Strategic thinking

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Strategic thinking is a mental or thinking process applied by an individual in the context of achieving a goal or set of goals. As a cognitive activity, it produces thought.

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When applied in an organizational strategic management process, strategic thinking involves the generation and application of unique business insights and opportunities intended to create competitive advantage for a firm or organization. [1] [2] [3] It can be done individually, as well as collaboratively among key people who can positively alter an organization's future. Group strategic thinking may create more value by enabling a proactive and creative dialogue, where individuals gain other people's perspectives on critical and complex issues. This is regarded as a benefit in highly competitive and fast-changing business landscapes. [4] [5] [6]

Overview

There is a generally accepted definition for strategic thinking, a common agreement as to its role or importance, and a standardised list of key competencies of strategic thinkers. [7] There is also a consensus on whether strategic thinking is an uncommon ideal or a common and observable property of strategy. It includes finding and developing a strategic foresight capacity for an organization, by exploring all possible organizational futures, and challenging conventional thinking to foster decision making today. [8] [9] Research on strategic thought indicates that the critical strategic question is not the conventional "What?", [10] but "Why?" or "How?". [10] The work of Henry Mintzberg [11] [12] and other authors, [13] [14] [15] further support the conclusion; and also draw a clear distinction between strategic thinking and strategic planning, another important strategic management thought process. [6] [16]

General Andre Beaufre wrote in 1963 that strategic thinking "is a mental process, at once abstract and rational, which must be capable of synthesizing both psychological and material data. The strategist must have a great capacity for both analysis and synthesis; analysis is necessary to assemble the data on which he makes his diagnosis, synthesis in order to produce from these data the diagnosis itself—and the diagnosis in fact amounts to a choice between alternative courses of action." [17]

Most agree that traditional models of strategy making, which are primarily based on strategic planning, are not working. [18] [19] [20] Strategy in today's competitive business landscape is moving away from the basic ‘strategic planning’ to more of ‘strategic thinking’ in order to remain competitive. [21] However, both thought processes must work hand-in-hand in order to reap maximum benefit. [6] It has been argued that the real heart of strategy is the 'strategist'; and for a better strategy execution requires a strategic thinker who can discover novel, imaginative strategies which can re-write the rules of the competitive game; and set in motion the chain of events that will shape and "define the future". [22] [23] .

There are many tools and techniques to promote and discipline strategic thinking. The flowchart to the right provides a process for classifying a phenomenon as a scenario in the intuitive logics tradition, and how it differs from a number of other planning approaches. [24]

Process for classifying a phenomenon as a scenario in the Intuitive Logics tradition. Flowchartv11png.png
Process for classifying a phenomenon as a scenario in the Intuitive Logics tradition.

Strategic thinking vs. strategic planning

In the view of F. Graetz, strategic thinking and planning are “distinct, but interrelated and complementary thought processes” that must sustain and support one another for effective strategic management. Graetz's model holds that the role of strategic thinking is "to seek innovation and imagine new and very different futures that may lead the company to redefine its core strategies and even its industry". Strategic planning's role is "to realise and to support strategies developed through the strategic thinking process and to integrate these back into the business". [14]

Henry Mintzberg wrote in 1994 that strategic thinking is more about synthesis (i.e., "connecting the dots") than analysis (i.e., "finding the dots"). It is about "capturing what the manager learns from all sources (both the soft insights from his or her personal experiences and the experiences of others throughout the organization and the hard data from market research and the like) and then synthesizing that learning into a vision of the direction that the business should pursue." Mintzberg argued that strategic thinking cannot be systematized and is the critical part of strategy formation, as opposed to strategic planning exercises. In his view, strategic planning happens around the strategy formation or strategic thinking activity, by providing inputs for the strategist to consider and providing plans for controlling the implementation of the strategy after it is formed. [25]

According to Jeanne Liedtka, strategic thinking differs from strategic planning along the following dimensions of strategic management: [15]

