Insight Editions · No. 267
Six Disciplines of Strategic Thinking
Leading Your Organization into the Future
Michael D. Watkins
Michael Watkins defines strategic thinking as a cycle of recognising, prioritising and mobilising, and breaks it into six learnable disciplines, from pattern recognition and systems analysis to mental agility and political savvy.
A study guide to Six Disciplines of Strategic Thinking by Michael D. Watkins. Shared free for personal reading; not for sale and not endorsed by the authors or publishers. Please read and buy the original.
The Book on One Page
Michael Watkins (IMD, author of The First 90 Days) argues that strategic thinking, the trait boards prize most in top leaders, is six distinct mental disciplines that anyone can strengthen. Three help you recognize and prioritize threats and opportunities; three help you mobilize an organization to act. Strategic-thinking capacity equals endowment plus experience plus exercise, and the last two are under your control.
- The problem. Leaders face rising complexity, uncertainty, volatility and ambiguity, which Watkins reorders as CUVA because understanding complexity unlocks the rest. Surveys show strong strategic thinkers are 6× more likely to be rated effective and are promoted faster.
- The definition. Strategic thinking is the set of mental disciplines used to recognize threats and opportunities, prioritize attention, and mobilize people to enact promising paths. It runs as an RPM cycle, and shorter cycle time beats rivals.
- Recognize and prioritize. Pattern recognition matches observations to rich mental models built by immersion while guarding against biases. Systems analysis models domains as interacting elements to find leverage points, constraints, feedback loops and tipping points, and to design adaptive organizations. Mental agility combines level-shifting (cloud to ground, now to future) with game-playing (first moves, signals, sequencing, backward induction).
- Mobilize. Structured problem-solving runs a five-phase cycle centred on rigorous framing (hero, quest, treasure, dragons). Visioning paints ambitious, achievable futures and communicates them through powerful simplification. Political savvy builds winning coalitions, blocks blocking ones and uses seven influence tools.
- The book's figures. Its 17 diagrams (RPM cycle, Star Model, adaptive subsystems, game tree, problem-solving cycle, fishbone, deal criteria, motivational drivers, exchange currencies, influence map, perceptual positions) are reproduced in the chapters where they carry information.
- The running case. Gene Woods turned an $8bn regional hospital system into Advocate Health ($27bn, 158,000 staff) by spotting consolidation early, framing the problem, co-creating a vision and building alliances.
- The development programme. Seek visible experience, practise targeted exercises for each discipline, build the same capacities in your team, and treat AI as a partner that amplifies, but does not replace, human framing, judgement and influence.
- How to read it. Each discipline chapter pairs a model (Kahneman's two systems, Galbraith's Star Model, game trees, the five-phase cycle, influence maps) with a short set of exercises, so the book works best as a training manual rather than a theory. Its value lies in the synthesis of familiar research into one usable frame; the evidence is mostly interviews and a single success story told by Woods's long-time adviser, and a few numbers and historical details are wrong (flagged in the chapters).
| Ch | Title | One-line payload |
|---|---|---|
| Intro | Power of Strategic Thinking | Six learnable disciplines, distinct from critical, creative and design thinking; CUVA; STC equation |
| 1 | Pattern Recognition | Immersion builds mental models that spot signals fast; bias and limited attention are the enemy |
| 2 | Systems Analysis | Adapted Star Model; leverage points, constraints, feedback, tipping points; four adaptive subsystems |
| 3 | Mental Agility | Shift levels; play the game: first moves, signals, sequencing, backward induction, eras |
| 4 | Problem-solving | Five-phase cycle; ASCI roles; hero-quest-treasure-dragons framing; explore before deciding |
| 5 | Visioning | Ambitious, achievable futures, co-created and spread by stories, repetition, push and pull |
| 6 | Political Savvy | Winning coalitions via exchanges, influence maps and seven influence tools |
| Concl. | Developing Your Ability | Get seen, train each discipline, build a strategic team, use AI as a partner |
The Power of Strategic Thinking
Watkins defines strategic thinking as a set of six learnable mental disciplines that let leaders recognize threats and opportunities, set priorities and mobilize their organizations. It is distinct from critical, creative and design thinking, and from competitive analysis and strategic planning: those are collective and deductive, while strategic thinking is individual, inductive and synthetic. You can rise far as a strong operator, but boards reserve the top jobs for strategic thinkers, and the capacity can be built through experience and deliberate exercise.
Foreword: strategic thinking in the age of AI
The book opens with an unsigned Foreword that frames the whole project. It argues that technological disruption, globalization and political and economic instability have raised the premium on leaders who can anticipate the future, reason critically and creatively about complex problems and decide well under uncertainty. Disrupted business models create openings for those who think strategically about how to exploit them; interdependent markets force leaders to think more broadly; instability makes prediction and planning harder.
Its main claim is about artificial intelligence. The foundations of strategic thinking stay the same, but AI will change how leaders do it. Systems that process huge volumes of data, find patterns and make predictions will give leaders insights they could not get before, and the implications for strategy consulting are large.
- Symbiosis. Top leaders and AI-enabled strategic support systems will work as partners: the machines supply real-time data, analysis, pattern and trend detection, predictions, risk identification, scenario simulation and option sets with recommendations.
- The human share. Leaders frame the right questions, interpret what the systems return, supply context and creativity, and bring the emotional intelligence and political savvy needed to adapt and implement the results.
- New skills. Leaders must understand the technology and its data, interpret and analyze its outputs, decide on that basis, and grasp the ethical and societal implications of the systems they use.
- Reading instruction. The Foreword asks readers to imagine, chapter by chapter, how they would apply each tool alongside an AI system tailored to their company and tuned to work with them.
The Gene Woods story
Watkins anchors the book in Gene Woods, who became CEO of Carolinas HealthCare System (CHS) in 2016. CHS was a respected non-profit hospital system, mainly in North Carolina, with $8 billion annual revenue and 60,000 employees. Woods, already an experienced chief executive, inherited good margins, an AA-rated balance sheet, deep clinical talent and a long-serving leadership team. On paper this was a sustainable success; Woods saw storm clouds.
US healthcare was shifting fast. Expenses were outrunning revenues even at the best systems, political turmoil clouded regulatory policy, and private equity was financing new competitors set on disruption. The board had hired Woods precisely to prepare CHS for that future. His own reading, from extensive interviews for the book: the organization had thrived under the old rules, and where others saw success he saw vulnerability.
He also expected the industry's rapid consolidation to continue. CHS was not in immediate danger, but he judged that its business model could not stay viable for long. It ran management service agreements with nearby systems, managing them for a fee, but these were loosely integrated: they spread no best practice and produced no economies of scale. Woods believed such relationships were losing their value and that CHS had to become far more integrated. He foresaw two problems: soon having to decide whether the loose affiliations were affordable, and within a few years being surrounded by big systems hungry for CHS's business. His conclusion was that CHS had to drive regional consolidation itself, or in his phrase, be the convener rather than the convened.
That insight produced his "next-generation network strategy": a tightly integrated regional network of systems with aligned missions and cultures, competing by sharing best practices, combining complementary capabilities and capturing scale. To prepare the ground he worked on two fronts:
- Outside. He built relationships with other healthcare CEOs and with community and government leaders across the region.
- Inside. He launched a transformation to create a new partnering model and a more adaptive culture, because CHS had been known for a top-down, "we manage you, so do as we say" style that would not fit the strategy.
2016 Woods takes over CHS: $8bn revenue, 60,000 employees, mainly North Carolina.
2018 Merger with Georgia's Navicent Health; the group is renamed Atrium Health.
Late 2021 Atrium, having joined forces with three nearby systems, reaches $12bn revenue and 77,000 staff (17,000 added) across North Carolina, South Carolina, Georgia and Virginia, including the academic Wake Forest Baptist Health.
May 2022 Woods and Jim Skogsbergh of Advocate Aurora Health (Wisconsin and Illinois) announce a merger, stunning the industry.
Late 2022 The FTC and state regulators approve; Advocate Health becomes the fifth-largest US non-profit system: 158,000 staff, $27bn revenue, 67 hospitals, 1,000+ sites. Woods and Skogsbergh are co-CEOs; Skogsbergh plans to retire after 18 months, leaving Woods sole CEO.
By late 2021 Atrium was a transformed organization with a new leadership team and an inclusive, high-performance culture. The Wake Forest Baptist combination added world-class research to clinical excellence, positioning Atrium to lead in new healthcare models. Woods kept going, and the Advocate Aurora deal turned a modest local system into a national powerhouse.
Why it matters for your career
Watkins draws a blunt lesson from Woods. Solid operators can go far, but never succeed at the top without strategic thinking, because businesses led by non-strategists get outmanoeuvred: they are acquired or they wither. Boards therefore pick leaders with strong strategic capability to steer through hazardous waters, and every business now faces such waters.
- 2013, Management Research Group. Survey of 60,000 managers and executives in 140 countries across 26 industries.
- 6×. Those with superior strategic-thinking skills (defined as critical analysis, thinking ahead and planning) were six times more likely to be seen by colleagues as effective leaders.
- 4×. They were four times more likely to be perceived as having strong growth potential.
- 3 studies, Zenger Folkman. Research publicized in 2021 (but conducted a few years earlier) found strong correlations between a "strategic perspective" and promotion to senior levels.
His bottom line is that strategic thinking is the fast lane to the top, and that it can be learned. Leaders like Woods have natural talent but also worked hard to build their capacity. The book promises to help readers assess their innate ability and then amplify it through experience and training.
What is strategic thinking?
Good definitions have been elusive. When Watkins asked more than 50 senior executives, HR leaders and learning-and-development professionals to define the term, their first answers amounted to "I know it when I see it." All agreed it was a distinct capability of senior leaders, but beyond that the views split: for some it meant taking in a mass of information and sorting the important from the trivial; for others, thinking through moves and countermoves; for others, envisioning the future. Without a definition, assessment and development are nearly impossible, since you can only design ways to test and strengthen a skill once its building blocks are isolated. Deeper interviews surfaced common themes, which he distilled into a definition.
Strategic thinking is the set of mental disciplines leaders use to recognize potential threats and opportunities, establish priorities to focus attention, and mobilize themselves and their organizations to envision and enact promising paths forward. Put simply, it means looking past the present, thinking critically and creatively about many possible futures, weighing each scenario's risks and opportunities, and building strategies from that assessment.
Ability is not enough: recognition also needs opportunity. Someone with outstanding potential may never be recognized if their role offers no chance to shine, and many senior posts require only strong analysis, problem-solving and execution. Getting a role that displays strategic skill is often intensely political, and strategists tend to be good at winning such roles. Watkins thinks the stakes are too high to leave the identification and development of strategic thinkers to chance and politics.
Watkins scatters Reflection prompts through the book as invitations to pause. Here they ask: how does the definition map onto your own abilities, and how could you develop them? and later which CUVA dimensions create the greatest challenges for you and your organization?
Strategic thinking versus its neighbours
Watkins sharpens the definition by contrasting it with four related capacities.
- Critical thinking. The logical, systematic evaluation of information and arguments: gathering and assessing facts, spotting assumptions and biases, weighing an argument's strengths and weaknesses. It is a necessary foundation but not sufficient, because strategic thinking adds anticipation, creativity, vision, goal setting and execution, and requires deciding well amid uncertainty and change.
- Creative thinking. Generating new ideas by questioning assumptions and challenging the status quo. It supplies fresh perspectives that inform strategic decisions and grows more important as change accelerates. Tom and David Kelley's Creative Confidence shows that anyone can learn to be more creative and gives concrete methods; developed as part of a broader programme, creativity helps you anticipate trends and exploit them.
- Design thinking. A creative process for understanding customers' needs and building solutions. As Nigel Cross summarizes in Design Thinking, it runs through empathizing with end users, defining problems, generating ideas, prototyping and testing. Strategic thinking analyzes the organization's current state and environment, finds challenges and opportunities and plans action toward long-term organizational goals; design thinking aims at innovative solutions that delight customers.
- Contextual awareness. The precondition for all of it. You need deep insight into the internal environment (culture, structure, resources, hence strengths and weaknesses), the external environment (economic, political, social and technological forces, hence coming changes and growth opportunities) and the expectations of stakeholders such as customers, shareholders, employees and regulators. The practical implication: invest continuously in absorbing and synthesizing information about your organization and its world.
Why strategic thinking is so valuable: the CUVA world
If business were benign, stable and predictable, strategic thinking would be unnecessary. It is none of these: competition keeps intensifying and the stakes are high, and it is this combination of high stakes and hard environments that gives the skill its value. Leaders like Woods face four dimensions of difficulty usually labelled VUCA (volatility, uncertainty, complexity, ambiguity), a term traced to Warren G. Bennis and Burt Nanus in the mid-1980s, later adopted by the US Army and then by leadership writing generally.
Watkins reorders the acronym as CUVA, with complexity first. The four are interrelated and understanding one helps with the next: grasp the complexity of your organization and environment, and you can anticipate and make sense of the key uncertainties, which in turn helps you respond to volatility and deal with ambiguity.
| Dimension | Meaning and healthcare example | What strategic thinkers do |
|---|---|---|
| Complexity | Many interconnected variables exceed human cognitive capacity; tens of thousands of staff, hundreds of facilities, many technologies and dozens of processes | Understand how systems work, build good mental models, focus on what matters |
| Uncertainty | A known set of outcomes but no way to predict which occurs, however much information you gather; elections reshape regulation | Isolate key uncertainties, think in probabilities, explore scenarios |
| Volatility | Important variables change fast (oil prices, technology); new entrants target profitable niches and make models obsolete | Sense and respond rapidly to threats and opportunities |
| Ambiguity | Stakeholders disagree on the problem and on solutions; affordable care is good for patients but forces trade-offs on administrators | Negotiate shared "frames" of problems and agreements |
CUVA now affects every business, and technological, social and environmental change is intensifying it, so the value of strategic thinking keeps rising.
What strategic thinking is not
A working definition also shows what the term excludes. Watkins notes a habit of stressing the "strategic" part and forgetting the thinking part.
Competitive analysis. Applying a framework such as Michael Porter's Five Forces to your context to see what is important and what to do. An essential input to strategic thinking. Strategic planning. The organizational process of defining strategy: choosing what to do and not do, allocating resources and setting decision criteria consistent with the strategy. It can be powerfully shaped by strategic thinking.
Strategic thinking. Both activities are deductive, analytical and collective, run as organizational processes, and plenty of books and programmes teach them. Strategic thinking is more inductive and synthetic, and it relies on an individual leader using the right modes of mental processing to reach actionable insights and promising strategies.
Born or made: the STC equation
Watkins's answer is both. Inborn ability, your endowment, probably caps your potential, but strategic thinking is more than raw analytical power: emotional intelligence, creativity and the ability to collaborate and communicate all matter, so leaders who manage their own and others' emotions, generate ideas and work well with people tend to be better strategists.
His analogy is the marathon. A higher share of slow-twitch muscle fibres and greater lung capacity make it easier to become a strong runner, but if you do not run a lot, with proper technique, you will lose to people with less potential and more discipline. A lucky few are born with the analytical ability, emotional intelligence and creativity of a brilliant business leader; most are not, and everyone can still improve with self-knowledge and disciplined work.
STC = Endowment + Experience + Exercise
- Endowment. Natural ability from genetics and upbringing.
