The Power of Strategic Centering

Imagine you are sitting on the capital allocation committee of a major company that is in the eye care, consumer healthcare products, generic drug, and pharmaceutical businesses. Two proposals are on the table. The first is a multibillion-dollar request to build a next-generation production facility for consumer health products, such as over-the-counter painkillers. The investment case is straightforward: stable demand, predictable margins, and a well-understood manufacturing process.

The second proposal requests several billion dollars to acquire three companies that are pioneering a novel therapy area called radioligand therapy—a radically different approach to treating cancer that uses radioactive particles attached to molecules to target tumors with almost pinpoint precision. The science is promising—but early. The manufacturing is novel. The regulatory pathway is unclear. It’s an edge case investment.

How do you choose? The factory proposal for over-the-counter painkillers feels safe. The radioligand bet feels risky. You can model the economics of the first; you can only imagine those of the second. In the logic of traditional capital allocation, the safe bet often wins.

But if your company has decided to organize its identity, strategy, and resource allocation around a single coherent organizing principle, then the safe bet may not be the best one. A different bet might make more sense—as the leaders of the company I’ve just described, Novartis, discovered. When its CEO, Vasant Vas Narasimhan, centered the company on innovative medicines that truly help patients in specific disease areas, he didn’t see the radioligand investment as a gamble. It was directly connected to Novartis’s strategy.

Shortly after Narasimhan learned about the science of radioligands, Novartis acquired two pioneering companies in that space. Today Novartis is a world leader in a small but highly promising therapeutic area that could transform cancer treatment. Its consumer healthcare products business? Divested.

Here’s where things get interesting. When Narasimhan took over as CEO, in 2018, Novartis’s valuation (its market capitalization) with all the businesses together was between $190 billion and $200 billion, and it employed 126,000 people. Today the smaller pure-play pharmaceutical company is valued at around $300 billion, with just 76,000 employees. Alcon, the eye care company that Novartis spun off in 2019, is worth around $40 billion. Sandoz, the generics and biosimilars business Novartis spun off in 2023, is worth around $35 billion. Haleon, the company spun off by GSK, which includes the divested Novartis consumer healthcare business, is worth around $40 billion. That makes the value of the now-separate companies about two times Novartis’s original valuation, without any dramatic changes in their underlying businesses (and not accounting for dividends and share buybacks).

Narasimhan’s move illustrates a strategic concept that I believe is urgently needed in a business environment characterized by radical uncertainty, dissolving industry boundaries, and an accelerating shift from physical to intangible value creation. I call it strategic centering: deliberately choosing an organizing principle that provides clarity and coherence to a company’s strategy when the traditional anchors—defensible positions, stable industries, long-lived physical assets—are losing their power.

In this article I’ll present the concept and identify the various types of centering that companies can consider. I’ll begin, though, by explaining how it has come of age.

The End of the “Stuff” Economy

The strategy frameworks that most executives rely on were forged in what we might call the “stuff” economy. Michael Porter’s seminal five forces model worked beautifully when we had stable industry boundaries and well-defined roles for the players (buyers, suppliers, and so on). The resource-based view assumed that companies could acquire or create valuable, rare, durable, hard-to-imitate assets and capabilities. Even W. Chan Kim and Renée Mauborgne’s influential Blue Ocean strategies assumed executives were creating definable market spaces where it was clear whether or not there was established competition. Those frameworks made sense in a world where most corporate value resided in tangible things: factories, distribution networks, inventory, and equipment. In 1975 roughly 83% of the assets on the books of Fortune 500 companies were tangible. Strategy was, in essence, about identifying opportunities or defending positions in physical space.

Today that ratio has inverted: Approximately 90% of corporate value is now in intangible assets such as software, data, brands, relationships, intellectual property, and organizational capabilities. The shift has been accelerated by what the economic historian Carlota Perez calls a technological revolution—the kind of once-in-a-half-century transformation that reshapes not just technology but the entire logic of how economies work. She identifies five such revolutions in the history of capitalism, each driven by a cheap input with economy-wide applications: the original industrial revolution; steam and railways; steel and electricity; oil, automobiles, and mass production; and now information and telecommunications.

