A New Way To Think

A New Way To Think Plot Summary

Introduction

Management theories and models shape how executives and consultants approach business challenges, yet many of these conventional frameworks fail to deliver their promised results. Instead of questioning the model, most leaders assume they've simply applied it incorrectly and try harder with the same approach—a cycle that produces consistently disappointing outcomes. Roger Martin challenges this pattern by proposing that when a model doesn't work, we need to rethink the model itself rather than doubling down on flawed thinking. The new way to think about management involves recognizing that all models have limitations and none is perfect. From competition to stakeholder theory, from planning to execution, traditional management frameworks often miss crucial dimensions of business reality. By examining fourteen critical domains where conventional thinking falls short, Martin offers alternative models that promise superior results. These frameworks aren't merely academic—they represent practical approaches that can transform how organizations operate, innovate, and create value. Throughout, Martin demonstrates that shifting our mental models may be uncomfortable but is essential for achieving breakthrough performance in today's complex business environment.

Chapter 1: The Flawed Model of Competition: From Corporations to Front Lines

Competition doesn't actually happen between corporations—it happens between products and services at the front line where customers make choices. The conventional wisdom suggests that corporations compete against each other like nations at war, with CEOs as generals directing the battle from headquarters. This model leads executives to focus on company-wide strategies and market share calculations that often miss what truly influences customer decisions. In reality, customers choose between specific offerings, not between corporate entities. When someone buys a smartphone, they're choosing between an iPhone and a Galaxy, not between Apple and Samsung as corporations. Similarly, when purchasing shampoo, consumers decide between Pantene and Dove products, not between Procter & Gamble and Unilever. This distinction is crucial because it redirects attention to where value is actually created—at the point of customer interaction. The front-line competition model reshapes organizational structure and responsibilities. Instead of viewing the corporate hierarchy as a command-and-control system where wisdom flows from the top, it treats each level of the organization as serving the level below it. The frontline units that directly engage with customers become the focus, with every layer above them evaluated based on whether they add more value than they cost to those frontline operations. This creates a clear metric: if the marketing department, for instance, doesn't help the product teams succeed more than it costs to maintain, it's a net liability. This perspective transforms how corporations should develop their strategies. Rather than asking "How do we beat our corporate rivals?" leaders should ask, "How do we help our frontline offerings win their specific competitive battles?" This means corporate executives need to deeply understand customer experiences, spending time observing interactions rather than remaining isolated in executive suites. A.G. Lafley exemplified this approach at P&G by making in-home consumer visits and store walk-throughs mandatory components of his travel schedule, signaling that even the CEO needed direct customer insights. Creating value from the front line back requires iterative strategy development. Companies must identify which capabilities truly matter to frontline success, decide which products deserve continued investment, determine what new offerings to develop, and eliminate organizational layers that don't contribute net value. P&G demonstrated this discipline by divesting food, pharmaceutical, and beauty businesses where its core capabilities couldn't add sufficient value, while investing in categories where its innovation and brand-building strengths could truly differentiate offerings in consumers' eyes.

