Denniston's X-Factor - what made him stand out?
The reasons Denniston was chosen to lead the GC&CS over the Army's candidate are well documented. It is less obvious why he was the Navy's candidate in the first place: he wanted to continue to work in cryptanalysis, but so did others; he is reported to have been a good cryptanalyst, but probably not the best; he was a competent administrator of an organisation the size of Room 40 but administration was not his calling; and he probably was not even the most senior of potential candidates.
The answer is probably to be found in Denniston's character and his belief that a diversity of people would lead to a diversity of thoughts, and that combining these would deliver results against the toughest signals intelligence challenges of the time. Sinclair, and his predecessor as DNI, the legendary 'Blinker' Hall, both recognised in Denniston personal qualities which would enable him to manage, encourage, support, and develop a set of individual and idiosyncratic staff working on a process which few outside their environment understood: to produce the intelligence which the Prime Minister (Lloyd George), the Foreign Secretary (Lord Curzon), and the Secretary of State for War and Air (Winston Churchill), had come to rely on, and to do so loyally without trying to take over the top spot for himself.
On Denniston's part, it is tempting to speculate that Admirals Hall and Sinclair became father figures to a man whose own father had died at sea when Alastair was 11. They certainly knew how to nurture his talents and provide an environment in which he and his team could flourish. Hall arranged for Denniston to be commissioned as a Commander in the Royal Navy Volunteer Reserve, a title he used for the rest of his life. Certainly, his affection and respect for them made him a dependable and trustworthy subordinate, albeit not an unquestioning one.