PART ONE Unbalanced Orchestration

A train can be heading along a track, deliberate and steady, for hundreds of miles. All of a sudden something happens, and the train derails and flies off the track. The “something” might be a break in the tracks, excessive speed, mechanical problems, human error, or a combination. The Federal Railroad Administration reported that in 2008, nearly two thousand derailments occurred in the United States.¹ Among those incidents, nearly one third were caused by human factors. Human factors are usually a result of going too fast. The cliché “falling asleep at the switch” is rarely a cause. It’s not that the people in charge aren’t paying attention; they are. They’re just making bad decisions.

What does train derailment have to do with thinking outside the box? Just as a train can be heading quite steadily down the tracks and suddenly derail, so can a company be making good money, moving along steadily and methodically for years, even decades, and suddenly be derailed, leaving the leaders scratching their heads, wondering how this could have happened. And according to our survey of executives, the number one cause of business derailment is thinking outside the box. It can derail even the most successful companies in no time at all.

“Thinking outside the box” has become one of the most common buzz phrases in business. We read about it in books and hear about it from some of the leading management gurus. Thinking outside the box is billed as innovative and exciting, and many blue-sky business books tell you that you must do it in order to succeed. But is that true? Have you ever really thought about whether or not it is a good idea when a leader is trying to sustain performance? Thinking outside the box has its place, but that place is a limited one—and it only rarely has anything to do with good strategic leadership.

In practice, it is often a reactionary position, taken in a misguided effort to keep the new-product pipeline full—truly, there are better, more effective ways to keep a pipeline full. In British novelist Sir Terry Pratchett’s pointed words: “I’ll be more enthusiastic about encouraging thinking outside the box when there’s evidence of any thinking going on inside it!”² In this chapter, we will show you how thinking outside the box is, contrary to popular perception, one of the most common—and most destructive—mistakes that leaders make. We’ll discuss why some leaders pursue out-of-the-box thinking when they should not, and tell you how avoid this mistake.

BOXES AND STRATEGIC DIRECTION

Outside-the-box thinking—let’s call it the “box paradigm”—can lead to pursuing new ideas simply for the sake of pursuing new ideas. This can be particularly dangerous when applied to the strategic direction of the organization—the underlying reason why the company exists. New ideas, whether or not they are achieved as a result of having a box paradigm, aren’t necessarily bad ideas, but often they are shinier and get a lot more attention than older ways of doing business, regardless of their merit. When leaders use the box paradigm to define the strategic direction of their organizations, it can lead to strategic ambiguity, blurring the company’s direction. And although free-form thinking may be an interesting exercise in creativity, when applied to strategic direction it can lead to random actions, and randomness in leadership can be very costly at many levels—and even lethal.

As appealing as thinking outside the box sounds—conjuring images of brainstorming sessions in roller skates, or promising inspired, creative innovations—the entire concept has no objective reality. The conceptual “box” could be anything, and there can be many of them. They may represent any aspect of your business from your current customer base to your company structure, or maybe even your markets—yet all of these definitions are subjective, lacking true substantive boundaries. And the big peril of the box paradigm is in clinging to it as a business nostrum without ever thinking through its terms. As media entrepreneur and writer Kirk Cheyfitz argues in his book Thinking Inside the Box, “We can’t think outside the box … unless we have a precise idea of what the box is.”³

So how can you expect to think outside the box if you have no way of accurately defining it? Or, for the sake of argument, let’s say that you are brighter than everyone else and you have figured out a way to define the boundaries of the box. Here is when it gets dangerous. The concept of thinking outside the box provides no direction regarding where you need to focus your efforts. According to our interviews, rather than following a well-thought-out strategy, thinking outside the box leads to (1) creativity for the sake of creativity rather than for the sake of progress, and (2) situations in which a “solution” is identified first, and it goes in search of problems to fix. As a form of unbalanced orchestration, not only is the box paradigm expensive in terms of resources and time, but often it gets in the way of what a leader needs to be focusing on. Author Seth Godin warns, “Don’t think outside the box, because outside the box there’s a vacuum. Outside of the box there are no rules, there is no reality.” Moreover, he contends, “If you set out to do something way outside of the box … then you’ll never be able to do the real work.”⁴

