Creating Breakthrough Ideas: 3 Lessons From The Boston Consulting Group
Unconventional approaches will lead to breakthrough ideas
Boston Consulting Group has always been an idea generating machine. In the mid-1960s it established the idea that the cost for a particular product falls the more experience a company gains in producing it.
As The Economist puts it, “… the curve is not particularly earth shattering [but] the strategic implications of the experience curve came closer to shattering earth. ” It means the company with the biggest market share is likely to have a big cost advantage. This underpins the growth-share matrix, known to every MBA student as the BCG matrix.
Today the BCG Henderson Institute—a think-tank named after BCG’s founder, a pioneer in competitive strategy—makes sure fresh ideas keep coming.
With a group of around 30 people and networks connecting academia, the corporate world and BCG’s own consultants, the institute has developed a reputation for occasionally entertaining quirky ideas (like “poetry in business”) but more importantly to find answers to things that are both interesting and important.
Yes, the kind of ideas that keep clients engaged (e.g. Your Strategy Needs a Strategy: How to Choose and Execute the Right Approach)!
I analysed their output, had access to some of their internal email communication and interviewed four members of the team, including Martin Reeves, who has led the institute since its inception. Based on this I developed a blueprint that others might follow when attempting to create breakthrough ideas.
Lesson #1: Know where to look for breakthrough ideas
Isomorphism—meaning our tendency to think and act similar to those around us—is the silent killer of fresh ideas. As we interact primarily with people from the same industry and walk of life, we all end up thinking the same way. To avoid this trap, BCG turns to unconventional sources: business anomalies and phenomena, and academic disciplines other than business and economics.
How can a Chinese company very much focused on cut-throat competition and daily survival establish a system that increases the chances for sustainable competitive advantage?
Is AI offering new organizational models that finally increase the likelihood of organizational change being successful? Reeves is constantly on the look for out for “strange leads”, new questions from clients that don’t have an easy and obvious answer.
For instance, finding a strange lead kicked off a series of projects describing paths towards adaptability.
Sometimes there is a topical element—for example the COVID crisis prompted extensive research on measuring and managing resilience. This focus on business anomalies and phenomena has a much higher chance to challenge strategy fundamentals (and therefore spark fresh thinking) than more conventional approaches, often starting with bench-marking within an industry.
Eureka moments can be triggered by the collision of ideas that occur when specialized knowledge from different disciplines crosses boundaries. As Gary Klein points out in Seeing What Others Don’t, connections, coincidences and contradictions are more likely to inspire breakthrough ideas than sequential and systematic analysis.
BCG has taken this to heart. A longstanding cooperation with the London Institute of Mathematical Sciences is applying methods used by mathematicians to better understand serendipity in innovation.
The results are published in top-tier scientific journal Nature as well as Sloan Management Review, an outlet targeting managers. Another multi-year partnership with Princeton Ecologist Simon Levin fed into the adaptability issue, explaining the Biology of Corporate Survival.
Besides these two more unconventional wellsprings of knowledge, BCG also goes down a well trodden path in academic research, namely using past insights as inspiration for new projects.
Most articles have a section on limitations at the end, a fertile hunting ground for new PhD students looking for questions not yet answered. BCG has a particular eye on articles in scientific journals (PNAS and Science), business magazines and press (Harvard Business Review, Sloan Management Review, The Economist, Wall Street Journal), and their own in-house newsletter.
But unpublished ideas, discussions and cases are also captured, using a log-book of headlines, stories the institute might want to write one day. Many journalists do this (as it turns out, this very story was a headline on my Forbes story idea list before I approached Reeves). Some of these headlines get an abstract at some point, some turn into real stories.
Lesson #2: Know how to extract fresh ideas
Watching Inside Bill’s Brain, a Netflix series, you see Bill Gates always carrying a heavy canvas bag full of books. He follows a mantra that dates back to Benjamin Franklin, who set aside roughly an hour per day for reading. BCG’s strategy think-tank encourages its members to do the same. While this is a vital part of scanning for new ideas, BCG wants to ensure that it pursues ideas that matter for business, preventing “art for art’s sake”.
