Steve Jobs contribution to Apple has been profound. Steve Jobs is not an engineer himself, yet he has guided Apple into being one of the great engineering companies, in the true sense of what it means to “engineer.” Apple did not invent personal computers, or the mouse and windows interface, nor did it invent digital music players, smartphones, or tablets. What it has done is to engineer products in these categories that are uniquely beautiful, efficient, easy to operate, and a joy to own and use.

This kind of design excellence is very difficult to achieve. It depends on a great many elements all working together and all working at a very high level. Like the excellence of a great film or work of music, the whole can be quickly ruined by a single false note. Steve Jobs’ special genius has been in holding to this very high standard and imposing it on the very talented engineers he has recruited to Apple. Competitors have raced to be first to market or to include the most features in their products, but have built products which are clunky and awkward in comparison to Apple’s.

To fully understand Apple, it is vital to look at the difference between its kind of excellence and cutting edge visionary technology. Back in 1993, CEO John Scully had Apple introduce a tablet called the “Newton.” It was visionary and advanced, attempting to recognize handwriting. Unfortunately, you cannot reliably do that, just as you cannot reliably implement voice recognition. When he returned to Apple in 1997, Steve Job’s killed the Newton. The secret of Apple’s excellence is not in living on the unworkable bleeding edge, but in doing exceptionally well that which can be done well with present technology.

Many people and companies want to emulate Apple and study what the company has done. I believe that in trying to learn from Steve Jobs and Apple it is very useful to pay attention to what he did not do. In compiling this short list, I have used ideas and phrases in common use by managers and business consultants:

• He did not “drive business success by a relentless focus on performance metrics.” Success came to Apple by having successful products and strategies, not by chasing metrics.
• He did not “motivate high performance by tying incentives to key strategic success factors.” Apple did not run a decentralized system based on pressuring individuals to deliver targeted business results.
• He did not have a strategy “built through participation by all levels to achieve a consensus which resolves key differences in perspectives and values.” Strategy at Apple is essentially driven from the top.
• He did not waste time on the delicate distinctions among “missions,” “visions,” and “strategies.”
• He did not use acquisitions to hit “strategic growth goals.” Growth was the outcome of successful product development and accompanying business strategies.
• He did not seek to engineer higher margins by chasing rust-belt concepts of “economies of scale.” He left such antics to HP.

Emulating Apple is not easy, but it is not impossible either. We are all surrounded by so-called high-tech products that promise much more than they deliver. I am writing this article on a Dell Inspiron 2305 that is a lovely all-in-one computer but which has a stereo sound system that cannot be heard three feet away. I expected my wife’s HTC Incredible 2 Android phone would provide a seamless interface to Google documents, but there is no such capability. RIM has built its market position on professional grade email, yet is trying to sell a tablet without email capability. Just two weeks ago I returned an HP 4500 Office Jet printer because its drivers refused to install on my Windows 7 64-bit system (a problem reported by many others over two years.)

The secret to emulating Apple lies in its efficiency at excellent design. Indeed, Apple has awakened many people to the value and joy of excellence in design. Not just the prettiness of the box, not just the simplicity of the interface, but the whole sense that a product is the best it can be, for the moment, at what it does.

Also see some of my comments in print and video at Apple Changed the Way the World Communicates.

There are very few surprised faces from either side of the Verizon picket lines. When a labor contract signed in buoyant times expires in a bleaker era – as is the case with the company’s current 45,000-worker strike — the stage is set for conflict. . . .

Although Verizon is making decent profits, only 0.5% of its income is attributable to the slowly shrinking landline business where its unionized employees are concentrated. The difference between the wireless and wireline sides of Verizon’s house is driven by its network architecture. In the wireline business, there are hundreds of thousands of miles of individual telephone and data lines, most sagging from aging telephone poles, exposed to the elements and accidents. After a major storm in southern California it may take 10,000 truck rolls to repair the damage. That is why the wireline business needs 111,000 employees – about one-third more than the wireless business – to support revenues only two-thirds as large. . . .

In cases like these, where the pie is shrinking, management may have to legally separate the two businesses in order to avoid cross subsidization. When the business in question has no surplus, the union’s position is greatly weakened.