- Experience. Engagement in situations that build strategic ability. Many leaders stall here for lack of opportunity, so you must seek it actively: take on new projects, lead cross-functional teams, and pursue roles that demand more strategic thinking, which broaden your perspective.
- Exercise. The deliberate mental work that builds strategic-thinking "muscles". Suggestions appear in every chapter and are gathered into an exercise programme in the Conclusion.
The role of personality
Strategic thinking rests on cognitive and emotional capacities, but Watkins names three personality prerequisites:
- Openness to new experiences. Strong strategists adapt to changing circumstances and fold new information into their assessments.
- Unshakeable confidence. The belief that you can anticipate and proactively shape the future for yourself and your organization, rather than merely reacting.
- A drive to win. Ambition is a necessary quality of great strategic thinkers.
The six disciplines
The book rests on Watkins's belief, backed by research and practice, that with the right exposure and exercises strategic ability grows substantially, helping you reach the top and lead the organization forward. Six mental disciplines make up strategic thinking, split into two groups that map onto the definition.
Recognize and prioritize
- Pattern recognition. Observe CUVA business scenarios, quickly separate the essential from the non-essential, and identify the critical threats and opportunities.
- Systems analysis. Mentally model complex situations as systems and use those models to recognize patterns, predict and develop promising strategies.
- Mental agility. Explore challenges at different levels of analysis and anticipate the actions and reactions of other stakeholders pursuing their own goals.
Mobilize
- Structured problem-solving. Direct the organization to frame problems, develop creative solutions and make tough choices in the most effective ways.
- Visioning. Imagine futures that are ambitious yet achievable and energize the organization to realize them.
- Political savvy. Understand how influence works in organizations and use that to build alliances with key stakeholders.
Each chapter explains what a discipline is and how to develop it; the Conclusion distils the advice into an exercise programme.
AI and the future of strategic thinking
The Introduction closes by restating the Foreword's AI case in the present tense. Machine-learning systems trained on broad and specialized business knowledge, reached through conversational natural-language interfaces, are already changing how leaders think strategically. Leaders increasingly form symbiotic relationships with AI-enabled strategic systems that provide real-time data, analysis and insight, simulate scenarios and offer options and recommendations.
For now, Watkins argues, the six disciplines remain essential: leaders apply them to ask the right questions and interpret what their AI partners return, while supplying context, creativity, emotional intelligence and political savvy to adapt and implement the results. Recommended further reading: the Kelleys' Creative Confidence and Cross's Design Thinking.
Woods is the book's recurring hero, and the Acknowledgements disclose that Watkins has worked with him for over seven years, so the case is told by an insider. Treating a merger spree as proof of strategic brilliance risks the very halo effect Watkins warns against in Chapter 1; scale gains were not yet proven when the book went to press. The MRG and Zenger Folkman findings are correlations from perception surveys, and MRG defined strategic skill as "critical analysis, thinking ahead and planning", which overlaps with the planning Watkins later says strategic thinking is not. The unsigned Foreword largely repeats the Introduction's AI section.
The Discipline of Pattern Recognition
Pattern recognition is the brain's capacity to detect regularities, and in business it is the ability to scan a CUVA environment and quickly see what matters: the threats and opportunities hidden in noise. It rests on rich mental models of cause and effect stored in long-term memory, built by immersion, and it is undermined by limited attention and cognitive bias. If you cannot recognize the patterns that matter, you cannot prioritize or mobilize; every other discipline depends on this one.
What pattern recognition is
Watkins starts with the cognitive definition: pattern recognition is how the human brain identifies regularities in the flood of information that hits it, so that it can "make sense" of the world. It draws on several functions at once (perception, attention, memory and reasoning) and lets us recognize familiar objects and scenes, make predictions and inferences, and learn from experience.
In business it means observing the CUVA domains your organization operates in and identifying what is important. Strategic thinkers carry powerful mental models of cause-and-effect in their areas of expertise, such as customer behaviour, financial trends and market conditions. Better pattern recognition lets you perceive emerging challenges and opportunities sooner and move faster to prioritize and mobilize, either to avoid value destruction by neutralizing threats or to create value by capturing opportunities, or both.
The recognize–prioritize–mobilize cycle
Watkins frames strategic thinking as the recognize–prioritize–mobilize (RPM) cycle. Recognizing problems leads to prioritizing the most important, which leads to mobilizing the organization to solve them, and solved problems generate new ones, so the loop repeats. Moving through RPM cycles quickly is valuable in itself, because it lets you and your team outpace competitors.
On becoming CEO of CHS in 2016, Gene Woods foresaw a sharp rise in healthcare M&A, driven by declining profits, regulatory uncertainty and privately funded entrants, and concluded the industry was ripe for consolidation. He then noticed that many fellow CEOs saw the same potential but had no targets or plans: they were "heads-down" coping with market turbulence. Turning that into a "heads-up conversation" opened new possibilities. CHS merged with Georgia's Navicent Health in 2018 (the combination was renamed Atrium Health), made several further acquisitions, and in 2022 formed the fifth-largest non-profit health system in the US.
Why pattern recognition is so valuable
The logic is sequential: if you cannot recognize threats and opportunities, you cannot prioritize or mobilize to deal with them. Most executives steer through rapid change in competition, technology and society while under rising pressure to perform and transform, so the mental-processing load keeps growing. They must assess fast-moving situations, predict where they are heading and adapt strategy. Watkins's short version is "insight is power": whoever reads complex, fast-changing environments better can act faster and more effectively than rivals.
Lessons from games of strategy
Chess and Go are classic domains where pattern recognition decides results. Grandmasters beat average players largely because they perceive important configurations on the board and grasp what they imply for future moves. Arthur van de Oudeweetering, in Improve Your Chess Pattern Recognition, calls it one of the most important mechanisms of chess improvement: realizing a position resembles ones seen before lets a player seize its essence and find the most promising continuation.
- 1997. IBM's Deep Blue became the first computer to win a match against a reigning world champion, Garry Kasparov, by brute force: searching all combinations of moves and countermoves.
- 200 million. Positions Deep Blue could evaluate per second.
- 6-8 moves. Its typical search depth, reaching 20 or more in some positions.
- Today. The best engines combine brute-force calculation with deep-learning neural networks.
- 2017. DeepMind's AlphaGo decisively beat Ke Jie, the world's top-ranked Go professional.
The good news, "at least for now", is that AI augments and amplifies leaders' pattern recognition (and the other five disciplines) rather than replacing it. Business domains are volatile and ambiguous as well as complex and uncertain, so a leader in a symbiotic human–AI system still has to discern the signal amid noise, frame the most important problems, ask the right questions, prioritize and mobilize. Creativity and vision stay valuable in an era of intensifying competition, accelerating technology and routine political and environmental crises.
How pattern recognition works
Skilled executives match what they observe to patterns in memory, which tells them quickly where to focus, and they use their mental models to make sense of events and translate insight into action. At its best this goes beyond perceiving events to grasping their broader significance and anticipating how a dynamic environment will evolve. Jack Welch, the late GE chief executive, called this "seeing around corners" and thought few leaders could do it.
Strong strategists process huge amounts of information and judge rapidly what is essential. Their long-term mental models let them catch weak but important signals in noise, so they can decide on incomplete information and under great uncertainty. That is why you should build powerful models of your business's most critical domains: they let you process more without spreading your cognitive capacity so thin that you lose focus. Research shows information overload drains energy and self-control, impairs decisions and makes people less collaborative.
Kahneman's two systems
Watkins draws on Daniel Kahneman's Thinking, Fast and Slow (via a Scientific American excerpt).
- System 1. Fast, automatic and largely unconscious. It includes innate skills shared with animals (perceiving the world, recognizing objects, orienting attention, avoiding losses, fearing spiders) plus activities made automatic by prolonged practice. It is prone to bias and error.
- System 2. Slow, deliberate and analytical. It allocates attention to effortful tasks such as complex computation, is linked to the feeling of agency, choice and concentration, and takes control of attention when something surprising appears.
The surprised bank CEO. You run a financial-services firm and have set aside loan-loss provisions for a recession you expect, yet quarterly results beat consensus estimates. System 2 searches long-term memory for similar patterns (perhaps government stimulus or rising employment cutting defaults) and starts building a narrative to remember, understand and communicate what you see. Then associative activation kicks in: the thought "stimulus" instantly activates related ideas such as quantitative easing, liquidity and inflation. That produces priming, where exposure to one stimulus speeds your reaction to related ones; like ripples in water, associations prime further ideas.
The underperforming company. Sales, profits and share price are falling. Seeing the results, memories of activist investors come to mind, so when a hedge fund builds a larger stake and pushes for a board seat, your primed brain reacts fast. That ability to sense and respond is, for Watkins, the bedrock of strategic thinking.
These processes let you extract trends and relationships from large amounts of data, decide better, design better strategies, anticipate events and spot risks and opportunities. Because System 1 runs the show unnoticed, Watkins urges you to make developing System 2 part of your exercise programme, and asks how you can become more aware of when you are, and are not, using it.
The limitations of pattern recognition
Limited and selective attention
The first trap is ignoring basic cognitive limits. Nobody can sense every important development, and intense focus on one task can blind you to things that would normally catch your eye.
Christopher Chabris and Daniel Simons asked Harvard psychology students to watch a video and count basketball passes. More than half missed a person in a gorilla suit walking through the game and pounding their chest. Watkins adds that even when told afterwards they could not recall it. Their minds were absorbed by the task they had been told was critical, leaving little capacity to notice a very novel stimulus.
Selective focus is an evolutionary legacy: prioritizing the gravest threats and best opportunities improved survival, and in business it lets leaders concentrate without being swamped. But it carries downsides as the world grows more complicated. Watkins's paradoxical advice is to stay wary of selective attention and make time to step back and reflect, so you catch the patterns that matter and are not distracted by shiny objects. Rising demands on your time make this more necessary, not less.
Nassim Nicholas Taleb, in The Black Swan, shows a related blindness: leaders repeatedly miss significant but unlikely threats (the 2008 global financial crisis) and opportunities (the rise of cryptocurrencies and blockchain).
Cognitive biases
Kahneman calls the mind "a machine for jumping to conclusions." Without good information we make assumptions; when those assumptions are decent and errors cheap, the shortcut helps us cope without the full picture. Watkins then lists the classic traps.
| Trap | What happens |
|---|---|
| Confirmation bias | Seeking new data that fit existing views, or recalling evidence that confirms your theories |
| Narrative trap | Seeing patterns that are not there by inventing causal stories; media say bank shares rise "on the back of" a rate rise, ignoring coincidence and other variables |
| Halo effect | Phil Rosenzweig: one salient trait colours the whole; strong results make strategy and leaders look sound, weak results make the CEO look arrogant, so outputs are confused with inputs |
| Sunk cost ("wishful thinking") | Pouring resources into a losing proposition to recoup past losses; rogue traders doubling down have fed institutional failures and even global crises |
| Self-serving bias | Blaming outside factors for failures and claiming credit for successes; strategists resist scapegoating and instead fix the structures behind poor performance |
The upshot is "garbage in, garbage out": with crippling biases in collecting and interpreting information you cannot read shifting realities, identify threats and opportunities or choose the right course.
Beyond debiasing: critical thinking and open discussion
Avoiding biases is not enough. You also need critical-thinking skills that test your pattern recognition. In a novel, high-stakes situation, critique your first perceptions deliberately, since bias makes us see what we want to see; the best strategists are sceptical of their intuitions and challenge everyone's convictions.
Leaders like Woods naturally pick paths that advance their goals, but pattern recognition can also tell you to change course, and continuous adaptation is a hallmark of great strategists. It often starts with open discussion with diverse teams, whose varied viewpoints improve problem-solving and decisions. Such discussion can expose flaws in your mental model, for instance when new observations contradict your original assessment and make a strategic plan unreliable; you then gather more data and revise your assumptions. Critiquing and correcting is how strategists improve the fruits of pattern recognition.
Watkins equates "wishful thinking" with the sunk cost fallacy; they are distinct (sunk cost is letting unrecoverable past spending drive future choices; wishful thinking is believing what you want to be true). His claim that gorilla-study participants could not recall the gorilla "even after being told" goes beyond what Chabris and Simons reported: most were simply surprised when shown it again. The book calls Fred Smith FedEx's executive chairman; Smith died in June 2025. The evidence for the training methods below is cited generically ("research shows") rather than examined.
How to improve your pattern-recognition ability
The capacity is built into the brain, but like the other disciplines it can be developed. Neuroplasticity research shows the brain mobilizes attention and effort for activities that strain it; as you master a skill, regions governing attention and effortful control become much less active. Watkins's methods:
- Immerse yourself. Total immersion is the best way to learn a language and to understand complex business environments, because people need "soak time" to build strong mental models. He warns talent-development professionals that moving people too quickly between businesses or jobs denies them time to master each situation's core dynamics.
- Choose your domains. You cannot be expert everywhere, so pick a few areas to go deep in: a function (marketing), an industry (fast-moving consumer goods) or a stakeholder environment (government relations). Selecting the domains where you want to be a strategic thinker deserves real thought.
- Apprentice with experts. Observe people who are great at pattern recognition and absorb their ways of thinking. Observation is not enough; you need access to their internal thought processes, which means they must give you time to talk them through.
- Cultivate curiosity. Psychologists find that curiosity itself spurs the urge to explore, discover and grow, which helps with fine details of the micro-environment you might otherwise miss. Cast a wide net for sources.
- Track trends and form hypotheses. Use news, research and networking. Woods, despite decades of experience, keeps strengthening his models; he describes absorbing many data points, qualitative dynamics and experiences in order to "connect the dots" into a hypothesis about the best bets.
- Study cases. Consuming diverse, realistic cases (in-depth studies of a group, event, organization or industry) and reflecting on them builds models; research suggests depictions of reality are especially powerful.
- Use simulations. Business simulations that mirror real situations improve situational awareness, pattern recognition and even strategic planning and execution.
- Seek detailed feedback. Research shows that with detailed performance feedback after a task, people rapidly converge on the optimal speed-accuracy trade-off in decisions. Feedback provides reference points, reinforces links between cues and strategies, and lets executives test their convictions against bias.
- What were the most important patterns or signals you perceived?
- What connections did you make to previous situations or events?
- What, if anything, was novel about the situation or problem?
- How confident are you in your conclusions?
- How far will you keep refining your thinking and adjusting your approach?
From change comes opportunity, so absorb information about change from many disciplines at once.
Fred W. Smith told Inc. that his method was to assimilate information from many disciplines simultaneously, especially about change; reading US cultural history might, for instance, yield an insight about the country's demographic direction. He read close to four hours a day: newspapers, management theory, flight theory and technology journals, driven by fascination with the future.
Summary and checklist
Pattern recognition lets you find patterns and trends in data, understand operations, markets and customers more deeply, and identify challenges and opportunities. Without it in your most important domains you cannot focus on what matters or build good strategies, so strengthen it through immersion, observation and distillation. The next chapter shows how systems analysis sharpens it.
- Domains. Which are the most important domains in which to develop pattern recognition?
- Immersion. How can you best immerse yourself in them to enrich your mental models?
- Practices. Which methods will you use: simulations, working with experts, feedback?
- Curiosity. How will you feed curiosity and stay in tune with emerging trends?
- Bias awareness. How will you learn your own vulnerabilities to cognitive bias?
