strategic thinking

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A strategic thinking definition (Abraham, Stan, Stretching strategic thinking, Strategy & Leadership, Vol. 33, No. 5 (2005), 5-12) --
""Strategic thinking is defined as coming up with alternative viable strategies or business models that deliver customer value."" Strategic thinking has to do with finding alternative ways of competing and providing customer value. A company needs to compete, it needs a strategy to compete. A strategy is more than a plan, as strategy implies competing -- outwitting competitors and providing unique value.

Strategic thinking as integral to management --
Management's strategic concerns and choices include --

  • The firm - defining the purpose of the firm
  • Environment -- defining its environment
  • Advantage - creating a competitive advantage
  • Growth - growing the firm, using the resources of the firm
  • Evolution - evolving the firm to both adapt to and shape its environment to sustain advantage
See firm theory of.

Strategic thinking is a competency --
Strategic thinking is a management competency required to carry-out strategy.

Strategic thinking to carry-out exploration and exploitation --
The two fundamental activities of an organization are exploration and exploitation. All organizational activities can be understood as one or the other, or the linkage of the two, which transforms the enterprise. These activities, including and the synergy between them, drive the evolution and performance of the enterprise. The effectiveness of these activities is the major factor in a firm's performance results.

  • Exploration -- discover, develop, or acquire new value creation potential -- invention or discovery of a new technology
    • Exploration activities discover, develop, or acquire new value creation potential.
    • Learning is pursued with the intent to increase organizational performance through the exploration of new possibilities.
    • Exploration can be thought of as the invention or discovery of a new technology -- technology being the application of human knowledge to work (Drucker, 1985).
    • ""The essence of exploration is experimentation and new alternatives.
    • ""Exploration's returns are uncertain, distant, and often negative."" (March, 1991, p 85)
  • Exploitation -- employ existing technology to produce wealth
    • Exploitation employs existing technology to produce wealth.
    • Learning and knowledge development is pursued with the intent to increase organizational performance through the exploitation of old certainties.
    • Exploitation activities tap the business organization's value creation potential to produce offerings, refining and optimizing these activities in order to be competitive.
    • ""The essence of exploitation is the refinement and extension of existing competencies, technologies, and paradigms.
    • ""Exploitation's returns are positive, proximate, and predictable."" (March, 1991, p 85)

Without an ongoing cycle of creation, destruction, deployment, and optimization, an organization will fade in importance and ultimately fade from existence.

Strategic thinking forms strategy --
In line with Mintzberg's construct for schools of strategy and Stacey's organization evolution causality, strategic thinking has multiple dimensions associate with strategy formation. These dimensions derive from the assumptions behind and approaches to strategy formation and organization causality --

  • Strategy is made -- The external world is viewed as comprehensible and controllable, the internal strategy formation is a deliberate rational-analytic process. When the environment is seen as sufficiently comprehensible and predictable, strategic thinking is oriented towards analytical methods that serve to exploit the firm's opportunities, leverage current market positions, and build existing competencies. This would be in line with Stacey's formative causality, where the organization largely has the same basic form as it builds its exploitive capability. This is not a novelty producing process, but an aligning and leverage process. The business organization is designed, planned, and/or positioned.
  • Strategy is vision -- The external world is viewed as comprehensible and controllable, the internal strategy formation is an organic synthetic process. This can be the case of an entrepreneurial endeavor where strategy is a vision formed organically and carried out deliberately. This approach requires unleashing a visionary leader to form and execute the strategy. It is essentially a formative causality where the organization is formed from the vision of the leader.
  • Reaction is strategy -- The external world is viewed as unpredictable and confusing, the internal strategy formation is a rational-analytical reaction to external events. The strategy evolves as the firm reacts to the environmental changes. Strategic thinking is about rapid decoding of the environment as it changes and organization flexibility that enables a timely reaction. Strategy emerges through the chain of successive reactions. Depending on how the reactive process is build, whether single-loop learning, double-loop learning, or responsive processes, the causality can either be formative or transformative. In the first two cases, the organization largely reacts based on its existing form. In the later case, the organization has the possibility of generating true novelty and holds the potential for transformation.
  • Strategy happens -- The external world is viewed as unpredictable and confusing, the internal strategy formation is an organic process of novelty creating interactions, learning, experimentation, and creative thinking. Strategy emerges from this collection of activity. Strategic thinking is oriented toward unrestrained creative thought and robust communicative interaction, creating an environment from which true novelty can emerge, be nurtured, and exploited. Taken to its full potential, this becomes a transformative process which holds the potential for creating true novelty.
  • Strategy is power, politics, and culture -- This is a hybrid that is not necessarily associated with a view of the comprehensibility of the external world . Strategy forms in an organic way in the power relationships, politics, and culture of the organization. As a result, strategy may tend to be either more deliberate or more organic, depending on the result of these processes. Strategic thinking addresses the health of the internal processes and culture in order to bring about effective strategy. Given the organic nature of the process, the focus may fall back to the ethics and values governing these processes to guide the process on its journey. Strategic thinking also addresses the causality involved in the interactive dynamics -- whether it is formative or transformative.