Strategic ThinkingStrategic Planning
Vision of the FutureOnly the shape of the future can be predicted.A future that is predictable and specifiable in detail.
Strategic Formulation and ImplementationFormulation and implementation are interactive rather than sequential and discrete.The roles of formulation and implementation can be neatly divided.
Managerial Role in Strategy MakingLower-level managers have a voice in strategy-making, as well as greater latitude to respond opportunistically to developing conditions.Senior executives obtain the needed information from lower-level managers, and then use it to create a plan which is, in turn, disseminated to managers for implementation.
ControlRelies on self-reference – a sense of strategic intent and purpose embedded in the minds of managers throughout the organisation that guides their choices on a daily basis in a process that is often difficult to measure and monitor from above.Asserts control through measurement systems, assuming that organisations can measure and monitor important variables both accurately and quickly.
Managerial Role in ImplementationAll managers understand the larger system, the connection between their roles and the functioning of that system, as well as the interdependence between the various roles that comprise the system.Lower-level managers need only know his or her own role well and can be expected to defend only his or her own turf.
Strategy MakingSees strategy and change as inescapably linked and assumes that finding new strategic options and implementing them successfully is harder and more important than evaluating them.The challenge of setting strategic direction is primarily analytic.
Process and OutcomeSees the planning process itself as a critical value-adding element.Focus is on the creation of the plan as the ultimate objective.

Strategic thinking and Complexity

In a complex scenario, organizational actions are intensified by a global network of interactions, leading to diverse environmental, economic, and social challenges [26] [27] [28] [29] . This complexity is characterized by intricate networks and recursive cause-and-effect relationships, diverging from the linear logic of Cartesian thought and the punctual logic of dialectical thought. Within such systems, seemingly trivial actions can produce unexpected outcomes or be magnified by intricate relationship networks, resulting in entirely unpredictable consequences [28] [29] [30]

To address this context, Terra and Passador [28] advocate for strategic thinking capable of: (1) reconnecting phenomena across different levels and disciplines and treating them holistically; (2) addressing objects of study subjected to recursive causality; (3) understanding facts through their dynamics; (4) approaching problems through mappings and negative approaches; (5) integrating non-empirical elements; and (6) incorporating a new mathematical rationale to navigate the non-linearity of such systems and the continuous transition between certainty and uncertainty inherent in their dynamics.

In the realm of academic research, Stacey [27] suggests that this reality demands studies in the field of strategic thinking to focus on explanation, hypotheses about whole systems, their dynamics, and the relationship between dynamic behavior and innovative success. In this type of study, methods such as scheme construction, phenomenological approaches based on deductions and metaphors [31] [28] and integrative frameworks [32] [33] have been employed to understand the dynamics of various organizational problems by assimilating concepts common to several fields of science [28] . In the field of studies on strategic thinking, several authors have developed multidisciplinary approaches based on these premises, utilizing systems thinking and cybernetics [29] [34] , integrative approaches [32] , new mathematics of chaos [29] [30] [35] , and concepts such as order through noise, autopoiesis, and self-organization [29] [35] .

Strategic thinking competencies

Liedtka observed five “major attributes of strategic thinking in practice” that resemble competencies: [15] [36]

  1. Systems perspective, refers to being able to understand implications of strategic actions. "A strategic thinker has a mental model of the complete end-to-end system of value creation, his or her role within it, and an understanding of the competencies it contains." [15]
  2. Intent focused which means more determined and less distractible than rivals in the marketplace. Crediting Hamel and Prahalad with popularising the concept, Liedtka describes strategic intent as "the focus that allows individuals within an organization to marshal and leverage their energy, to focus attention, to resist distraction, and to concentrate for as long as it takes to achieve a goal." [15]
  3. Thinking in time means being able to hold past, present and future in mind at the same time to create better decision making and speed implementation. "Strategy is not driven by future intent alone. It is the gap between today’s reality and intent for the future that is critical." [15] Scenario planning is a practical application for incorporating "thinking in time" into strategy making. [37]
  4. Hypothesis driven, ensuring that both creative and critical thinking are incorporated into strategy making. This competency explicitly incorporates the scientific method into strategic thinking. [36]
  5. Intelligent opportunism, which means being responsive to good opportunities. "The dilemma involved in using a well-articulated strategy to channel organisational efforts effectively and efficiently must always be balanced against the risks of losing sight of alternative strategies better suited to a changing environment." [15]

See also

Related Research Articles

Strategy is a general plan to achieve one or more long-term or overall goals under conditions of uncertainty. In the sense of the "art of the general", which included several subsets of skills including military tactics, siegecraft, logistics etc., the term came into use in the 6th century C.E. in Eastern Roman terminology, and was translated into Western vernacular languages only in the 18th century. From then until the 20th century, the word "strategy" came to denote "a comprehensive way to try to pursue political ends, including the threat or actual use of force, in a dialectic of wills" in a military conflict, in which both adversaries interact.