Each revolution follows a pattern. In the irruption and installation phases, financial capital rushes in, bubbles form, and inequality surges. Then comes a turning point—a period of crisis and institutional adjustment. Finally, in the deployment phase, the new paradigm takes hold, institutions adapt, and a new age of broad-based prosperity becomes possible.

We are at a turning point right now. The symptoms are unmistakable: massive income inequality, political instability, widespread dissatisfaction, and an old strategic paradigm whose productivity has been exhausted but has not yet been replaced. The defining characteristic of this transition is what I call dematerialization: Value creation is shifting decisively from physical stuff to digital services, coordinated ecosystems, intangible assets, and experiences.

Consider what has happened to music. When you wanted to hear a song you liked, you used to buy sheet music and play it yourself. Later, you discovered new songs by listening to the radio. If you really liked one, you could buy a record to hear the artist play it, and later still, a CD. Today most people don’t buy music. It flies through the air and lands on a device, and an algorithm curates it for the listener. This shift—from physical artifact to dematerialized service—is playing out across industry after industry, including media, financial services, healthcare, and even manufacturing.

When value dematerializes, the old strategic anchors dissolve with it. What is your industry when digital technology erases the boundaries? What is your competitive advantage when intangible assets can be replicated or leapfrogged at digital speed? What is your planning horizon when technologies emerge, combine, and become obsolete in years rather than decades? Executives need a new anchor—not a position to defend but a center to home in on.

What Strategic Centering Is—and Isn’t

Strategic centering is deliberately choosing one organizing principle to guide resource allocation, opportunity selection, and organizational identity in a dematerializing world. It involves answering a simple but profound question: What are we really about?

Centering is not the same as purpose, a term that has become so expansive and aspirational as to be nearly useless for strategic decision-making. (For instance, a theater company whose purpose is “to create art that causes you to feel something” is no closer to knowing whether to produce experimental plays or beloved musicals than a theater group that didn’t articulate a purpose.) Centering is not vision, which is too often a static destination rather than a dynamic direction. And it is not a core competence, which can become a prison when the underlying technology shifts.

Centering is closer to what Theodore Levitt was getting at when he asked railroad executives whether they were in the railroad business or the transportation business. But it goes further because in a dematerializing world, the question isn’t just about broadening your definition of your industry. Rather, it’s about choosing the dimension along which you will pursue coherent opportunity sets as industries themselves dissolve.

A center does three things. First, it bounds the opportunity set without closing it. You know you cannot pursue everything, but a center lets you pursue a set of possibilities that share a common logic. When Novartis centered on innovative medicines, it didn’t just narrow its focus—it opened up an entire landscape of therapeutic technologies (including radioligands, gene therapy, and siRNA medications) that its old conglomerate structure might have obscured.

Second, centering resolves capital allocation dilemmas. In a diversified company without a center, every investment decision is a battle between competing logics. Once a center is clear, resources flow toward it naturally. To go back to the initial example, the painkiller-versus-radioligand debate simply vanishes.

Third, having a center enables what I call permissionless action. When people throughout an organization share a clear understanding of the center, they can make decisions and take action without waiting for approval from above. They know the direction; they don’t need permission to take each step. That dramatically increases organizational speed and reduces the return on internal politics. When what matters is advancing the center rather than climbing the hierarchy, the dynamics of the organization shift fundamentally.

Five Ways to Find Your Center

My research has identified five types of strategic centering, each anchored to a different organizing principle. (See the exhibit “The Five Centers.”) They are not mutually exclusive in a strict sense; elements of several may be present in any company. But the organizations with the clearest strategy have a dominant center—and the discipline to subordinate other considerations to it.

1. Center on the mission: “What problem are we solving?” Mission centering organizes a company around a problem to be solved, independent of any particular technology, customer segment, or product category. The company follows the problem wherever it leads.

Novartis under Narasimhan is a clear example. By centering on innovative medicines in specific therapy areas, Novartis gave itself permission to pursue whatever therapeutic technologies showed the most promise—even when those technologies, like radioligand therapy, bore no resemblance to the company’s traditional chemical-compound approach. Narasimhan’s scientific background gave him an edge in sensing these opportunities, but it was the organization’s strategic centering that gave it the clarity to act on them quickly.

Shopify offers another example. The company’s mission—to make commerce better for everyone—has guided Shopify into businesses from simple online storefronts to payment processing, shipping logistics, point-of-sale systems, and business financing. That portfolio would look incoherent through an industry lens, but it is perfectly coherent through a mission lens.