- Routines. What processes will debias you and strengthen critical thinking?
Further reading: Kahneman's Thinking, Fast and Slow; Rosenzweig's The Halo Effect; and Naturalistic Decision Making, edited by Caroline E. Zsambok and Gary Klein.
The Discipline of Systems Analysis
Systems analysis means building simplified models of complex domains: break the phenomenon into elements, understand how they interact, and represent the key cause-effect links. Good models cut cognitive load, sharpen pattern recognition and reveal where to act: leverage points, binding constraints, feedback loops and tipping points. Because behaviour emerges from interactions rather than parts, leaders who only manage components will be "predictably surprised."
The three-step recipe
Watkins defines systems analysis as building mental models of complex domains such as your competitive environment. Creating a systems model takes three steps:
- Decompose complex phenomena into sets of component elements.
- Understand how those elements interact.
- Represent the most important cause-effect relationships in a usable model.
Internally, this exposes the interconnections and dependencies among functions, processes and systems, so you can find improvement opportunities and optimize performance. Externally, it clarifies how the organization interacts with customers, suppliers, competitors and governments, revealing growth opportunities and strategies to capture them.
What systems analysis is
It is a holistic approach: the focus is on connections and interactions between elements, not on components in isolation. Its founding idea is that the interactions between parts determine a system's behaviour, so a change in one part can cascade through the others. That makes it a strong tool for complex problems and for decisions whose knock-on effects matter. Systems models also enhance pattern recognition by reducing the cognitive load of focusing on what matters, so you "see" emerging challenges sooner, predict impacts faster and design strategies to shift system dynamics.
Watkins shows how other fields already work this way.
- Climate science and economics. The phenomena are far too complex to treat whole, so they are split into subsystems modelled independently. Climate scientists build separate models of the atmosphere, ocean, cryosphere (areas of frozen water) and biosphere, each with its own elements, then use them alone or coupled to predict global climate. Computer models with analytical and pattern-recognition algorithms already work with humans in symbiotic relationships.
- Engineering. Computer-supported models of parallel and sequential processes are used to maximize throughput and productivity, for example by cutting inventory-holding costs.
- Product development. Designers use "architectural" models. An increasingly autonomous vehicle combines sensors, actuators, processors and algorithms with engines, drivetrains and chassis; it is designed as many elements worked on independently and then integrated, so long as the agreed interface specifications are honoured.
Why systems analysis is so valuable
Systems models help you recognize patterns, predict, formulate strategy, decide and act faster. They can be formal computer models, but often they are mental models you "run" in your head. You can model production processes, organizations, industries and economies, and leaders must use them both for internal dynamics and for the economic, political and social forces outside.
Our minds naturally break complicated problems into parts. Understanding the parts matters, but knowing how they fit together matters as much; neglect it and you will be "predictably surprised."
- 6 days. The skyscraper-sized container ship stayed wedged across the Suez Canal after a navigation error.
- $9 billion+. Value of international trade blocked each day.
- $400 million per hour, or $6.7 million per minute.
- Weeks. Time for global trade flows to stabilize after the canal reopened.
The cause was structural. Global trade is a complex and surprisingly fragile system. The relentless push for efficiency, especially to minimize inventory costs, moves materials and components great distances to arrive "just in time" for the next production stage. In stable times this runs smoothly, but it is brittle: with little slack or redundancy, small failures cascade into bigger ones. Lukas Kinigadner, CEO and co-founder of mobile-data firm Anyline, calls supply chains the arteries of industry, where even a small blockage disrupts everything downstream.
Logistics analysts had long warned of "cascading systems failures", in which one small problem triggers breakdowns elsewhere and potentially collapse. They could not name the initiating event, yet few companies had built in slack, so most could not escape the impact. Watkins's point: the specific nature, place and timing of the blockage were unpredictable, but the potential for a key link to fail was known. Systems analysis supports contingency planning because, although you cannot predict the specific crisis, you can anticipate broad classes of financial, ecological, social and political disasters and design response plans for them.
The pandemic's systemic effects spiralled into an economic crisis: production meltdowns and collapsing consumption and confidence. Investors who understood how markets behave under stress saw quickly that a minority of firms would prosper: some pharmaceutical companies (vaccines), technology giants (remote work) and online retailers (lockdowns). They moved money out of travel and tourism into likely winners. Bill Ackman of hedge fund Pershing Square Capital Management, in Watkins's telling, bet that insurance premiums would rise in 2020 as economies locked down, turning a $27 million investment into a $2.6 billion profit.
In a world that is ever more dynamic and complex, risk, uncertainty and information overload grow together. Systems analysis cuts through the noise to what is essential, helps you "see around corners" in Jack Welch's phrase, and equips you to turn disruption to your advantage.
How systems analysis works
Every system model has three components: elements, interconnections (or "interfaces") and a purpose or function. An organization succeeds only by integrating diverse functions and talents into a whole greater than its parts. Katherine Bach Kalin, a former HR executive now on several corporate boards, stresses connecting people, functions and processes and managing the enterprise holistically, with a view of resources across every function.
Galbraith, McKinsey and Watkins's adaptation
Organizational systems modelling began in the 1970s.
- Jay Galbraith's Star Model (1978). Developed while he was at Wharton, it arrays five interconnected elements as a star: strategy, structure, processes, rewards and people.
- McKinsey's 7-S Framework (1980). Seven elements: strategy, structure, systems, staff (people), style (culture), skills and shared values (purpose).
- Survival. Galbraith's model has lasted better and is still widely used, perhaps because a star makes a more appealing diagram and five items are easier to remember than seven.
Watkins's own version broadens "strategy" to strategic direction (mission, vision, purpose, strategy and key objectives), adds decision-making, capabilities and systems, and puts a new element, culture, at the centre.
- Strategic direction. Purpose, vision, values, mission, goals and strategy; it aligns people on what must be done, how, and why the journey is worth getting excited about.
- Structure and decision-making. How people are grouped in units, how work is coordinated (for example through cross-functional teams) and who holds decision authority.
- Processes and systems. Flows of materials and information. Processes run laterally and are where work is done and value created; systems such as strategic planning and budgeting provide control and coherent action.
- People and capabilities. Talent and core competencies, for example a data-analytics capability built by hiring data scientists and investing in tools and platforms.
- Measures and rewards. How performance is measured and incentivized: compensation plus non-monetary rewards such as recognition and advancement.
- Culture. Shared values (what we care about), beliefs (what we hold true) and norms (how we do things) that shape behaviour.
Thinking of the organization as a system lets you diagnose and design each element independently and drive change from any of the six: a new strategy, a restructuring, new processes (the foundation of digital transformation) or people with different capabilities. But you must understand how a change in one element affects the others and the system's overall state, because organizations need "fit" among elements; misalignment, say between strategy and structure, breeds dysfunction. A strategy of becoming customer-centric will fail if decision-making stays siloed or the processes and data for understanding customers are missing, so a new strategy demands changes to the other elements too.
Four ways to put a model to work
Identify leverage points
Leverage points are places where modest changes create significant shifts. Culture sits in the middle of the model because every other element shapes it:
- the purpose, vision and values of strategic direction;
- the number of layers, reporting lines and decision rights of structure and governance;
- the "ways of working" that processes and systems create;
- the backgrounds and skills of the most influential people;
- the incentives produced by what is measured and rewarded.
To change culture, use these links. Define the goal as target behaviours, then realign the HR systems that drive behaviour (hiring, onboarding, performance management, engagement, and learning and development) to reinforce them.
Focus on limiting factors
A second use is finding limiting factors or "binding constraints". Peter M. Senge in The Fifth Discipline, a seminal book on organizational learning, names "limits to growth" analysis as a classic systems application: the scarcest critical resources cap an organization's growth. It parallels finding bottlenecks in production, which constrain output however much effort goes elsewhere, the core of Eliyahu M. Goldratt's theory of constraints in The Goal. Project management adds the critical path: a project is only as fast as its slowest critical task. Finding these constraints shows where effort unlocks energy, growth, productivity and speed.
Recognize feedback loops
A system's state is the status of its key variables at a given time; it is in equilibrium when that state is stable or fluctuates within intended limits. Feedback loops occur when outputs are cycled back as inputs.
- Stabilizing feedback is often good. An autonomous car's speed subsystem cuts engine power when it speeds up downhill and adds power when it slows uphill, so speed stays within a set band.
- Financial controls. These should work the same way: falter early, get noticed, get corrected. The control system must (1) measure things that give early warning of trouble and (2) have feedback mechanisms that direct attention and stimulate the right corrective action.
- Stability can also block change. In transformations, restraining forces (rigid mindsets, fear of change, conflicting incentives, culture) resist. Some keep the organization stable and productive in normal times but become severe obstacles when it must move to a new and better state.
Beware non-linearities and tipping points
In a linear system, inputs produce proportional outputs: press the accelerator twice as hard and you go twice as fast. Watkins asks you to imagine a non-linear pedal: one push adds 10% speed, the same push again 100%, then 1,000%, a recipe for a crash. Non-linearity can also show up as diminishing returns: brakes that slow the car a lot with a light touch but less and less as you press harder, until slamming them does nothing. In business, if substandard pay is driving people away, improving working conditions helps up to a point; once the environment is pleasant and remote work flexible, a Starbucks gift card adds little. Stay alert for points where small changes start producing unintended harm or diminishing returns.
Tipping points occur when a roughly linear system reaches a critical threshold beyond which change becomes rapid, non-linear and irreversible. Climate change is the "best worst-case" example:
- Polar ice loss. White ice reflects solar radiation; as it melts, darker soil or water absorbs more heat, speeding further melting and warming.
- Permafrost thaw. Warmer poles may release large amounts of trapped carbon dioxide and methane (a more potent greenhouse gas), pushing temperatures higher and potentially forcing sudden, irreversible climate shifts.
Organizational systems are far less complex or catastrophic, and their tipping points can be benign: once a transformation makes enough progress, resistance may collapse, and resisters stop blocking change (actively or passively) and either accept it or leave.
Designing adaptive organizations
Systems analysis can also design essential processes. Watkins cites the COVID-19 vaccination effort: billions of doses produced and delivered worldwide at breakneck speed. He says a single Pfizer-BioNTech injection contains more than 280 ingredients and needed 25 suppliers in 19 nations, a triumph of science, drug development and supply-chain management.
Well-designed systems are adaptive: they recognize emerging threats and opportunities and adjust. Many firms underperform or fail because bureaucracy or silos delay sensing and responding. Watkins presents an approach co-developed with Amit S. Mukherjee, author of Leading in the Digital World. Start with basic questions: what are the critical elements of the organizational system and how should they connect, what are the most important feedback loops, and what does that imply for design? As Mukherjee stresses, the foundation of adaptability is the capacity to sense and respond; sensing too slowly guarantees you see threats and opportunities only when it is too late.
Detecting threats
The first need is a threat-detection subsystem that flags changes and potential dangers. It must perceive important patterns and separate real signals from background noise; otherwise you either miss signals and underreact, or chase false ones and overreact. It comprises everything the organization does to scan the external (social, regulatory, competitive) and internal environments and raise awareness of the need to respond: HR watching engagement and retention, government relations tracking regulation and legislation, external communications monitoring social media, strategists following competitors.
Much of this probably exists already. Assess three things:
- Whether each element is effective enough at recognizing important patterns and feeding back fast enough.
- Whether the inputs are integrated and interpreted appropriately.
- Whether there are dangerous gaps in overall coverage.
When threats go unseen, or are seen too late, the surprise is often predictable but unrecognized, because silos stop information being integrated or incentives reward the wrong behaviour. Many businesses fail from predictable surprises rooted in organizational design weaknesses.
Responding to crises
Some surprises are genuinely unforeseeable "bolts from the blue." When serious enough they create crises, so the second subsystem is crisis management, the mechanism for mobilizing to limit damage. It often uses a separate set of structures and processes that shift the business from "normal operations" to "war-fighting" mode, usually with more centralized control for rapid, coherent response. Good systems keep resources ready: modular response plans, communications protocols and pre-written scripts on the shelf, and protocols for facility lockdowns or evacuations.
Learning from experience
After a crisis, do not simply return to business as usual. A post-crisis-learning subsystem should distil and disseminate lessons that strengthen detection and crisis management. The model is the US Army's "after-action review", which requires commanders whose units have seen combat to reflect and learn; the insights go into the Center for Army Lessons Learned, which supports officer training.
Preventing future problems
When detection works and spots an emerging threat, can the business act proactively to stop it becoming a crisis? The fourth subsystem, problem prevention, mobilizes resources in advance so the organization avoids having to react to a preventable issue that has escalated.
- Threat detection. Recognizing and prioritizing responses to emerging threats.
- Crisis management. Diagnosing and responding to crisis-generating surprises.
- Post-crisis learning. Reflecting on crises and disseminating lessons to avoid unnecessary future problems.
- Problem prevention. Mobilizing resources and acting to avoid the impact of threats you can recognize and prioritize.
Designed well and interacting as intended, these subsystems position an organization to thrive in turbulence. The same architecture applies to opportunities, and seeing opportunities rather than just reacting to problems is a hallmark of true strategists: identify them; pursue promising, time-sensitive ones fast (success can make you a market leader); learn from failures such as a flopped product launch; and capture many small improvements as part of normal operations.
Watkins sums up the adaptive design as four personal capabilities: (1) use pattern recognition and systems analysis to detect challenges and opportunities; (2) handle crises created by unpredictable surprises; (3) learn from these experiences; and (4) progressively refine your capacity to prevent problems before they happen.
The limitations of systems analysis
A model helps only if it captures a domain's essential features and dynamics, its fidelity. Low fidelity means missing variables or dynamics, and a model is only as good as its assumptions; oversimplify and you get dangerously wrong predictions or severe unintended consequences. Good models correlate strongly with their domains though never perfectly, and predictions depend on accurate, complete and timely information. The mind prefers simple linear chains of cause and effect, which fail when dynamics are non-linear or have tipping points, and models can fail spectacularly when curveballs hit.
Unseen change is a further danger: an out-of-date model can be worse than no model at all. In fast-changing business you must be ready to update or discard models, which means unlearning, not just learning:
- Recognize that the old model is incomplete or ineffective.
- Find or create a fresh model that serves your purpose better.
- Build new mental habits and resist reverting to old ways of thinking.
How to get better at systems analysis
It takes work. Watkins cites one estimate that 95% of people cannot think in systems because they are used to simple cause-and-effect chains, which shows the advantage systems thinkers hold. Many learn the basics in school, especially in engineering or science, but anyone already does some modelling: recall the water cycle of evaporation, condensation, precipitation and transpiration. In experiments, young children develop systems-analysis skills very quickly.
- Set boundaries. They give clarity and reduce complexity; too narrow misses knock-on effects, too wide buries the insight in data. There is no one-size-fits-all; boundaries depend on the problem.
- Map causation. Lay out what happens, why and how (A causes B, C causes A). Draw causal loop diagrams to visualize connections, test your mental models, and invite colleagues to challenge your assumptions.
- Find limiting factors. Could leadership agree, for instance, to a modest additional investment to build a missing capability?
- Test solutions. Evaluate options with simulations, experiments or prototypes, decide on the likeliest to succeed, and iterate if it fails until you get the result you want.
