“Emotion as the Foundation of Strategy” – John Hagel
As we head further into the new decade, we need to reflect on how the world is changing on so many levels. Given all these changes, it’s perhaps time to reassess our approach to strategy. At the risk of being viewed as a heretic, let me suggest that the successful strategies going forward will be strongly rooted in addressing the emotions of participants, rather than simply relying on facts and figures.
The Big Shift in the world
We are in the early stages of a Big Shift that is transforming our global economy, something that I have written about a lot, including here and here. This Big Shift is creating exponentially expanding opportunity – we can create far more value with far less resources far more quickly. The paradox is that, at the same time, the Big Shift is creating mounting performance pressure, making it more and more challenging to sustain the performance we’ve enjoyed in the past.
How do we resolve this paradox and make the journey from mounting performance pressure to exponentially expanding opportunity? We need to re-think strategy at a fundamental level and focus much more on the emotions of all participants so that we can truly unleash the power of pull.
The opportunity for strategy
The opportunity for strategy in the next decade and beyond is to unleash ways to deliver more and more value with fewer and fewer resources. If we’re going to succeed at that, we need to be able to anticipate the rapidly evolving unmet needs of the people we are trying to reach. We then need to be able to find ways to increase leverage, mobilizing the resources of others. We also need to find ways to accelerate learning – not learning in the form of training programs sharing existing knowledge, but learning in the form of action with others in ways that can rapidly increase impact over time by creating new knowledge in a rapidly changing world.
In the industrial age that brought us to where we are today, unmet needs were largely defined in material terms – what products and services could address our material needs, whether it involved our physical needs for food, or our broader needs to be comfortable in the physical world, like homes and cars. Meeting those material needs has been more and more successful, despite temporary setbacks like financial crises or pandemics.
Certainly, there are still large segments of the population with significant material needs, especially in trying times like this pandemic. But the mounting performance pressure of the Big Shift is also generating unmet needs at the emotional level. More and more of us are becoming consumed with the emotion of fear – and given the long-term forces shaping our world today, that fear is likely to intensify. While fear is certainly understandable, we as humans don’t want to live in fear – we have a deep hunger for hope and excitement. The institutions that understand and act to address that unmet emotional need will create enormous value for their stakeholders. Now, tell me, when was the last time you sat through a strategy discussion that began with an effort to understand the emotional needs of the participants being served by your institution?
Focusing on unmet emotional needs
The successful strategies of the next decade will begin with cultivating a deep understanding of these unmet emotional needs and then developing unique approaches that are effective in addressing these emotional needs. In this context, I have written extensively about institutional narratives, including here and here, which I believe can become a powerful instrument to build much deeper relationships with stakeholders by addressing their unmet emotional needs. I hasten to add that these new strategies will not be focused on manipulating the emotions of participants, but instead deeply understanding these emotional needs, why they exist, and how they can be addressed.
In this context, we need to be careful to “Zoom Out and Zoom In.” Don’t just look at the emotions around you today. Look ahead and anticipate how long-term forces will generate much deeper unmet emotional needs and then look for the highest impact steps you can take today to begin address those unmet needs.
But this is just the beginning. To harness the exponential opportunities that are being created by the Big Shift, all institutions will need to be much more aggressive in seeking leverage. The key to successful strategies will be to deliver significant value with as few of your own resources as possible. The global connectivity that is being fostered by the Big Shift makes it far easier to connect with a broader range of third-party resources.
But the ability to connect makes it even more important to understand what will be required to motivate third parties to invest the time and resources required to amplify the impact of your own products and services. Once again, this involves delving deeply into the emotions of the third parties that can be most helpful to you. Sure, you can and will have to offer them material rewards for collaborating with you, but you’re going to get much greater value from them if you can find ways to build trust and excite them about the longer-term opportunities for impact that can be created by coming together.