Strategic planning is an organization's process of defining its strategy or direction, and making decisions on allocating its resources to attain strategic goals.

<span class="mw-page-title-main">Henry Mintzberg</span> Canadian academic and author on business and management

Henry Mintzberg is a Canadian academic and author on business and management. He is currently the Cleghorn Professor of Management Studies at the Desautels Faculty of Management of McGill University in Montreal, Quebec, Canada, where he has been teaching since 1968.

In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of resources and an assessment of the internal and external environments in which the organization operates. Strategic management provides overall direction to an enterprise and involves specifying the organization's objectives, developing policies and plans to achieve those objectives, and then allocating resources to implement the plans. Academics and practicing managers have developed numerous models and frameworks to assist in strategic decision-making in the context of complex environments and competitive dynamics. Strategic management is not static in nature; the models can include a feedback loop to monitor execution and to inform the next round of planning.

<span class="mw-page-title-main">SWOT analysis</span> Business planning and analysis technique

SWOT analysis is a strategic planning and strategic management technique used to help a person or organization identify Strengths, Weaknesses, Opportunities, and Threats related to business competition or project planning. It is sometimes called situational assessment or situational analysis. Additional acronyms using the same components include TOWS and WOTS-UP.

The word ‘dynamics’ appears frequently in discussions and writing about strategy, and is used in two distinct, though equally important senses.

Marketing strategy is an organization's promotional efforts to allocate its resources across a wide range of platforms and channels to increase its sales and achieve sustainable competitive advantage within its corresponding market.

Scenario planning, scenario thinking, scenario analysis, scenario prediction and the scenario method all describe a strategic planning method that some organizations use to make flexible long-term plans. It is in large part an adaptation and generalization of classic methods used by military intelligence.

A strategist is a person with responsibility for the formulation and implementation of a strategy. Strategy generally involves setting goals, determining actions to achieve the goals, and mobilizing resources to execute the actions. A strategy describes how the ends (goals) will be achieved by the means (resources). The senior leadership of an organization is generally tasked with determining strategy. Strategy can be intended or can emerge as a pattern of activity as the organization adapts to its environment or competes. It involves activities such as strategic planning and strategic thinking.

Complexity theory and organizations, also called complexity strategy or complex adaptive organizations, is the use of the study of complexity systems in the field of strategic management and organizational studies. It draws from research in the natural sciences that examines uncertainty and non-linearity. Complexity theory emphasizes interactions and the accompanying feedback loops that constantly change systems. While it proposes that systems are unpredictable, they are also constrained by order-generating rules.

Business agility refers to rapid, continuous, and systematic evolutionary adaptation and entrepreneurial innovation directed at gaining and maintaining competitive advantage. Business agility can be sustained by maintaining and adapting the goods and services offered to meet with customer demands, adjusting to the marketplace changes in a business environment, and taking advantage of available human resources.

Paul J. H. Schoemaker is an academic, author, and an expert in the fields of strategic management and decision making.

Corporate foresight has been conceptualised by strategic foresight practitioners and academics working and/or studying corporations as a set of practices, a set of capabilities and an ability of a firm. It enables firms to detect discontinuous change early, interpret its consequences for the firm, and inform future courses of action to ensure the long-term survival and success of the company.

Geoffrey P. Chamberlain's theory of strategy was first published in 2010. The theory draws on the work of Alfred D. Chandler, Jr., Kenneth R. Andrews, Henry Mintzberg and James Brian Quinn but is more specific and attempts to cover the main areas they did not address. Chamberlain analyzes the strategy construct by treating it as a combination of four factors.