Turning to the union’s strategy, it is smart to push back on management before such a split is engineered, exploiting the company’s overall profitability. And, it is smart to push back at a moment when the unions have the luxury of having sympathetic ears in the White House.

But winning concessions from management in this round of contract negotiations does nothing to halt the gradual shrinkage of the wireline business. This shrinkage is a problem for more than the workers at Verizon; it affects many of the estimated 500,000 union workers in the U.S. wireline industry.

The Communication Workers union would have a much stronger position were it to use its clout across the industry to work with Congress and the administration to promote a national fiber-to-the-home initiative. Such a program would build infrastructure, create jobs, and, like Eisenhower’s Interstate highway program, would have benefits to the economy that many conservative Republicans could embrace.

In a surprise move, top union leaders called off the strike on August 20. The striking workers returned to their jobs with no new contract.

In response to the disappointing second quarter performance of the U.S. economy, Ben Bernanke has suggested that the Fed may have to initiate a third round of “quantitative easing” and told Congress that it should maintain fiscal stimulus

Does the U.S. economy need another round of stimulus? Before one decides on a policy or strategy, it is important to first identify the problem. In searching for a diagnosis of the present economic situation, I am reminded of “west coast turnarounds.”

In the mid-1960s, when I was in college, one of my best friends dropped out. An indifferent student, Paul had a girlfriend and wanted to get on with life, so he went to a school for big-rig truckers. When I saw Paul again after two years, I was shocked. His eyes were sunken and shadowed and his body had gone to fat. Yet he smiled and proudly pointed out an award on his wall announcing that he was the “Driver of the Year.”

“How did you get that?” I asked. Paul dug into his pocket and pulled out a clear envelope holding a number of large black torpedo-shaped pills.

“These are west coast turnarounds,” he explained. “They let you drive from New York to San Francisco, turn around, and come back without stopping.”

I spouted the usual cautions about what he was doing.

Six months later, Paul’s girlfriend called me because she couldn’t wake him up. I arrived at their apartment at the same time as Andy, one of Paul’s truck driver colleagues. Paul sputtered awake when Andy poured water on his face. Then, Andy offered Paul some strong coffee because he “needed a stimulant.”

A chemical stimulant provides a temporary speed up, a boost that must be paid for later. Notwithstanding Paul’s award for “Driver of the Year,” taking stimulants is not a path to long-term productivity. Andy’s diagnosis that Paul needed “a stimulant” was dead wrong. Paul had been living on stimulants for so long that his body could no longer respond to them. Paul needed to recover and get back to normal.

Like its chemical analog, an economic stimulus is a temporary jolt aimed at helping the economy over a rough patch, with the cost of the jolt paid for out of normal-times incomes. Unfortunately, like Paul, the U.S. has been taking economic stimuli every quarter for a decade, pretending that a sequence of temporary jolts is the same thing as economic growth. But true per-capita economic growth is the outcome of productivity-increasing innovation. You cannot engineer true economic growth by fiddling with fiscal or monetary policy or by financing excess consumption with shaky loans.

To recount recent history, the U.S. federal government began stimulating the economy in 2001, at first in response to a recession and then in fear that 9/11 would dampen growth. During 2001-2004, the Bush administration pushed through tax cuts, offered $35 billion in tax rebates, and changed asset depreciation rules to front-load business cash flows, all presented as measures to stimulate the economy.

More important than these fiscal stimuli, the Federal Reserve began to loosen monetary policy, driving down interest rates. The economy climbed out of the 2001 recession later that year, but rates on three-month treasuries were nevertheless driven down from 4% to 3.5% by late 2002, then to 1.6% in late 2003, then to 1% in 2004, rising to a still-low 2% in 2005.

Despite a reasonably healthy economy, the Fed kept stimulating the economy with very low interest rates because there seemed to be no inflation. And there seemed to be no inflation because, down in the boiler room of the Fed, there was no meter labeled “soaring home prices.”

The massive stimulus of very low interest rates from 2003-2005 helped power the housing bubble. When the artificial stimulus of 1% interest rates was removed, home prices slowed their ascent and, as we all know, began to crater in 2007-2008. This bursting of the housing bubble ignited a new round of stimuli. Interest rates were brought to the lowest levels in history — essentially zero — where they reside today.