Chapter 2: Stakeholder Theory Reimagined: Customers Before Shareholders

The conventional model of shareholder primacy has dominated corporate thinking since the 1970s, when economists like Jensen and Meckling argued that companies exist primarily to maximize shareholder value. This theory suggests that by focusing single-mindedly on shareholder returns, executives will make decisions that optimize overall corporate performance. Generations of business leaders have embraced this approach, creating compensation systems, governance structures, and strategic frameworks all designed to align management actions with stock price appreciation. However, this model contains a fundamental contradiction. Shareholder value is based on expectations about future performance, not current activities. Stock prices reflect investors' collective predictions about future cash flows, which means that increasing shareholder value requires continually exceeding market expectations—an unsustainable task. When executives focus exclusively on stock price, they often resort to managing expectations rather than building actual long-term competitive strength, leading to short-term decisions that ultimately destroy value. Companies that consistently create superior shareholder returns over decades often follow a different approach—they prioritize customers over shareholders. Johnson & Johnson's famous credo explicitly ranks stakeholders, with customers first and shareholders last. Similarly, Procter & Gamble's statement of purpose emphasizes improving consumers' lives, with shareholder returns positioned as a result rather than the primary goal. These companies recognize that exceptional customer value is what ultimately generates sustainable profits. This reimagined stakeholder model was dramatically demonstrated during the 1982 Tylenol poisoning crisis. When seven Chicago consumers died after taking tampered Tylenol capsules, J&J's CEO James Burke immediately recalled every Tylenol capsule nationwide—a decision that sacrificed short-term profits but prioritized customer safety above all else. Rather than being punished by the market, J&J's commitment to putting customers first ultimately strengthened its reputation and long-term value, with the company remaining among the world's most valuable corporations decades later. When Unilever CEO Paul Polman took over in 2009, he boldly informed shareholders that the company had been underinvesting in long-term innovation and brand building to boost short-term results. He announced his intention to prioritize sustainable growth and consumer needs over quarterly earnings targets, telling investors who disagreed to simply sell their shares. While some did, they were replaced by investors who shared his longer-term vision, and Unilever's stock rose 266% during his decade-long tenure—despite explicitly deprioritizing shareholder returns. The evidence consistently shows that companies focusing obsessively on shareholder value often fail to create it sustainably, while those treating shareholder returns as the natural outcome of serving customers exceptionally well tend to outperform. This requires a fundamental shift in how businesses structure leadership incentives, measure success, and communicate priorities—moving from a model that maximizes quarterly returns to one that builds enduring customer relationships and competitive advantages.

Chapter 3: The Familiarity Principle: Why Habits Trump Perfect Solutions

The dominant theory in marketing and product development assumes that brands win by constantly improving their value proposition to remain the rational or emotional best choice for consumers. This leads companies to continuously update and reinvent their offerings, believing that customer loyalty depends on having the objectively superior product in a category. Instagram's controversial 2016 redesign of its iconic camera logo exemplifies this approach—the company abandoned a familiar design that millions recognized in favor of a more "modern" look that theoretically reflected evolving user needs. However, this model fundamentally misunderstands how consumers actually make choices. Behavioral psychology reveals that most purchase decisions aren't the result of conscious deliberation but rather of unconscious habit formation. Our brains are designed to minimize cognitive effort, creating processing shortcuts that favor familiar options over new ones—even when the new options might theoretically be "better." Each time we select and use a product, neural pathways are strengthened, making that same choice progressively easier and more automatic the next time. This "familiarity principle" explains why market leaders tend to maintain their dominance even when competitors introduce seemingly superior alternatives. Tide detergent, for instance, has steadily widened its market lead for decades despite numerous competitive challenges. The explanation isn't that Tide has always been objectively superior, but rather that each purchase reinforces consumer habit, creating what Martin calls "cumulative advantage"—a widening ease gap between the familiar leading brand and its competitors. Understanding this principle transforms how companies should approach innovation and growth. Rather than constantly reinventing their offerings, successful brands like Tide innovate within familiar frameworks, preserving the distinctive orange packaging and logo while introducing improvements as extensions of the existing brand (Tide Pods, Tide Coldwater). Even when radical innovation is necessary—as when Netflix shifted from DVD delivery to streaming—the company maintained familiar elements like the user interface design and subscription model to ease the transition for habituated customers. This principle reveals why many rebranding efforts fail spectacularly. When companies disrupt established visual cues and interaction patterns, they force customers to make conscious choices rather than allowing them to rely on comfortable habits. Four strategies help companies build rather than disrupt cumulative advantage: becoming popular early through aggressive initial marketing; designing products and experiences specifically to become habitual; innovating within established brand frameworks rather than replacing them; and keeping marketing communications simple enough for "fast thinking" rather than requiring analytical "slow thinking" from customers.