Many of the successful leaders we interviewed referenced the box paradigm as “aimlessly wandering,” “lost,” and “dabbling.” George Ruebenson, former president of Allstate Property and Casualty, told us that the box paradigm “can cause a leader to dabble. When you dabble, you make mistakes.” Dabbling is needlessly risky, especially when, as in Ruebenson’s case, you are managing the futures of millions of customers, over seventy thousand employees, and one of the biggest brands in the United States. “Allstate decided to dabble in hotels,” he told us. “There was a Holiday Inn near our corporate headquarters in Northbrook, IL. We were sending numerous visitors there all of the time. So we decided to get into the hotel business. Even though we booked the hotel to capacity every night, we ran it into bankruptcy. We didn’t know how to run a hotel. We got involved in a business that we knew nothing about.”

In the moment, getting into the hotel business probably seemed like a fine idea for Allstate. But in retrospect, it was a business they had no business being in.

THE LURE OF THE EXCITING AND THE NEW

Most leaders with whom we spoke were very open about times they’d learned from others’ mistakes. However, several of these same executives found it embarrassing to talk about mistakes they themselves had made, and they did not want us to disclose their names. Their stories and the underlying messages are powerful, so we still opted to tell them (but, in accordance with their wishes, without disclosing their names and the names of their companies). One such story involves a large, well-known real-estate developer.

This organization represents a classic success story. Started as a small land-development firm in the 1970s, by 2005 the company had become one of the largest retail developers in the central United States. They would purchase undeveloped land, then improve it to make it sellable to others. They also started partnering with others to build retail space on the newly improved land. Business was great. The company grew from a small family start-up to a multifaceted development firm with several locations and employing hundreds of people. Their scope had grown from improving land to financing, construction, brokerage, and leasing.

When the founder retired in 1997, his son took over as CEO. The son successfully led the company for eight years, but then decided it was time to start thinking outside the box. He started looking for new growth opportunities. Up to this point, the company had successfully developed numerous retail outlets, many in the form of large strip malls. Most strip malls have a large “anchor” store—a nationally recognized brand that attracts customers to the location with the idea that customers will also shop at smaller stores in the mall. Specifically, most of the strip malls that this particular real-estate developer built used a regional or national grocery store as the anchor.

And then came the big mistake. An outside-the-box idea that caused the company to lose its strategic direction, sending it into a devastating tailspin in less than eighteen months. The CEO decided to reinvent the company to not only develop retail space but also manage the retail operations. After all, who better to manage a grocery store than the company that built the facility? According to the son, “Managing a grocery store seemed like a good idea, a cash cow. And quite honestly, it sounded exciting compared to the doldrums of real estate development. Can you think of any other business where multiple cash registers are ringing all day long? I completely convinced myself that the grocery store business was just the real estate business at a faster pace. I mean, companies have to lease shelf space from the chain groceries.” So off he went, investing significant capital in his new outside-the-box idea.

Unfortunately, no one at the company knew anything about managing a grocery business. Everything was different. Rather than working in a business-to-business environment, they were now working in a business-to-consumer market. Supply chains were different, employees were different, and operations were different. Instead of working with timelines focusing on months or even years, the company now had timelines that focused on days. Inventory such as steel beams sitting on a job site for months was a far cry from perishable inventory that had to be turned over in a week.

The company was in over its head. Management started throwing more and more capital into the grocery stores to cover up day-to-day mistakes. It became so bad that they started pulling money out of their construction projects to cover the grocery stores. In less than a year, the company was running out of cash and had started borrowing money against the real-estate development business—the business that had been so successful for decades.