In 2008-2009, the government provided $65 billion in tax rebates, offering cash for clunkers and tax rebates for first-time homebuyers, spending over $750 billion to stimulate the economy. During 2009-2010, the Fed embarked on a program called “quantitative easing” in which it purchased $1.3 trillion in bank debt, mortgage-backed securities, and Treasury notes with newly created money.

Then in 2010-2011, the Fed embarked on another round of “easing” during which it created an additional $1 trillion in new bank reserves by buying bonds on the open market. The apparent purpose of this last “stimulus” was to artificially inflate stock and asset prices to make people feel richer and more likely to borrow and spend.

A decade of constant stimuli has produced the same effect as Paul’s west-coast turnarounds — a series of highs and crashes followed by a comatose condition that no longer responds to stimuli. Despite what various politicians and experts tell you, real productivity gains and real economic growth do not come from taking stimulants.

This weekend’s Wall Street Journal contains my op-ed “WWII Stimulus and the Postwar Boom.” The article takes issue with the received wisdom among many economists that WWII was a giant Keynesian stimulus, bringing an end to the Great Depression. The data about the WWII economy points in other directions.

During World War II, there was no investment in civilian infrastructure and the government placed severe restrictions on consumption. That meant significant portions of the massive government spending went toward saving and private debt repayment. Thrift restored personal balance sheets, ultimately setting the stage for the postwar boom.

During the war, roughly 11% of the workforce served in the military at low pay and little chance to consume. The civilian workforce actually shrank, but worked longer hours and take-home pay rose. But, despite the rise in disposable household incomes, consumption stayed at depression-era levels. During WWII, Americans saved an astounding 22% of their income, bulking up savings and paying down debt. By the war’s end, household debt had been lowered to levels not seen since 1924.

The article concludes:

The difficult truth is there is no easy cure for the present hangover. Myopic policies allowed credit to be pushed over its natural limit. Credit expansion shifts consumption from the future to the present, but the future has now arrived. Policies aimed at reigniting the credit-driven consumption boom of the last 25 years won’t work.

Instead of looking for a pre-election year pop, it would be wiser to focus on transitioning from credit-driven economic growth to growth that is, once again, driven by new productive investments. The key policy aims should be removing the tangle of tax, policy, regulatory and human-capital impediments to domestic private investment.

There are four principle aims of this book:

1. To call attention to and debunk the nonsense that is labeled “strategy” in so many companies, non-profit organizations, and government agencies. A strategy is not what you wish would happen. It is a set of practical actions for moving forward. It is not a “dog’s dinner” of all the things various parties would like to see done. It is a focusing of energy and resources on a few key objectives whose accomplishment will make a real difference.
2. To offer a view of strategy that is not rooted in economics. Current teaching about strategy in schools of business is largely based on the industrial-organization model of competition, with some extensions to deal with information economics and network effects. This is not wrong, but it is woefully incomplete. The concept of strategy applies outside of industry settings. Good Strategy/Bad Strategy argues that the essence of a good strategy is logical and practical coherence. Logical coherence means having policies and actions based on a sound diagnosis of the challenges being faced. To create good strategy, one must acknowledge and understand why the challenge is difficult and resistant to standard routines. Practical coherence means coordinating policies and actions on critical keystone tasks and objectives.
3. To illustrate and describe how good strategies are built while, at the same time, being truthful about how difficult this is. Strategy is not easy. There are no simple tools, matrices, techniques, or fill-in-the-blanks templates that will generate good strategies. Good strategy flows from insight and very skilled judgment. At the same time, insight and judgment can be stimulated and enhanced by looking in the right places. The mid-section of the book, “Sources of Power,” discusses the tools of anticipation, concentration of effort, proximate objectives, the role of chain-link logic, the power of design-type logic, the logic of focus, good and bad growth, how to build on advantage, the importance of dynamics, and the roles of inertia and entropy in strategy work. The last section, “Thinking Like a Strategist,” shows how strategy is like a scientific hypothesis that is tested and adjusted over time, and provides some clues to help you be “less myopic than your undeliberative self.
4. To be interesting. Good Strategy/Bad Strategy is opinionated and chock full of stories and examples.