Chapter 4: Strategy as Possibility Testing: The What-Would-Have-To-Be-True Approach

Traditional strategic planning typically begins with extensive analysis of historical data, market research, and competitor positioning to determine "what is true" about the current situation. This approach relies on the assumption that the best strategic choices emerge from rigorous examination of facts and trends. Strategic planners pride themselves on being scientific and data-driven, filling spreadsheets and generating voluminous reports that feel authoritative yet often fail to produce truly novel strategic directions. The what-would-have-to-be-true approach offers a fundamentally different path to strategy formation. Rather than asking "What is true?" (which anchors thinking in the status quo), it asks "What would have to be true for this strategic possibility to succeed?" This shift transforms strategy-making from an exercise in analyzing the past to a structured exploration of possible futures, focusing on identifying and testing the conditions required for different strategic options to work. This methodology unfolds through seven structured steps. First, teams frame their challenge as a choice between possibilities rather than as a problem to solve. Second, they generate multiple strategic possibilities—complete stories about how the company might succeed—without immediately judging their feasibility. Third, for each possibility, the team specifies what conditions would need to hold true for that strategy to be successful, considering factors like industry economics, customer preferences, and organizational capabilities. The process continues with the team identifying which conditions seem least likely to hold true for each strategic possibility—these become the "barrier conditions" that determine whether a strategy is viable. The fifth step involves designing specific tests to determine whether these barrier conditions actually hold true. Importantly, the most skeptical team members design the tests for the possibilities they doubt most, ensuring rigorous examination. In the sixth step, these tests are conducted efficiently, starting with the conditions deemed least likely to hold true to quickly eliminate unfeasible options. Finally, the team selects the strategic possibility with the fewest serious barriers. This approach transformed strategy at Procter & Gamble when considering how to revitalize its Oil of Olay brand. Instead of simply analyzing historical performance data, the team explored multiple possibilities, including taking the brand upmarket, acquiring a different skincare brand, or creating an entirely new "masstige" category between mass and prestige markets. By systematically identifying and testing the conditions for each possibility, they discovered that mass-market consumers would accept a dramatically higher price point, but only at certain specific price levels that signaled quality. This insight led to the creation of Olay Total Effects at $18.99—a dramatic price increase that proved successful because the team had tested the precise conditions required for the strategy to work. The what-would-have-to-be-true approach isn't easier than traditional planning—it requires significant mental discipline to explore possibilities without prematurely judging them and to design objective tests of critical assumptions. However, by separating the generation of strategic options from their evaluation, it dramatically expands the range of possibilities considered and leads to strategies that are both more innovative and more likely to succeed.

