In the conference room, the contract managers (CMs) sat silently stunned! They heard details about the expanded and redistributed product lines, knowing this would end the contract with a major distributor who would later file arbitration. Everyone wondered -- Is there a better option? Yes, but It require a wide-angle lens from the outset to enlarge their thinking to avoid potential disputes. This article explains how large corporations have had to think way ahead of the game with open minds. For some, it became a rough ride with losses, but in the end, the gain of deeper thinking and lessons learned far outweighed the losses.
Consider two examples of erroneous ways of thinking and resulting approaches we use all too often:
- If we define the problem as a performance failure, we gather evidence and demand our vendor to make good of it.
- Or, if we see the problem as a contention between parties without resolution, we get our lawyer to work out the damages to terminate, sue or both.
Those might be easy solutions when fault lies ostensibly with the counterparty, but…
- What if the problem turns more complicated where other parties or projects are involved?
- Or what if causes arise from unnatural forces like the Covid pandemic?
Clearly, problem solving becomes tricky. You need the skill of the CM with experiences that are varied, diverse and come from many areas to think broadly before looking for ways to benefit the organization in the long run and gain trust from the partners. David Epstein, New York Times bestseller, in his book RANGE…1 asserted that when you are “facing uncertain environments and wicked problems, the breadth of experience is invaluable.”
What is a wide-angle lens and where should it focus?
In a world that is increasingly unpredictable and complex, we need to define both problem and solution not only on what you know, but also what your span of experiences2 teach you. This plus the gymnastics of your mind will stretch and think beyond all known factors to figure out the whole of the problem or solution applicable.
The term wide angle lens was obtained from the book Kissinger the Negotiatior: Lessons from Dealmaking at the Highest Level.3 Henry Kissinger had adopted wide-angle lens in his diplomatic negotiation that resulted in favorable outcomes. Through this lens we see further and beyond by switching our thinking from automatic to reflective.4 It is also called gut reaction (automatic) and conscious thought (reflective) interchanging ideas from varied experiences.
Automatic gut reaction is triggered effortlessly based on our familiarity on what we are accustomed to or our expertise from repetition that we use to respond to a narrow and confined problem.
Reflective conscious thought, on the other hand, expands beyond our habitual to other nonhabitual thinking that are critically useful in problem solving.
How does lateral thinking widen our vision?
Simply put, it means taking a conceptual idea from one problem and applying it in a different area. A good example is Steve Jobs on the typography design for his first Macintosh computer -- an unplanned move that led him to attend a calligraphy course in college that gave him the idea for designing typography 10 years later.
Another area is wide-ranging analogical thinking which means acquiring facts and knowledge from specialists and integrating them into a whole new idea. It produces the ability to see relationships between seemingly unrelated fields and connect them. Authors of a research paper titled, The Evolutionary Nature of Breakthrough Innovation: Re-Evaluating the Exploration vs. Exploitation Dichotomy5 assert that a breakthrough innovation requires an exploration into unknown terrain and subsequent exploitation to iteratively find a solution.
They use the example of the invention of transistor at Bell Labs in the 20th century where the scientists were creating, building, and testing in completely unprecedented novel ways using combinations of materials before getting the final breakthrough.
During the pandemic crisis when companies around the world were badly hit and many became insolvent, the companies that exhibited lateral thinking in responding to the situation by changing from their usual way of doing things have profited. Airbnb and Domino’s Pizza were among survived well and differentiated themselves from their peers by adopting and innovating changes that put them on top. Likewise, many companies took advantage of the value of lateral thinking by hiring people outside their organizations to solve their problems6.
They had learned that too much of an insider perspective makes it impossible or difficult to compete successfully. Insider perspective constrains the solution. An outsider view with little or no internal details and interest is not hindered by politics or people pressure. Rather, a wide background and broad spectrum of experiences is more likely to observe different groups producing effective solutions.
In his study of InnoCentive the crowdsourcing platform, Dr Karim Lakhani, assistant professor at Harvard Business School, found that the further the problem was from the solver’s expertise, the more likely they would solve the problem.7 Psychologists have defined the expertise’ problem-solving issue as the Einstellung effect - a tendency to use only familiar methods in problem-solving even if better solutions are available.
Be curious with an open mind
The world tends to believe the only certainty is change. Yet, “many (influenced by their automatic system) are unwilling even to consider the possibility that their strongly held beliefs might be wrong,” said Richard Thaler and Cass Sunstein, winners of Nobel prize and Holberg prize respectively, in their New York Times bestseller Nudge.8 These experts who were “deep and narrow” had spent their lives studying a single problem but “fashioned tidy theories of how the world works through the single lens of their specialty, and then bent every event to fit them,” said Epstein.
By contrast, it is only by having actively open-minded thinking, that we can consider new possibilities. Jonathan Baron and his team examined the correlations between actively open-minded thinking and the ability to solve various problems, and the results showed that people who think in a way that is actively open-minded are better at solving problems.9
Another study done by academics and researchers through interviews with serial innovators,10 had found that innovators are mostly curious and open minded and they ask more questions. They tend to read more and read widely because they want to learn from multiple sources.