In an 2009 interview, the director of the Center for Strategic and International Studies, said “In 2007 we probably had our electronic Pearl Harbor. It was an espionage Pearl Harbor. Some unknown foreign power, and honestly, we don’t know who it is, broke into the Department of Defense, to the Department of State, the Department of Commerce, probably the Department of Energy, probably NASA. They broke into all of the high tech agencies, all of the military agencies, and downloaded terabytes of information.”

Given the structure of the Internet, it is virtually inevitable that someone, either a genius in a garage, or a government sponsored cyber-attack group, is going to shut down millions of computers at once. Or, worse, shut down airports or the power grid. We know it can be done and we know how to do it. All of our designs—all of them—for thermonuclear weapons have already been stolen.

In addition to these sorts of headline events, millions of Internet users experience a daily barrage of spam and pop-ups. Their computers are invaded by viruses and worms. Their identities are hacked and stolen. If you run a server, as I do, it is like the scene in The Matrix where the Sentinel squids attack the Nebuchadnezzar hovercraft. With the right tracking software you can see a continual barrage of bots trying to drill into the server by guessing passwords, scanning for open ports, and looking for bits of code on pages that can be exploited.

The problems with the present structure of the Internet go beyond security. The current architecture makes it difficult and awkward for users to pay for content or for email. Even just a 1¢ charge per email would put almost all spammers out of business. Spammers rely on it being virtually costless to send out several million emails. More importantly, the lack of a micro-payment system makes it extremely difficult for those who create content—especially written content and images—to receive any payments for their work. The result has been the evolution of an advertising-based Internet with “successful” firms being the ones who can capture and exploit the most private information about their “customers.”

It is not unusual to rebuild infrastructure as times change. With greater urban densities, and the consequent risk of fire, wood frame houses were replaced by brick. In the first round of railroad building during the 1840s and 50s, most lines went from west to east, linking towns with seaports along the coast. Because the lines didn’t connect, track standards varied. But, after the US Civil War, north-south trade grew rapidly and the infrastructure was rebuilt with standardized track widths (4′ 8.5″).

Our present Internet was constructed by computer scientists to connect labs and universities together. They were appalled when the opening up of the Internet in 1994-95 led to discussion boards being filled with advertisements for pornography and other off-topic blandishments. The word “spam” was coined to describe this unexpected flood of anonymous communication.The Internet’s designers had no idea it would be used by billions of people all over the world.

The basic architectural error in the Internet is anonymity. It is a mistake of epic proportions. The key problems of the Internet—piracy, viruses, hacking, spam, systematic attacks—can all be traced to anonymity. It makes no more sense for serious people to prefer an anonymous Internet than to prefer that automobile drivers remain anonymous, or that airline passengers travel under false names.

One way to look at the explosive growth of social networking sites is people’s desire to be identified and to interact with others who are identified. And to not be constantly spammed and attacked by anonymous sociopaths. To the extent that companies like Facebook and LinkedIn lose control of this, and subject their users to spam, spurious advertising, and cyber attacks, their utility will shrink sharply.

The second architectural error in the Internet is the lack of a micro-payment system. The use of credit-cards makes each transaction complex and leads companies to work to bind users into monthly-dues arrangements, breaking the open character of the Web. Imagine if there were a simple way to stuff money into an online account and to make small payments of, say 5¢, by pressing the Alt-F12 key. Then a magazine or newspaper could offer a few free pages but ask you to pay a nickel to see more. By keeping the payment small and easy, browsing freedom is maintained. But, by having a payment, the print publishing industry might actually flourish.

Many people will dislike these proposals, seeing free access and anonymity as basic values delivered by the Internet. Free access is a fine thing, but anonymous use of other people’s copyright material is more simply described as theft. The desire for anonymity seems rooted in a fear of Big Brother, the ever-watching figure of the tyranny described in George Orwell’s 1984. My own view is that the protection against tyranny is political vigilance, not anonymity. And, more importantly, the threats against my person and my property are not emanating from “Big Brother.” They are coming from the anonymous sociopaths among us.