Mission centering works best when the problem being addressed is large enough to sustain decades of exploration, when the technologies for addressing it are in flux, and when the organization has deep domain expertise that transfers across technological generations. The danger is mission drift—gradually broadening the mission until it means everything and therefore nothing.

2. Center on the customer: “Who are we serving?” Customer centering organizes a company around a deep understanding of its customers and their evolving needs. The company follows wherever those needs lead, crossing industry boundaries as necessary. Tony Ulwick and Clayton Christensen’s notion of “jobs to be done” is useful here. Companies ask themselves, “What jobs are we doing for these specific sets of customers?”

Amazon’s early years offer a canonical example. “Start with the customers and work backward to see how their needs could be met by online technology” was the operating principle that drove investments—from one-click ordering to Prime to Amazon Web Services, which originated as an internal infrastructure solution to serve customers better and faster. Customer centering gave Amazon the coherence to move from books to electronics to cloud computing to streaming to grocery to healthcare—a trajectory that defies traditional industry classification.

Brian Chesky’s return to what he calls “founder mode” at Airbnb is a story of recentering. After a period in which the company drifted toward becoming a real estate platform optimized for hosts and institutional operators, Chesky pulled the center back to the guest experience—the traveler who wants to “belong anywhere.” That recentering drove a redesign of the product, the search experience, and the company’s relationship with its host community.

Customer centering works when your customers have complex, evolving needs that cut across traditional industry boundaries, and when deep customer understanding creates compounding advantages. The danger with this approach is that being truly customer-centric may over time conflict with other corporate goals. For instance, Amazon has been criticized for letting advertising interfere with the customer experience. That may be a sign that the company is starting to drift from its center. Southwest Airlines, bowing to pressure from an activist investor, is being criticized for becoming just like any other airline, instituting (once-unthinkable) assigned seats, tiers of service, and baggage fees.

3. Center on a technology: “What can our capabilities do?” Technology centering organizes a company around a set of deep technological capabilities, and then the company searches for applications across any domain where those capabilities create value. It is agnostic about particular customers and markets; the organization follows its technology wherever it can be applied.

The contrast between Fujifilm and Kodak is among the most instructive in modern business history. Both faced the same inflection point: Digital photography was destroying their core film business. Kodak, whose CEO misguidedly focused on printing, has become a relatively small, 4,000-person B2B player. Fujifilm today has more than 72,000 employees and is thriving. The difference was centering.

Fujifilm looked at its film business and began focusing on the underlying technologies—chemical compounds, precision coating, optical films, and imaging science. It became completely agnostic about customers. That approach led the company into cosmetics (leveraging its expertise in collagen films and antioxidants), medical imaging, pharmaceutical manufacturing, and advanced materials for LCD screens. The applications look random; centering reveals their coherence.

Two corporations from the energy industry highlight how profoundly different technology-centering approaches can be. The oil giant Shell has positioned itself as a “molecule company,” which means its future lies in plastics, chemicals, and hydrocarbon derivatives even as it transitions away from fuel. BP, by contrast, has positioned itself as an “integrated energy company,” which would logically take it into solar, wind, nuclear, and battery technology. These two companies’ centerings lead to different opportunity sets, different capability investments, and different organizational identities. Ultimately, they place Shell and BP in different competitive arenas.

Technology centering works when your capabilities are deep and transferable across domains and there is a compelling road map for continuing improvement. By centering on parallel computing architecture, for example, Nvidia moved from gaming graphics to becoming the backbone of the AI revolution. In that case technology centering led to options that were literally unimaginable when the center was first established. The danger with this approach is technological narcissism: falling so in love with your capabilities that you miss the moment when the technology becomes obsolete or that you fail to connect it to genuine problems.

4. Center on a regional or national ecosystem: “What system are we building?” Ecosystem centering organizes a company around its role in building a larger system, typically the productive capability of a nation or region. The company’s strategy is inseparable from the system it is helping to create.