Reliable prediction is extremely hard, perhaps impossible, as complexity rises. So the goal is not to forecast every possibility but to assess uncertainty itself, which sharpens intuition and improves choices. Practice is the main teacher, and business simulations are ideal: a manageably complex environment where you can experiment safely, learn cause and effect, and, unlike real life, rewind and try again.
Ackman's 2020 windfall came from credit-default protection on corporate bond indices, a hedge against widening credit spreads, not a bet on rising insurance premiums as Watkins says. The 280 figure in Pfizer's own communications refers to the materials and components used to make the vaccine, not ingredients in a single dose, which has only about a dozen. The claim that 95% of people cannot think in systems rests on one weakly sourced estimate. The accelerator analogy (double pressure, double speed) is illustrative, not physical. Figure 4 of the original (detection linked to crisis management) is described but not reproduced here; Figures 6-8 contain its content.
Summary and checklist
Systems analysis builds on pattern recognition: simplified models of your business's domains help you manage complexity, think precisely about key elements and interactions, diagnose issues and design solutions. The next chapter turns to a third discipline that supports modelling and strategy: mental agility.
- Modelling candidates. Which complex, hard-to-understand domains in your business would benefit from being modelled as systems?
- Organization as system. Does viewing your organization this way help you understand its dynamics, diagnose problems and drive change?
- Where to act. What are the key leverage points, limiting factors and feedback loops in the systems you face?
- Adaptiveness. Can systems analysis make your organization more adaptive?
- Capability. How will you strengthen your own and your organization's use of systems analysis?
Further reading: Senge's The Fifth Discipline; Steven Schuster, The Art of Thinking in Systems; Donella H. Meadows, Thinking in Systems: A Primer.
The Discipline of Mental Agility
Mental agility is the capacity to keep rethinking how to move the organization forward amid rising CUVA, and it rests on two skills that amplify each other. Level-shifting means moving fluidly between the big picture and the details, and between now and the future; game-playing means anticipating the moves of other intelligent players and building them into strategy. Every action you take triggers reactions from customers, competitors, regulators and your own staff, so strategy has to be built around those reactions.
Two pillars
Pattern recognition and systems analysis lay the foundation for sound strategy; mental agility amplifies them. Its two cognitive abilities are:
- Level-shifting. Exploring hard situations at different levels of analysis: seeing the forest and the trees, foreseeing future developments and their present implications, and moving fluidly and intentionally between levels.
- Game-playing. Focusing on the "games" your business must play, anticipating the actions of other intelligent "players", and factoring them into strategy. Launch a product and competitors respond; make an acquisition and regulators object; change incentives and the sales force reacts.
Together they let you recognize and respond rapidly to emerging threats and opportunities.
Learning to level-shift
Level-shifting means viewing one situation from several altitudes: taking the "50,000-foot view", getting down to details, then shifting back up. Gene Woods tells his team they must be "cloud-to-ground thinkers": you cannot craft strategy without knowing what is happening in the organization and whether it will enable or frustrate your aims, and he shifts between cloud and ground several times in every strategy discussion.
A second axis is now versus future. A former HR leader at a global healthcare company warns that running a business pulls you into the day-to-day minutiae, so you must reserve a large share of your thinking for tomorrow and for the actions that serve long-range goals. Level-shifting lets you examine problems from multiple complementary perspectives, probe every angle and incorporate others' views. The best strategists can dive deep to check that the people responsible for details are doing their jobs, then zoom out to the big picture.
What matters most is knowing when to switch. Woods's version: too long on the ground and you are bogged down in detail; in the clouds when you should be on the ground and you lack the organizational insight strategy needs, so you must find the right altitude at which to fly.
Failing to go down. Michael Parker, former CEO of Dow Chemical, watched people with higher IQs than his fail as leaders: brilliant talkers with broad high-level knowledge who did not know what was happening "way down in the system." Without level-shifting, Watkins says, you are unlikely to become a great strategist.
Shifting too fast. A newly appointed pharmaceutical leader was skilled at vision and strategy but also needed the nitty-gritty of her company's drugs, the patients who could benefit and the physicians who would prescribe them. Her reports suffered "mental whiplash" from her rapid changes of "magnification". Her lesson: signal explicitly when you are making a shift, and bring people with you.
Playing (and winning) games
The game-playing dimension rests on game theory, "the science of strategy": strategizing to win the games that shape your business, played against intelligent actors who make moves and countermoves to advance their agendas. Woods likens leadership to playing many chess games at once against politicians, regulators, competitors and customers; some you control, some you can influence, some are free agents, and the pieces never stand still.
Business games usually mix two modes:
- Cooperation to create value. Building alliances with players pursuing complementary objectives, as in an industry association shaping regulation for everyone's benefit (though factions within it often want somewhat different things).
- Competition to capture value. Fighting for the biggest share of a fixed pie, as rivals in low-growth industries do through pricing and marketing. Even fierce competitors may cooperate implicitly and legally, for instance by not starting price wars that erode everyone's profits.
- Assess what types of games they are playing.
- Identify all the players and what they care about.
- Find opportunities to create value through cooperation and capture value through competition.
- Craft their strategies accordingly.
Applying game-theory concepts
Game theory has a mathematical foundation, applied with sophisticated analytics to problems such as dynamic airline seat pricing. Many real business decisions cannot (yet) be modelled mathematically, but the principles remain indispensable.
First-mover advantage and the river of decisions
In sequential games such as chess, does moving first help? Yes: between equally able players, the first mover wins an estimated 52-56% of games. In business, first-mover advantage usually means entering a new market first and capturing more value through higher revenues and profits over time; it applies wherever the order of action matters. When an industry ripens for consolidation, the firms that thrive often move first to grab the most attractive acquisitions. Hence the need to recognize early that you are in such a game, which loops back to pattern recognition.
Inside the organization you can gain influence by being first to surface and frame problems. Watkins compares decision-making to a river: big decisions are shaped by earlier processes that generate alternatives and weigh costs and benefits, and by the time the problem and options are defined, the river is already flowing in its channel and the choice may be foregone. A related micro-level source of power is being the one who convenes and organizes a group around a shared agenda.
Fast following
First is not always best. Suppose you lead R&D at a pharmaceutical company and a new analytical technology could dramatically speed early drug discovery, but development is expensive and may well fail. You can build the capability now (first mover) and perhaps reap the advantage, or wait while start-ups develop it, then acquire one or hire people to build the now-proven capability (fast follower).
Signalling, equilibrium, deterrence and commitment
Players often cannot or will not talk directly; price-fixing collusion is illegal in most places, but firms may legally change prices and send signals. Watkins builds the example from an industry in stable equilibrium: no player has an incentive to diverge from its current strategy, shares and profits are steady, and divergences (such as price cuts to grab share) are effectively punished.
Signalling to move the equilibrium. Inflation flares and raw-material and labour costs erode everyone's profits. All should raise prices, but who goes first? If Company Alpha raises prices, Company Beta might hold back to gain share. So Alpha tests with one product category; if Beta follows, Alpha raises prices broadly and the industry settles at a new stable equilibrium.
Deterrence. If Beta unilaterally cuts prices in a key category to take share, Alpha can signal willingness to cut even deeper, raising the spectre of a mutually destructive price war. It works only if the threat is credible.
Commitment. You lead an electric-vehicle maker that won a strong position by being early but now faces incumbents and private-equity-funded start-ups. EV production needs heavy up-front investment that others will make only if the risk seems acceptable. You announce a large battery plant, then back it by buying land, seeking preliminary approvals and signing key suppliers. If rivals believe you are irreversibly committed, their risk-benefit calculus shifts and they may not invest. This is another form of first-mover advantage.
Sequencing
Sequencing means choosing the best combination and order of moves. Suppose you lead a business unit seeking corporate approval for a big acquisition. Formal vetting processes exist, but you also need political support: identify the key decision-makers and who shapes their thinking, then pick the order in which to approach stakeholders so as to build momentum. Landing one key person makes others easier, and as support broadens, success becomes likelier and recruiting easier still. Here there is no adversary, but in most important games there are other intelligent players to cooperate and compete with, so you must anticipate their responses.
| Concept | Watkins's example |
|---|---|
| First-mover advantage | White wins 52-56% of chess games between equals; first movers grab the best targets in consolidating industries; inside firms, whoever frames the problem first shapes the decision |
| Fast follower | Pharma R&D waits while start-ups prove a costly drug-discovery technology, then buys one or hires the talent |
| Equilibrium | No player gains by diverging unilaterally; stable shares and profits, deviations punished |
| Signalling | Alpha tests a price rise in one category during inflation; if Beta follows, prices rise broadly |
| Deterrence | Alpha threatens deeper cuts if Beta cuts; works only if credible |
| Commitment | EV leader buys land, gets permits and signs suppliers for a battery plant, deterring rivals |
| Sequencing | Order stakeholder conversations on an acquisition to build momentum |
| Backward induction | Picture the end state, reason back to the best first move |
Game trees and backward induction
Game trees clarify sequencing. You are the market leader with one major competitor, considering a price increase. Before moving, anticipate whether the rival will match or hold, estimate the probabilities (say 50:50, so 0.5 each), and value the outcomes: the benefit of higher profits if they follow and the cost of lost share if they do not. Then choose the sequence of moves that maximizes expected value. Watkins writes EV = 0.5 × Benefit + 0.5 × Cost, positive when Benefit > Cost.
Sequencing usually starts from where you are and charts a path forward. Backward induction reverses this: look ahead to where you want to end up, then reason backwards to the present to find the best first move. Top chess players do this, imagining their desired endgame position and planning back from it.
Era planning
Era planning applies backward induction. First set the era's length. In turbulent times a horizon beyond two or three years is unrealistic, and plans may need drastic change after upheavals such as a pandemic, war or severe climate events (though, per Chapter 2, you should foresee such threats and hold high-level plans). Then work on two dimensions, illustrated by a career plan: you have just taken over sales and marketing at a mid-sized company and expect to stay three years.
- "What will be true." What you will have accomplished by the end. Decide what you want your legacy to be, then reason back to what you must do in the next six months to lay the foundation.
- "What will be possible." What you do now to create options for what comes next. Identify at least three and at most five potential futures, as precisely as possible. Some are natural extensions (becoming CEO of your current company); include aspirational, out-of-the-box ones (starting your own company). Then reason back to the bridges you must build to make them real.
The same logic serves business strategy: establish the planning horizon; look ahead to what will be true and what will be possible; reason back to the short-term actions that lay the foundations. It also feeds into developing a vision for the business.
How to develop mental agility
Mental agility looks innate but improves with practice. Recall STC = Endowment + Experience + Exercise: seek experiences that show level-shifting in action, ideally alongside established strategists, then exercise rigorously and regularly to build a level-shifting "habit of mind".
- Look from multiple viewpoints, and combine with systems thinking. On any problem or decision, pause and ask whether thinking in systems terms clarifies the dynamics. If so, shift deliberately between the whole system and specific elements and connections, and when you or others get stuck too high or mired in minutiae, move the level on purpose.
- Practise now versus future. It is natural to fixate on the near term, so ask what the situation will look like in a month, six months, a year, and whether that future view changes what you should do now. This is where level-shifting meets game-playing.
- Think in action-reaction chains. If we do A, they will likely do B; if we do X, they will do Y. Look a few moves out, then work backwards to the best next step.
- Play games. Chess, even occasionally on a phone against virtual opponents, internalizes action and reaction; competitive card games hone moves and countermoves. Online bridge is especially good for signalling, since each round begins with partners bidding to convey the strength of their hands and what they can achieve together.
Scenario-planning workshops
For complex situations and team strategizing, Watkins recommends scenario planning, whose aim he describes as widening your scope to every possible scenario so you see threats and opportunities and craft robust strategies for big shifts. A workshop promotes open dialogue about possible futures; invite outsiders with relevant expertise to spark creativity. Deepen the debate deliberately with:
- Dialectical inquiry. Subgroups debate alternatives and work toward a consensus solution.
- Devil's advocacy. One group proposes a course of action and the other critically analyzes every element.
From George Wright and George Cairns, Scenario Thinking:
- Define the main issues about the future and a timescale; interview stakeholders for broader context.
- Determine the external driving forces, first individually (for many perspectives), then as a group.
- Cluster the forces so the volume is digestible, and trace the links showing how each affects the others.
- Define two extreme but possible outcomes for each cluster and rate their relative impact on the focal issue.
- Assess uncertainty about the outcomes and test independence; merge dependent factors into one to widen the range.
- Reality-check the outcomes for gaps in logic, scale and information.
- Group outcomes into best-case and worst-case scenarios, flesh them out and debate which futures are most plausible.
- Write storylines: key events, chronology and the "who and why" of what happens.
The aim is to understand the external drivers, see threats and opportunities clearly, and then weigh the organization's strengths and weaknesses against the shifting environment.
Role-playing simulates the interactions among a game's players. Marketing expert Scott Armstrong found it predicts most accurately when the scenario is as close as possible to the real situation, and accuracy improves when the full range of stakeholders (competitors, customers, regulators) is role-played.
The expected-value formula is mis-signed: if Cost is a loss, EV = 0.5 × Benefit − 0.5 × Cost, which is positive when Benefit exceeds Cost (as written, Watkins's version adds the loss). Watkins says era planning feeds visioning "in the next chapter," but visioning is Chapter 5. Scenario planning cannot cover "every possible scenario," as he claims; its value lies in a few well-chosen, divergent ones. The chess first-move edge is real but small, a reminder that first-mover advantage in business is conditional rather than a rule.
Summary and checklist
Mental agility is the ability to switch tasks, shift attention and think flexibly; for strategists it means level-shifting (viewing one situation at different levels and moving fluidly among them) and game-playing (assessing and winning the key games your business plays). Together they deepen insight and strategy. Next comes the fourth discipline, structured problem-solving.
- When to shift. When is it most important to view challenges and opportunities from multiple perspectives or levels?
- Role models. Which leaders are great at level-shifting, and what can you learn from them?
- Exercises. What will you do to build level-shifting ability?
- Your games. What are the most important games your organization must play to create and capture value?
- Concepts. How could first-mover advantage, signalling, equilibrium, sequencing and backward induction improve your strategies?
- Plan. How will you get better at game-playing, for example by hosting scenario-planning exercises?
Further reading: Avinash K. Dixit and Barry J. Nalebuff, The Art of Strategy; William Spaniel, Game Theory 101: The Complete Textbook.
The Discipline of Structured Problem-solving
The last three disciplines serve the mobilize stage of the RPM cycle, and structured problem-solving comes first: a disciplined, collective process that involves the right stakeholders, frames problems, generates options, makes trade-offs and commits resources, while leaving room for creativity. For novel, "wicked" problems, framing the question rigorously is the most important phase of the whole process.
From recognizing to mobilizing
The first three disciplines help you recognize and prioritize: pattern recognition identifies what matters, systems analysis builds simplified models that amplify it, and mental agility lets you view challenges from different perspectives and think through actions and reactions. The next three help you mobilize: structured problem-solving for thinking problems through and developing solutions, visioning for identifying desirable futures and motivating people toward them, and political savvy for handling internal and external politics and building alliances to implement solutions.
Structured problem-solving breaks the work into discrete steps: identify key stakeholders, frame the problem, generate solutions, evaluate and select the best, implement it. Strategic thinkers must lead processes that provide structure while encouraging creativity; too much structure and valuable perspectives never surface and creative options are never explored.