After almost two years of burning through cash, wrong turns, and sleepless nights, the CEO finally realized that going into retail had been a big mistake. As the CEO told us his story, he began to slump in his chair, shake his head, and avoid eye contact with us. As he got to end of his story, he stared despondently out the window. “What the heck was I thinking?” he said. “I thought, as a leader of this company, I needed to think outside the box to take my company forward. If I would have just focused on what we did well, we would still be in business today. Thinking outside the box killed my company.”

In 2007, the company retrenched to focus on real-estate development. Unfortunately, in 2008, when the real-estate market began to unravel, the company had very little cash. As the market began to slip away, so did the CEO’s company. In 2009 he closed all but one office, laying off hundreds of employees. In 2010, he closed his doors for good. In contrast, most of his direct competitors were in a good cash position when the recession hit; they weathered the storm and today are rebounding quite well.

How could this happen? Why would the CEO of a successful company suddenly decide to change course and get into a business that he had no business being in? As Seth Godin suggested, when you start thinking outside the box, you can’t do the real work. For this company, the real work wasn’t in reinventing itself but in continuing down its established path. It wasn’t broken and didn’t need fixing. Because of his attraction to the box paradigm, the CEO destroyed the family business and also affected creditors, suppliers, and hundreds of families. He chased something that he thought was exciting. And it was. Unfortunately, exciting doesn’t always make the best business sense.

LETTING COMPETITORS DEFINE THE BOX

Another mistake leaders make is looking over the fence into someone else’s backyard—presumably a competitor’s—and letting that someone else define the box. This can happen even if the company on the other side of the fence hasn’t proven itself yet. It seems beyond reason that a market leader would decide to change the course of what their company has done so well in the past in order to follow a follower. Even worse, in some cases companies will collect data to justify changing course, only to find out in the end that the data was bad—or at least badly used—and the decision was a big mistake. Mistakes of this nature are not reserved for small start-ups; they happen to Fortune 100 companies as well. What many pundits dubbed the most notorious business blunder in history was Coca-Cola’s roll-out of New Coke. Let’s examine the thought process that went into this debacle.

In early 1985, rumors started circulating that Coca-Cola’s chairman Roberto C. Goizueta and president Donald Keough had been working on a secret plan called “Project Kansas,” named for a photograph of a Kansas journalist, William Allen White, drinking a Coke—a photo that Coke had used in many advertising campaigns. Project Kansas—headed by the president of Coca-Cola USA, Brian Dyson, and marketing vice president Sergio Zyman—charged its team with inventing a new kind of Coke. The company was very adept at keeping things under wraps; they ran taste tests and conducted research for over two years prior to the announcement of New Coke.

Coca-Cola was about as American as hot dogs and apple pie. It was part of U.S. history. What would motivate the leaders of a company with literally the highest-rated brand in the world to try to change everything up? Simply, they looked over the fence. Project Kansas was a reaction to an aggressive marketing campaign initiated by PepsiCo, the Pepsi Challenge, wherein Pepsi was cast as the choice of the “new generation,” and Coke was portrayed as old and stuffy. The leadership at Coca-Cola looked over the fence, got caught up in what they saw, and started playing by new rules—rules established by Pepsi—even though Coke still had the vast majority of worldwide market share. Up to this point, Coke had never thought about changing the formula that gave the company the number one brand in the world. But PepsiCo decided to make the debate about taste, not about nostalgia. Alas, so did Coke.

After Coca-Cola took the bait of PepsiCo’s marketing campaign, on April 23, 1985, New Coke was distributed to the masses. Goizueta decreed New Coke a “smoother, rounder yet bolder” experience. He spoke of New Coke being “more like a fine wine than a carbonated treat.”⁵ And it got worse. Not only did Zyman and Dyson attempt to change one of the greatest brands in world history, but they decided to take the original Coke off the market in order to change the company’s focus.

