Anuradha Sengupta:

Taking us on this journey into the mind is Yoram Jerry Wind, Professor at the Wharton school and co-author of the book - The Power of Impossible Thinking. And joining us on the first stop on this journey is Ranjan Kapoor, one of the most authoritative voices in the Indian communications business. Thank you both very much for being on this fresh series of Lessons In Excellence. Jerry, you spent a lifetime researching marketing strategy and marketing led corporate growth strategies. What prompted you to shift into this sphere of mental models?

Yoram Wind: Three things. First, I started a programme, 'the Wharton Fellow'- a programme, which is life long education, a programme for top executive-owned transformation leadership and we realised that one of the major obstacles to effective transformation is the mental models of the participants. This was the first major incentive to start thinking about mental models.

The second is the dramatic changes we have seen in the business environment especially in terms of consumer behaviour and other changes in technology and the like and the fact that a lot of businesses are not reacting to them. If you think about - you mention marketing - you think about the changing role of the 30-second commercial , dramatic impact, yet the industry is very slow to react to it. Napster - major innovation - change of behaviour and the record companies behave as if nothing has happened. So you have these changes but no reaction. And the third fact here is that it has always been disturbing to me why so many innovations start not from the incumbent but from companies coming from other industries.

If you think about Federal Express, if you think about Diet Coke, if you think about the variety of breakthrough innovations, they all come from outside the industry and why is it that the industry is not capable of leading the change? Look at the three combination and it is natural - what is common to them - and the mental models of the participants can explain that.

Anuradha Sengupta: But Ranjan, you have read the book. Do you think at some level this concept of mental models is pretty breathtaking in its simplicity isn't it? And yet do you feel that as individuals and organisations we tend to overlook them or are we conscious of them? What has your experience being?

Ranjan Kapoor: I think once you put a concept down, it always looks blindingly obvious and simple and that is the problem. Most solutions look very simple after they have solved a problem.

Anuradha Sengupta: And they are being articulated.

Ranjan Kapoor: And they are being articulated and therefore you sort of say - hey I could have written that book. It sounds very simple but the problem is that this is common sense in a sense but then common sense is rare.

Anuradha Sengupta: What have your experiences been? Do you see organisations and individuals aware of what these mental models are? Of course I am going to come to Jerry in a bit to explain what they are…

Ranjan Kapoor: I personally don't think that people are aware of it because as Jerry mentions in the book, paraphrasing it, but frankly, your condition through your upbringing, your education etc, and you develop these blind spots and you see the world as your mind sees it

Anuradha Sengupta: So your experience suggests that we are pretty ignorant, unaware of these mental models?

Ranjan Kapoor: Generally so. And that is the reason why a lot of us do not see the blindingly obvious things.

Anuradha Sengupta: Ok, Jerry, how would you explain mental models? Would I be right in saying that sum of all mental models we have is our imperceptive background, what we are used to calling our imperceptive background?

Yoram Wind: Yes in the sense there has been many terms used over the years in the Literature describing it. We describe this as the sum processes that lead the person to understand the environment in a certain way, to make sense of the environment and to act in a certain way.

I think the easiest way to understand mental models are through examples and if I may, the cleanest way and the most intuitive one is really the example we tried in the book and the example is that you walk at night - you leave your office and walk to the parking lot and you suddenly hear steps behind you and you suddenly start walking a little faster because you are a little scared and as you walk faster the steps behind you get faster and closer to you and suddenly you turn your head a little bit and you see a colleague of yours walking also to his car and you sigh of relief and also walk your colleague to the car.

Now what happened here is that the situation was exactly the same situation - the steps behind you. We created two different models in our mind. One was the fear because suddenly you remember that you had read in the papers that there was a attack at night in a similar situation and your mind created the whole situation of fear. Next once you recognised the person - the instant change. The model that you had changed completely. And I think that's what it becomes. It's the way that we think. I'll give you another example. When we think about inner city, the images that come into mind immediately is crime, drug, poverty…

Anuradha Sengupta: A place you don't want to go to!

Yoram Wind: Right. And not only that, a place where you will never invest in. Now take another model. When I say emerging markets - all the publicity about China and India and all other emerging markets, people love to invest in emerging markets because the connotation is opportunities. Now what if we change the inner city? And we didn't call it the inner city anymore and we call it the domestic emerging markets? A term coined by Michael Porter and the Wilkins institute. Well, this simple change in term - from inner city to emerging domestic markets gives us a totally different frame of reference.

Anuradha Sengupta: And an opportunity and a vista opens out!

Yoram Wind: Opportunity!

Anuradha Sengupta: Ranjan, domestic emerging markets - would Indian businesses be guilty of not noticing these emerging domestic markets?

Ranjan Kapoor: A clear example sitting in front of us is Dharavi. We disdainfully call Dharavi "Asia's largest slum". But it is a big contributor to the city's economy. I think probably India's largest exports of leather go out of Dharavi.

Anuradha Sengupta: And the unorganised services powering the city.