What problems and decisions are
The word "problem" sounds negative, evoking threats, yet the best approach to threats and opportunities is essentially the same, so Watkins widens problem-solving to cover both good and bad news. Decision-making is choosing a solution from a set of mutually exclusive options by applying evaluative criteria and making trade-offs. Structured problem-solving is the process for developing solutions that avoid value destruction by neutralizing threats and create value by capturing opportunities.
What makes "wicked big" problems hard
Choosing where to eat lunch is a recurring, low-consequence problem. Your organization's high-stakes problems are usually novel and complex, and that combination shapes how the process must be led. Routine problems are ground out with existing procedures and little judgement. Novel ones have no playbook, and often it is not even clear what the problem is, so defining it (variously called problem formulation, finding or framing; Watkins uses problem framing) becomes an essential early phase.
Most important problems are also "wicked": highly challenging, increasingly intractable problems that show some mix of the four CUVA factors.
| CUVA factor | What it does to problem-solving | What to do |
|---|---|---|
| Complexity | Many elements and interdependencies obscure cause and effect, prediction and leverage points | Invest in the best possible system models |
| Uncertainty | Solutions require probabilities and risk judgements, and stakeholders differ in estimates and risk appetite, so they disagree on what is "best" | Agree up front on how solutions will be judged on probability and risk |
| Volatility | A problem's seriousness can change suddenly, and bigger issues can appear with little warning | Sense changes and rapidly reassess priorities |
| Ambiguity | No consensus on what the problem is, whether there is one, or on solutions and criteria | Negotiate and educate stakeholders to align on framing and criteria |
Combined, CUVA can make problems seem intractable, which is why a structured process is essential, and leading high-CUVA problem-solving well is a competitive advantage for you and your organization.
Leading structured problem-solving processes
Formal thinking about problem-solving goes back at least to 1910, when the American philosopher John Dewey published How We Think, a manual on critical thinking with five phases of inquiry: recognize a problem, define it, develop a suggested solution, refine it and test it. Organizational problem-solving departs from Dewey's intellectual inquiry in two fundamental ways: it is a collective effort, and implementing "solutions" usually commits substantial resources.
Assuming you have recognized and prioritized a significant problem and want to mobilize to solve it, Watkins proposes five phases, each with guiding questions.
- Define roles and communicate the process. Who must be involved, and in what roles? How should you communicate the process, and with what implications?
- Frame the problem. How can you define the problem as a specific question? What criteria will judge the fitness of solutions? What are the biggest obstacles to overcome?
- Explore potential solutions. What is a complete set of promising solutions? What approach will identify or develop them?
- Decide on the best option. Given your criteria, which option best solves the problem? How will you handle significant uncertainties?
- Commit to a course of action. What resources must be allocated? What needs to be done, and by whom?
Because solving one significant problem usually generates more to frame and solve, the process is drawn as a cycle. At its centre Watkins places a reminder to balance the "two halves of the brain": the left more structured, the right more creative. Creativity can play a role in every phase, but structure is essential throughout.
Soon after becoming CEO in 2016, Gene Woods examined CHS's model. Part of its success came from contracts to provide management services (such as back-office payment processing) to nearby systems, which brought about $3 billion of annual revenue on top of the $5 billion CHS generated itself, adding scale, geographic breadth and bargaining power with suppliers and insurers. Woods saw a threat: none of the relationships offered a path to true integration, so value was being left on the table; CHS was propping up weaker systems, which paradoxically let them negotiate harder when contracts came up for renewal, as many did soon after he arrived. Stepping back, he concluded CHS could not stay viable long term without scale from combining with other systems. Expecting consolidation to continue or accelerate, he decided CHS had to be the regional first mover in initiating partnerships or be acquired. That exploration became the next-generation network strategy, and the five phases below follow it.
Phase 1: Define roles and communicate the process
Most executives must involve their leadership team and others, which adds complexity: these are people, groups or organizations that (1) have a stake in the problem and (2) influence your ability to frame and solve it. Woods, for example, had to engage his board regularly. First identify the stakeholders, then decide how to involve them using ASCI.
- Approve. You need their formal approval for key decisions or commitments. Any significant combination would need sign-off from the state and federal agencies overseeing antitrust.
- Support. They control resources you need: people, funding, information, relationships. Beyond approving deals, Woods's board had to fund key activities.
- Consult. You want them on board, their input on critical issues, or both; they may move into the Approve or Support columns later, so engage them early.
- Inform. Keep them updated through one-way communication, often because they will play more active roles later.
Complete an ASCI matrix before starting, mapping each stakeholder's expected role in each phase, and update it as understanding grows. Woods's matrix engaged these groups phase by phase:
| Phase | Stakeholders Woods engaged |
|---|---|
| 1. Define roles and design the process | Board (approve); board, chief of staff, CFO and general counsel (support); government-relations staff; leaders of existing relationships with other systems |
| 2. Frame the problem | Executive team |
| 3. Explore potential solutions | Extended leadership team; key organizational thought leaders; external consultants |
| 4. Decide on the best option | Board; extended leadership team; thought leaders and consultants; leaders engaged in strategy execution |
| 5. Commit to a course of action | Board and state and federal regulators; external legal and regulatory advisers; leaders engaged in strategy execution |
Next, communicate the problem so stakeholders can make sense of what is happening. Here Watkins invokes the "power of fair process": research shows people more readily accept outcomes not wholly in their favour when they see the decision process as fair, which in practice means being transparent about the process.
Phase 2: Frame the problem
With novel and especially wicked problems, rigorous framing may be the most important phase of all. Watkins cites Albert Einstein and Leopold Infeld (The Evolution of Physics): formulating a problem is often more essential than solving it, and seeing old problems from new angles takes creative imagination. Framing involves three tasks, which take effort up front but save time later:
- Define the problem as a question to be answered.
- Clarify the criteria for judging the fitness of potential solutions.
- Identify the most significant barriers to success.
From Arnaud Chevallier and Albrecht Enders, Solvable, built on the storytelling arc of the Hero's Journey (think Luke Skywalker in Star Wars):
- Hero. You, the leader framing and solving a significant organizational problem.
- Quest. The reason for the journey, expressed as a question that clearly defines the problem.
- Treasure. The best possible solution and the benefits of realizing it.
- Dragons. The barriers to confront and overcome along the way.
It distils thinking memorably and gives multiple stakeholders a shared language for aligning on the problem, solutions and criteria; agreeing definitions of quest, treasure and dragons helps you manage them.
Defining the quest
Phrase the quest as a precise question and size it correctly. Try to "boil the ocean" and you set yourself up to fail; fixate on how many angels can dance on a pinhead and you are destined for disappointment. The right ambition lies between the two. Be strategic (understand all stakeholder interests and frame the problem with them in mind) and creative (understand and use the biases in how people think).
In Chevallier and Enders's parable, two monks want to smoke while they pray, which would mean more praying but less concentration, so the net benefit is unclear. The first asks the abbot whether he may smoke while praying and is refused. The second asks whether he may pray while smoking and is allowed. The difference is loss aversion, the well-established finding that people care more about avoiding losses than gaining equivalent amounts: the first framing highlights a loss (worse average prayer), the second a gain (more prayer).
Setting evaluative criteria
The criteria answer two questions: what must be true of an acceptable solution (the treasure), and how will solutions be ranked on attractiveness. They should be distinct, compact and reasonably comprehensive, and focus on the most important yardsticks, since too many bring diminishing returns. For a restaurant, "tastes good", "is satisfying" and "leaves me feeling good" are too generic and vague. With his leadership team, Woods set the criteria for evaluating deals with other systems.
Say yes if: there is a path to geographic density and state-wide networks; fixed infrastructure and capabilities can be leveraged; the deal is accretive; cultures align and are committed to the "for all" mission; population-health coverage and capabilities expand; differentiating strategies accelerate.
Say no if: the effort is a poor use of resources or a distraction; it is a one-off with no long-term strategic potential; it is a pure "rescue mission"; the cultural fit is poor.
Naming the dragons
The final framing task is to anticipate obstacles before exploring, evaluating and deciding. Woods saw three dragons:
- Helping his team become comfortable with ambiguity and give up needing a defined strategy up front.
- Convincing the board and other stakeholders that Atrium Health had to grow differently despite the old model's success.
- Restructuring his leadership team and adding the talent to drive the new approach.
Phase 3: Explore potential solutions
Separate exploration from evaluation. Finding solutions to wicked problems takes creativity, ingenuity and vision; choosing among them takes hard-headed analysis, and premature criticism squashes creativity. Michael A. Roberto (Unlocking Creativity) notes that failing to manage dissent and contrarian views constructively lets many good ideas wither. Then identify which kind of exploration you need.
- Options fixed and obvious. For a quick lunch you know the neighbourhood and your time, so the options are immediately available: skip straight to evaluation, and the options stay fixed unless restaurants open or close.
- Options exist but are not obvious. Exploration becomes efficient search: devote resources until you have found all the options, or, when search is costly or slow, set a stopping rule and search until you have a plausible set, then evaluate rigorously. Stopping at the first solution breaks the separation rule but is sometimes justified under time pressure.
- No good options found. Break the problem down with analytical tools such as systems modelling (Chapter 2) and root-cause analysis to expose underlying drivers, easy fixes and the hardest subproblems, then build solutions up creatively.
Root-cause analysis breaks a problem into finer pieces. Watkins's example diagnoses shipping delays at a manufacturing facility, sorting possible causes into logical categories so you can find quick fixes and new approaches to subproblems such as cutting equipment downtime.
- Equipment. Unpredictable downtime.
- Process. Manual needs updating; complicated approval flow.
- People. Missing key people.
- Materials. Lacking raw-material processing power; insufficient storage space.
- Environment. Frequent storms.
- Management. No control of delayed shipments; incorrect KPIs.
Building solutions requires creative talent, motivated well: do not impose too much structure or over-constrain the process, and give creative thought space and time. Graham Wallas's The Art of Thought stresses time in a five-stage model of creativity:
- Preparation. The mind is on the problem, exploring its dimensions.
- Incubation. The problem is internalized in the unconscious mind.
- Intimation. A "feeling" arrives that a solution is on its way.
- Illumination. The idea bursts from preconscious processing into conscious awareness.
- Verification. The idea is consciously checked, elaborated and applied.
Phase 4: Decide on the best option
With a complete set of options, evaluate rigorously and choose. If all criteria are must-haves, evaluation is a simple yes or no. Usually it means trade-offs. With only taste and time as criteria, you may love Italian far more than Mexican but the Italian place takes much longer: you would spend five extra minutes, not an extra hour, maybe twenty. When criteria are measurable and convertible to a common currency (time, money), trade-offs are easy; when assessments are qualitative, build a scoring system, following "Scoring a Deal", a Columbia Business School case on complex negotiations.
- Define the dimensions for assessing options (already done during framing).
- Rank the options from worst to best on each dimension.
- Create a 0-100 scale for each dimension (100 most effective) and place the options on it.
- Assign weights reflecting each dimension's importance to your strategy, totalling one (for four dimensions, say 0.3, 0.2, 0.4 and 0.1).
- Calculate each option's total: multiply its score on each dimension by that dimension's weight and add up.
In the worked example the criteria are taste, cost, total time and nutrition, the options the local Thai, Mexican and Italian restaurants. Time carries the most weight, taste and cost some, nutrition little ("clearly your health isn't a big concern right now"). Mexican is cheapest (100), Thai close (90), Italian costly (70); Italian tastes best (100), Thai close (90), Mexican much less satisfying (70).
| Option | Taste 0.3 | Cost 0.2 | Time 0.4 | Nutrition 0.1 | Total |
|---|---|---|---|---|---|
| Thai | 90 | 90 | 85 | 90 | 88 |
| Mexican | 70 | 100 | 100 | 50 | 86 |
| Italian | 100 | 70 | 40 | 100 | 70 (book: 78) |
Thai wins without topping any single dimension, because it is good on several important ones: rigorous trade-off analysis can produce an unexpected "best". Watkins then lists the method's limits and refinements.
- Non-linearity. The scales assume linear 0-100 values, but if you have 30 minutes before a client meeting and the Thai trip takes 40, its time score collapses.
- Additivity. Summing weighted scores assumes no interactions among dimensions, which often fails.
- Advisory, not determinative. Use the result to inform judgement: does it feel right, were the weights and scores right, are there non-linearities or interactions to consider?
- Expected values. Add probabilities: if the Mexican place reliably serves you in 10 minutes but Thai varies from 5 to 25, assign probabilities to wait times and compare on an expected-value basis.
- Timing. Build the scoring system while framing, not while evaluating, so weights and scores are not bent by options you already know and may have informally judged.
Phase 5: Commit to a course of action
Solutions to organizational problems are not "answers" but paths forward the organization commits to, made up of goals, strategies, plans and resource commitments. Converging on a solution often means substantial, irreversible commitments, plus the opportunity costs of roads not taken. A disappointing Thai lunch prompts a fleeting "should have gone Italian" and a resolve to go tomorrow; failing on a major organizational problem costs far more. Fortunately paths can usually be adjusted as you learn, and that process surfaces new problems for the next cycle. You may need to move backwards as well as forwards through the phases.
Developing structured problem-solving ability
Start with the principles: the steps, the tools and techniques for each, and the common pitfalls. Then practise, since the skill grows with experience: work on varied problems, seek feedback and guidance, and join problem-solving processes run by more experienced people.
Watkins's restaurant table is wrong for Italian: 0.3×100 + 0.2×70 + 0.4×40 + 0.1×100 = 70, not 78 (the ranking is unchanged). The left-brain/right-brain split used to label the cycle is a popular myth rather than neuroscience. The ASCI matrix printed as a grid in the original; its extracted text loses some column placements, so only the clearly assigned roles are labelled above. The chapter leans heavily on Solvable and on one sympathetic case; it shows no instance where the process led to a wrong or abandoned decision.
Summary and checklist
Structured problem-solving guides you through your organization's most important challenges in discrete steps: identify stakeholders, frame the problem, generate solutions, evaluate and select, implement. Much of its power lies in aligning stakeholders behind the quest. Next comes visioning, the discipline of imagining and realizing attractive futures.
- Diagnosis. How effective is your organization at defining and solving its biggest problems today, and what are its strengths and weaknesses?
- Stakeholders. How should you engage key stakeholders early? Would an ASCI assessment help?
- Framing. How can you better define and communicate the quest, treasure and dragons to your team?
- Options. Do you balance analysis and creativity in generating options?
- Evaluation. Are you rigorous enough and making the right trade-offs?
Further reading: Chevallier and Enders, Solvable; Roberto, The Art of Critical Decision Making; Mukherjee, Leading in the Digital World.
The Discipline of Visioning
Visioning is the ability to imagine futures that are both ambitious and achievable and to mobilize the organization to reach them. It builds a bridge between a desired future and today's reality, and it only works when paired with powerful simplification: stating the destination, and the strategy to reach it, in vivid, simple, repeatable terms. A great strategy is useless if people do not understand why to act, where they are going and what arrival will look like.
What a vision is
For Watkins, a vision is a compelling mental picture of how the organization will look and feel once the strategy is fully realized: a meaningful, attractive future. It answers one question: given what the organization must do (mission), its priorities (core objectives) and how it plans to move (strategy), what will it look like and how will people act when the vision is fulfilled? One interviewee called it the future "distilled down to its crystalline, simplest form"; another insisted it be descriptive and specific, set in a reasonable time frame, and a genuine stretch, since without stretch it is not a vision.
