AI has increased the urgency for businesses to revisit and reimagine their strategies to respond to a rapidly changing world. The influence of AI is fast impacting how businesses are run and how their products and services are selected, created, marketed, purchased, sold, delivered, and supported. Many new industries will be created, and many established industries will reshuffle their hierarchies or become obsolete.
Strategy is about winning. To succeed in this high-stakes and fast-moving environment requires creating a targeted and forward-thinking business strategy that increases the likelihood of success.
The quote, “If a man knows not which port he sails, no wind is favorable,” often attributed to Seneca, conveys a profound metaphor about the importance of having clear goals and direction in life. Without a strategy supported by a clear mission, vision, and adequate resources, efforts risk being unfocused, wasting time, energy and money while missing valuable opportunities. The quote is an excellent reminder to identify your goals and chart a course to best achieve them.
When developing a business strategy, we naturally ask questions to help us achieve goals and focus on what we want to happen. Anyone who has done any strategic planning on a personal or organizational level has asked some form of the question, “What are the desired goals, outcome, result, or future state?”
These are important questions, as defining what success looks like is essential to the strategic planning process.
At a high level, the strategy creation process involves defining the organization’s vision, goals, and objectives, understanding the current market landscape, looking into the crystal ball of the future, setting key strategic objectives to achieve those objectives, and continuously monitoring and refining the strategy as needed. Ultimately, it’s about establishing a clear direction, aligning internal capabilities with external opportunities, and mapping out the major actions to achieve desired outcomes.
A powerful technique that can improve strategy quality is inverse thinking. Instead of focusing solely on what we want, inverse thinking challenges us to ask and think about, “What don’t we want to happen?” and “How do we improve the odds of something not happening?” In today’s fast-changing world, asking these questions is an important exercise for any business during the strategy creation process. It is especially important if you run an established and successful business and want to stay at the top of your industry.
History has shown us time and again that businesses that assume the status quo at major innovation inflection points often end up on the short end of the stick. Many companies have even faced obsolescence due to their inability to adapt their business strategy to these shifts.
Not too long ago, Kodak, once synonymous with photography, failed to fully embrace digital technology despite inventing the first digital camera, allowing competitors to dominate and rendering its film-based business model obsolete. Similarly, Blockbuster, a giant in video rentals, ignored the growing trend of online streaming, leading to its downfall as Netflix and other on-demand platforms rose to prominence. Borders, a major bookseller and once an industry leader, did not embrace e-books and e-commerce quickly enough and has been playing catch up as it competes with Amazon's convenience and cost structure.
Polaroid, once a household name for instant photography, was sidelined by the rise of digital cameras and smartphones, leading to its bankruptcy. Tower Records, which once dominated the music retail space, could not transition to the digital era as music consumption shifted to downloads and streaming services like Napster, Pandora, and later Spotify, and Apple Music. Once the global leader in mobile phones, Nokia faltered when it underestimated the impact of smartphones powered by iOS and Android, dramatically losing market share.
Traditional retail giants also struggled to adapt. Sears, which once revolutionized shopping through its mail-order catalogs, could not compete with the rise of e-commerce and online giants like Amazon and Walmart, leading to their bankruptcy. Similarly, RadioShack, a go-to source for electronics and computers, saw its relevance fade as consumers shifted to larger chains and online retailers like Best Buy, and Dell. Established auto industry leaders Toyota and Honda have been unseeded by the Tesla Model Y as the world's best-selling car in 2023. This is pretty impressive, considering that model Y and mass-produced electric vehicles sold directly to consumers did not even exist a few short years ago. There are now reports that Honda may merge with Nissan to maintain competitiveness.
These examples underline a consistent truth, no matter how dominant a company might be, failing to create a strategy that adapts to market changes can lead to irrelevance or collapse.
So, how does inverse thinking play into the ability to create a winning strategy in times of such change? Charlie Munger, the renowned billionaire investor, Berkshire Hathaway vice chairman, and inverse thinking proponent, has attributed much of his success is avoiding making big mistakes, “All I want to know is where I’m going to die, so I’ll never go there.” [1] In business strategy terms, understand where failure lies and avoid it at all costs, and you have a greater probability of success.
