Analogous Thinking for the Modern Business

Modern businesses have taken a beating in the last 10 years. From black swan events with long lasting repercussions to technology that becomes obsolete before a newborn becomes a toddler, organizations are having to adapt at a rate that they never have before. Old tools for identifying and developing business unit strategy are slowly falling short in helping organizations navigate their evolving markets. As a result, this can leave a business far behind its competitors. Leaders need to round out their tools kits with other tools, such as analogous thinking, in order to adequately respond to a rapidly changing environment.

What is analogous thinking?

According to this SingularityHub article, analogous thinking is when individuals look for solutions to a specific problem by referencing other situations or events that are unfamiliar to their current issue. For example, business leaders may turn to professional sports, like basketball or football, for answers on leadership and teamwork. Another popular example is the rise of DevOps within software companies, which borrows its strategic approach from manufacturing operations.

Current approaches to strategic thinking in business

Business Strategy Approches

In the current environment, senior leaders typically apply either deduction and or trial and error to answer questions around their business strategy. Take the example of launching a product into a new market.

With deduction, the leader makes a series of choices based by identifying relevant criteria, listing out options, and weighing choices and alternatives. From there, they select the most rational decision. This usually means the option with the best outcomes for the organization. Thus, they will pick the product that will make the most money for the company.

This method is only effective in situations where decision makers have access to lots of information. Furthermore, it requires a lot of resources and cognitive ability to process. This makes the method inappropriate for highly complex problems with lots of variables. A human will simply be unable to process all the data and decisions needed.

With trial and error, senior leaders simply test their hypothesis and or strategy and then perform a retrospective. Leader may opt to use this when there is little data available and or the effort require to process all the deductive decisions far outweigh the benefits. In this approach, experience reigns king. This option doesn’t work if there is significant risk involved. For example, if the new product requires millions of dollars in research and development, the company may not opt to trial and error as it is simply financially unfeasible to do so.

How does analogous thinking benefit businesses?

Analogous thinking is beneficial for businesses for multiple reasons. First, it provides leaders with a tool for solving unfamiliar business problems when other tools will not suffice. Instead of investing significant resources to validate if a product works, drawing an analogy can help unearth the right insights to answer key questions.

Another benefit of analogous thinking for business strategy is that it efficiently bundles decisions. Where deduction focuses on a narrow subset of decisions, analogies provide the set of decisions that led to such success. This enables the leader with a playbook for replication.

Finally, analogies make it easy for other individuals to digest the information being communicated. Instead of trying to explain an elaborate solution and a potential outcome, an analogy can help a leader communicate what they are trying to achieve by leveraging the stories from another organization.

Pitfalls of a poor analogy

Analogies are not fool proof from human biases. With that, they suffer from pitfalls that can make them ineffective and, as a result, point leaders down the wrong rabbit hole. For example, in the early days of the internet, different search engine giants adopted superficial analogies which misguided their business strategy. Instead of viewing the bigger picture, management drew from personal experiences and shaped their strategy based on their narrow set of experience. Yahoo! viewed search as an ad platform while Lycos deeply invested in having the best search capabilities. Few were able to step back and recognize the misuse of their analogies.

Cognitive biases may be the culprit to such misses. Confirmation bias, where individuals seek out information that purposely reinforces their views, that can lead a manager astray. Instead of heeding to warning signs of why the analogy won’t work, leaders will continue to validate their decision with (potentially weak) data points that support their strategy. Anchoring, where individuals make decisions that are influenced by something they experienced recently, can create a myopic view of whether the analogy is effective. For example, a team member with deep experience in sales may incorrectly draw an analogy for selling something that people don’t want to pay for.

How to use analogous thinking in business

There are steps leaders can take to harness analogous thinking and to avoid the pitfalls and superficial analogies. These steps include.

  1. Clearly identify and define your problem – one of the most common mistakes of any problem-solving exercise is not clearly and concretely identifying the problem that you want solved. Understanding what you want solved and what the outcome may look like is imperative for successfully leveraging an analogy. This becomes your target problem to solve.
  2. Identify the right stimulus for your source problem – find an environment that sparks new ideas for potential analogies. Ditch the office and try working in a different setting, like the kitchen or at a park. Observing and or reflecting in a new environment can help draw out analogies for use. When you identify one, this becomes your source problem.
  3. Match potential similarities – in this step, list the success attributes of your source problem. Also look for differences between the source and target problems. By evaluating both, you can skirt around potential confirmation bias.
  4. Translate and adapt the solution – most solutions from an analogy rarely fit the problem to a tee. It’s important that leaders adapt the proposed solution to meet the nuances of their own industry.

Key takeaways

  • Analogous thinking is an efficient way for business leaders to make decisions about problems that they may be unaccustomed to by turning to unfamiliar industries, sectors, and or scenarios to draw on for similarities and insights.
  • Analogies can fail in being effective tools for solving business problems if a superficial analogy is used.
  • Leaders should be aware of cognitive biases, such as confirmation bias and anchoring; these can impact how they decide whether an analogy is suitable for use.

Related Readings

Professional Leadership Institute (PLI) is an educational website providing professionals from all types of businesses with practical education in human resources and leadership. To keep evolving your leadership toolkit, additional PLI resources below will be useful:


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