What a vision is not
| Term | What it is |
|---|---|
| Purpose | A general heading ("advancing man's capability to explore the heavens") |
| Mission | What leaders want the organization to do and be known for doing |
| Core objectives | The priorities that set the targets for the mission |
| Strategy | The general path by which mission and objectives will be realized |
| Vision | A specific destination, a picture of a desired future ("a man on the moon by the end of the 1960s") |
The vision must be consistent with mission, objectives and strategy; substantial positive change rarely happens unless meaning, purpose and vision hang together, so that people can say they see how it all fits and where they are going. The purpose-versus-vision examples come from Peter M. Senge. The two belong together: a strong purpose without a vision leaves no clear destination for the choppy CUVA waters, and passionate effort often produces results that do not last or fall short. A shared vision aligns behaviour, pulls people toward a desirable future and tempers anxiety about an uncertain world.
Why visioning is important
Empty corporate intent turns vision into cliché. Chris Bart, formerly of McMaster University's DeGroote School of Business, found "mendacity and misrepresentation" in his 1997 paper "Sex, Lies, and Mission Statements" and judged most mission statements not worth the paper they are written on. Former West German chancellor Helmut Schmidt, asked about his big vision, quipped that anyone with visions should see a doctor.
Watkins nonetheless calls visioning an essential discipline. Former Johnson & Johnson executive Troy Taylor describes it as helping the organization understand where you want to go, what it takes to get there, and what life will be like on arrival. A compelling vision generates directed passion; without a clear "why" and "where", even the best strategy fails. Visionary leaders supply aims that overcome self-interest and factionalism: Nelson Mandela galvanized people with his vision of a South Africa united across racial and political divides. In business, a vision shows employees how their work contributes to success, mission and purpose, and works even better when it matches their personal values.
- Earnings. Research shows employees will sacrifice future earnings for work they find meaningful.
- 69%. Employees who find their work meaningful are this much less likely to quit, saving large turnover costs.
- 18 points. In a study of 50,000+ employees, those who see their company's vision as meaningful show engagement 18 percentage points above average.
Visioning also underpins alliance-building (Chapter 6), helping leaders form relationships and networks. It matters most for newly appointed CEOs, who must win stakeholders, create excitement about their strategy and build early momentum, so effective visioning reduces transition risk, especially for outsider CEOs, who tend to underperform when stakeholders are unimpressed, sceptical or disgruntled early on.
How to develop a vision
There are two routes, and you can use both.
- Look forward, then reason back. The same logic as backward induction in Chapter 3: visualize a desirable future state, then work back to what it will take.
- Take stock and imagine. Inventory available resources and envision what they can achieve, a process entrepreneurship research calls effectuation: what do we have today, and what do we already do well that we can build on?
Either way, aim for futures that are ambitious but achievable. Ambition matters because the vision must stretch the organization: Jim Collins and Jerry I. Porras coined "BHAG" (Big, Hairy, Audacious Goal) in Built to Last to tie vision and ambition together. But it cannot look like "pie in the sky". John F. Kennedy's 1961 challenge to land a man on the moon before the decade's end met both tests, "but only just": the first landing came in July 1969. The case shows why visions need built-in flexibility to create options when obstacles prove insurmountable. Watkins's analogy is a car's GPS: miss a turn and it first tells you to turn around, but ignore it and it plots a new route to the same destination.
From personal vision to shared vision
- Develop a personal vision first. Picture a clear, desirable future to lead the business toward; it must be achievable and consistent with your leadership style and situational context. Test it with people you trust.
- Link it to core objectives to make it action-oriented and tangible, and to core values (loyalty, commitment, dignity, integrity) to give it meaning and purpose.
- Base it on recognized motivators. The late psychologist David McClelland held that people are driven by needs for achievement (to compete, perform better or win), affiliation (to belong to a group or team) and power (status or control). A vision can show how the strategy will meet some of these needs.
- Test and refine broadly. Discuss the draft with a wide range of stakeholders who probe it for gaps and flaws; through clarification, testing and refinement it evolves into a shared narrative for success.
When to co-create, and how
Sometimes it makes sense to co-create the vision with the leadership team or the wider organization. Paul Culleton, former head of talent management at J&J, stresses that a simple, compelling vision matters, and that pairing a visioning exercise with learning how people relate to one another is a good starting point. But co-create only when it makes sense:
- Only if the vision can truly inspire. That may be impossible while the business is making redundancies.
- Only if involvement raises commitment. If it does, the benefit may outweigh the cost of compromising parts of your personal vision.
- Protect the audacity. Be clear on the non-negotiable core elements; beyond them, be flexible in folding in others' ideas so they share ownership.
Instead of decreeing from the top, Gene Woods began with an intensive bottom-up listening exercise, walking the halls to ask what the organization did well, what its aspirations should be and what got in the way, and asking community leaders about its strengths and opportunities. Themes emerged, above all people's thirst to connect their roles to a broader purpose: staff wanted to keep people healthy, not just treat the sick, to tell stories of giving hope in people's darkest moments, and to be national leaders in advancing healing. He synthesized the feedback and communicated it authentically. The new mission: "To improve health, elevate hope and advance healing – for all," where "for all" committed the system both to privileged patients with a choice of care and to society's most vulnerable. The same process produced the vision "To be the first and best choice for care," which struck a chord and became a rallying cry. In Woods's account, the mission reflected the organization's heart and spirit, while the vision signalled a more deliberate orientation toward growth and change and defined how success would be recognized.
A good vision is therefore clear and specific, supplies meaning and passion, fits the mission, objectives and strategy, paints a vivid picture of the desired future, and aligns employees' aspirations with the organization's. Brad Neilley, former HR vice president at J&J, describes being visionary as having a picture of where the organization is heading and showing it clearly so people understand.
The importance of powerful simplification
To galvanize people you must achieve powerful simplification: communicate future direction in straightforward, evocative terms. Knowing this and doing it differ, and many leaders struggle as they rise. Peter Tattle, former commercial head of J&J's pharmaceutical business, notes that leading a whole business may be the first time you need such breadth, and the job is to describe it simply and engagingly so people rally behind what it can become.
Stories and metaphors
Stories and metaphors convey threats, opportunities and strategies powerfully. Psychologist Howard Gardner (Leading Minds) argues leaders are effective chiefly through the stories they relate, and that they also embody those stories in the lives they lead. An eyecare business's vision, "Vision for life", evokes how eyesight develops over a lifetime and ties the firm to patients' experience. Stories build connection, familiarity and trust in ways data cannot, and we recall them more accurately and for longer than facts and figures. Kendall Haven (Story Proof, Story Smart) argues information alone rarely changes attitudes, beliefs or behaviour, and research shows well-designed stories are the most effective vehicle for influence.
The best stories distil core lessons (mistakes make good material) and model desired behaviour, and vision stories should echo the company's older mythology, combining the best of what was with what could be. Watkins lists five classic archetypes:
- Love. The company has fallen in love with its product or service and wants to share the passion.
- Redemption. The business has fallen on hard times and seeks recovery.
- Rags to riches. The underdog overcomes adversity.
- Stranger in a strange land. For example, launching a new product or service.
- The holy grail. Ambitious goals in pursuit of deep fulfilment.
CHS's statement fits the love archetype, since it wants to serve patients at the highest level, which lets it harness audience-centred speaking.
Repetition and modalities
Social psychology's exposure effect shows repeated exposure to a stimulus increases liking for it, and expressing the vision in different modalities (speech, letter, video) helps it sink in. Watkins cites Edgar Dale's "Cone of Experience": we retain 10% of what we read, 20% of what we hear, 30% of what we see, 50% of what we hear and see together (a video), 70% of what we say and write (discussing and taking notes) and 90% of what we say and do (a simulation). Culleton adds that a vision should rest on images, ideas and compelling pictures more than words.
Evocative descriptors
Evocative descriptors are statements that graphically embody core values and form a picture in the listener's mind, rather than merely stating a target. Watkins cites McDonald's, whose statement speaks of running great restaurants, empowering people and getting faster, more innovative and more efficient at solving problems for customers and staff. Think about how the statement is organized (structure, information flow) and how it feels (the behaviour called for, the needs met). Many corporate visions are bland for lack of detail; a powerful one forms a gripping image.
Persuading from a distance: signals, push and pull
Leaders cannot speak to everyone, so they must persuade from a distance and enlist believers to spread buy-in. That means sending the right signals and living the change personally, which goes beyond modelling behaviour to making day-to-day decisions that support the vision, and putting resources behind it: capital, the right people, and measurable targets for benchmarking progress.
Push. Written strategies, compensation plans, measurement systems and annual budgets set expectations and define rewards and advancement. They rely on authority, loyalty and the expectation of reward, and are especially useful when the vision requires better performance or culture change.
Pull. An attractive future people want for themselves, which works only if they believe new methods will meet their needs better (less frustration, less wasted energy, better chances of advancement). Individually it takes active listening and relationship-building feedback; at team level, turning a personal vision into a common one that inspires a critical mass.
Push and pull are complementary; neither alone shifts embedded habits. Most leaders are better at one, so learn employees' preferences, build your skills, and surround yourself with people who complement your communication.
Involve the wider organization early, or grapevines fill the information void and distort your message; take control of the narrative with an in-house newsletter, a column in a corporate magazine, or vision boards (poster-sized images and text embodying the goals). New CEOs often set out their vision early:
- Alison Rose, NatWest Group, 2019. On her first day as CEO she shared her vision and told colleagues what to expect, including staying curious and investing in new skills to build a culture of continuous learning.
- Amanda Blanc, Aviva. The group CEO releases regular videos with quarterly results reinforcing her ambitions (better delivery, high performance, unwavering financial discipline); in 2020 she declared that Aviva would win.
Finally, leaders influence far better when they are respected, trustworthy and seen to have sound judgement.
The limits of visioning: the grandiosity trap
The main trap is a vision that stakeholders see as grandiose or unrealistic.
1930s Bombardier starts as a snowmobile maker.
1990s It sets out to become a substantial aircraft maker, buying Boeing's de Havilland division and then Learjet (as Watkins orders them).
2005 Long-time CEO Laurent Beaudoin bets on the C Series airliner to make Bombardier a top-tier global manufacturer; debt mounts, costs overrun, schedules slip.
July 2016 The C Series enters service 18 months late; Airbus cuts prices on A320 variants to compete head-to-head.
2017 After poor sales and unsustainable losses, control of the programme is sold to Airbus for a token $1; it is renamed the A220.
2020 CEO Alain Bellemare is ousted.
The decisive error was underestimating the competitive response. Watkins's lesson: do not commit to an unachievable vision; bold, confident articulation is desirable, but what first looks visionary can turn out to be grandiose.
Developing your visioning capabilities
Visioning improves through intentional observation, imaginative visualization and clarification.
- The architect's exercise. Every time you enter a new home or office, spend a few minutes imagining how you would change the space to make it more attractive to live or work in. Write down observations and insights, and keep a journal to capture ideas and spark others.
- Visioning workshops. Take the team off-site to envision the enterprise's future together: use pattern recognition (Chapter 1) to anticipate the competitive, regulatory and financial environment; use systems analysis and scenario planning (Chapters 2-3) to explore how to frame and solve the biggest problems (Chapter 4); then define the ambitious, achievable end state. Break into small groups where each person describes the scene in their mind's eye; collate and present the images to the whole group.
The workshop clarifies individual thinking and shows how much change the top team will accept, helping the leader shape a common vision while keeping control. Its downside is that a top-team-only workshop may not engage subordinates; engaging others early builds commitment, though some leaders prefer not to share a vision until it is fully formed.
Kennedy's moon goal came in a May 1961 address to Congress, not his inaugural address as Watkins says. Dale's Cone originally carried no percentages; the retention figures are a long-debunked later add-on. The "McDonald's vision" Watkins quotes is a strategy statement rather than a picture of a future, and he alternately calls CHS's mission statement a vision. Bombardier bought Learjet (1990) before de Havilland (1992). Alison Rose resigned from NatWest in July 2023 after the Farage account row, and the source of the 69% and 18-point figures is a pair of survey reports, not controlled studies.
Summary and checklist
Visioning creates a compelling picture of what the organization could become and uses it to guide and motivate people. It gives direction and purpose, and it works through powerful simplification and storytelling that align strategies, policies and actions with the vision. The next chapter covers the sixth discipline, political savvy.
- Need. How important is a shared vision for your organization right now?
- Route. Will you look forward and reason back, take stock and imagine possibilities, or both?
- Practice. How will you build visioning ability, for example through regular architect's exercises?
- Communication. How will you learn to communicate simply and powerfully?
Further reading: Collins and Porras, Built to Last; Simon Sinek, Start with Why and his TED talk "How Great Leaders Inspire Action".
The Discipline of Political Savvy
Political savvy is understanding how influence actually works (power dynamics, stakeholders' motives and interests, the implications of different moves) and using it to build alliances inside and outside the organization. Politics intensifies with seniority because ambitious people meet ambiguous problems, so decisions get made by winning coalitions and stopped by blocking coalitions. If you dislike politics, get over it: at the top you lead through influence, not authority.
Why politics grows at the top
Watkins defines political savvy as a combination of knowledge, skills and attitudes that rests on deep understanding of your organization, its resources, culture and political environment. Organizations become more political the higher you go, for two reasons:
- Ambitious people. Those near the top are intelligent and ambitious, with agendas both for the business and for their own recognition and advancement.
- Ambiguous problems. Top-level problems and decisions seldom have "right" answers, so debate over the way forward is vigorous.
Together these make politics a primary driver of outcomes at the highest levels, so you must think strategically about building and sustaining internal alliances. Externally, you must also shape the political environment: manage key relationships with customers, suppliers, joint-venture and alliance partners, and team up to influence the institutions that set the "rules of the game": governments at several levels, NGOs, the media and investors.
Here Watkins's model is the corporate diplomat. International diplomats protect and advance national interests by fostering relationships, building alliances and negotiating agreements; corporate diplomats do the same for their business. Savvy therefore rests on three layers: first a willingness to embrace politics and grasp its logic, then the ability to diagnose political systems, and finally crafting influence strategies, which also draw on the power of fair process (Chapter 4) and on compelling visions that pull people forward (Chapter 5).
Understanding and embracing politics
Alina Nowak, a hard-driving, results-oriented sales and marketing professional, rose through country management at Van Horn, a leading international food company, to become MD in her native Poland, where she drove dramatic growth. Sent to turn around the struggling Balkans business, she thrived; after two and a half years it was on track for sustained double-digit growth. To prepare her for bigger roles, she was made regional VP of marketing for EMEA, overseeing marketing strategy, branding and new-product development.
Van Horn ran a matrix. Nowak reported directly to Marjorie Aaron, SVP of corporate marketing at the Chicago headquarters, with a dotted line to her former boss Harald Eisenberg, international VP for EMEA, to whom all country MDs reported. After one-on-ones with MDs and Eisenberg, she concluded the most pressing problem was the tension between centralizing and decentralizing product development: how far to require standard formulations and packaging across the region versus allowing local variation in taste. She proposed more centralization in some areas (overall brand identity and positioning) and more flexibility in others (limited recipe adjustments). Aaron and Eisenberg saw merit and told her to consult those most affected.