Rob Wilkinson, lecturer in public policy and leadership from Harvard Kennedy School, in a recent webinar revealed his proposed 4P framework for strategic leadership11. The first P was perception involving the necessary discipline of leaders to slow down and think about the multiple perspectives before carrying out a decision, which requires inquiry and curiosity. Often it takes humility to acknowledge we may not be seeing everything that is important and others’ perspectives may be more valid.
When a counterparty refuses to budge in a contract negotiation, anyone with an open mind would not assume the counterparty is irrational but would try to understand the underlying reason by inquiring. Valuable information might turn up.
Courage to stop when deal is dead – Starbucks vs Kraft case study
The dispute between Starbucks and its distributor, Kraft, resulted in Starbucks having to pay a large damage claim to its opponent, Kraft, to end the contract. This raised much controversy. The contract between the parties was long-term established in the early days. Starbucks claimed that the agreed terms were no longer beneficial in today's market serving its need for high growth. Starbucks was not happy with Kraft's delivery and sought to break the contract, but Kraft objected. This led to an arbitration and huge concluding losses.
Quoting from a Harvard Law School daily blog,12 “Starbucks offered Kraft $750 million to end their negotiated agreement. Starbucks wanted greater flexibility to sell the single-serve coffee pods that were taking off in the market at the time. The company’s agreement with Kraft limited Starbucks to selling pods that worked in Kraft’s Tassimo machines. Starbucks was in danger of being left behind in a race for market share against Green Mountain Coffee’s Keurig system and K-Cup single serving packs. Kraft then objected to the deal termination, but Starbucks decided to break off the business relationship nonetheless and began to sell K-Cup packs…”
Although this incident may seem a bit mystifying, one thing is true. Although Starbucks knew that their company would incur hefty losses, Nevertheless, Starbucks forged ahead to break the contract. It then expanded its product line, distributed it widely, and within few years Starbucks’ revenue had grown beyond the amount lost.
Obviously, Starbucks used their wide-angle lens vision to see far and beyond its existing losses, and they deployed appropriate strategy for winning in the long run. But again, it all started with the willingness to jettison a project or change direction where needed to get a better fit and avoid the sunk cost fallacy by sticking to any false idea of wasted time and money -- when it was already gone.
Often it takes more courage to scrap the status quo when it is dead rather than to enter a whole new opportunity for potential gain. Loss aversion produces inertia, as Thaler and Sunstein8 noted, because most people view loss as more painful than potential gain.
Research surveys of large corporations have shown that much value was left on the table as a result of loss aversion,13 due to the unwillingness of the managers to advocate for risky -- but smart -- investment in fear of jeopardizing their careers even when they knew the investment would benefit the companies in the longer term.
This is about perspective you might have in balancing between potential gain and risk management or probably the wider issue, as the study showed, that rests on a company's culture in how employees are incentivized.
Think objectively -- longer-term
We need to understand the broader organizational goal to plan and align our strategies to it.14 In dealing with contracts, it is critical to take a broad, long-range approach incorporating the larger organization’s strategy to problem solving. Simultaneously, as we adopt to changes as circumstances shift, we need to think systemically when analyzing how a decision will affect interorganizational departments, suppliers, and customers.
Any decision based on a silo or internally-centered objective that fails to consider the larger perspective is heading for disaster. Study after study has shown this to be the case, yet too many companies insist on pursuing quick, short-term gains, meaning they overlook the long-term results and end up out of business.
Henry Kissinger in his success as a diplomat negotiator,15 was clear in his long-term objective and broad in his thinking in connecting all issues with alliances and various parties. He mapped it all into his larger strategic plan, treating all small negotiations as interconnected. Constantly, through his wide-angle lens he would zoom out and in on his opponents focusing both on the strategic and interpersonal aspects in advancing his goal that gained him great desired results.
Decisions are mostly emotional; they can be made without real data and proof. Consider the case of Theranos, a deceptive healthcare technology company, which was once worth $9 billion before it collapsed. And consider the case of OneCoin, a cryptocurrency Ponzi scheme that defrauded $4 billion worldwide.
Both companies managed to dupe millions of people into believing and investing with them. Why? It was the influence of groupthink which caused people to make irrational decisions by following what others are doing. This is demonstrated by the Asch conformity experiments16 developed by Solomon Asch, psychologist, in the 1950s. Hence in having an objective long-term thinking becomes critical, it helps to steer our focus in the right direction, stopping the mind from following emotions that would otherwise detract our course.
