value. Should your organization be shifting to new and better offerings in order to retain customer loyalty? Is it timely to consider expanding into different markets to find some new customers who need the current offering? Perhaps the existing group of customers doesn't need more of your services, and others do. And finally, is it advisable to consider the riskier Diversification approach? Maybe the company is doing this now without fully recognizing the exposure.
What is the most crucial issue facing organizations in the future? According to knowledge management expert Ikujirio Nonaka, it is balancing the need for speed in planning and execution with the need to develop the economies of scale and scope that lead to long-term competitive advantage.[7]
To Nonaka, scale and scope refer more directly to knowledge and capabilities than size. Nonaka's career has been devoted to studying how knowledge is replacing other resources as a business's most important asset and how it is created, deployed, and shared within firms. Much of the knowledge that creates competitive advantage is tacit: it exists mainly in the heads of workers, not in spreadsheets, databases, or training courses. Workers at all levels develop tacit knowledge as they practice craft skills and learn to recognize patterns in the business problems they encounter.
Deep knowledge assets get expressed as advantages in economies of scale or scope. A great deal of the competitive advantage of a retailer aggregator like Wal-Mart or a services business like a large consultancy comes from the interdependent knowledge assets that exist within the firm's workers and are embedded in daily work processes. But as knowledge has increased in importance, so has speed. Firms are pulled toward what Nonaka calls "an economy of speed." The business environment has become more dynamic, and firms must now be more agile and flexible. One popular way of becoming quicker has been to unbundle the firm by creating webs of interconnected companies through outsourcing and partnering. In this way, firms can downsize and remove layers of hierarchy, becoming faster at decision making and execution.
The danger in this approach is that firms can get too lean. Solving complex issues is rarely a matter of simply choosing one option or the other, leading Nonaka to conclude that the ability to synthesize knowledge and seek transcendent solutions is the hallmark of today's successful firms.
The 2 × 2 matrix in Figure 1.3 depicts the dilemma of Speed (succeeding today) versus Scale and Scope (investing to succeed tomorrow). Typically, firms cycle through the four strategic options in accordance with shifting business phases and demands. Finding balance between the two driving forces eventually becomes a necessity for all firms.
Nonaka's work is not academic speculation; it is as hard as the news in this morning's paper. Many leading firms embody aspects of the upper right quadrant. Wal-Mart is able to open new stores and introduce new products and services at a pace much faster than its rivals, while at the same time using information technology to operate with lower costs than its competition. Cisco became the largest manufacturer of networking equipment in the world by retaining vital functions while partnering to attain speed and scale in other areas. To keep pace with cutting-edge engineering, Cisco has purchased a steady stream of start-up companies with promising technologies. New companies are integrated quickly, with special attention given to recognizing and rewarding staff efforts. Capital-intensive processes in areas such as manufacturing, logistics, and distribution are treated as noncore and better suited to best-of-breed strategic partners. Companies such as these are succeeding by focusing on achieving the two contradictory aims of efficiency in scale and the advantages of speed.
It is worth reflecting for a moment on the balance between Speed and Scale and Scope in your own organization. Is the right amount of attention and resources being given to each? Does the firm possess the basic competencies to do these things well?
We often begin business strategy sessions with a new client by asking team members to draft their personal dialectic. The instruction is simple and straightforward: create a 2 × 2 matrix that expresses a real and important tension in your life. Once they have done this, we ask them to name the ends of the two axes, and the four quadrants contained in the matrix. As an example, we share one of our own (see Figure 1.4).
The tension here is between spending time on activities that are meaningful and developmentally useful (work that makes a positive difference in the world and jazz piano are two goals that come to mind) and the ability to do them reasonably well. This sums up Alex's priority setting. He tries to say no to low-value demands and opportunities, while actively expanding the limits of what he can take on. His greatest challenge is recognizing limits and setting realistic expectations to avoid frustration. The star at the top of the matrix in Figure 1.4 is the spot he aims for: working on rewarding projects that represent creative stretch yet are achievable.
When clients discuss their personal dialectics, the comments are always of a similar tone:
People are surprised at how easy it was to complete the task.
Creating the matrix was eye-opening twice: once while developing it and again when talking about it with peers.
When the matrix is completed in a group, people feel more connected, open, and accepted by the rest of the team.
These kinds of experiences illustrate just how relevant and applicable the 2 × 2 approach is to personal problem solving. It is not surprising, therefore, that many of the most useful and powerful frameworks are found at this level.