To be clear, inverse thinking isn’t about pessimism; it’s about covering your strategic bases.
What is Inverse Thinking?
Inverse thinking (or “inversion”) is thinking backward. Instead of asking, “How to succeed?” also ask, “How can I fail?” or “What don’t I want to happen?” and then ensure those failure points are avoided through strategic planning. This balanced approach forces you to consider hidden dangers, blind spots, and assumptions that might otherwise escape notice.
An inverse is like working a problem backward. Imagine a function as a machine: you put in a number, and it spits out a result. The inverse is the reverse machine—it takes the result and figures out what you put in. This is useful when solving tricky problems because sometimes going forward is too complicated, but going backward is easier. In real life, we do this all the time, like retracing our steps when we lose something. In the same way, in business, thinking about how things could fail (working backward) can help us avoid mistakes and figure out how to succeed. It’s often easier to identify what not to do than to pinpoint the exact formula for success.
Why Inverse Thinking Works
Identifies Hidden Risks: It uncovers weaknesses that a traditional forward-thinking approach might miss.
Enhances Strategic Clarity: Focuses on potential failure and risk points to make your strategy clearer and more robust.
Reduces Overconfidence: It counters the natural human tendency towards optimism and status quo bias.
Considers the Uncomfortable: Provides an opportunity to consider the tough questions with big implications.
Adopting this mindset can fortify your strategy against unseen vulnerabilities, keeping you in good company and at the top of your industry.
In the 1960s, NASA engineers faced President Kennedy’s extraordinary challenge and goal - Send humans to the Moon and bring them back safely. Success would demand innovative thinking balanced with the rigorous practice of inverse thinking—focusing on what could go wrong and systematically solving potential failures. This mindset was critical to the Apollo program’s triumph, exemplified by the Apollo 11 mission, which landed astronauts on the moon, and the infamous Apollo 13 mission, where preparation for failure saved the lives of the astronauts when an oxygen tank exploded. [2] [3]
Amazon uses pre-mortems as part of its culture of operational excellence. A pre-mortem is a proactive exercise where teams imagine a project has failed and then work backward to identify the possible reasons for the failure. This helps uncover potential risks, address blind spots, and implement safeguards before execution, improving the project’s chances of success. Amazon’s Prime Day events are a great example of inverse thinking success. Running a global shopping event with millions of transactions requires flawless execution. A failure in logistics, inventory, or server infrastructure could lead to significant losses in revenue and reputation. By conducting pre-mortems, Amazon's teams can anticipate potential challenges, such as server overloads, supply chain bottlenecks, or unexpected spikes in demand, and plan contingencies to address them. Amazon knows firsthand the criticality of this step toward success. To help Amazon Web Services (AWS) customers maximize success - which also benefits Amazon, they share and stress the importance of pre-mortem scenarios with customers and non-customers as part of their recommended best practices. [4]
Consulting firm McKinsey & Company highlights the significant impact of proactive risk management on financial stability and organizational resilience. Their research demonstrates that companies that invest in robust risk management frameworks experience significantly fewer adverse financial shocks than their peers. This reduction in financial disruptions translates to more predictable cash flows, greater investor confidence, and an enhanced ability to navigate market volatility. This approach protects the bottom line and creates a competitive advantage, enabling organizations to innovate and grow even in uncertain environments. They regularly share their research, findings, and trends through a dedicated website section. [5] [6]
Applying Inverse Thinking to Strategy Development
Let’s explore how to apply inverse thinking to strategy development through a few practical steps and actionable insights to help you identify potential failure points, avoid common pitfalls, and build a more resilient and effective strategy.
Applying Inverse Thinking to Strategy Development
Figure 1.