Within days, New Coke became one of the biggest business disasters industry had ever seen.⁶ The backlash was unprecedented. Consumers were nothing short of outraged that their beloved original Coke was being taken away from them. How dare the leadership at Coca-Cola do this!

Over the following few weeks, Coca-Cola Company received over four hundred thousand phone calls and letters from disgruntled customers. Bob Greene, nationally syndicated writer for the Chicago Tribune, dedicated his column to ridiculing the new flavor and directly chastised the leaders at Coca-Cola Company for making such a significant mistake. Even Fidel Castro (incidentally, the man who had created the environment that caused Goizueta’s family to flee Cuba) chimed in, saying that American capitalism was damaging relationships with customers; he was a loyal Coke drinker, too.

The weekend after Goizueta’s big announcement, Roger Enrico, director of PepsiCo North American operations (who ultimately became Chairman and CEO in 1996), took out a full-page ad in the New York Times declaring that Pepsi had officially won the cola war, and he actually instituted a company-wide holiday to celebrate. The momentum kept growing. Pepsi ran television commercials ridiculing Coke for its decision to play by PepsiCo’s rules—namely, the rule that taste was more important than brand. One ad featured a first-time Pepsi drinker stating, “Now I know why Coke did it.” There was also a commercial featuring an elderly man sitting on a park bench, despondently questioning how leadership at Coke could take his drink away.

It was only seventy-seven days before Goizueta announced that the original Coke would soon be back on the shelves, but the damage to Coca-Cola and its brand was already done.

This debacle begs the question: How could leadership at the company with the number one brand in the world be so convinced that this was the correct decision, when it so clearly was not? Bad data. Armed with the same approach that Pepsi used against them, Coca-Cola marketing experts had performed taste tests to prove that New Coke tasted better than Pepsi. They spent millions on these tests, focus groups, interviews, and surveys. Results were overwhelming, justifying that New Coke did indeed taste better than Pepsi. Leadership at Coca-Cola then determined that if they kept two brands of Coke on the market, they’d cannibalize each other, so they decided to pull old Coke off. The strategy, according to Goizueta, was “New Coke or no Coke.”⁷

After the dust had settled, leadership at Coke spent a lot of effort (and resources) trying to figure out what had gone wrong. The company had forgotten one of the most important value drivers for customers: emotional attachment. They had missed the fact that people were emotionally attached to Coke, as if it were a family member. Years later, author Malcolm Gladwell delved into the debacle in his book Blink. He argued that much of Coke’s success is based on “sensation transference,” wherein the packaging of the product subconsciously affects drinkers’ reactions to a beverage.⁸ For example, when 7-Up drinkers were offered a sample from a bottle with a yellowish label, they stated that the drink tasted more lemony, although in reality the flavor was not changed. Further, Gladwell asserted that taste tests are flawed at the core—sipping a beverage and drinking a larger quantity are two totally different experiences, especially when researching flavor. Coca-Cola had ventured outside the box with nothing to lead them but flawed information.

When the original Coke was reintroduced (rebranded as “Coca-Cola Classic”), millions of customers were relieved. The protests stopped, the lawsuits from disgruntled customers stopped, the lobbying interest groups disbanded. Years and years later, in 2009, Coke finished its long retreat from New Coke, announcing it would drop the word “Classic” and revert back to plain Coca-Cola.

