by Stefanie Habersang

Last week the Strategic Management Society launched a new series called the Strategy Imagination Forums. The Imagination Forums share cutting-the-edge thinking on current strategy issues and topics presented by leading strategy thinkers from academia, business, and consulting and is organized by Will Mitchell, University of Toronto and George Stalk Jr., The Boston Consulting Group.

The first Strategy Imagination Forum engages with a discussion around topic of imagination. What is “imagination” and how does imagination work? How can companies build and operate an “imagination machine”? The inaugural forum featured Martin Reeves, Chairman of the BCG Henderson Institute, who spoke about imagination and shared ideas from his forthcoming book “The Imagination Machine – How to Spark New Ideas and Create Your Company’s Future” (Harvard Business Press, available in 2021).

Why is it important to talk about imagination in the business context? As business environments become more unpredictable companies increasingly need to innovate – across their operations, offerings, and business models. Yet, many large companies struggle to make use of imagination in their innovation process. They often try to make it a mechanical endeavor and end up with routinization and incrementalism. Reeves highlights four major reasons why companies need to harness their imagination beyond incrementalism:

  1. Responding to crisis
    1. Crisis expose companies to rapid environmental changes that offer an opportunity to reimagine current businesses.
  2. Growth and fate: 
    1. Since several years aggregate growth is declining and competitive advantages become less sustainable. Companies need to find ways to stay competitive.
  3. Inertia of maturity and scale:  
    1. Large companies in particular face decreasing corporate vitality – the capacity for future growth and reinvention. 
  4. The role of AI
    1. Companies must harness human capacity in an age when more routine cognitive tasks are being substituted by robots/machine learning.

While business environments offer many yet unrealized opportunities to create and capture value, businesses must first imagine them. Reeves argues that firms do not only compete on scale efficiency, but also increasingly on imagination. But what is imagination? Reeves proposes that imagination is the human capacity to engage in and harness counterfactual-thinking, to imagine “What if…”. Thus, counterfactual thinking goes beyond understanding correlation and causation (which can be easily solved through analysis and machine learning). Counterfactual thinking involves a higher level of cognition that is unique to the human mind.

How does imagination work? Reeves says that we often have a romanticized view of imagination, something that falls in the domain of the unmanageable, an individualistic endeavor that is momentary and cerebral. In contrast to this (mis-)understanding he proposes a structured process for hunting down imagination. His “Imagination Machine” involves 6 stages on two levels:

Individual level: The personal side of imagination

  1. Trigger: 
    1. The 1st stage is about encountering surprise, anomaly, accident, caring about anomalies (noticing frictions and frustrations) – a collision between mind and reality that enables imagining a “better reality”.
  • Rethink
    • The 2nd stage is about creating new mental models: What should the business be about and what are the relationships between different aspects of the business? A new mental model does not (yet) represent reality but it inspires imagination.
  • Act
    • The 3rd stage is about acting, such as experimenting (i.e. AB testing). It is also about communicating and discovering further surprises or frictions by taking action.

Group level: The social side of imagination 

  • Amplify 
    • The 4th stage is about inspiring others to gain legitimacy in the context of the company culture (sociality of acceptability). Existing mental models must be broken down and deeply anchored assumptions how the company works must be collectively challenged. Imagination must be socialized in a way that everyone can participate in the company.
  • Codify 
    • The 5th stage is about writing down the standard operating procedures. The codified documents are what is “sold” at the end.
  • Sustain
    • The 6th stage is about keeping imagination alive by exploring and exploiting ideas achieving ambidexterity.

Reeves argues that this imagination process focuses on creation rather than position. Managers need to get serious about understanding this capacity, how it works individually and collectively, and how to deploy it reliably and powerfully, especially in large mature businesses that have been successful often through one way of doing and seeing things.

 Click here to watch the full session or find it on the SMS YouTube Channel.

Martin has provided written answers to some of the questions that were submitted during the live session! Click here to view his responses on the SMS website. 

You may also be interested in some of the materials Martin referenced during the presentation. Click here to pre-order his book The Imagination Machine: How to Spark New Ideas and Create Your Company’s Future on Amazon; check out the articles, We Need Imagination Now More Than EverCompeting on Imagination, and Your Capabilities Need a Strategy; or read Martin’s interview with Bob Goodson.


Blog authors: 
Stefanie Habersang is a postdoc at Leuphana University of Lüneburg, Germany. 

Published Date
06 August 2020

Article Type
Archived Webinar, Article Summary/Abstract


Sign up to receive updates on the latest research, events, and SMS news.