Identify the Failure Points
Consider potential obstacles by asking, “What would cause this strategy to fail spectacularly, and how do we avoid it?” These can include:
Market misjudgments
Technological disruptions
Competitive threats
Financial overextension
Leadership blind spots
The wrong or not enough of the right people driving the process
Current business viability in an AI-driven world – don’t take for granted that today’s success will be tomorrow’s results
Next, ask specific questions focused on the most likely or significant obstacles. For example, if your goal is to launch a new product or service, inversion might lead you to ask:
“What assumptions about customer demand might be wrong?”
“How could supply chain issues delay our launch?”
“How might competitors respond to undermine us?”
“Will AI make any of our current or proposed product or service offerings obsolete
“Could our entire industry become antiquated?”
By answering these questions, you can design strategies to prevent these outcomes.
Create an Anti-Strategy
A personal favorite is developing an anti-strategy strategy. A list of actions guaranteed to lead to failure. For instance, if your objective is to improve customer retention, the anti-strategy or what would cause a decrease in customer retention, might include:
Ignoring customer feedback
Delivering inconsistent service
Overpromising and underdelivering
Not providing products or services that offer actual customer value
Now, make sure your strategy work to avoid these pitfalls.
Conduct a Pre-Mortem
Before implementing your strategy, imagine it has already failed. Ask your team: “What went wrong?” This exercise helps uncover weaknesses while there’s still time to address them.
A pre-mortem can reveal issues that might not surface in traditional brainstorming sessions that take on a Pollyanna approach that only looks at the world optimistically.
Avoid Over-Engineering
Sometimes, strategies fail not due to significant flaws but because of excessive and unnecessary complexity. Ideas sound great in the vacuum of a strategy workshop to people who have expert knowledge – but does that idea translate and add value to your staff, partners, customers or non-customers? Inverse thinking reminds us to ask: “Are we optimizing to the point of fragility and adding in complexity that does not add value?”
Avoid making your strategy so intricate that it collapses under real-world pressures and can’t be executed or provides services, features, and functions that may be technically innovative, but your customers don’t value or care about them.
Inverse Thinking in Action
Let’s explore a few examples to see inverse thinking applied to real-world situations as part of the strategy creation process.
AI Startups and Ethical Pitfalls
In the rush to develop AI-driven products, many companies overlook the ethical and legal implications of their technologies. Inverse thinking could lead them to ask:
“How might our AI solution harm privacy or security?”
“What unintended biases could our AI solution introduce?”
What regulatory or legal challenges could derail our AI launch?”
By addressing these questions early, companies can create strategies that avoid reputational damage, legal penalties, and loss of customer trust.
AI for Professional Services
While many firms focus on leveraging AI to optimize processes and enhance service delivery, inversion encourages them to consider:
“Could AI replace our services?”
“What will AI do to the industries we serve?”
“What tasks could AI fail to perform accurately, leading to client dissatisfaction?”
“How might reliance on AI reduce human oversight or critical judgment?”
“What risks could arise from misaligned AI recommendations or predictions?”
“Does AI usage by our staff open us up to intellectual property infringement or violate any non-disclosures?”
By addressing these concerns early, professional service firms can develop strategies that ensure professional relevancy, and that AI tools complement human expertise, maintain client trust, and minimize operational risks.
Self-Driving Car Safety
Autonomous vehicles face immense challenges in ensuring safety. Instead of only asking how to make cars safer, inversion leads manufacturers to ask:
“What situations are likely to cause accidents?”
“How could AI misinterpret environmental data?”
“What edge cases could the system fail to handle?”
Identifying these failure points can help create strategies that create safer, more reliable self-driving systems.
Learn from Kodak’s Digital Downfall
We earlier discussed several companies that looked at their present market dominance and turned a blind eye to what could change that would reverse those fortunes. Kodak, once a dominant photography force, is a classic example of a company that failed to apply inverse thinking. Despite inventing the digital camera, Kodak focused on preserving its film business. A strategy approach that more strongly balanced the inversion process might have led leadership to consider and act on a digital future more aggressively. [7]
“What if film becomes obsolete?”
“What could competitors do with digital technology that we’re not considering?”
By failing to avoid the obvious pitfalls of ignoring digital disruption, Kodak missed a critical opportunity to develop a strategy for the future. How many market leaders across the spectrum of all business categories can and will be displaced by AI today?