Morris Chang founded TSMC in 1987 with what appeared to be a business model innovation: Manufacture chips designed by others and design none of your own. But TSMC’s center was building Taiwan’s semiconductor capability into a strategic asset so essential to the global economy that it became the island’s ultimate security guarantee—a “silicon shield.” That national centering enabled TSMC to make enormous, long-horizon investments that no purely private-market logic could justify, such as fabrication plants that cost more than $20 billion each. Supported by government partnership, the company enjoys the benefits of aligned national education pipelines and infrastructure investments. TSMC thrives as the catalytic force behind an ecosystem that has made Taiwan a global leader in manufacturing these critical components.

Samsung’s history offers parallels. From its start, Samsung was intertwined with South Korea’s national development ambitions. Its willingness to make bet-the-company investments in memory chips and displays reflected a centering that transcended quarterly earnings. The result was an industrial ecosystem that lifted an entire nation’s productive capability and created competitive advantages—patient capital, aligned talent pipelines, and government support—that no standalone market entrant could replicate.

One could argue that the post–World War II consensus between business and government in the United States is a further example, although it is now unraveling. The goal of creating a prosperous middle class, supported by government investments in highways, housing, and technology during the Cold War, was widely shared by business leaders. General Motors CEO Charles E. Wilson famously said in 1953 that “what was good for our country was good for General Motors, and vice versa. The difference did not exist.”

Ecosystem centering works when there is a common commitment to development goals on the part of business leaders and the state. This allows ventures that require investments at a scale and time horizon beyond what private capital alone can sustain to move forward. It also works when geopolitical dynamics create strategic value in a national capability. Its danger is dependency: Companies centered on national ecosystems can become instruments of state policy, which could generate a backlash from other countries. Huawei learned that when the United States and other countries, fearing security risks, pursued a “clean network” initiative, hoping to wean themselves from the telecom firm’s technology entirely. Its revenues dropped 29% from 2020 to 2021. State support can also make companies uncompetitive globally and at risk should protectionist policies disappear, as we have seen with U.S.-based steel manufacturing.

5. Center on friction erasure: “What’s unnecessarily hard?” This type of centering organizes a company around the systematic identification and elimination of unnecessary difficulty in a domain. The company doesn’t anchor to a mission, a customer, a technology, or a system. Instead, it asks, “What is still absurdly hard, and how do we make it effortless?” For instance, eliminating the friction for participants in two-sided markets is at the heart of platform strategies used by Facebook (eliminate the friction of finding friends), Google (eliminate the friction of search), and Apple (eliminate the friction of finding apps in its store).

The South Korean fintech company Toss was founded by S.G. Lee, a dentist by training, who looked at the Korean financial system and asked a simple question: Why is moving money so hard? Rather than centering on a customer segment or a technology, Toss centered on the relentless elimination of friction in financial services. Doing so allowed the company to expand from payments to banking to insurance to investment to stock trading to media content, all without losing coherence. Each expansion worked to erase another friction.

The organizational implications are telling. Instead of a traditional manager-to-subordinate structure organized around functions, Toss operates with what it calls “directly responsible individuals.” These people are aligned with key outcomes, not with a reporting structure. Toss has virtually no hierarchy and has a governing principle of being “tightly aligned on mission but loosely coupled” in structure. When one team decided to launch a YouTube channel exploring how money intersects with culture—sports, fashion, lifestyle—no one had to ask permission. The initiative introduced Toss to an entirely new audience, one with no interest in the core content of its existing YouTube channel but great interest in how athletes earn money. A centralized content department at a traditional bank would have killed the idea. But for a friction-erasure-centered organization, it was an obvious move: Use an unexpected channel to remove the friction between young consumers and financial literacy.

DBS, the Development Bank of Singapore, followed a similar path. By centering on eliminating friction in banking across Southeast Asia, it transformed itself from a sleepy government institution into what has been called the world’s best digital bank. Its mobile-only banking offer allowed it to operate with far lower customer acquisition and servicing costs than banks that required physical infrastructure. Its AI-powered, hyperpersonalized “nudges” catch customers at the exact moment they are making a financial decision and help them to optimize their outcomes. Its Smart Buddy wearable device for schoolchildren allows them to make contactless payments in school canteens, facilitating budgeting and even nutrition tracking for parents. Not bad for a bank whose nickname was once “Damn Bloody Slow.” The logic here is endlessly extendable: There is always more friction to eliminate.