Ranjan Kapoor: And there are lots of companies going into rural India to try and reach the 600,000 villages we have when you have a huge village - mindset sitting in the heart of Mumbai city and you are not tapping that emerging domestic market.

Anuradha Sengupta: So you are the urban market, the rural market, these are perhaps the existing mindsets when it comes to looking at markets but there are other unexplored and you have given Dharavi as an example. Would there be others?

Ranjan Kapoor: I could give you another example. Because we called it a slum so it will always retain the mental image of a slum. I asked somebody the other day "have you been to Dharavi?" "Who wants to go to Dharavi", says he. It is a dirty, filthy place. I said "I think you should go to Dharavi. You will be amazed. It is not a slum as you see it - it's different." But he couldn't cope with that.

Let me give you another example. The fishing villages of Mumbai. Don't we consider them a blot on our landscape? We wish they would go away. They happen to be a part of our heritage but do you realise how they contribute to our economy? What if we did not call them the fishing villages of Mumbai or the machhimaars (fishermen) of Mumbai? And we call them the cultural heritage centres of Mumbai - that is what they are. They are the original inhabitants of this city and we want to shove them away under a carpet of something because they are dirty and it is bedraggled but that is our fault because we do not preserve it and celebrate it - I am giving you a second example.

Anuradha Sengupta: It's completely based on the way we are seeing something.

Ranjan Kapoor: It is because we see them either as a dirty fishing village or we see it as a slum and miss the opportunity.

Anuradha Sengupta: Jerry, you are very categorical that these mental models have a direct impact, have direct profit and loss, life and death impact. In fact you believe that the 9/11 hijacking has changed the way the mindset or the mental model in which people will now react to hijacking.

Yoram Wind: Lets take the example. The first two planes that hit the World Trade Centre, the passengers in these planes basically behaved based on the current mental model in respect to hijacking that is - do nothing, just be quiet, obey the hijackers and eventually the authorities will negotiate and everything will be ok. The third plane, the flight which eventually crashed in Pennsylvania, the passengers received information as to what happened in New York.

So the passengers and crew - we don't know exactly what happened on the flight - but we know that once they realised what happened in New York with the first two planes, they changed their mental models and acted. They did something that brought the plane down. Since then I am absolutely certain that any new hijacking that will happen, people will not behave based on their old mental model but their new one. That is an extreme situation where you have such life and death situation that led people to change behaviour. But in business you have all the time a situation of changing mental models is leading to new form of behaviour.

Anuradha Sengupta: Ranjan, here we have an example of an extreme case and a very extraordinary situation which compelled people to change their mental model. But in ordinary life why do you think these mental models are invisible or we tend to forget that they exist?

Ranjan Kapoor: I think as I mentioned earlier, it is because of the blind spot you develop and you are going along a trodden path, your comfort levels are high. Unless and until something negative happens in that space, you are likely to travel on that trodden path. And more or less we have come out of an easy sort of situation as a country. We haven't faced global challenges. We have been fairly closed in and only recently we have been beginning to face those challenges. We were License Raj - blocked growth rate of one to three per cent… sort of happy, discontent but not revolutionary in our approach to things. Now we are changing. We are part of the global set-up.

Anuradha Sengupta: Jerry, what would you attribute as being the main reasons why we are not aware of these mental models and we sort of - they are unconsciously guiding so much of our actions or most of our actions?

Yoram Wind: Well, first we must realise that mental models are critical to our survival. We cannot operate without mental models. We are subject to thousands of stimuli everyday and we have to have this heuristic and short cut and this ability to operate in a complex environment. If I am in a room with hundreds of people out there and I see you - now that I know who you are - I'll recognise you. That is a mental model. I know who you are and I can immediately recognise you. I don't have to study the situation anymore.

So mental models are critical to our ability to operate. Now given this we develop and evolve over the years. Now the thing that is critical to understand is that we are being enforced with what we do. Most of the people are in position of critical decision making, power, influence, are people for which this is not the first decision. They have done certain things in the past, they were reinforced by their success and given this there is very little incentive to change.

That is the point that Ranjan made, which is so correct, that change often happens in crisis, when the situation is dramatically different, when you are in trouble and most companies are more receptive to change once they are in trouble. The challenge is - how do we recognise the early warning signals and how do we know that the mental models that we have which cherished and helped us to achieve what we did is no longer appropriate to the changing environment and that is what the challenge of the mental model is.

So the reality is the organisations, the culture, the values, everything around us is very sickly leading us to resistance to change. In most cases - there are of course exceptions - of companies that thrive on change - but typically the reinforcement, the values, the culture, the structure of the organisation, the entire organisation and the society when subject - just continue with what we are doing and we will be successful.

Anuradha Sengupta: Right. Can you give us an example of where you have seen this kind of thing happen?

Yoram Wind: The resistance to change? Take all the major companies over the years. Take General Motors over the years, how they suffered, look at IBM before Gerstner took over. It was with all the large companies. They became large, arrogant, successful and they really resist changes even though it is obvious. Look at the current situation. The record companies still don't get it.