Learn from Amazon’s Massive Growth
Conversely, Amazon’s relentless focus on avoiding customer dissatisfaction is a hallmark of inverse thinking. Jeff Bezos is frequently attributed with asking some variation of the question, “What do we know customers hate?” Bezos highlighted in many interviews and shareholder letters his and the company’s focus on customer experience and innovation. Late deliveries, poor customer service, limited selection, and unreliable, slow, and insecure technology mediums are all failure points Amazon actively works to avoid. [8]
This inversion-led approach has helped Amazon to become and maintain its position as a market leader in e-commerce, cloud computing, digital media, logistics and fulfillment, subscription services, and AI and automation-related devices and services.
Embrace Inversion for AI Strategic Success
Inverse thinking is a powerful complement to traditional strategy development. By asking what to avoid, we gain clarity on what to pursue. As billionaire investor Charlie says, “Avoiding stupidity is easier than seeking brilliance.” [9]
With the business landscape rapidly evolving and industries transforming through AI, the stakes have never been higher. As you formulate your next strategy, pause to think in reverse: identify potential failure points, develop an anti-strategy, conduct a pre-mortem, and refrain from creating complexity simply because you can.
In a world obsessed with finding the “right moves,” sometimes the best move includes avoiding the wrong ones. Focusing on“what you want” and “what you want to avoid” will strengthen your path to building a successful AI strategy and help you dodge pitfalls that ensnare the less prepared competitors.
References and Citations
Munger, Charlie. Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger. Donning Company Publishers, 2006.
Seamans, R. NASA. (2007). PROJECT APOLLO The Tough Decisions #37. Retrieved December 10, 2024, from https://www.nasa.gov/wp-content/uploads/2023/04/sp-4537.pdf.
Hobbs, C. Georgia Institute of Technology. (2020, April). Working out the problems: Apollo 13. Retrieved December 12, 2024, from https://coe.gatech.edu/news/2020/04/working-out-problems-apollo-13.
Amazon Web Services. (n.d.). OPS05: Ready to support informed deployment decisions. AWS Well-Architected Framework. Retrieved December 1, 2024, from https://docs.aws.amazon.com/wellarchitected/latest/framework/ops_ready_to_support_informed_deploy_decisions.html.
Jain, R., Nauck, F., Poppensieker, T., & White, O. (2020, November 17). Meeting the future: Dynamic risk management for uncertain times. McKinsey & Company. Retrieved December 29, 2024, from https://www.mckinsey.com/capabilities/risk-and-resilience/our-insights/meeting-the-future-dynamic-risk-management-for-uncertain-times.
McKinsey & Company. McKinsey on Risk & Resilience. Retrieved December 29, 2024, from https://www.mckinsey.com/capabilities/risk-and-resilience/our-insights/mckinsey-on-risk.
Anthony, S. (2016, July). Kodak’s downfall wasn’t about technology. Harvard Business Review. Retrieved December 29, 2024, from https://hbr.org/2016/07/kodaks-downfall-wasnt-about-technology.
Amazon. (n.d.). Shareholder letters. About Amazon. Retrieved December 29, 2024, from https://www.aboutamazon.com/about-us/shareholder-letters.
Munger, Charlie. Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger. Donning Company Publishers, 2006.
Images and Media
Cover image, Microsoft Stock Image Photos, December 28, 2024
AI Tools
An actual human – Greg Valyou, wrote this article. In addition to calling on my experiences, knowledge, and research, the following AI tools were utilized to augment that process.
Napkin. https://www.napkin.ai. Accessed December 14, 2024
Illustration creation, Figure 1. Applying Inverse Thinking to Strategy Development
Grammarly. https://www.grammarly.com. Accessed December 1-30, 2024
Spelling, grammar, sentence structure, and plagiarism checks
ChatGPT (4o). https://chatgpt.com. Apple Store Application. Accessed December 1-30, 2024
During draft creation, reviewed suggested options for how to adjust some paragraphs for clarity
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