Insight draws its power by restructuring a situation into a more productive form. But in this restructuring, there are costs as well as gains. To see the world anew, an older frame must be cast aside. Academic research on insight misses this issue by looking at puzzles rather than strategic problems.

A standard “insight” problem beloved by academics is the nine dots. Three rows of three dots form a square and the challenge is to draw four straight lines through all the dots without lifting your pen from the paper. The trick is to realize that the corners joining the lines you draw do not have to be placed on a dot or lie inside the imaginary square; a single triangle covers eight and a bisecting line reaches the ninth. The nine-dot problem, like the word problems used by Beeman, Bowden, and Kounios in their MRI and EEG tests, is an intellectual puzzle: it poses an initial difficulty; it must have a solution or it wouldn’t be posed; the solution is obvious once obtained. And one reaches a solution without having to cast aside deep seated ideas or valued beliefs.

By contrast, real-world strategy situations are messy, lacking the neat structure of a puzzle. There is no given definition of the situation; determining if there is a problem and how to state it is part of the problem. An insight, once obtained, is clearly novel but is not necessarily productive. Testing the value of an insight is part of the problem. Most critically, embracing an insight may require you to cast aside whole doctrines, beliefs, philosophies, and ways of organizing work. To adopt a strategic insight one must also push aside an alternate living reality.

As an example, consider public policy in a recession. The recent sharp economic downturn in 2008-09 triggered a resurgence of Keynesian thinking and policy. The dilemma in a recession is that less employment can lead to less spending which, in turn, may lead to still less employment. The Keynesian idea is to break this cycle by increasing government spending to preserve incomes, spending, and employment. This way of looking at things has been a living, breathing, reality among a class of policy makers for generations.

The trouble with this worldview is that it sees the economy as a gigantic factory employing workers who take home their paychecks and then consume. To gain insights into another set of possible policies, one must throw aside this simple model and consider that the economy is composed of sectors. If, as in the present case, the retail and home construction sectors have built too much capacity, the solution is not to try to re-ignite the building of stores or homes. Instead, activity must be shifted to other sectors. That, in turn, means more, not less, unemployment, at least temporarily. As real-estate agents and mortgage brokers become unemployed, a sectoral view of the economy suggests that road-building project will do little to employ them. To gain insights into policies that might actually re-ignite economic growth, one must toss aside simple one-dimensional models that have been taught in thousands of college courses.

Consider, for example, the invention of animation. When I was a boy in fifth grade, I used to amuse the girl sitting next to me with short animated stories about boxes, arrows, and circles. I drew the frames of the short movie on the edges of pages of books. The margins of our history texts and her Nancy Drew novels acquired odd calligraphic markings, undecipherable when seen alone. But as she flipped the pages with her thumb, a secret story unfolded: boxes advanced on and consumed fleeing circles, only to be punctured by flying arrows. Once you understand how an animation is made, it is obvious how to make another.

To make an animation one takes a sequence of images and views them sequentially. The illusion of fluid continuous motion is generated in the brain, stimulated by the quick succession of images. It is often said that this illusion comes from persistence of vision, but it does not. Persistence of vision actually names the opposite illusion—the conversion of motion into a static image. For example, moving a light in a continuous circle creates the appearance of a solid wheel of light.

Despite the availability of paper and pen, no boys amused girls with moving boxes on the edges of books before 1833. In that year the oddly named phenakistoscope was invented. It was a toy—a cardboard disc with a series of slits around the perimeter. Below the slits, a sequence of images was printed. Turn the disc to face a mirror, peer through a slit at the reflected image in the mirror, and spin the disc about its axis. As each slit passes your eye, you see one of the images; the sequence creates the illusion of motion. With a phenakistoscope, one could, for the first time in history, see an image move; see a horse appear to gallop.

The animation insight was not technologically difficult. To make an animation, all it really takes is a pen, a book, and a thumb to flip the pages. The much deeper problem to be overcome was the overwhelmingly powerful universal belief that perception maps reality. If you believe that you perceive continuous motion because motion is continuous, you know that a sequence of still images cannot possibly look like motion—it can only look like what it is, a jerky sequence of still images. To understand animation, one must entertain the radical and disturbing idea that perceived reality is not real, that it is constructed by the mind—that our perceptual system fills in the blanks, performing massive acts of interpolation. Constructing early animations required an uncomfortable shift in philosophy.