Some believe that the New Coke debacle was an intentional publicity stunt to lure customers back. “Some critics will say Coca-Cola made a marketing mistake,” Keough said in response. “Some cynics will say that we planned the whole thing. The truth is we are not that dumb, and we are not that smart.”⁹

The truth was, leaders at the number one brand in the world had missed the big picture. They had focused on flavor (and used a flawed methodology to do so) when flavor was only one factor in a long chain of characteristics motivating customers to buy Coke. But the bottom line of the New Coke episode—the fundamental takeaway—is that the way to make buying into the box paradigm an even worse mistake is letting your competitors define the box. As Earl Nightingale observed in his 1950s bestseller Lead the Field, “It’s been said that if the other guy’s pasture appears to be greener than ours, it’s quite possible that it’s getting better care. Besides, while we’re looking at other pastures, other people are looking at ours!”¹⁰

THINKING INSIDE THE BOX

As we have seen, over and over again, trying to be a visionary leader by using the box paradigm can make you blind. So how can you, as a leader, effectively avoid the mistakes associated with a box paradigm and still identify growth opportunities? By thinking “inside the box”—being very aware of what business you are in and what value propositions your company and your brand offer. You can still do critical, analytical, and creative thinking within the context of your own business environment. But you will need to pay attention at times when it is tempting to take a quick peek over the fence into someone else’s. Effective leaders know what businesses to be in, and know what businesses they have no business being in. Although many pundits credit Apple’s successes to outside-the-box thinking, closer inspection reveals that Steve Jobs was a master at using technology, not for the sake of making things more complicated but to make things more simple. Did Apple develop the first personal computer, the digital music player, the smartphone, or even the tablet computer? No! Jobs was able to take the ideas of others and use technology to make usable products like the Mac, iPod, iPhone, and iPad. That was his business model.

Can thinking inside the box provide us with enough possibilities to fill our pipelines and lead our organizations successfully? Yes! Effective leaders can avoid veering off course and still find numerous ways to effectively navigate their organizations, by what’s come to be known as “diamond mining.”

The concept of diamond mining was popularized in the late 1950s by Earl Nightingale. It is based on a true story of a young African farmer. He worked long hours out in his fields all day, with little to show for his efforts. He began to hear stories, fascinating tales of other African farmers getting rich beyond their wildest dreams by discovering diamond mines. These get-rich-quick stories consumed the farmer to the extent that he decided to sell his farm (a difficult decision, given this farm had been in his family for many generations), and he set out in search of his own diamond mine. He aimlessly wandered around the African continent for several years in search of his own fortune. Eventually he ran out of money and had nothing to show for his efforts. As the story goes, he became so despondent and humiliated after selling his family farm and failing to find diamonds that he threw himself into a river and drowned.

Meanwhile, the man who bought his farm was wandering around the property one day, and as he was crossing a small stream he saw a brilliant flash of blue and white light coming from the bottom of the stream. He bent down, reached into the stream, and picked up one of the stones. When he got back to his house, he placed it up on his fireplace mantel. A few weeks later, when a friend came over to visit the man, he noticed the brilliant stone on the mantel, and after carefully looking at the stone, he had trouble catching his breath. He asked the farmer if he had any idea what he had found. The farmer said he assumed it was just a beautiful piece of crystal. The friend told the farmer that what he had found was not crystal at all, but a diamond in its rough form. This piece of “beautiful crystal” was one of the biggest diamonds ever discovered. The farmer was amazed; he couldn’t believe what was happening. The farmer told his friend that the creek was full of these stones—maybe not as big as the one he had put up on his mantel, but there in abundance.

This same piece of land that the first farmer had eagerly sold to someone else so he could go off in search of diamonds became the most productive diamond mine on the entire continent of Africa. The first farmer had owned literally acres of diamonds, free and clear, and the land had been in his family for generations. But instead of considering the value of what he already had, he had sold his fortune for almost nothing in order to look for it somewhere else. If the first farmer had only taken the time to understand how a diamond appeared in its rough form, he would have achieved everything he ever wanted. Bottom line, he should have explored the value of his own farm before aimlessly wandering off to look elsewhere. Leaders will—and should—continually explore in an effort to find new ideas and opportunities. However, where they look for those opportunities and, more important, how they look can be the difference between leading their organizations effectively or putting them out of business.