Anuradha Sengupta: Is there a cultural spin that we can put on these things? Is this the human condition that makes us like this, Ranjan? Would we say that a certain culture or society makes you more adept to recognise resisting change or actually…

Ranjan Kapoor: I'll give you a totally different and dramatic examples. I don't think it is a human condition. It is in all animals. I have just come back from South Africa. You are in a Land Rover and you are right in the middle of this pride of lions. Two lionesses and eight little kids playing around. And they don't bother you. You don't bother them and they don't bother you.

Their mental model has accepted the Land Rover and everything in it as a safe unit, that makes a lot of noise, comes and settles amongst them but does nothing else. It is a very benign object and that mental model is fixed. Try stepping out of that and they start fuming and they kill you and there have been examples of someone even standing up in the Land Rover - that's why you are told, "do not stand, do not talk" because those are the two things that can immediately become a threat. I am giving this example because that is exactly what it is about.

I think all mental models are formed out of conditioning and your upbringing and there are set ways of doing things. You do this, you will be safe. You do this and you will be successful. You do this, you will grow. It is all transactions.

Anuradha Sengupta: So there is no cultural spin that we can -

Ranjan Kapoor: I am not sure if it is a cultural spin because I feel if animals can have mental models, human beings across all cultures…

Yoram Wind: I love the example of the lion. I think that is a great example. I don't know enough about all the world's cultures to find out if there is a cultural difference among different societies but I do know that there are corporate cultures and our corporate cultures are much more tuned and geared to identify the need for change. There are corporate cultures which are very still and conservative and would be almost anti-any change and this relates to top executives and to the values they can bring, the culture they can create, their attitude towards failure.

If a company basically punishes - if you fail you are out - you never get experimentation, a willingness to change, will have a more conservative attitude. On the other hand you take a company that encourages basically lessons from failure. There is a wonderful story about 3M. A person who was in charge of a large project came to Ron Mitch, who was the vice chairman during that time, and said, "I assume that I have to prepare my resume... we just realised that we lost over 40 million dollars in this." Ron looked at him and said, "You must be kidding, I just invested 40 million dollars in you and now go and show me what you have learned." I think that is a corporate culture that encourages people to learn from mistakes, to take risks, to experiment as opposed…

Anuradha Sengupta: But Jerry, the point is that how come one company has it or one person has it and the other doesn't. Where do the blocks come in?

Yoram Wind: I think to a large extent from the top executives. Top executives set the tone and you can have a CEO who encourages this and if you take a company such as SCI investments, Al West, the founder chairman, he continuously pushes the envelope and changes and everything around what he creates, he creates an atmosphere of change. For example, they have only open offices. In the whole company, there is no distinction between his office and others. He doesn't have an office.

He has a desk and all desks are on wheels. The chairs are on wheels, the book case is on wheels and the signals that it sends is "change". Fluidity…change. You can create a group, a theme. The company is based in theme. Into this very theme from different areas within an hour it is zero cost. It used to cost them over the year, millions of dollars to try and move people and change walls and configuration. Now there isn't anything. You want to follow a theme, you get the theme, you move the desk, move everything …

Anuradha Sengupta: Ranjan is very used to it. Ranjan represents a company which is talking nothing but interdisciplinary and across agency teams. Do you see what WPP is doing in doing these global pitches where people from different agencies are coming together and looking at global clients - it is a very different way of doing advertising business, isn't it?

Ranjan Kapoor: I think it is radically new and radically different and I think it is a precursor to what the agency business can become or will become into the future and it is no longer an experimentation. I mean frankly you are building businesses around brands and clients and that is what clients love and if you think about it today, client relationships, client focus is what matters in a service industry.

This whole thing of "me first" is being thrown out of the window. When you put your brand there, then all you are suggesting to that brand is - I am giving you my best resources, I am actually giving you a separate bricks and mortar unit that will service this and I am also getting rid of all those conflict issues that you had in your head because this is a dedicated team meant for you. So, Motorola gets its own dedicated team, Nokia gets its own dedicated team.

Anuradha Sengupta: So it is a change. Jerry I am going to put the final question to you - the whole thing about the power of the impossible, thinking about changing mental models is about transformation. What is it as a society that can be harnessed by changing mental models? What do you think is an example of how society, civilisation has benefited from change mental models?

Yoram Wind: I think if you look at this from the historical perspective, then most progress has come from the changes in the mental model. If you look at all the breakthrough innovations, they all basically are changing the existing mental models. What we have to do when we start the transformation is that we have to understand the process that evolves here.

Understand that it is critical for us to understand the importance of mental models, the importance for us to understand what are our mental models, important for us to understand when do we have to change them. When are the conditions such that we have the change the mental models because they don't fit, how to modify them and we have also to understand then assuming we come up with a new mental model or it could be - of the old and the new - how to implement it, how to go about implementing it.

Anuradha Sengupta: Right. Thank you very much for being on this show of Lessons In Excellence. Thank you for watching, we will be back again next week.