Systems-oriented design (SOD) uses system thinking in order to capture the complexity of systems addressed in design practice. The main mission of SOD is to build the designers' own interpretation and implementation of systems thinking. SOD aims at enabling systems thinking to fully benefit from design thinking and practice and design thinking and practice to fully benefit from systems thinking. SOD addresses design for human activity systems and can be applied to any kind of design problem ranging from product design and interaction design through architecture to decision-making processes and policy design.

<span class="mw-page-title-main">Ralph D. Stacey</span>

Ralph Douglas Stacey was a British organizational theorist and Professor of Management at Hertfordshire Business School, University of Hertfordshire, in the UK and one of the pioneers of enquiring into the implications of the natural sciences of complexity for understanding human organisations and their management. He is best known for his writings on the theory of organisations as complex responsive processes of relating.

<span class="mw-page-title-main">Jeanne Liedtka</span> American professor of business administration (born 1955)

Jeanne M. Liedtka, is an American strategist and professor of business administration at the Darden School of the University of Virginia, particularly known for her work on strategic thinking, design thinking and organic growth.

<span class="mw-page-title-main">Raymond-Alain Thietart</span> French business school professor (born 1944)

Raymond-Alain Thietart is a French business school professor. He is the author of eight books on strategy and management and over a hundred articles in the same field. His research and teaching focus on organization theory and strategic management.

Strategic planning and uncertainty intertwine in a realistic framework where companies and organizations are bounded to develop and compete in a world dominated by complexity, ambiguity, and uncertainty in which unpredictable, unstoppable and, sometimes, meaningless circumstances may have a direct impact on the expected outcomes. In this scenario, formal planning systems are criticized by a number of academics, who argue that conventional methods, based on classic analytical tools, fail to shape a strategy that can adjust to the changing market and enhance the competitiveness of each business unit, which is the basic principle of a competitive business strategy. Strategy planning systems are supposed to produce the best approaches to concretize long-term objectives. However, since strategy deals with the upcoming future, the strategic context of an organization will always be uncertain, therefore the first choice an organisation has to make is when to act; acting now or when the uncertainty has been resolved.