Mike Delazzer, a founding member of Redbox, told us that “the difference between effective leaders and those that fail is that effective leaders have the ability to see opportunities that don’t expose the company to undesirable risk. They have the innate ability to perceive their markets in different ways. Average leaders may take a look at a market and think it is stagnant, whereas a successful leader will effectively explore the market, looking for opportunities that most others cannot see.” Only through awareness and persistence can an effective leader avoid the pitfalls of the box paradigm and instead identify new opportunities that may have gone unnoticed by most. Effective leaders are constantly learning, educating themselves regarding what their diamonds look like in rough form, rather than wandering off in search of diamonds on someone else’s land.

Netscape’s leaders made the mistake of the first farmer. The company got too far ahead of itself on numerous occasions, trying to identify new and creative opportunities, when the diamond mine was sitting under their feet the entire time, waiting to be discovered. Instead of realizing the value that Netscape had already created as an internet browser, leaders at Netscape were peeking over the fence to try to figure out what opportunities lay outside the box. At that same time, however, Bill Gates, CEO of Microsoft, was already lurking in Netscape’s backyard with his own internet browser, Internet Explorer. Instead of developing new features for Netscape’s successful internet browser, cofounder Marc Andreessen invested significant resources in developing a new Java-based language from scratch, only to come to the realization that the language he was fueling was still too underdeveloped to meet the needs of Netscape. Andreessen’s decision paralyzed the company. Netscape was unable to add any new features for three years. So, while Gates’s Internet Explorer was evolving to meet the changing requirements in the market, Netscape had to sit on the sidelines while Gates took away their market share. By thinking outside the box, Andreessen overlooked significant diamond mining opportunities in his own backyard—namely, to focus on providing the most cost-effective solutions for internet browser services. In an interview, Andreessen confessed that he’d overlooked an obvious opportunity that had been staring him in the face the entire time, admitting, “I thought [using our website] was a distraction. It’s kind of funny to think about how many people have had the opportunity to make billion-dollar mistakes. I absolutely thought we were a software company—we build software and put it in boxes, and we sell it. Oops. Wrong.”¹¹ He was so busy focusing on technology for the sake of technology that he never saw the obvious opportunity to develop Netscape’s web browsing business.

Any seasoned leader will tell you that the pressure to find new opportunities can become extremely intense. Proactive leaders will make mistakes—more mistakes than leaders who are never willing to take risks. Correctly anticipating change is extremely difficult—and occasionally impossible. This is why successful leaders tend to look closely at what they are already doing well and consider how they can leverage and build on existing strengths, rather than jumping into something way out in left field.

Are you using a box paradigm to generate new ideas for the strategic direction of your organization, or are you exploring your own acre of diamonds? Take inventory of what is already around you; there’s probably a very good rationale for being in the business you are already in. Identify it and take a good look at it. At some point your predecessors decided to do what you are currently doing. What have you previously done that has created success for your people and your organization? How can you leverage previous successes and current strengths?

Before you decide to wander outside of the box into totally new areas (like the real-estate developer getting into the grocery store business), or feel forced to look into someone else’s backyard, as Goizueta did with PepsiCo, make sure that you have looked in your own backyard first and have taken the time to understand what a diamond looks like in its rough form. Make sure that you truly understand the underlying reasons for your previous successes.

INSIDE-THE-BOX LEADERS

There are many industry leaders who have applied “diamond mining” principles to avoid the box paradigm—leaders who have understood the importance of strategic direction and have created multibillion-dollar opportunities without ever having to wander outside.

We profiled Jim Owens’ Caterpillar in the first chapter; one of his predecessors there, George Schaefer, was a master at thinking inside the box to identify new growth opportunities. In the early 1980s, Caterpillar lost considerable market share to Komatsu. Schaefer could have looked to expand into a different sector, like the real-estate developer we profiled earlier in this chapter, but he didn’t. Schaefer could have panicked, like Coke’s Goizueta, and looked at reinventing the company—even though Caterpillar, like Coke, had the number one brand in their industry—but he didn’t. Instead, he decided to look inward to discover new opportunities.