She met virtually with David Wallace, corporate SVP of product development, his staff and corporate marketing, then flew to Chicago to present to about 30 people. Nearly all their suggestions meant more centralization, and body language and comments revealed sharp tensions between product development and marketing. She thought she had walked into a political minefield, and felt new sympathy for her predecessor, with whom she had often clashed as an MD. Her call with the EMEA MDs went no better: they welcomed flexibility but hardened against any new limits. Respected MD Rolf Eiklid said the extra flexibility would not compensate for what they gave up. Since MDs held P&L responsibility and wide autonomy over local resources, they could not be forced. Four months in, she wondered whether she had the patience and finesse for the role.
Nowak's story is the classic moment when a leader can no longer rely on positional authority and must lead through influence. The foundation is a willingness to view organizations through a political lens; if you dislike politics, Watkins says, get over it, or think of it as building alliances to achieve important things.
Thinking politically
Visualize the business and its environment as a collection of powerful actors pursuing agendas, combinations of organizational and personal objectives. Businesses are systems whose structures and processes shape what gets done (Chapter 2), but at the top, important decisions are made because a winning coalition of decision-makers supports them, or are not made because a blocking coalition opposes them.
- Build the winning coalition. Identify the people who collectively have the power to support your agenda and plan how to bring them together. Nowak needed Aaron and Wallace on the corporate side and Eisenberg on the EMEA side.
- Pre-empt blocking coalitions. Ask who might ally to block you, why, and how; with insight into where opposition will come from you can neutralize it. Nowak faced potential blockers both in corporate and among the regional MDs.
- Separate relationships from alliances. Relationships matter, but alliances rest on agendas and their alignment. You can have a strong relationship with someone whose incentives compete with yours, and be allies with someone you are neutral or even hostile toward because your agendas align or complement each other.
Defining your influence objectives
First get clear on why you need others' support. Nowak's goal was to negotiate a new deal between her new and old bosses on how EMEA marketing decisions would be made. The status quo was a long-standing compromise between the two sides, so on its face any change was a win-lose proposition; an agreement, if possible at all, would have to be a set of trades both sides could support.
Understanding the key decision-makers
With the objective clear, identify the alliances you need and how far you must win over people you have no authority over. For each key decision-maker, assess three things.
Potential exchanges
Explore the deals you could strike, which requires clarity both about your needs and about what others value. The process runs from my needs (clarify your goals) to their needs (assess the other person's goals) to the exchange (a dialogue to accomplish both).
- Resources. You provide information, time or connections that help them reach their goals.
- Status. You bring them into something, or connect them with people, that raises their perceived status.
- Inspiration. You make them part of something inspiring or give them a challenging opportunity.
- Support. You become a trusted adviser or a source of connection and support.
- Appreciation. You express gratitude or acknowledge their contributions.
Situational pressures
Next, understand the forces acting on decision-makers because of their context. Driving forces push them where you want them to go; restraining forces are situational reasons to say no. Social psychology shows people overestimate personality and underestimate situation when explaining behaviour. Rolf's opposition might reflect inflexibility and a wish to protect power and status, or simply the need to hit his business targets. So study the forces on the people you want to move, then strengthen the drivers and remove some restraints.
Perceived alternatives
Finally, ask what options people believe they have. Critically, do opponents think overt or covert resistance can preserve the status quo? If so, you may need to convince them the status quo is no longer viable; once people believe change will happen regardless, the game usually shifts from outright opposition to competition over what change occurs. Watkins asks whether Nowak could have convinced the key players that the current situation was unacceptable.
Doubts about implementation belong here too: people may fear others' concessions will not be honoured and prefer fighting for the status quo. Where such insecure contracts block progress, raise confidence, for example by phasing in changes, each step contingent on success with the previous one.
Watkins offers a simple table for your own influence challenge: for each key decision-maker, fill in the potential exchanges that might win them over, the situational pressures driving them, and the alternatives they believe they have. Before that, write a short summary of the influence challenge itself.
Mapping influence networks
Decision-makers rely on the opinions of people they trust, so ask who influences whom on the issue. Influence networks are channels of communication and persuasion running parallel to the formal structure, a kind of shadow organization, and they can decide whether you succeed. Watkins's bullseye method, applied to Nowak:
- Put the key decision-makers in the centre.
- Place the people and groups who influence them in outer rings; the further out, the less influence.
- Draw arrows for the direction and strength of influence, thicker for more.
- Mark each party as supportive, neutral or opposed.
- Identify potential winning and blocking coalitions.
Crafting your influence strategies: seven tools
With deeper insight into the people you must sway, Watkins offers seven tools: consultation, framing, social pressure, choice-shaping, entanglement, sequencing and action-forcing events.
| Tool | How it works |
|---|---|
| Consultation | Ask genuine questions, listen actively, feed back what you heard; buy-in follows involvement |
| Framing | Define the problem and acceptable solutions person by person, using logos, ethos and pathos |
| Social pressure | Win respected opinion leaders and let their networks carry the message |
| Choice-shaping | Offer "yesable propositions"; frame narrowly or broadly; add issues to enlarge the pie; park toxic issues |
| Entanglement | Lead people step by step (shared diagnosis, then options, then criteria) to places they would never jump to |
| Sequencing | Approach people in the order that builds momentum; mix one-on-ones with group meetings |
| Action-forcing events | Meetings, reviews and deadlines that remove inaction as an option |
1. Consultation
Consultation builds buy-in because people feel invested in the outcome, and it depends on active listening. Jeff Immelt, GE's former chief executive, called listening the most undervalued and underdeveloped business skill, especially amid uncertainty and fast change. Yet the more senior leaders become, the less they listen, and subordinates hesitate to deliver bad news. Counter this by seeking input and visibly using feedback: pose focused, genuine questions, encourage people to voice real concerns, then summarize and feed back what you heard. Because the questions leaders ask and how they summarize answers shape perceptions, active listening also channels thinking, helps frame choices and eases acceptance of hard decisions.
- Be present. Give complete, undivided attention: turn from the computer, ignore the phone, make eye contact, do not glance at other people or things. Paraphrase in your own words ("what I heard is...") and clarify ("if I understand you correctly...").
- Encourage. Use minimal verbal cues ("uh huh", "yes"), nod, lean in. Listen without interrupting, suspend judgement, do not impose solutions, and acknowledge feelings ("you seem to be feeling...").
- Question. Aim to learn rather than confirm your beliefs. Ask reflective, open questions, not yes/no ones: "Tell me more about that"; "Why do you think that is the case?" for causes; "What would happen if...?" and "What would happen then?" for consequences.
- Summarize. Open with "To summarize our discussion...", restate the key facts, information and agreements, check the other person shares your understanding ("does that sound OK?"), and thank them.
2. Framing
Framing uses argument and analogy to define the problem and the set of acceptable solutions, crafted person by person: the right tone, tapped into each player's motivations and agendas, shaping how they see their alternatives. Nowak, for instance, should have asked what it would take to move Eiklid from opposed to neutral, ideally supportive: did he have specific concerns she could address, a set of trades he would accept if implementation were guaranteed, or other agendas she could help with in exchange?
Watkins borrows Aristotle's rhetorical categories:
- Logos: data and reasoned arguments. What data or analysis would they find persuasive? What logic appeals to them?
- Ethos: principles, policies and other "rules". Which principles (fairness) or values (a culture of teamwork) could they be convinced should apply? If you ask them to act against a principle or policy, can you help them justify an exception?
- Pathos: emotions and meaning. Are there emotional triggers, such as loyalty or contribution to the common good? Can you help them find meaning in supporting or opposing a cause? If they are overreacting, can you help them step back and regain perspective?
Framing usually means a few key arguments repeated until they sink in, akin to powerful simplification. Repetition works because people learn through reinforcement: by the third or fourth hearing a song sticks in your head. But overplay it and people tire of it, and identical words make the persuasion obvious and invite backlash. The art is to repeat and elaborate core themes without sounding like a parrot. Also "inoculate" audiences: present and decisively refute weak versions of the counter-arguments you expect, which immunizes listeners when opponents make stronger ones.
3. Social pressure
Social pressure is the persuasive effect of others' opinions and of the norms of people's societies and identity groups. Knowing a highly respected person already backs a decision changes how attractive it looks, so getting opinion leaders to commit and mobilize their networks gives powerful leverage. Drawing on social psychologists including Robert B. Cialdini (Influence), Watkins lists four behavioural preferences:
- Stay consistent with firmly held values and beliefs. People share values with the groups they identify with and will almost certainly resist behaviour that contradicts them. James Clear ("Why Facts Don't Change Our Minds") notes that trying to change things tied to someone's identity rarely gets far.
- Stay consistent with prior commitments and decisions. Breaking commitments brings social sanctions, and inconsistency signals unreliability; people avoid choices that reverse earlier commitments or set undesirable precedents.
- Repay obligations. Reciprocity is a strong norm, and people respond to appeals that invoke past favours.
- Preserve reputations. Choices that protect or enhance reputation are welcome; those that jeopardize it are not.
So avoid, as far as possible, asking people to act against their identities and prior commitments, lower their status, threaten their reputations or risk the disapproval of respected others. If someone has a competing prior commitment, help them escape it gracefully.
4. Choice-shaping
Choice-shaping influences how people perceive their alternatives, making it hard to say no. Roger Fisher, co-author of Getting to Yes, advised always offering "yesable propositions".
- Narrow or broad. If support might set an undesirable precedent, frame the request as an isolated case; elsewhere, link it to larger concerns.
- Enlarge the pie. Win-lose propositions are hard to sell, so broaden the issues or options to enable mutually beneficial trades.
- Neutralize toxic issues. Irreconcilable issues can stall progress; set them aside for later or make up-front commitments that allay anxiety.
5. Entanglement
Entanglement means leading people step by step to places they would not reach in one leap: each small step sets a new baseline from which they decide on the next. Involving key people early in a shared diagnosis is a form of it, since it becomes hard for them to dodge tough decisions later. Once there is consensus on the problem, move to options, then to evaluation criteria; by the end people often accept outcomes they would have rejected at the start. Because it is so powerful, influence decision-making before momentum builds the wrong way, by taking the initiative to surface and frame problems. Watkins repeats his river image: by the time the problem, alternatives and criteria are set, the river is already cutting a channel to a particular outcome.
6. Sequencing
Sequencing means choosing the order in which you influence people (Chapter 3). Approach the right people first and you start a virtuous cycle: one respected ally makes others easier to recruit, your resource base grows, success becomes likelier, and recruiting gets easier still. Nowak should have met corporate marketing first, then product-development chief David Wallace, to secure his support.
More broadly, her plan needed a deliberate mix of one-on-one and group meetings. One-on-ones are good for getting the lie of the land: hearing positions, shaping views with new information, negotiating side deals. But in serious negotiations people often make final concessions and commitments only face to face with the others involved, which is when group meetings work best.
7. Action-forcing events
Action-forcing events stop people deferring decisions, delaying and withholding scarce resources. When success needs many people's coordinated action, one person's delay can cascade, giving others an excuse not to proceed, so eliminate inaction as an option. Meetings, review sessions, teleconferences and deadlines create and sustain momentum and raise the psychological pressure to follow through.
The importance of emotional intelligence
Influence rests heavily on emotional intelligence: the capacity to see beyond your own objectives and perspective and put yourself in others' shoes. Leaders high in it are better at reading others' emotions, the foundation of social influence, which you can sharpen by reading body language, catching the mood of the room and listening actively (consciously grasping meaning rather than passively hearing words). Self-awareness helps you manage your own behaviour and emotions: notice how your feelings ripple out to others, and know what and who triggers your anger, irritation or exasperation.
The perceptual-positions exercise
Looking at the world through your own interests is natural but creates blind spots and biases that hide the real issue or better ways to engage. The perceptual positions exercise deliberately adopts other perspectives in hard situations.
- Start with your own view of the situation.
- Step to the other side. See it as you imagine the other people involved would. Empathy is not sympathy: understanding their view does not mean abandoning your aims, and deeper understanding rarely hurts.
- Go to the balcony. Take a neutral, dispassionate view: what would someone with no history or stake observe, and what advice would they give?
- Return to your own view and see whether your thinking has changed.
The goal is to become fluid in shifting among the three; practised diligently, the exercise strengthens emotional intelligence and with it your influence.
Developing your political savvy
- Look through a political lens. Observe and analyze the politics of your organization and its environment. Who has influence, what are their agendas and sources of power: deep technical expertise, access to information, access to decision-makers, or alliances with other influential players?
- Experiment with the tools. Try framing, choice-shaping and sequencing: how should you frame arguments to fit influential players' interests, how do you want them to perceive their alternatives, and in what order should you talk to people to build momentum?
- Build your networks. Invest in networking skills and a diverse, strategic network inside and outside the firm.
Watkins's "ethos" means principles and values; for Aristotle it meant the speaker's credibility and character. The four "preferences" are his adaptation, not Cialdini's principles (reciprocity, commitment and consistency, social proof, authority, liking, scarcity, later unity). "Go to the balcony" comes from William Ury (Getting Past No, listed only as further reading). The Nowak case is illustrative and never resolved, so we never learn whether the prescribed sequencing would have worked, and the ethical limits of entanglement, which shades into manipulation, go undiscussed.
Summary and checklist
Political savvy lets you work within and shape the political environment of organizations. Understanding power dynamics, stakeholders' agendas and patterns of influence lets you design strategies to build alliances for your goals, using tools such as consultation, framing, social pressure and sequencing.
- Alliances. Which alliances, internal and external, matter most for advancing your agenda?
- Agendas. What are other influential players pursuing, and where do their agendas align or conflict with yours?
- Influence. How does influence work here, and who defers to whom on key issues?
- Key individuals. What are their motivations, the situational pressures on them, and their perceptions of their choices?
- Strategy. How should you frame your arguments, and could entanglement, sequencing and action-forcing events help?
Further reading: Cialdini, Influence; Fisher, Ury and Patton, Getting to Yes; Ury, Getting Past No; Jeffrey Pfeffer, 7 Rules of Power.
Developing Your Strategic-thinking Ability
Watkins closes by returning to STC = Endowment + Experience + Exercise. Endowment (genetics and upbringing) is fixed, so the programme works on the other two terms: experiences that let senior people see your strategic ability, and deliberate mental exercise for each discipline. Gaining visible experience and doing deliberate mental exercise for each discipline is how any leader, and any team, becomes a stronger strategic thinker.
Gaining experience (and exposure)
Watkins sharpens the definition of experience: involvement in situations that develop strategic ability, ideally ones where senior leaders can watch you use it. The networking maxim "it's not who you know, it's who knows you" applies: being a strong strategist is not enough if your boss, other senior leaders and HR and talent-development executives never see your ability and potential. Many leaders lack the chance to show it, so Watkins offers seven tactics that work in any role.
Experience. Situations that build strategic ability and make it visible: new projects, cross-functional teams, roles that demand strategy, and moments where senior leaders see you think. The constraint is opportunity, so it has to be sought.
Exercise. Deliberate mental work on each of the six disciplines, done regularly and combined into a personal training plan. The constraint is discipline, since nobody assigns it to you.
- Show you see the big picture. Demonstrate deep understanding of the organization's context and challenges, and link current issues to the wider picture.
