Business Bookshelf: Surprised by Opportunity

November 14, 2007

Review of Strategic Intuition: The Creative Spark in Human Achievement, by William Duggan.

Set big goals. Do whatever it takes to reach them. These muscular sentences form the core of commencement addresses, business-advice books, political movements and even the United Nations approach to global poverty. In “Strategic Intuition,” a concise and entertaining treatise on human achievement, William Duggan says that such pronouncements are not only banal but wrong.

Mr. Duggan, who teaches strategy at Columbia Business School, argues that the commonplace formula has it backward. Instead of setting goals first, he says, it is better to watch for opportunities with large payoffs at low costs and only then set your goals. That is what innovators throughout history have done, as Mr. Duggan shows in a deliriously fast-paced tour of history.

Napoleon is Mr. Duggan’s canonical example — his strategic genius was not to storm a pre-fixed position on the battlefield (the traditional approach to military strategy at the time) but to attack any old position that came along where his army was at its strongest and the enemy’s at its weakest. Similarly, in the battle for civil rights, Martin Luther King Jr. seized on the Montgomery bus boycott in 1955 to shift the NAACP’s strategy away from filing lawsuits and toward organizing nonviolent civil disobedience.

What appears to be innovative and new, of course, is often just a creative combination of familiar elements. Bill Gates’s early success came from minicomputers, standardized software and fast microchips, but each was the invention of someone else and, at the time, better deployed by other people. But Mr. Gates, who originally had started a company called Traf-O-Data to sell computer hardware, was the first to see that a software cookie-cutter could thrive in a world where computers were getting ever smaller and ever faster.

One of the insights of “Strategic Intuition” is that business makes progress by following the opportunistic innovation model, while governments and international-aid agencies aim repetitively at rigid social goals. Such rigidity happens partly for a reason that Mr. Duggan is too polite to mention — bureaucrats, by nature, rarely give off a creative spark. Mr. Duggan prefers to emphasize a structural cause: The public demands solutions to problems of great social importance; thus bureaucrats get stuck with fixed objectives. Yet Mr. Duggan also shows that social progress often happens by emulating the opportunism of business. Among the most powerful of his examples is Muhammad Yunus’s invention of microcredit.

Mr. Yunus wanted to do something about rural poverty in Bangladesh, and his training steered him in the direction of something like the well-drilling and crop-enhancing strategies of the so-called Green Revolution. In the 1970s, he undertook a modest agricultural project along these lines and, achieving some success, won the Bangladesh President’s Award. If he had kept to a fixed agriculture goal, though, we never would have heard of him again.

Instead, as he wrote in his memoir, he noticed “a problem I had not focused on before.” The Green Revolution was happening, but it was bypassing landless women. They were making handicrafts for a pittance because, to get money for their raw materials, they had to go to the village moneylender, who charged as much as 10% interest a day. Mr. Yunus found a way to make small loans to groups of women at lower interest rates. By doing so, he achieved high repayment rates and higher profits for the landless women, and he founded a global microfinance industry that has benefited millions of people.

Despite such success stories, official aid agencies persist in the bull-headed approach. In a caricature of everything Mr. Duggan says not to do, the U.N. and the World Bank have been pushing a campaign called the Millennium Development Goals. It sets quantitative targets for every conceivable problem of the poor. It then tries to raise whatever it takes in aid money to reach them. This approach has succeeded as a fund-raising strategy but not as a problem-solving one — it is already clear that most of the goals, if not all, will be missed for Africa, where the problems of the poor are most dire.

The lure of fixed goals is hard to resist even for people who know better. As Mr. Duggan notes, Bill Gates has failed to transfer his Microsoft creative spark to the realm of global poverty. The Gates Foundation is following the fixed-goal approach — throw a lot of money at the pre-determined goal of an AIDS vaccine, for example. Mr. Gates even gave a Harvard commencement speech on global poverty this year in which he said — you guessed it — that you need first to set your goals and then to do whatever it takes to reach them.

If there are still businessmen who feel compelled to follow a fixed- goal plan — missing out on the profits of opportunistic flexibility — then at least there is the free market to punish them. Market feedback is surely one big reason that we have so many innovative entrepreneurs. Where the old approach does most of the damage is in social policy, where the feedback is either fuzzy (as in domestic policy) or absent (foreign aid). Social policy could use a lot fewer commencement speakers and a lot more creative sparkers.