There are tools in every field. To master finance one has to learn discounting, option pricing, and the more general logic of arbitrage. To become expert at marketing, one has to learn methods for estimating market response to price, promotion, and advertising and accept the discipline of thinking about how the world looks to a buyer. In strategy work, our key tools are frameworks designed to trigger and guide insight.

We talk for a bit about her business and about the course concepts. I encourage her to identify what makes her business different, or special, compared to its competitors. This simple exercise is designed to discover relative strengths and weaknesses, the building blocks of insights into strategic advantage.

“We have good people,” she says. “We try to keep our products up to date. We …” She pauses, then spills out her concern. “The company’s strategic plans are short documents that describe financial goals and show the milestones for getting there. There really isn’t a lot of room for this kind of philosophizing. What I need is a simple roadmap, a plan for achieving the goal.”The EMBA student is in a tough spot. Her company’s planning system is just a longer-term budget exercise. It isn’t designed to create strategy, but instead to force people into commitments to financial goals that they will later be held responsible for achieving. There is nothing wrong with such plans and budgets, they are absolutely essential for managing complex organizations. The trouble is that calling this “strategic planning” creates the illusion that a strategy exists. If a company had no future oriented plan of any kind, everyone would understand that something was missing. But a steady rolling three-year budget, labeled Strategic Plan, can lull many into complacency about the future.

The EMBA student wants a strategy tool, imagining, or hoping for an algorithm, a formula, or at least a precise methodology. But there are no precise methods for triggering insight. “Bear with me awhile,” I say, “and let’s talk about your company’s relative strengths.

How does insight happen? Insight has several defining characteristics. Insight springs upon us, taking us by surprise. Insight may arise unasked, catching us in the middle of some unconnected activity. An insight “feels right,” its truth self-evident. And, we are unaware of how insight is attained. Introspection fails to reveal the underlying process.

Scientists both prize and fear insight. Prized because it is the inductive fount of new science, it is also feared because its workings are mysterious and cannot be assured to either intelligence or diligence. That duality is often expressed in the tales told of the giants in the field. Writer James Gleick recounts this story about Nobel Laureate physicists Richard Feynman and Murry Gell-Mann.

A physicist . . . discovers unpublished lecture notes by Richard Feynman . . . He asks Gell-Mann about them. Gell-Mann says “no, Dick’s methods are not the same as the methods used here.” The student asks, “well, what are Feynman’s methods?” Gell-Mann leans coyly against the blackboard and says, “Dick’s method is this. You write down the problem. You think very hard.” (He shuts his eyes and presses his knuckles parodically to his forehead.) “Then you write down the answer.”

The human brain is a mass of soft gelid tissue with a ropy convoluted surface. Exposed, it literally looks like a bag of fat worms. A central crease runs from front to back, marking the brain’s division into right and left hemispheres. On the sides of the brain are the temporal lobes—bulges of brain matter extending back from the temples and lying just above the ears. The main areas of basic language processing lie on the left side of the brain, just above the temporal lobes. One, to the front, deals with speaking. The other, to the rear, deals with understanding the speech of others. When you hear the sentence “My house has two bedrooms,” the area to the left-rear flares into activity. A semantically more complex sentence invokes additional areas of the brain. When you read “My Father’s house has many mansions” the upper front edges of your temporal lobes turn on to process the metaphor. This region is known as the anterior superior temporal gyrus (aSTG). (A gyrus is one of the “worms” on the brain’s surface and these particular worms lie on the top edges of the temporal lobes.) Put your fingers on either side of your head about 1 inch above your ears. Under your fingers are your aSTGs, playing key roles in your ability to comprehend metaphor and analogy. There is an even further specialization between the two aSTGs: The right-side aSTG is specialized around recognizing more abstract and distant semantic associations.

