Embracing a Strategic Paradox

The writer F. Scott Fitzgerald once observed, “The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time, and still retain the ability to function.”

But within a business, opposing ideas typically lead to conflict, and in the face of conflicting demands, managers will feel anxiety, stress, and frustration. However, our research at Aeon Co. Ltd., one of Japan’s largest retailers, suggests that a positive approach to handling conflicts between opposing ideas can create new value for a company.

Like many retailers, Aeon faces a built-in conflict in its operations. On the one hand, managers in local stores want to adapt their stock to meet local communities’ preferences and needs. On the other hand, the executive team at Aeon’s national headquarters in Chiba, Japan, strives for greater economies of scale.

In many organizations, this kind of conflict tends to be resolved on the steamroller principle, with one side or the other eventually giving way. But Aeon operates differently. Rather than simply cope with the tension, Aeon considers the conflict to be an opportunity to invent fresh solutions that add value to the whole company.

This might sound like a recipe for gridlock, but Aeon handles these disputes so well that top executives say they would actually like to have more of them. “We would like to see more competition between the two sides [stores and regional headquarters on one hand and the national headquarters on the other],” one senior manager at Aeon’s human resources department told us.

In our research, which included 46 interviews with managers at every level of the organization, we found that Aeon uses these local versus national conflicts as an opportunity to invent creative solutions that satisfy both local and national objectives. Two examples illustrate how this process works.

At a store in a Japanese ski resort community, the manager was puzzled by weak sales. The head office had mandated that her store sell a staid collection of clothes that fit the urban stereotype of what rural women wanted, but the sales were not meeting her expectations. When she looked into why, she discovered that the women in her region were actually interested in trendier, yet still not urban, fashions. She proposed a new women’s boutique based on an up-to-date, soft-color, natural-look concept.