Chapter 5: Data vs. Imagination: When Analytics Fails Innovation

The business world has embraced data-driven decision making as the gold standard of management practice. With the rise of big data and advanced analytics, executives increasingly believe that rigorous analysis of information should drive every business decision. This scientific approach seems inherently sensible—after all, data provides objectivity and precision in a complex world. Many business leaders, especially those with backgrounds in applied sciences or MBA programs steeped in scientific management traditions, find comfort in letting data dictate direction. However, this data-centric model fails to recognize a crucial distinction that dates back to Aristotle. The ancient philosopher distinguished between two fundamentally different domains: things that "cannot be other than they are" (governed by natural laws) and things that "can be other than they are" (shaped by human choice and invention). While scientific analysis excels at understanding the former, it's often inadequate—and sometimes actively harmful—when applied to the latter. The key insight is recognizing which elements of a business situation fall into each category. In a water bottling operation, certain physical aspects like heating requirements, cooling times, and fluid dynamics cannot be changed—they're governed by immutable laws of physics. But the sequence of operations, the design of the bottle, and the entire business model absolutely can be different. Companies like LiquiForm demonstrate this by questioning industry assumptions, creating breakthrough innovations by combining traditionally separate manufacturing steps. When executives mistake changeable elements for fixed ones, they inadvertently limit innovation. At Lego, data showed that 85% of brick players were boys, which many interpreted as evidence that girls were inherently less interested in construction toys. By recognizing this as an assumption rather than an immutable fact, CEO Jørgen Vig Knudstorp led research that revealed girls were interested in different collaborative play patterns. This insight led to the successful Lego Friends line, which dramatically expanded the company's market. For situations where possibilities can be created, an entirely different approach is needed—one based on narrative construction rather than data analysis. Aristotle's principles of rhetoric provide guidance here too, requiring a compelling combination of ethos (credibility and character), logos (logical structure), and pathos (emotional connection). When a merged insurance company needed to transform its culture after acquiring numerous smaller firms during a financial crisis, leadership created a metaphor of building a "thriving city" rather than simply analyzing cost synergies. This narrative approach engaged employees emotionally and intellectually, resulting in dramatic improvements in engagement and performance. The most powerful innovation tools aren't spreadsheets but well-crafted metaphors that allow people to connect previously unrelated concepts—like Samuel Colt developing the revolver after observing a ship's wheel mechanism, or describing early automobiles as "horseless carriages" to make the innovation comprehensible. When working in the realm of possibility, creating and testing narratives through prototyping generates data that doesn't yet exist, enabling the creation of entirely new products, services, and business models that analysis of historical data could never reveal.

Chapter 6: Culture Change Through Micro-Interventions: Altering How People Work Together

Organizational culture is widely recognized as a critical factor in company performance, with management scholars like Peter Drucker noting that culture is "singularly persistent" and Edgar Schein observing that "culture determines and limits strategy." Most executives understand that culture—the unwritten rulebook that guides how employees interpret situations and make decisions—can either enable or undermine strategic initiatives. Yet traditional approaches to changing culture, which typically involve formal reorganizations or inspirational pronouncements from leadership, rarely succeed. The fundamental misconception is treating culture as something that can be directly manipulated. In reality, culture is a derivative construct that emerges from the interaction between an organization's formal mechanisms (structures, systems, processes) and its interpersonal mechanisms (how individuals actually interact face-to-face). These organizational steering mechanisms form an interconnected system with continuous feedback loops. When Nokia attempted to become more entrepreneurial through restructuring in 2004, the effort failed because employees continued to follow their existing cultural rules—including an aversion to failure that prevented the risk-taking needed for innovation. Effective culture change requires focusing on the interpersonal layer—the actual interactions between people. This means implementing micro-interventions that alter how people prepare for meetings, who participates in discussions, and how conversations are framed. These seemingly small changes can trigger profound shifts in behavior that gradually rewrite the organization's cultural rulebook. At Procter & Gamble, CEO A.G. Lafley transformed the corporate strategy process not through reorganization but by changing how strategy reviews were conducted—eliminating lengthy PowerPoint presentations and issue sheets in favor of focused discussions on a few critical topics. The power of micro-interventions was demonstrated at Amcor, where a personal strategic initiative program was redesigned to create peer working groups that helped participants develop their projects together rather than presenting finished work for evaluation. This subtle shift changed the culture from one focused on performance assessment to one centered on collaborative improvement. Similarly, at a Fortune 25 company, reframing board interactions from "presenting for approval" to "seeking experienced advice" transformed the previously antagonistic relationship between executives and directors. Martin's experience as dean of the Rotman School of Management provides a comprehensive example of culture change through micro-interventions. Rather than announcing a new culture or reorganizing the school, Martin modified three key interactions: faculty reviews (shifting from evaluation to asking how he could help professors achieve their goals); conflict management (offering to immediately bring conflicting parties together rather than allowing behind-the-back complaints); and external stakeholder engagement (adopting a "doctrine of relentless utility" that focused on providing value to alumni and business partners without expecting immediate returns). The cumulative effect of these micro-interventions was transformative. Faculty retention improved dramatically, conflicts were resolved directly rather than escalating to administration, and external engagement flourished—with event participation growing from two business community events annually to 122 events attracting over 10,000 attendees. By focusing on changing specific interactions rather than declaring cultural change, Martin created sustainable shifts in behavior that ultimately rewrote the school's cultural rulebook without ever explicitly discussing "culture change."