A few years ago, a team of cognitive neuroscientists set out to determine just what parts of the brain were used when people reported experiencing insight. Mark Jung-Beeman, Edward Bowden, John Kounios designed an experiment in which people tried to solve complicated word problems while lying in a giant MRI machine or while hooked up to an electroencephalograph (EEG). Typical of the problems was this one: “A compound word is one made up by joining two shorter words, like base and ball to make baseball. Here are three words: pine, crab, sauce. What one word, when added to each of these three, creates three sensible compound words?” Subjects had 30 seconds to solve this problem. If a subject got an answer, and experienced a sudden “Ah-ha” insight into the solution, they pressed a button. If they could not solve the problem, or if they solved it by a methodical approach, there was no button press.

One-third of a second before an insight (“Ah-ha”) sensation was reported, the right-side aSTG had begun to fire, emitting electrical waves for about one second. The energy emitted had a frequency of 39 Hz. On a piano, strike the third black key from the left, the lowest D#, to hear a tone of 39 Hz. The researchers suggested that this activity marked the emergence of the solution from unconscious processes into conscious thought. If you solved the above word problem with insight, the word “apple” suddenly surfaced into your consciousness as your right-side aSTG fired.

There is another burst of brain activity especially associated with insight. Visual processing takes place in the rear of the brain. When an insight was reported, the subject’s right-side visual cortex emitted a very low frequency (6-10 Hz) alpha wave for about one second. The alpha wave started early, pulsing for about 1 second, and ending just before the aSTG pulse started. Low frequency alpha waves are thought to inhibit brain activity—they are connected to rest, sleep, and meditation. The researchers believe that this one second pulse temporarily shuts down high level visual processing on the right side, allowing other regions of the right hemisphere to concentrate on weaker internal signals without so much distraction.

Run your finger up the back of your head to a spot about one inch above an imaginary hat band and about one inch over to the right from the center. That is where the alpha pulse occurs 1.4 seconds before a feeling of insight. That pulse allows your inward vision to take over, free from the distraction of normal sight. And when that pause ends, you sense a flash as full visual processing is restored and the right-side aSTG pushes the answer into consciousness. The phrase “flash of insight” is not just a figure of speech.

Curtiss-Wright-Logo

Misunderstanding the relationship between goals and strategy is the origin of wheel-spinning frustration in many strategic retreats and planning meetings. The executives want to develop strategy, but first mistakenly try to agree on the overall goals of the company. Agreement on broad universal goals is easy but uninformative. Searching for something concrete, senior executives finally impose some arbitrary metrics, like a 15% after-tax return on capital and a 12% annual rate of growth. The group now tries to identify “strategies” for achieving these goals.

What should have been a discussion of how and where to compete devolves into an exercise in hockey-stick financial forecasting.  The problem the group has experienced is that a strategy is not a plan for reaching an arbitrary goal. A strategy structures the situation, providing guidance as to how to best use the resources and insights available. Useful strategic objectives are not simply the echo of ambition; they reflect an understanding of the forces at work and seek a balance between what is desired and what is possible.

My doctoral research was on diversification and the ensuing book, Strategy, Structure, and Economic Performance, was, for a brief moment, a Fortune Book Club selection. This opened a number of doors into senior management groups of diversified companies. Thus, in 1975, while on the faculty of Harvard Business School, I was asked to work with a small top management team at Curtiss-Wright. The CEO, Ted Berner, had guided the company since 1960 and he wanted an outsider with expertise in diversification to help shape the corporate strategy.

Glenn Curtiss "The Fastest Man Alive" in 1907

Headquartered in Woodridge, NJ, Curtiss-Wright was the legacy of aviation pioneers Glenn H. Curtiss and the Wright brothers. Glenn Curtis was a motor designer, motorcycle racer, and test pilot. Curtiss rose to national fame in 1907 when his V-8 powered motorcycle achieved a speed of 136 mph. He was the first man to fly an airplane on a take off from a naval ship (1910). During World War I, Curtiss supplied thousands of easy-to-fly “Jennys” and N-9 seaplanes to the military. Wright Aeronautical was an engine manufacturer. On its non-stop flight from New York to Paris, Lindbergh’s  Spirit of Saint Louis was powered by a Wright Whirlwind engine. Two years later, in 1929, Curtiss-Wright was formed as a merger of the Wright and Curtiss interests.

