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08 May 2012 Back

Cognitive Thinking for Strategy Creation

NYU Stern Melissa Schiling Cognitive Insights
NYU Stern professor, Melissa Schilling, examines how breakthrough strategy creation can be improved by use of 'cognitive insight'


Melissa Schiling NYU Stern cognitive insight and strategy creationMelissa Schilling is a professor of management at New York University Stern School of Business.

Professor Schilling has two primary research areas: knowledge creation and technological innovation. She has conducted research on learning curves, and cognitive insight and creativity. With respect to technological innovation, she has published numerous articles on new product development processes and standards battles in the personal computer, PDA and video game industries. Professor Schilling has been published in many journals and is author of the standard textbook ‘Strategic Management on Technological Innovation’.  



What brings about the ‘aha’ moment, when the strategy puzzle suddenly falls into place? Melissa Schilling of NYU Stern School of Business, has studied this process and discovered that often it happens when an unlikely association of ideas occurs through a random yet purposeful search that then creates a ‘shortcut’ to seeing a new pattern or system. This ‘cognitive insight’ can be brought about by adopting a systematic approach to problem solving.

To gain ‘cognitive insight’ into a sector, it is important for people to look for symmetries and patterns, that will enable them to map out the complexities of the situation more clearly so that they can plot likely trajectories. This is a process of applying creative thinking techniques that allows them to gather together all the information they already possess on a topic and then re-assemble it to come up with ‘divergent ideas’ from those previously understood. Schilling has evolved a three-step process that takes executives through the data gathering and analysis stage, onto the creative thinking/cognitive insight element and concludes with applying  game theory to understand how competitive advantage can best be achieved from the situation.

According to a 2009 piece of research by Schilling geothermal energy has shown the greatest potential for delivering cheap alternative energy. . But why do we never hear about geothermal opportunities, she asks? All the hot money is flowing into solar (particularly from high tech start-ups) and wind (particularly from the big engineering and existing energy companies). Why are they ploughing their cash into a technology strategy that is not optimal?

The answer, is to understand the trajectories and dynamics of technology innovation. The standard approach is to view technology innovation via the S-Curve model, where an initially steep improvement in performance starts to tail-off as additional improvements to the technology have a more marginal gain for it. After a period of flat-lining a disruptive or discontinuous technological improvement can occur that once again creates a significant performance improvement and the product life-cycle takes on the classic S-Curve shape. The S-Curve model therefore describes the various key stages of a technology life-cycle, but it does not explain how or when or to what effect they will occur.

Or why some technologies do better than others. How, asks Schilling, did Apple and Google come to dominate the Smartphone market rather than existing industry giants like Microsoft or Nokia? “Innovation is all about motion” explains Schilling “technologies have trajectories and dynamics, moving through space and time.” For people looking to understand technology strategy it is important for them to be able to see what the drivers are that affect those trajectories.

Strategy creation and cognitive insight Melissa SchillingUsing her methodology, the initial data gathering and analysis of alternative energies’ relative potentials, led Schilling to examine why some technologies are more heavily invested in and promoted than others – and the discovery regarding geothermal’s potential. Applying some cognitive insight techniques Schilling explains how she realised that companies tend to invest in in technologies that are salient to them – so Silicon Valley high tech companies go for solar; and engineering and energy companies such as GE took the wind power path. Following this ‘salience’ trajectory she explored who would be in the best position to capitalise on technologies to benefit from geothermal – and the realisation that it is predominantly the oil and gas companies that have the foundation of technology and experience to exploit this resource. Having understood this dynamic, it was not perhaps the most complex of gamesmanship riddles to work out how much incentive they had to develop this technology and why the oil and gas giants were not pouring resources into this exploitation.

Schilling, although grounded in new technology and innovations herself, is clear that this approach to strategy is equally applicable to all ‘dynamic industries’ . Understanding ‘who is likely to bet on what and why’ is critical to planning your own strategy. “If you are in a dynamic industry you need to be able to do this strategic thinking; and if your industry is not so dynamic – this is the route to making it more so!”

 

Further Information:

Melissa Schilling leads the ‘Breakthrough Strategic Thinking’ program at NYU Stern which next runs from 1 – 3 October in New York. 




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