This type of centering is particularly powerful in a dematerializing world because digital technology is the ultimate friction-erasure tool. Centering in this way naturally leads toward dematerialization—replacing physical processes with digital ones, replacing bureaucratic approvals with automated flows, replacing institutional complexity with elegant simplicity. The danger with this approach is scope creep: When everything looks like a friction to be erased, it can be easy to lose the discipline that keeps the center coherent.

Each kind of centering has a different relationship to the forces of dematerialization. Mission centering enables you to ride technological transitions because you are loyal to the problem, not the technology. Customer centering keeps you relevant as customer behaviors dematerialize (from owning to renting, for instance, and from buying to subscribing). Technology centering lets you find new applications as old markets dematerialize. Ecosystem centering positions you to shape the infrastructure of the next paradigm. And friction-erasure centering is dematerialization in its most direct form—replacing what is heavy, slow, and complex with what is light, fast, and simple.

As you think about where to center, you should consider how much dematerialization your industry has experienced. In industries in which dematerialization is transforming how work is organized but the output is still physical, such as construction and mining, centering on the ecosystem or on technology may be the best choice. In partially dematerialized industries, however, such as healthcare and education, where human expertise remains central, mission or customer centering may best guide the transition. In industries in which value has already shifted to the digital realm but the legacy complexity of the physical era remains—financial services, for example, and media—friction-erasure centering is frequently the best choice. Finally, in industries that are already dematerialized, such as software and AI, the strategic question is often about mission or customer centering, because technology alone doesn’t differentiate you in a world where everyone has access to the same tools.

Leading the Centered Organization

Choosing a center is a necessary act of strategic clarity. But a center is useful only if the organization can move along its trajectory with speed and coherence. This is where leadership is critical—and where the findings from my research surprised me.

I expected the leaders of the most successful centered organizations to be the servant-leader types that decades of management literature have celebrated: Leaders who hire great people, get out of their way, and provide support from behind. What I found was quite different. The leaders of centered organizations are deeply engaged, highly visible, and intensely present. Narasimhan records multiple videos a day, travels widely to Novartis facilities, and is constantly visible. Jensen Huang of Nvidia reads employee emails every Sunday and has equipped every meeting space with whiteboards, which he uses to ideate with people from any level of the company. Airbnb’s Chesky returned to reviewing product designs and questioning decisions that he had once delegated away.

Those leaders are not micromanaging. They are doing something more subtle and more demanding: They are maintaining the center. They are out in the organization sensing weak signals (as Narasimhan sensed radioligands). They are providing direction without dictating methods. They are making the center vivid, concrete, and present in daily decisions.

That kind of leadership has a powerful secondary effect. It dramatically reduces the return on organizational politics. As noted earlier, when everyone in an organization is aligned on the center, rather than on climbing the hierarchy, there’s little to be gained by playing political games. In every centered organization I studied, people described the same phenomenon: Clarity about the center liberated them to focus on the work rather than on navigating the bureaucracy.

This is the connection between centering and permissionless organizations. Centering is the prerequisite for permissionlessness. Without a clear center, removing hierarchy produces confusion. With a clear center, it produces speed.

The Strategic Choice of Our Era

The mass production paradigm that shaped our organizational structures and our assumptions about how value is created and captured are giving way to something fundamentally different—a dematerialized economy where intangible assets, digital services, coordinated ecosystems, and experiences are the primary sources of value. The strategy frameworks we inherited are dangerously incomplete for a new and rapidly dematerializing world.

Strategic centering provides the clarity that enables speed, the coherence that enables resource allocation, and the shared understanding that enables people to act without waiting for permission. In a dematerializing world, the centered organization is the one that can grasp the opportunity in radioligands rather than retreating to the safety of painkillers. It is the one that can launch a YouTube channel about money and culture without convening a committee. It is the one that follows its technology into cosmetics, or its mission into gene therapy, or its national ambition into advanced semiconductor fabrication.

Choosing a center, therefore, is the most important strategic decision a leader can make today. The good news is that multiple kinds of centers can be legitimate. It’s imperative that leaders choose one, commit to it with discipline, and build the organization that can act on it. The next golden age will not arrive automatically. It will be built by leaders and organizations that find their center and have the courage to shed everything that doesn’t serve it.

Copyright 2026 Harvard Business School Publishing Corporation. Distributed by The New York Times Syndicate.

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