Curtiss-Wright became a major manufacturer of aircraft engines and propellers during World War II and in the 1950s. The rise of jet engines in the 1960s almost eliminated that business and Curtiss-Wright diversified into other aircraft components, nuclear control equipment, and components for the automobile and construction equipment industries.

Ted Berner began the strategy meetings by asking the group to clarify the company’s goals. I recall his injunction that “We should first agree on what we are trying to accomplish. Once that is clear, we can dig into how to get there.”

The morning’s two-hour discussion of goals was painful. No one could argue with a broad goal like “grow,” or “diversify,” but this kind of aspiration had no bite—you couldn’t deduce much from it. Economists will tell you that the goal of the corporation is to maximize profit, or value, but this statement is equally empty of actionable implications. Yet, if someone was more specific, arguing that the company should seek to be the leader in advanced rotary engines, we quickly realized that such a “goal” was actually an extremely powerful decision about where to allocate resources.

The rest of the day was committed to a review of the company’s businesses. As we broke, Berner told me that we would revisit the topic of goals the next morning. He asked me to lead off with a quick summary of what constituted a “good strategic goal.”

I did not sleep that night. I had come prepared to discuss the pros-and-cons of various approaches to diversification, not the problem of goals. The question “what should a business strive to accomplish?” is, logically no different than the question “what should a person strive to do in life?” And, this question has bedeviled philosophers for twenty-five hundred years. Should people seek faith, honor, truth, justice, power, wealth, balance, or simply happiness? Or, are we free to define our own goals and values, as existentialists hold? And, what does any of that have to do with what one does tomorrow?

The brief presentation I developed that night has stood the test of time. More than thirty years later I continue to find it helpful in setting the stage for fruitful strategy work.

When we do strategy work it is natural to remind ourselves of our broad goals. But it is also important to remind ourselves that broad goals can never tell us what to do. For example, broad goals like liberty and security are shared by almost all Americans, but they do not tell us whether or not Social Security should be a backed by real savings or simply be a pay-as-you-go commitment. And, they do not tell us exactly how much security we are willing to give up to gain an increment of liberty, or vice versa.

Broad goals are best seen as constraints on strategy. Like laws, or like the rules of a game, they constrain our actions without specifying them. Broad goals rule out certain things, and encourage us in certain directions, but cannot tell us what to do.

Specific goals, like grow the GNP by 3 percent next year, or earn more than 15 percent on capital, may seem more “practical” in that they are concrete. But such performance goals still do not tell us what to do and they can actually damage further strategy work. Real strategy work looks beneath the surface of performance measures and attempts to discern underlying causes—the trends, opportunities, and threats that will shape performance in years to come.

After we have reminded ourselves of our broad goals and values, real strategy work begins by examining changes. Strategy may in the service of our desires, but its practical shape is always determined by our insights into how to cope with change—with our diminishing effectiveness in some activities, with the opening of new avenues of activity, and with new modes of operating and of competing.

Importantly, the skillful strategist is not bound by arbitrary goals. The strategist chooses which broad goals can be advanced and which cannot in each situation.

Once we have a firm grasp on a way forward—a strategy—it is necessary to go beyond general guidance and establish explicit targets to measure and control our forward progress. If, for example, we have a strategy of being the most reliable supplier of engine components to truck and construction equipment manufacturers, it behooves us to define “reliability” in this sphere and create systems to both improve it. Such targets are best named “objectives” rather than goals. Goals guide and constrain strategy work whereas objectives are part of its product.

A Note on Curtiss-Wright

At the time of the strategy retreat, Curtiss-Wright was deeply involved in bringing the rotary Wankel engine to market. However, the Wankel’s promise was never realized. Production costs remained high and the rapid run-up in gasoline prices sealed its fate. With this setback, CEO Ted Berner turned his attention to a series of complex take-over battles. While highly-diversified Teledyne was acquiring a major stake in Curtiss-Wright, Berner sought to gain control of Kennecott Corporation (copper). Ted Berner died in 1990.

Today, Curtiss-Wright is a medium-sized diversified provider of flow and motion control products for the aerospace, nuclear, and oil/gas industries, and of metal treatment services for aerospace, automotive, and industrial markets. Click on the logo to visit its Web site.