- RANGE: Why Generalists Triumph in a Specialized World by David Epstein: Summary & Notes https://www.grahammann.net/book-notes/range-why-generalists-triumph-in-a-specialized-world-david-epstein
- A Leadership Agenda for the Next Decade, by Rich Lesser, Martin Reeves, Kevin Whitaker, and Rich Hutchinson, BCG Henderson Institute, 14 Dec 2018 https://www.bcg.com/en-sea/publications/2018/winning-the-20s-leadership-agenda-for-next-decade
- Kissinger the Negotiatior: Lessons from Dealmaking at the Highest Level https://www.amazon.com/Kissinger-Negotiator-Lessons-Dealmaking-Highest/dp/1538480433
- Dual-system theory https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/dual-system-theory/
- Research paper ‘The Evolutionary Nature of Breakthrough Innovation: Re-Evaluating the Exploration vs. Exploitation Dichotomy, by Dominika K. Sarnecka and Gary P. Pisano, Harvard Business School, 25 Jan 2021 Research Paper The Evolutionary Nature of Breakthrough Innovation https://hbswk.hbs.edu/item/the-evolutionary-nature-of-breakthrough-innovation?cid=spmailing-32999160-WK%20Newsletter%201-27-21%20(1)-January%2027,%202021
- If You have a Problem, Ask Everyone, by Cornelia Dean, The New York Times, 22 July 2008https://www.nytimes.com/2008/07/22/science/22inno.html
- The Principles of Distributed Innovation, by Karim R. Lakhani, Harvard University, Feb 2007https://www.researchgate.net/publication/24090028_The_Principles_of_Distributed_Innovation
- Nudge https://en.wikipedia.org/wiki/Nudge_(book) See also article titled Diversity, Equity and Inclusion, AKSARBEN Foundation, May 12, 2020.
- Thinking and Deciding, by Jonathan Baron, University of Pennsylvania, Oct 2006 https://www.cambridge.org/sg/academic/subjects/psychology/cognition/thinking-and-deciding-4th-edition?format=HB&isbn=9780521862073#contentsTabAnchor
- Serial Innovators, by Abbie Griffin, Raymond L. Price, and Bruce A. Vojak, Stanford University Press, 2012 https://www.sup.org/books/extra/?id=18763&i=Preface_pages
- Leading with Intentionality: The 4P framework for strategic leadership, by Robert Wilkinson, Kimberlyn Leary, Harvard University, 8 Sep 2020 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3689291
- Negotiation in Business: Starbucks and Kraft’s Coffee Conflict: Jan 14, 2021: article from Program on Negotiation, Harvard Law School Daily Blog by Katie Shonk
- Your Company is Too Risk-Averse, by Dan Lovallo, Tim Koller, Robert Uhlaner, and Daniel Kahneman, Harvard Business Review, Mar-Apr 2020 https://hbr.org/2020/03/your-company-is-too-risk-averse
- Develop Strategic Thinkers Throughout Your Organization, by Robert Kabacoff, Harvard Business Review, 7 Feb 2014 https://hbr.org/2014/02/develop-strategic-thinkers-throughout-your-organization
- Henry Kissinger’s lessons for business negotiators, book, 5 Jul 2018 https://hbswk.hbs.edu/item/henry-kissinger-s-lessons-for-business-negotiators
- Asch conformity experiments https://en.wikipedia.org/wiki/Asch_conformity_experiments
- Steve Jobs' 2005 Stanford Commencement Address. Steve Jobs' 2005 Stanford Commencement Address
- What hotels can learn from Airbnb’s response to the COVID-19 crisis, by Matthieu Mauguin, hospitalitynet, 17 Sept 2020https://www.hospitalitynet.org/opinion/4100678.html
- The pizza that defied the Covid-19 pandemic: How Domino’s managed to stay afloat in the US, by DH Web Desk, DeccanHerald, 5 Sept 2020 https://www.deccanherald.com/business/business-news/the-pizza-that-defied-the-covid-19-pandemic-how-dominos-managed-to-stay-afloat-in-the-us-882778.html
- Starbucks Concludes Packaged Coffee Dispute with Kraft, Starbucks Investor Relations, 11 Dec 2013 https://investor.starbucks.com/press-releases/financial-releases/press-release-details/2013/Starbucks-Concludes-Packaged-Coffee-Dispute-with-Kraft/default.aspx
- Did you ever make a poor decision just to win a deal?, by Yvonne Sophia Low, Contracting Excellence Journal at World Commerce and Contracting, Dec 8, 2020 https://journal.iaccm.com/contracting-excellence-journal/did-you-ever-make-a-poor-decision-just-to-win-a-deal
- Theranos https://en.wikipedia.org/wiki/Theranos
- OneCoin https://en.wikipedia.org/wiki/OneCoin
- Kross E., Grossmann I. (2012). Boosting wisdom: distance from the self enhances wise reasoning, attitudes, and behavior. Journal of Experimental Psychology: General, 141, 43–8. https://content.apa.org/record/2011-13461-001
ABOUT THE AUTHOR
Yvonne Sophia Low has been a professional in strategic sourcing procurement and vendor partnerships for 15 years, during which she added significant value to various multinational corporations (MNCs) in transformative projects focusing on cost and contract optimization, excellence and effectiveness, processes, and risk mitigation. Recently she dedicated her time to humanitarian initiatives by writing two books for the underprivileged community. She can be contacted via https://www.linkedin.com/in/yvonne-sophia-low.
Content reflects views and opinions of the author and do not necessarily reflect the views and opinions of World Commerce & Contracting.