The simple solution: always involve a client. BCG does this through dinner talks, workshops, oversight committees and personal relationships.
Senior partners on a fellowship program do much of this. At any time around a dozen senior partners are in the program, dedicating 30 percent of their time to one of the research projects for a period of 3 years. Ulrich Pidun, a partner and director of BCG’s corporate strategy practice, for example, looks at ecosystems.
As he points out the fellows are close to the issues their clients worry about. Not only does this keep the research relevant but but also ensures access to data. After all turning up on a company’s door step asking for access to data is not likely to work—not even for a big brand consulting firm.
Some of these efforts to identify promising new ideas will lead to intense research projects. And once again, some form of client engagement is required. In the early years this was more of a challenge but with growing success and publicity companies reach out to them.
Successful companies are more likely to reach out. They know how fleeting competitive advantage can be. They also have a more profound understanding of their own limitations. And while they know they do something right, they need help to codify their knowledge, creating a replicable success formula.
Alibaba’s Chief Strategy Officer Ming Zeng, for example, only needs to take a quick look at the tech giant’s growth rate to be reassured he is doing something right, but even he asked BCG to help him codify its approach to strategy—later accessible in a co-authored article explaining how the company uses algorithmic thinking to constantly reinvent itself.
The final step in the knowledge creation process is “thinking through writing”. As you write, you need to carefully consider how to express an idea. Which arguments work? Which ones are a bit flimsy? It’s also a more social process than you imagine. BCG often co-authors, with multiple revisions taking place before ideas are first floated in a regular post to CEOs.
Next: publish it in BCG’s newsletter or more promising pieces are pitched to Harvard Business Review (HBR). This might be a HBR blog in the first place and, after further work, a fully-fledged and much longer magazine article.
In same (more exceptional) cases a book follows. The latest The Imagination Machine, about the creative side of strategy, will be published next year. Social media is a natural companion of all these outlets.
Lesson #3: put the right innovators in charge
For an idea to gain traction the innovators are as important as the idea itself. Reeves has two qualities that make him ideal as the Institute’s boss.
First, he self-identifies as an aspiring polymath. He searches for ideas everywhere, literally everywhere, reaching out to diplomats, philosophers, biologists and mathematicians. Often Reeves forms lasting collaborations.
In the hard-hitting world of consulting, it is not easy to find someone who is genuinely interested in ideas, which initially do not promise any returns. Both the fellows and even more so the ambassadors – the more junior staff on one-year secondments to the Institute – are selected for having strong growth mindsets.
Those aspiring to join have to submit a one-page motivation letter and they are given a question outside their expertise with only a day to produce an essay. What BCG looks for is individuals with a clear spike, curiosity, conceptual thinking skills, the ability to explain ideas and the resilience and autonomy to develop ideas which may not pan out easily.
Secondly, Reeves has translational ability. He can be both conceptual and concrete. As he readily admits, the packaging of an idea matters. He is engaging, funny and always thought provoking.
Watch one of his many talks and you will immediately realize how he communicates complex ideas in an accessible manner. Other thought leaders are good at that too, but what sets him apart from many of those I met over the years, is he does not preach.
While he clearly has a message, he does not come across as if he is in a permanent selling mode. Instead he listens and so has a genuine conversation.
Using this approach in your own organization
In a previous article I pointed out that learning from the best can be problematic. They can often do things others can’t. There is no doubt that BCG has larger budgets than most consulting firms but their approach can be calibrated.
If you are a one-woman shop you can still set aside a few hours a week reading, try to reach out to people you usually don’t talk to, and convince a long-standing client to collaborate on a project not paying off immediately.
The core message: try to occasionally divert from you usual routines and you will increase your chance to come up with new ideas. Maybe even a breakthrough idea.