Why the Best Choice Between Growth and Risk May Be…Both

Strategic thinking implies hard choices between competing priorities. But Dr. Wendy Smith argues that the better course may be to embrace paradox, rather than trying to overcome it – and that successful strategies are often born from the combination of contradictory ideas.

Dr. Wendy Smith has a piece of advice for banking leaders struggling to steer between competing priorities – such as growth vs. risk, or innovation vs. stability. Her message: Stop thinking in terms of either/or and embrace the promise of both/and.

Smith has always been fascinated with paradox, and she’s especially intrigued by how leaders effectively respond to contradictory agendas. Asked in a recent interview what led her down this particular path, she exclaimed, “Ben and Jerry’s!” While working as a management consultant en route to her PhD., she saw a fascinating paradox in companies like the ice cream pioneer to “demonstrate sustainable pathways to integrate profits and purpose.”

That insight put her on the path to exploring when she now calls “both/and” thinking. She believes companies with the courage to take on both/and thinking can “simultaneously explore new possibilities while exploiting existing competencies.”

“Other academics told me ‘paradox’ belonged in a yoga study or a meditation session,” she says, rather than in an academic journal. But she has nonetheless carved out to explore this knotty topic. Smith is the Dana J. Johnson Professor of Business, faculty director and co-founder of the Women’s Leadership Initiative at the University of Delaware.

Wendy Smith is a featured speaker at The Financial Brand Forum 2024, May 20-22 in Las Vegas, part of our Forum University program, where, along with Scott Galloway, Professor of Marketing at NYU Stern, she will teach cutting-edge leadership skills and new management strategies. See the Forum website for more info on Forum University, and details on the full program.

Many know Smith primarily as the author of a forward-looking book aiming to sort through the paradoxes that businesses encounter with stunning regularity. Her 2022 book Both/And Thinking explores a paradigm-shifting alternative to either/or thinking allowing for “more creative, flexible, and impactful decisions in a world of competing demands.”

“Navigating paradoxes begins with understanding that tensions are double-edged swords,” she advises. “They can drag us down a negative path or catapult us toward a more positive one.”

Her research has been featured in an array of publications, including “Academy of Management Journal,” “Academy of Management Review,” “Administrative Science Quarterly,” “Harvard Business Review,” “Organization Science and Management Science.” She received the Web of Science Highly Cited Research Award (2019, 2020, and 2021) for being among the one percent most-cited researchers in her field and received the Decade Award (2021) from the Academy of Management Review for writing the most cited paper in the past 10 years.

She’s been honored with the University of Delaware’s first Mid-Career Excellence in Scholarship Award in 2018, along with its Lerner College Outstanding Scholar Award in 2015.

Here are some of the core ideas that drive the core ideas of Both/And.

Paradoxes are Everywhere

The first step to knowing how to navigate paradoxes is to recognize and then embrace them as part of the world we live in.

In an article Smith wrote with her Both/And co-author Marianne W. Lewis and organizational theorist Michael L. Tushman, called “Both/And Leadership,” they quote Nobel Prize–winning physicist Niels Bohr, who once said, “How wonderful that we have met with a paradox. Now we have some hope of making progress.”

Paradoxes address fundamental questions of whether we focus on today or tomorrow, the needs of ourselves or of others, preserve stability or affect change?

Smith and her collaborators point out that Albert Einstein being able to make sense of paradox allowed him to deliver the Theory of Relativity, but that it can also exist in more pragmatic forms that dictate business decisions reaching us on a day-to-day level.

The book’s introduction includes an example of Starbucks’ CEO fielding a question about “whether the company was trying to offer customers a convenient, quick cup of coffee or build space for gathering community,” which led him to explain, “We don’t believe there needs to be this kind of tradeoff,” eschewing a more traditional and perhaps safer “either/or” answer for a “both/and” one.

“Both/And Leadership” contains another real-world example: “Whole Foods showed that employees understood the company’s explicitly dual mission of earning profits and making the world a better place.”

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Smith notes that paradoxes in real life overlap categories and her book gives strategies to deal with paradoxes across the board. The four types of paradoxes, as Smith sees them, are:

Belonging paradoxes: Tensions of Identity (Who?)

  • These encompass concepts of whole and part, global and local, insider and outsider, and we and they.

Learning paradoxes: Tension of Time (When?)

  • These encompass concepts of short-term and long-term, traditional and modern, today and tomorrow, and stability and change.

Organizing paradoxes: Tensions of Processes (How?)

  • These encompass concepts of control and flexibility, centralization and decentralization, emerging and planning, and democratic and authoritative.

Performing paradoxes: Tension of Outcomes (Why?)

  • These encompass concepts of work and life, ends and means, instrumental and normative, and mission and market.

Business Leadership Has its Own Set of Paradoxes

In “Both/And Leadership,” Smith and her colleagues identify other categories for paradoxes that shape the journey of leading a business. Those include:

Innovation paradoxes, encompassing tensions between today and tomorrow, existing offerings and new ones, stability and change. A real-world example of this? IBM in the late 1990s, facing two diverging roads of sustaining its traditional strength in client-server markets and embracing the then-new possibilities of the internet, and choosing both;

Globalization paradoxes, encompassing tensions between global interconnection and local needs, breadth and depth, collaboration and competition. They point to NASA’s evolution, requiring collaboration among team members while honoring their researchers’ wishes to preserve their independent identities;

Obligation paradoxes, in which leaders are “torn between maximizing profits for the firm and trying to generate wider benefits—for investors, employees, customers, and society.”

They note here, “These tensions have mounted as public concerns about poverty and climate change have grown, as technology has helped enable and empower consumer activism, and as human capital has been increasingly recognized as the major driver of value. But being socially responsible can bring down share price, and prioritizing employees can conflict with short-term shareholders’ or customers’ needs.”

Smith and colleagues wrote in the “Both/And Leadership” article, “When leaders assume that there are multiple truths, that resources are abundant, and that the role of management is to cope with change rather than fight it, they can help their organizations reach a state of dynamic equilibrium. This is at the center of paradoxical leadership.”

They add, “However, trying to shift the hearts and minds of senior team members is challenging and time-consuming. Moreover, their roles and responsibilities often lead senior people to deeply identify with one goal or another, fostering conflict. To unleash the power of paradox, therefore, leaders must build supporting organizational competencies into their senior team. This requires managers to both separate and connect opposing forces.”

Smith writes in her book, “Paradoxes trigger complex and conflicting emotional reactions,” quickly following with, “To open ourselves to tensions, we must move beyond focusing on our mindsets and thinking to be able to engage our heart. We need to use our emotions as an enabling resource, rather than crippling obstacle.”

Paradoxes can bring uncertainty, but as she points out, “Uncertainty alone does not trigger a defensive reaction. Uncertainty can be beneficial or detrimental.” It can, of course, lead to defensiveness and stymie creativity. That’s thanks to a downward emotional spiral thanks to what the Buddha once called “shooting the second arrow,” in which uncomfortable experiences in our lives are akin to being shot with an arrow, and the negative experiences we might respond with (including shock, anger, and blame) is akin to shooting yourself with a second arrow.

But building in a pause can be sufficient for formulating a response that incorporates both/and thinking, and tapping into positive emotions can also broaden one’s perspective and enable both/and thinking.

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