Chapter 7: Knowledge Work as Project-Based: Organizing Beyond Permanent Jobs

Traditional management approaches treat knowledge work as fundamentally similar to manual work, organizing both around permanent, full-time jobs with steady outputs. This model assumes that a vice president of marketing, for instance, should produce roughly the same amount of work each day, performing a consistent set of activities specified in a job description. Companies then staff each function according to anticipated peak demand, creating significant excess capacity spread throughout the organization during normal operations. This mismatch between the permanent-job model and the reality of knowledge work creates a destructive cycle. Companies hire waves of knowledge workers during growth periods, discover they have excess capacity when conditions change, conduct large-scale layoffs, and then eventually begin hiring again—a pattern visible even at highly respected companies like General Electric, Colgate-Palmolive, and PepsiCo. This cycle wastes talent, destroys organizational knowledge, and prevents companies from allocating resources where they would create the most value. The fundamental insight is that knowledge work naturally arrives in the form of projects rather than steady streams of similar tasks. Knowledge workers experience significant variation in their workload, with intense periods of activity followed by relative lulls. The assistant brand manager for Dove at Unilever might work on pricing a brand extension one month, managing production issues the next, and then have a relatively quiet period before the next major project begins. Treating this naturally project-based work as a permanent job leads to inefficiency and prevents resources from flowing to where they're most needed. Professional services firms like Accenture and McKinsey demonstrate an alternative approach. These organizations, composed almost entirely of knowledge workers, organize around projects rather than permanent positions. When a project arrives, a team is assembled based on the required skills and availability. When the project concludes, team members move to new projects where their capabilities are needed. This flexibility allows these firms to rapidly deploy resources to the highest-value opportunities—which is precisely why their corporate clients, constrained by permanent job structures, often hire them in the first place. Some forward-thinking corporations have begun adopting this model. P&G's Global Business Services organization, under Filippo Passerini's leadership, created a "flow-to-the-work" structure for a significant portion of its workforce. Rather than assigning employees to permanent positions, it deployed them to high-priority projects based on business needs. This approach enabled P&G to complete the integration of its $57 billion Gillette acquisition in just fifteen months—less than half the typical time for an acquisition of that size, saving approximately $2 billion. Adopting a project-based approach also facilitates knowledge transfer and codification. When knowledge workers in permanent positions develop valuable expertise, they have little incentive to document or transfer it, as doing so might make them replaceable. In contrast, project-based structures encourage knowledge codification to enable smooth transitions between assignments. P&G leveraged this dynamic to transform its brand-building expertise from tacit knowledge held by experienced executives into a formal Brand Building Framework that accelerated learning for younger marketers and improved consistency across the organization.

Summary

A New Way to Think reveals that the fundamental challenge in management isn't applying existing models more rigorously, but recognizing when those models themselves are flawed and need replacement. The book's central insight is that when a framework repeatedly fails to deliver promised results, the solution isn't to blame the implementation but to develop a fundamentally different mental model—whether regarding competition, stakeholder priorities, culture change, or any other management domain. This perspective transforms how leaders approach their most critical challenges. By examining fourteen areas where conventional wisdom consistently underperforms, Martin provides alternative frameworks that better align with reality and produce superior outcomes. The implications extend beyond individual management practices to how we approach knowledge itself—recognizing that all models are provisional tools rather than permanent truths, and that progress comes from willingness to abandon familiar but flawed approaches in favor of new thinking. For executives and managers at every level, this means treating models as servants rather than masters, continuously evaluating their effectiveness and having the courage to adopt new mental frameworks when existing ones no longer serve.

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Roger L. Martin

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