- Demonstrate critical thinking. Ground arguments in solid analysis, show how you reached conclusions, and communicate concisely and logically in writing and speech.
- Have a point of view. Before any meeting where strategy may come up, review the topics and analyses and prepare specific insights or questions.
- Highlight foresight. Show you are tuned in to relevant trends and can see how the future could unfold.
- Speak like a strategist. Use phrases such as "strategic goals", "root causes" and "competitive responses".
- Challenge constructively. Ask hard questions without being disruptive or disrespectful; show you do not take things at face value and can think a few moves ahead.
- Reframe, don't rehash. Find new ways to define problems and solutions, and show the mental flexibility to see multiple perspectives.
Exercising your brain
Watkins restates his definition (the mental disciplines leaders use to recognize threats and opportunities, prioritize attention, and mobilize themselves and their organizations) and the six disciplines that underpin it. The case for exercise rests on neuroplasticity: until the late 1990s, he says, scientists thought the brain stayed relatively static after early childhood, but later research showed it continually forms and re-forms neural pathways when stimulated in specific ways. So the right mental exercises should improve you. He asks readers to build a personal training plan combining the exercises below on a regular basis.
| Discipline | What it is | Exercises |
|---|---|---|
| Pattern recognition | Spotting regularities, threats and opportunities in CUVA domains | Learn the mechanisms of how the brain recognizes patterns; immerse in chosen domains, find the key variables and trends, stay curious; engage experts on how they separate signal from noise |
| Systems analysis | Simplified models focused on connections, not components | Learn the principles through books, articles, workshops and experienced systems thinkers; practise on real problems, case studies and simulations |
| Mental agility | Multiple perspectives, scenarios, action and reaction, long-term implications | Practise level-shifting: lift your view when stuck on the ground, return to earth when stuck in the clouds; play games such as chess, puzzles and brain teasers to think in moves and countermoves |
| Structured problem-solving | Stakeholders, framing, options, selection, implementation | Learn the steps, tools and common pitfalls; practise on varied problems and seek feedback and guidance |
| Visioning | Creating and communicating an inspiring picture of the future | Learn the principles (role of vision, traits of a compelling one, powerful simplification); practise microvisioning: find small situations to improve substantially, such as the architect's exercise |
| Political savvy | Influencing internal and external political environments | Observe political terrain through a political lens, identifying stakeholders, agendas and interests; study power and influence: who has power and why, who influences whom and why |
Two general habits cut across all six:
- Reflect and assess. Regularly review your progress, where you are doing well and where you need to improve, so you know where to focus next.
- Seek feedback and advice. Be systematic about getting input from mentors, peers and experts, whose perspectives sharpen your strategic skills.
Watkins's programme treats strategic thinking like fitness: the six disciplines are separate muscle groups, each with a learn-the-principles step and a practise-with-feedback step, and progress comes from combining them regularly rather than waiting for strategic roles to arrive.
Building a strategic-thinking team
The book has focused on the individual leader, but much strategic thinking happens in teams, so Watkins ends with how to build a team's capacity.
- Define the term. Help the team understand what strategic thinking is and isn't.
- Audit the RPM cycle. Examine together how the team runs the recognize-prioritize-mobilize cycle: how effective it is and how to cut cycle time.
- Work through the six disciplines. Explore each, perhaps in separate sessions: what it is, why it matters, how to develop it. At the risk of being self-serving, Watkins suggests the team read and discuss the book's chapters together.
Beyond that, he lists four strategies:
- Encourage a culture of strategic thinking. Role-model, recognize and reward it among team members.
- Provide development opportunities. Workshops, seminars, mentoring programmes and chances to learn from experts.
- Foster collaboration. Have members share ideas to widen perspectives and build pattern recognition; give it time in regular team meetings and set up joint projects.
- Invest in action learning. Give people resources and support to test ideas and solve problems in a structured way (Chapter 4), with a budget for experimentation, dedicated time for innovation, and room to learn from both failure and success.
The future of strategic thinking
Watkins expects strategic thinking to matter even more, because the business environment keeps growing more complex, uncertain, volatile and ambiguous, and in a high-CUVA world strategic ability is a durable competitive advantage. It helps leaders anticipate and respond to technological advances, shifting markets and new competition, understand their organization's strengths and weaknesses, and allocate resources, prioritize initiatives and make trade-offs. He names three amplifiers:
- Innovation. Staying competitive requires thinking strategically about new products, services and business models, with creativity and a willingness to take calculated risks.
- Data and analytics. Leaders must think strategically about collecting, analyzing and using data, which demands critical, analytical thinking and comfort with data and AI-enabled tools.
- Interconnection. A more interconnected world requires handling the complexity of global business and building and maintaining relationships with key partners and stakeholders.
Neuroplasticity research long predates the late 1990s (work on adult cortical remapping goes back decades), though the landmark finding of adult neurogenesis in humans did appear in 1998. The exercises are general ("read books", "practise", "play chess") and the book offers no measurement of whether they raise strategic-thinking capacity, nor any assessment tool for the "endowment" it says sets the ceiling. The seven visibility tactics are partly about impression management (speaking like a strategist) rather than substance, which sits uneasily with the book's warning about the halo effect.
Master Takeaways
Watkins's six disciplines reduce to one habit: see the system clearly, then move the people who decide. Recognizing and prioritizing without mobilizing produces clever analysis that changes nothing. Strategic thinking is a trainable cycle of seeing, choosing and persuading, and the leader who runs it fastest wins.
- Strategic thinking is learnable. It is six disciplines, and capacity = endowment + experience + exercise; only endowment is fixed.
- Speed through the RPM cycle wins. Recognize, prioritize, mobilize, repeat; shorter cycle time than rivals is a competitive advantage in itself.
- Complexity comes first. Reorder VUCA as CUVA: modelling the system is what lets you handle uncertainty, volatility and ambiguity.
- Frame before you solve. For wicked problems, defining the question, criteria and barriers is the most important phase of problem-solving.
- Change fails without fit. Strategy, structure, processes, people, rewards and culture must cohere; culture sits at the centre as the main leverage point.
- At the top, influence replaces authority. Decisions follow winning coalitions and die to blocking coalitions; map them before you propose anything.
- Immersion builds intuition. Pattern recognition needs "soak time" in a few chosen domains; rotating talent too fast prevents it.
- Debias deliberately. Watch for confirmation bias, narrative traps, the halo effect, sunk costs and self-serving blame; test first reads with diverse teams.
- Look for the binding constraint. Effort spent anywhere but the scarcest critical resource is wasted (Senge, Goldratt, critical paths).
- Beware non-linearity. Small pushes can trigger tipping points or hit diminishing returns; linear mental models break exactly there.
- Design for adaptation. Build threat detection, crisis management, post-crisis learning and problem prevention as connected subsystems.
- Fly at the right altitude. Shift between cloud and ground deliberately, and signal each shift so your team keeps up.
- Every move invites a countermove. Map players, mixed cooperative and competitive motives, signals, credibility and sequence before acting.
- Plan in eras. Look out 2-3 years, define what will be true and what will be possible, and reason back to the next six months.
- Separate exploring from deciding. Early criticism kills options; use stopping rules, root-cause analysis and incubation time.
- Score, but don't obey the score. Weighted scoring clarifies trade-offs but ignores non-linearities and interactions; set weights before seeing options.
- A vision is a destination, not a slogan. It must stretch yet stay achievable; grandiosity (Bombardier's C Series) destroys value.
- Simplify powerfully. Stories, archetypes, repetition and vivid descriptors spread a vision; push systems and pull aspirations must work together.
- Trade in currencies. Resources, status, inspiration, support and appreciation buy alliances; read situational pressures before blaming personality.
- Make the status quo unavailable. Once people believe change is coming, opposition turns into competition over its shape.
- Seven tools of influence. Consultation, framing, social pressure, choice-shaping, entanglement, sequencing and action-forcing events.
- Be visible. Strategic ability counts only if decision-makers see it: have a point of view, reframe problems, challenge constructively.
- AI amplifies, not replaces. Machines spot patterns and simulate scenarios; leaders frame questions, add context and win people over.
- Separate relationships from alliances. A friend with competing incentives is not an ally; a cool colleague whose agenda aligns can be.
- Systems thinking predicts classes, not events. Nobody foresaw the Ever Given, but brittle just-in-time chains made some such blockage likely, which justifies contingency plans.
- An out-of-date model is worse than none. Updating means unlearning: admit the old model fails, adopt a better one, and build habits against reverting.
- First is not always best. Moving first wins in consolidating markets and in framing internal decisions, but a fast follower can buy a capability once start-ups prove it.
- Frame requests as gains. The monk who asked to pray while smoking got a yes; loss aversion makes the same request sound worse framed as a loss.
- Co-create a vision only when it raises commitment. Protect the non-negotiable core, as Woods did by listening first and then distilling "for all".
- Feedback calibrates intuition. Detailed feedback after decisions moves people quickly to the best speed-accuracy trade-off.
- Mix one-on-ones and group meetings. Private talks reveal positions and side deals; final commitments usually come only face to face in the group.
Frameworks & mental models
Foundations and pattern recognition
| Name | What it says | Use it when |
|---|---|---|
| RPM cycle | Recognize, prioritize, mobilize; minimize cycle time | Diagnosing why your team reacts slowly |
| CUVA | Complexity, uncertainty, volatility, ambiguity; complexity first | Sizing what makes a problem hard |
| STC equation | Endowment + Experience + Exercise | Planning your own development |
| System 1 / System 2 | Fast intuition vs slow analysis (Kahneman) | Checking a quick read in a novel, high-stakes case |
| Five expert questions | Signals, analogues, novelty, confidence, refinement | Apprenticing to someone with strong pattern recognition |
| Bias traps | Confirmation, narrative, halo, sunk cost, self-serving | Auditing a first read before committing |
Systems analysis and mental agility
| Name | What it says | Use it when |
|---|---|---|
| Adapted Star Model | Strategic direction, structure, processes, people, rewards, culture at centre | Designing or changing an organization |
| Four adaptive subsystems | Detection, crisis management, learning, prevention | Building resilience to threats and opportunities |
| Leverage, constraints, feedback, tipping points | Four uses of a systems model | Deciding where to intervene |
| Level-shifting | Cloud to ground, now to future | Strategy reviews and leading through detail |
| Game-theory toolkit | First mover, fast follower, signalling, equilibrium, sequencing, backward induction | Competitive moves and internal campaigns |
| Era planning | What will be true, what will be possible, reason back | Setting a 2-3 year agenda or career plan |
| Wright & Cairns scenarios | Eight stages from issues to storylines | Team foresight workshops |
The mobilizing disciplines and the conclusion
| Name | What it says | Use it when |
|---|---|---|
| Five-phase problem cycle | Roles, frame, explore, decide, commit | Leading a complex organizational decision |
| ASCI | Approve, Support, Consult, Inform | Mapping stakeholder roles per phase |
| Hero, quest, treasure, dragons | Chevallier and Enders's framing story | Aligning people on what problem you solve |
| Weighted scoring | 0-100 scores × weights summing to 1 | Qualitative trade-offs among options |
| Push and pull | Systems and incentives vs attractive future | Spreading a vision |
| Influence analysis | Exchanges, situational pressures, alternatives, bullseye map | Preparing to win a coalition |
| Seven influence tools | Consultation to action-forcing events | Executing an influence campaign |
| Perceptual positions | Self, other side, balcony | Building empathy before a hard negotiation |
| Wallas's creative stages | Preparation, incubation, intimation, illumination, verification | Giving teams time to generate options |
| McClelland's needs and six drivers | Achievement, affiliation, power; commitment, contribution, trust, results, team, control | Writing a vision that motivates |
| Five story archetypes | Love, redemption, rags to riches, stranger in a strange land, holy grail | Turning a vision into a narrative |
| Five currencies | Resources, status, inspiration, support, appreciation | Designing trades to win support |
| Logos, ethos, pathos | Data, principles, emotion | Framing an argument person by person |
| Active listening | Be present, encourage, question, summarize | Consultation and hard conversations |
| Seven visibility tactics | Big picture, critical thinking, point of view, foresight, strategic language, constructive challenge, reframing | Getting your strategic ability noticed |
Who's who
| Name | Role | Why they matter |
|---|---|---|
| Gene Woods | CEO of CHS/Atrium, then Advocate Health | The book's model strategic thinker |
| Jim Skogsbergh | CEO of Advocate Aurora Health | Merger partner and co-CEO in 2022 |
| Daniel Kahneman | Psychologist | System 1 and System 2 underpin pattern recognition |
| Jay Galbraith | Organization theorist | Star Model, adapted in Chapter 2 |
| Arnaud Chevallier, Albrecht Enders | IMD authors of Solvable | Hero-quest-treasure-dragons framing |
| Alina Nowak (pseudonym) | EMEA marketing VP, Van Horn Foods | Case of authority failing where influence was needed |
| Robert Cialdini, Roger Fisher | Persuasion and negotiation scholars | Social-pressure and choice-shaping tools |
| Amit S. Mukherjee | Watkins's co-author on adaptive design | Four-subsystem model in Chapter 2 |
| Peter Senge, Eliyahu Goldratt | Systems and operations thinkers | Limits to growth and theory of constraints |
| Michael Parker | Former Dow Chemical CEO | Bright leaders fail without level-shifting |
| Wright and Cairns | Authors of Scenario Thinking | Eight-stage scenario workshop |
| Laurent Beaudoin | Long-time Bombardier CEO | C Series bet as the grandiosity trap |
Watkins synthesizes well-known material (Kahneman, Senge, Goldratt, Galbraith, Cialdini, Fisher, Solvable) into a tidy six-part frame, and that is his main contribution rather than new research. The evidence is mostly interviews and one recurring case told by Woods's long-time adviser, with no failures examined; ironically, crediting a merger spree to brilliance risks the halo effect he warns about. Several details are wrong: a mis-signed expected-value formula, a miscalculated scoring table (Italian = 70, not 78), Ackman's trade described as an insurance bet, Kennedy's moon pledge placed in his inaugural, Edgar Dale's mythical retention percentages, Pfizer's 280 manufacturing materials called ingredients of one dose, and sunk cost equated with wishful thinking. Some details have dated: Fred Smith died in 2025 and Alison Rose left NatWest in 2023. Its AI sections are generic and already dated. The exercises are sensible but untested.
Connect it
- AI. Watkins's division of labour (machines find patterns and simulate scenarios, humans frame questions and secure buy-in) maps neatly onto using AI copilots for scenario generation and pre-mortems, with the leader owning framing and politics.
- Enterprise architecture. The adapted Star Model and its insistence on fit echo capability-based architecture: a target operating model fails if processes, data and decision rights don't change with strategy, and interface specifications make modular design possible.
- Banking. The four adaptive subsystems mirror the three-lines risk model: early-warning indicators (detection), incident response (crisis), lessons-learned reviews and control remediation (prevention); Watkins's loan-loss example shows how priming shapes credit judgement.
About this book
Six Disciplines of Strategic Thinking: Leading Your Organization into the Future by Michael D. Watkins, 2024. This is a chapter-by-chapter study of the book, with summaries, maps, tables and diagrams; short quotations keep their page references. It is shared free for personal study, is not for sale, and is not endorsed by the author or publisher. Please read and buy the original.
Insight Editions · rajeshrmahapatra.com/insight-editions