References

  1. ↑ "What is Strategic Thinking?". harvardbusiness.org. Archived from the original on 19 August 2012. Retrieved 10 August 2012.
  2. ↑ "What is Strategic Thinking? by Rich Horwath" (PDF). Retrieved 10 August 2012.
  3. ↑ "Strategic Thinking" (PDF). Center for Applied Research. Retrieved 10 August 2012.
  4. ↑ "Strategic Thinking : The power of collaboration". harvardbusiness.org. Retrieved 10 August 2012.
  5. ↑ "Strategic Thinking : Is Leadership the missing link An Exploratory Study" (PDF). Retrieved 10 August 2012. by Manu Amitabh, Fellow Scholar, M.D.I Gurgaon and Arun Sahay, Professor and Area Chairman, Strategy Management, M.D.I Gurgaon
  6. 1 2 3 "Strategic Thinking : A discussion paper" (PDF). csun.edu. Retrieved 10 August 2012.
  7. ↑ David Hussey, (2001), “Creative Strategic Thinking and the Analytical Process: Critical Factors for Strategic Success”, Strategic Change, 10(4), 201–13.
  8. ↑ "Strategic Thinking presentation" . Retrieved 10 August 2012.
  9. ↑ "Thinking Futures ..thinking beyond the status-quo to strengthen today's decisions" . Retrieved 10 August 2012.
  10. 1 2 Michael D. Taylor Systems Thinking in Project Management
  11. ↑ Henry Mintzberg (1994), “The Fall and Rise of Strategic Planning”, Harvard Business Review
  12. ↑ Henry Mintzberg (1987), “Crafting Strategy”, Harvard Business Review, 65(4), 66–75.
  13. ↑ Ingrid Bonn, (2001), “Developing Strategic Thinking as a Core Competency”, Management Decision, 39(1), 63–76.
  14. 1 2 Fiona Graetz, (2002), “Strategic Thinking versus Strategic Planning: Towards Understanding the Complementarities”, Management Decision, 40(5/6), 456–62.
  15. 1 2 3 4 5 6 7 Jeanne Liedtka,(1998), “Linking Strategic Thinking with Strategic Planning”, Strategy and Leadership, 26(4), 30–35.
  16. ↑ Stan Abraham, (2005), “Stretching Strategic Thinking,” Strategy & Leadership, 33(5), 5–12.
  17. ↑ Beaufre, Andre (1965). An Introduction to Strategy. Frederick A. Prager. LCCN   65014177.
  18. ↑ Mark Chussil, (2005), “With All This Intelligence, Why Don’t We Have Better Strategies?”, Journal of Business Strategy, 26(1), 26–33.
  19. ↑ Jeanne Liedtka, (2000), “Strategic planning as a contributor to strategic change: a generative model
  20. ↑ "From Strategic Planning to Strategic Thinking" . Retrieved 10 August 2012.
  21. ↑ "Strategic Thinking versus Strategic Planning" . Retrieved 10 August 2012.
  22. ↑ Max Mckeown, (2011), “The Strategy Book: How to think and act strategically for outstanding results", FT-Prentice Hall.
  23. ↑ Paul Schoemaker, (2012), “6 Habits of True Strategic Thinkers”
  24. ↑ Spaniol, Matthew J.; Rowland, Nicholas J. (2018). "Defining Scenario". Futures & Foresight Science. 1: e3. doi: 10.1002/ffo2.3 .
  25. ↑ Henry Mintzberg. The Fall and Rise of Strategic Planning. Harvard Business Review. January 1994
  26. ↑ Senge, Peter M.; Scharmer, C. Otto; Jaworski, Joseph; Flowers, Betty Sue (2008). "Alternative Future". Leadership Excellence. 25 (2): 3–4.
  27. 1 2 Stacey, Ralph D. (1995). "The science of complexity - an alternative perspective for strategic change processes". Strategic Management Journal. 16 (6): 477–495. doi:10.1002/smj.4250160606.
  28. 1 2 3 4 5 Terra, Leonardo A. A.; Passador, João L. (2018). "Strategic Thinking in The Context of Complexity". Systems Research and Behavioral Science. 35 (6): 869–883. doi:10.1002/sres.2530.
  29. 1 2 3 4 5 Terra, Leonardo A. A.; Passador, João L. (2016). "Symbiotic Dynamic: The Strategic Problem from the Perspective of Complexity". Systems Research and Behavioral Science. 33 (2): 235–248. doi:10.1002/sres.2379.
  30. 1 2 Stacey, Ralph D. (2007). Strategic Management and Organisational Dynamics: The Challenge of Complexity to Ways of Thinking about Organisations. Financial Times Prentice Hall. ISBN   9780273708117.
  31. ↑ Terra, Leonardo A. A. (2015). "A Phenomenological Approach to the Study of Social Systems". Systemic Practice and Action Research. 28 (6): 613–627. doi:10.1007/s11213-015-9350-7.
  32. 1 2 Zollo, Maurizio; Minoja, Mario; Coda, Vittorio (2017). "Toward an integrated theory of strategy". Strategic Management Journal. 39 (6): 1753–1778. doi:10.1002/smj.2712.
  33. ↑ Mason, Jennifer (2016). "Mixing methods in a qualitatively driven way". Qualitative Research. 6 (1): 9–25. doi:10.1177/1468794106058866.
  34. ↑ Espejo, Raul; Schuhmann, Werner; Schwaninger, Markus; Bilello, Ubaldo (1996). Organizational transformation and learning: a cybernetic approach to management. Chichester: John Wiley & Sons. p. 350. ISBN   0-471-96182-5.
  35. 1 2 Stacey, Ralph D. (1993). "Strategy as order emerging from chaos". Long Range Planning. 26 (1): 10–17. doi:10.1016/0024-6301(93)90228-8.
  36. 1 2 "Liedktka Strategic Thinking-Can It Be Taught?-Long Range Planning-1998" (PDF). Archived from the original (PDF) on 2013-11-01. Retrieved 2014-04-28.
  37. ↑ Paul Schoemaker, (1995), “Scenario Planning Archived 2011-12-15 at the Wayback Machine : A Tool for Strategic Thinking”, Sloan Management Review, 36(2), 25–40.
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