This is particularly powerful because of another strategic lever that is becoming more and more important in the Big Shift. In a rapidly changing world, the ability to learn faster becomes key to success. To be clear, I’m not talking about learning in the form of going to classes and getting credentials. I’m talking about the most powerful form of learning which is creating new knowledge through action. And, no matter how smart we are as individuals or individual institutions, we will learn a lot faster if we act together with others and challenge each other to find more creative ways to deliver more impact. In this Big Shift world, this form of learning becomes The Only Sustainable Edge.
This takes leverage to another level. When they talk about leverage, most strategists focus on transactions to access existing expertise and resources from third parties. While that is certainly helpful, the most powerful form of leverage is learning leverage, where participants come together to learn faster together.
But what’s required to motivate participants to learn faster together? My experience suggests that participants learn much faster together if they are excited by an opportunity to create more impact that is meaningful to them. Once again, though, this requires a deep understanding of the emotions of the participants. We need to understand where there’s fear and how that fear can be overcome by cultivating excitement.
Learning in the form of creating new knowledge can generate a lot of fear. After all, it’s risky. It’s never been done before. It could fail. But those who are excited about an opportunity that’s never been achieved before are driven to learn faster. They actively seek out opportunities to learn and are challenging themselves and others to find ways to achieve even greater impact. They are restless when they are not learning.
Loyalty and the pull it generates
In the end, all of this comes together in a powerful way. If we are able to excite participants about a meaningful opportunity that can bring people together and help them to learn faster together, what happens? We develop deep loyalty. This is no longer about short-term transactions that can be measured in material terms. This is about building deep and lasting trust-based relationships where we can see impact that matters to all the participants.
In a more connected world, loyalty matters. With all the connectivity we’ve created, it has become far easier to leave someone who is not meeting our needs and connect with someone else. This is a growing challenge for all institutions, especially in a world of eroding trust. Loyalty will be a powerful source of strategic advantage because it unleashes a virtuous cycle of more rapid learning with greater and greater impact.
But, it’s not just about loyalty. It’s about the Power of Pull. If we’re addressing significant unmet emotional needs of participants, word of mouth will spread and more and more participants will seek us out and want to find ways to build deeper relationships with us. Network effects will take hold and we’ll begin to see exponentially expanding impact and this in turn will unleash another virtuous cycle that will pull more and more participants together.
I should hasten to add that this exponential opportunity will not be available for all businesses. As I’ve written elsewhere, businesses will face a painful choice in the decades ahead in terms of defining more clearly what business they are in. While all businesses will benefit by shifting to strategies that are focused on the emotions of participants, the exponential opportunity will be largely reserved for businesses that choose to become “trusted advisors.” That’s a largely untapped business opportunity today, even though everyone claims to be a “trusted advisor” to their customers.
The Big Shift in strategy
Looking back over decades, the focus of strategy has shifted in a profound way. Certainly the early days of business strategy focused on analyzing the structure of markets and industries to identify positions that could create sustainable strategic advantage.
In the past couple of decades, we’ve seen a shift away from strategies of structure to strategies of movement. Given the accelerating pace of change, the emphasis in strategy has been on how to move faster – agility has become the buzzword.
I believe we’re now on the cusp of another shift in strategy from movement to emotion. The strategies that will succeed in the future are those that focus on the emotions of the participants and find ways to cultivate deep, long-term, and trust-based relationships among a growing array of participants by meeting their deepest emotional needs. To be clear, structure and movement are still relevant, but only in the context of a deep understanding of the emotional environment. That’s a dimension that’s been largely ignored by the previous schools of strategy.
The bottom line
Strategy is ultimately about how to deliver greater impact and value with less resources in a way that is sustainable and rewarding to the provider. It’s all about doing more with less over the long-term. The strategies that generated success in the past are proving less and less effective in a rapidly changing world. To succeed in the future, we will need to evolve strategies that are shaped by a deep understanding of the emotional context and focused on addressing the unmet emotional needs of the participants. Those who do this well will succeed in tapping into the exponentially expanding opportunities created by the Big Shift.
While this post has focused on strategies for institutions, I would suggest that this shift in strategy also applies to us as individuals. But that’s a topic for another blog post.