Because Caterpillar was the world leader in manufacturing earthmoving equipment, they had become very skilled at getting the right part to the right place at the right time—anywhere in the world. They had to do this to maintain their competitive presence. Caterpillar had developed processes and put systems in place to improve their logistics management capabilities. They had become so good at managing parts and manufacturing logistics for their own company that other companies had started asking them questions about how they did it. Caterpillar recognized an opportunity to leverage the world-class logistics management processes they had already developed for themselves, without having to think outside the box.

Schaefer decided to create a new logistics management organization. Founded in 1987, the new organization was called Caterpillar Logistics Services and when Caterpillar ultimately decided to sell off part of the business in 2012, it boasted 130 facilities in 25 countries, employing over 12,000 people. This organization provides considerable value to other companies, using the same expertise Cat developed for itself. The opportunity was right in front of Schaefer, and he saw it and successfully operationalized it.

Michael Eisner, former CEO of Disney Corporation, also found numerous opportunities that had been staring previous leadership in the face for decades. Immediately after Eisner took over in 1984, he discovered many of Walt Disney’s old films (e.g., Fantasia, Bambi, and Cinderella) locked up in a vault. He cleaned them up and started releasing them on video for limited periods. He would then take the videos off the market in order to be able to rerelease them in the future. These films had been sitting in Disney’s own vault for years doing nothing. Under Eisner’s leadership, they netted the company billions of dollars in revenues. It was low-hanging fruit, just waiting to be picked.

Another great example of how Eisner understood the concept of diamond mining was the development of the Disney Institute. Over many years, Disney Company had developed an outstanding corporate culture. Considerable effort was made to socialize all of its new employees to the “Disney Way.” To accomplish this, Eisner built a world-class executive development training facility called Disney University. Everyone from senior vice presidents to college interns had to receive training in the Disney Way. Disney became so good at training its own employees that soon other companies asked if they could send their executives to the facility to receive the same training. So Eisner built the Disney Institute. Since its inception in 1987, the Disney Institute’s Disney Approach Business and Management Program has attracted millions of leaders from over thirty countries to learn about the Disney Way. In 2009, the Disney Institute was recognized as one of the top three brands in executive development and was awarded a ranking in the Top 20 Training and Development firms from 2009 to 2011. Rather than thinking outside the box, Eisner saw an opportunity to leverage something that the Disney Company was already doing for itself. There was no outside-the-box thinking for this venture, just the ability to see what was right in front of him already.

Eisner and Schaefer were being innovative and creative—qualities usually attributed to outside-the-box leadership. But how does a leader know when she is innovating in her backyard and when she is roaming outside of the box? First, note the differences between the actions of leaders at Caterpillar and Disney compared to the grocery store example earlier in the chapter. At Caterpillar, they had already built up a strong logistics knowledge base. Cat had been doing this for itself for years. For Schaefer, it was just a matter of taking something that the organization was already doing and commercializing it for others. He was leveraging, not leaping. Similarly, at Disney, the company had already developed an outstanding executive development model for itself. Eisner had the sense to see this and to start offering these same services for executives at other companies. He used resources appropriate to the task, starting a side venture that did not distract him from the business of running a media company—which is what Disney was and remained.

Unlike Caterpillar and Disney, the real-estate developer had no knowledge of or experience in the grocery store business. He didn’t understand the supply chain, retailing, or advertising to general consumers. The owner of the real-estate development firm wasn’t already in the grocery business, and his core business was nothing like his new venture. He was truly thinking outside the box, and he failed. Schaefer and Eisner were thinking inside the box, and they succeeded.

Does this mean that no one has ever succeeded by thinking outside the box? And that no one has ever failed by thinking inside the box? Of course not. Yet the probability of success is much higher when you leverage something you are already doing compared to venturing into a new landscape where you have no experience or business knowledge.