Perhaps the easiest Individual 2 × 2 framework for people to relate to is one created by Stephen Covey in his classic book, The Seven Habits of Highly Effective People (Figure 1.5).[8] Our days are filled with activities, yet for most of us, there is never enough time to do the things that matter most. So many of the things we do are what Covey classifies as Urgent—tasks that we believe must be done. Other things are Important, and we recognize that they hold a special place in achieving our goals and living a satisfying life. So what prevents us from making better-quality choices about how to spend time and live our lives?
This is not a simple or trivial question, but it most certainly is a compelling one. Life is about choices. When we shortchange one set of goals, it is because we are choosing to say yes to other things. We have all heard and possibly experienced firsthand the lamentations of people in their later years confronting premature ill health or loneliness. How many parents have we heard say, "I was so busy while the children were growing up; I wish I had spent more time with them"? Who among us is not interested in gaining control over our life and achieving more of our goals? Changing the balance requires awareness and a willingness to take greater responsibility for our lives.
To help people take greater control, Covey asks questions like these:
"How do you spend your time?"
"Is there enough balance between Urgency and Importance?"
"If you could make time for one Important but not Urgent agenda item, what would that be, and how would this improve your life?"
We have posed these questions to groups many times, with the same immediate and beneficial impact. That is why this particular 2 × 2 framework ranks so high on our list. Within minutes, people understand how it works and are gaining personal value that far exceeds the small amount of effort it has taken to apply it to their own experience.
2 × 2 Thinking is inherently and profoundly transcendent in nature. Two people face an identical problem differently: one sees an insurmountable problem, while the other perceives options and opportunities. Systems thinker Jamshid Gharajedaghi calls these two approaches either-or versus both-and. Confronted by tough choices, the either-or reaction is to feel trapped and obliged to pick one or the other. The both-and response draws us automatically to a new and different perspective, where it is possible to search for ways to reframe the problem or use conflicting factors in the solution. (Chapter Seven contains two of Gharajedaghi's matrices: Differentiation and Integration, and Similarities and Differences.)
After watching a rerun of a Time-Life special, "Great People of the Millennium," Phil had this conversation with his guitarist brother, Jeff, and his father:
PHIL:Jeff, who is the greatest man of the last millennium?
JEFF:A thousand years?
PHIL:Yeah.
JEFF:Easy. It's Bird [meaning Charlie Parker, the legendary bebop saxophonist].
PHIL:No, man, seriously. I'll give you a hint. Newton was second; Galileo was third. [My dad chips in: "What about Henry Ford?"]
JEFF:You're talking about money? And gravity? That's what you mean by great? Bird wasn't about gravity. He was about (pause) . . . transcendence.
Reflecting on this later, Phil observed that the line, "Bird wasn't about gravity," was as true as anything he'd ever heard. To jazz fans, Charlie Parker was the perfect mix of freedom and discipline. He was never constrained by the form of a song, but he was always mindful of it and showed it respect. Composers heard new, hidden meaning in their own works, and fellow musicians and listeners were inspired. His uncompromising musical integrity, combined with creativity and virtuosity, lifted the music to a new, transcendent plane where player and listeners were momentarily transformed.
The transcendent quality is at the center of great problem solving, and it is the one characteristic consistently mentioned by the experts we interviewed. It is apparent in the opening story in this chapter about the bank, where the planning group needed to let go of the problem momentarily in order to see options. We find it in other important works as well. Bill Russell, the outstanding basketball player with the Boston Celtics through the 1960s, writes about experiencing flow at times of peak performance, when it felt as if time slowed down and team members communicated as if by telepathy. They found a way to transcend the physical level of the game to perceive a larger set of choices. Martin Seligman, in his seminal work on learned helplessness, points to the connection between depression, pessimism, and the perception that there are no choices.[9] The either-or mind-set cannot surmount negative circumstances and spirals downward, while the both-and outlook does the opposite. Seligman's subsequent work on learned optimism in effect teaches transcendence.[10] A recent study on luck comes to a similar conclusion, finding that people make their own good and bad luck through their outlook. So-called lucky people are open to new experiences and capitalize on serendipity, while unlucky people experience life more narrowly, turning away from novelty before positive results can occur.[11] Their either-or mind-set precludes luck by cutting it off at the knees.
The structure of the 2 × 2 matrix creates the possibility of seeing beyond the restrictive either-or perspective by placing conflicting items in dynamic relationship to each other. Consider Ansoff's Product-Market matrix or Covey's modeling of Urgency and Importance. The answer might still be one or the other factor (perhaps Urgent but not Important), but one cannot easily ignore the other three possibilities. This momentary transcendence is the doorway into both-and reasoning and an important first step toward more successful problem solving.