The French novelist and critic Marcel Proust wrote, “The real voyage of discovery consists not in seeking new landscapes, but in having new eyes.”¹² It’s the low-hanging fruit, the low-risk opportunities, the things you are already doing. So before you go off half-cocked in search of new business, make sure that you’re not overlooking the obvious. It’s just common sense, not a thrilling exploit or exciting adventure, but it works.

THE POWER OF COMMON SENSE

“Common sense” may be one of the biggest oxymorons in leadership. Although common sense has tremendous power and provides critical insights, it’s actually not all that common. However, a leader can improve his chances of benefiting from common sense if he hits a metaphorical “pause button.” When you’re at the point of pursuing an opportunity that sounds like a good idea, stop. Think about why you are pursuing the opportunity. Start with the basic question, “Does this meet face validity?” Face validity refers to whether an idea makes sense; whether we are actually doing what we intend to do. It is the idea of taking something at face value. It means taking the time to kick the tires to make sure they’re sound—and this is a more basic assessment than making sure the numbers look good. In all of the leadership mistakes we’ve profiled here, outside-the-box ideas seemed like great ideas in the moment. The leaders had gathered data to back their ideas up, and felt the numbers looked good. If they’d hit the pause button and looked more closely, they probably would have seen that their ideas did not have face validity; the tires were flat.

There is a specific approach that leaders can use to check face validity. It is the ability to understand synergy. “Understanding synergy” sounds like a standard consulting phrase or material for a Dilbert cartoon (guilty on both counts), but there is tremendous value for leaders in the approach.

One of the best ways to proactively avoid blunders like the ones in this chapter is to ask yourself whether you are leveraging your assets synergistically. Are you recognizing true expertise in one area and leveraging that expertise in another area? Consider a basic example of synergy. A child wants an apple from a tree. She is not tall enough to reach it on her own. So she gets a friend to stand on her shoulders. They can now reach the apple. Alone, she couldn’t accomplish her goal. By leveraging (literally and figuratively) her height with her friend’s height, she could. Working together they could succeed; independently, they would fail. So next time you are considering an outside-the-box idea, ask yourself what you are leveraging. If the answer is nothing, as in the case of Allstate getting into the hotel business and the real-estate developer getting into the grocery store business, is it really something you should do?

A final thought: Note the similarities between the takeaways in Chapter Two and the takeaways in this chapter. For you as a leader, the ability to keep a strong focus on how you deliver value, combined with the ability to assess whether a new idea is strategically sound, not only decreases the chances of your chasing dollars for the sake of chasing dollars (as discussed in Chapter Two), but can also minimize the ill effects of using a box paradigm.

KEY TAKEAWAYS

Lessons Learned from Mistakes

Thinking outside the box has creative uses, but it can be disastrous when applied to strategic direction.
Making a mistake in defining strategic direction can completely derail a company.
Letting competitors define the box can lead to poor orchestration of resources.

Successful Navigation

Think inside the box by evaluating your existing activities—look first in your own backyard.
Hit the pause button before pursuing outside-the-box ideas, and look for synergy.
Check face validity—does this idea make sense strategically?

3. Kirk Cheyfitz, Thinking Inside the Box: The 12 Timeless Rules for Managing a Successful Business (New York: Simon & Schuster, 2003), 3.

7. Constance Hays, The Real Thing: Truth and Power at the Coca-Cola Company (New York: Random House, 2004), 106.

8. Malcolm Gladwell, Blink: The Power of Thinking Without Thinking (New York: Little, Brown, 2005).

10. Earl Nightingale, Lead the Field (abridged audio book) (New York: Simon & Schuster Audio/Nightingale-Conant, 2002).

11. David Yoffie and Michael Cusumano, “Building a Company on Internet Time: Lessons from Netscape,” Harvard Business Review 41(3) (1999): 8–28.