These collective dimensions are summed up in one sentence by Mintzberg --

    ""Strategy formation is judgmental designing, intuitive visioning, and emergent learning; it is about transformation as well as perpetuation; it must involve individual cognition and social interaction, cooperation as well as conflict; it has to include analyzing before and programming after as well as negotiating during; and all of this must be in response to what can be a demanding environment. Just try and leave any of this out and see what happens!"" (Mintzberg, 1998, pp 372-373).

Strategic thinking is thinking about the objectives of strategy. --
Strategy is what enables an organization to achieve and sustain competitive advantage.
The objectives of strategy are -

  • competitive advantage --
    • unique value
  • organization evolution --
    • entrepreneurship, invention, innovation, transformation
  • organization competency
    • strategic management competency - to have both continuity and transformation -- the competency to evolve, produce value, and optimize

Strategic thinking is thinking about enterprise competitive advantage --
Competitive advantage is what enables a business organization to thrive. It is the objective of strategy. See Rumelt's elements of strategic position, for those elements from which advantage is formed and the mechanism that serve to isolate those elements in the firm, in firm theory of. See competitive advantage. Also see advantage thinking for a means to build strategic thinking skills related to deciphering a competitive advantage.

  • Advantage comes from a unique value proposition for the organization's customers.
  • Advantage stems from having a way of providing value better than others. Strategic thinking is thinking about process, competency, structure, people, and resources.
  • Advantage requires pulling all aspects together into one coherent business organization. Strategic thinking is about purpose, identity, values, and vision guiding the development and optimization of offerings, processes, and resources.
  • Advantage must be produced and sustained by the organization. Strategic thinking is about leadership and management that both innovates and optimizes.
  • Competitive advantage derives from novelty -- creating new to the world offerings and capabilities. Strategic thinking is about creativity, intuition, invention, and innovation.
  • Advantage requires the simultaneous coexistence of continuity and transformation. Strategic thinking is paradoxical, melding the conflicting activities of exploration and exploitation.
  • Advantage without renewal fades away. Strategic thinking is about organization evolution to new forms and states of advantage.

Strategic thinking is an organization capability --
Strategic thinking is an organization member capability. It is a composite of other capabilities such as creative thinking and problem solving. It requires experience with and reflection on the particular business organization to be most effective. Strategic thinking brings into view opportunities in time to benefit from them and problems in time to avoid them. The business leader, thinking strategically, assesses capability and acts to develop the business vs. focusing his strategy on efficiency efforts or jockeying for position with existing competitors.

Jeanne Liedtka's (1997) definition of strategic thinking ties together the highlights of what strategic management is about. She clarifies that ""strategic thinking"" is not ""thinking about strategy"". It is about building a capability for real strategic thinking, which produces an innovative response and an efficient organization to capitalize on that innovation. Liedtka explains: ""Strategic thinking breeds inventiveness and innovation. It engenders speed and flexibility. It invites employees at all levels into the strategic conversation and engages them as a result.""

Strategic thinking as ways of seeing --
Mintzberg (2005) has defined seven dimensions of strategic thinking as ways of ""seeing"". The exercise of each technique and the synthesis of the seven form effective strategic thinking

  • Seeing ahead, foreseeing an expected future by constructing a framework out of the events of the past, intuitively forecasting discontinuities
  • Seeing behind, because any good vision of the future has to be rooted in an understanding of the past
  • Seeing above, seeing ""the forest from the trees""
  • Seeing below, understanding with depth to find the diamond in the rough, the gem of the idea that changes an organization
  • Seeing beside, creative thinking, or lateral thinking, the ability to think differently and challenge convention
  • Seeing beyond, placing creative ideas into context, to be seen to work in a world that has yet to unfold. This thinking constructs the future.
  • Seeing it through. For a thinker to deserve the label strategic, he or she must also systematically plan and implement the vision.

Strategic thinking is about understanding types of thinking and views of the world in approaches to strategy --
Schools of Strategy Formation --
Henry Mintzberg has built a strategy formation framework which classifies approaches to strategy based on thinking types and the strategy formulator's view of the world. He calls these schools of strategy.

  • Prescriptive schools (Stacey classifies as Strategic Choice)
    • design -- strategy is a deliberate process of conscious thought where responsibility rests with top management. The strategy seeks to match the internal capabilities of a firm with the opportunities proved by its external environment.
    • planning -- where specialist strategic planners adopt formal, step-by-step techniques to do much the same s the design school
    • positioning -- this school is built on the design and planning schools but focuses on strategy content, such as Porter or Treacy & Wiersema's models of advantage.
  • Descriptive schools (Stacey classifies as Organizational Learning) --
    • entrepreneurial -- strategy is seen as a visionary process carried out by leaders
    • cognitive -- focuses on the mental and interpretive processes of strategizers
    • learning -- strategies emerge as people learn over time, emergent as distinct from deliberate strategy
    • power -- sees strategy as a political process
    • cultural
    • -- which is concerned with the influence of culture on strategic stability
  • Descriptive (Stacey classifies as Evolutionary) --
    • environmental -- sees the environment as the active cause of strategy while the organization is passive.
  • Synthesis --
    • configuration -- integrates the views of all the other schools in terms of configurations or in terms of transformations

Strategic thinking understands organization change (Stacey) --

    Strategic thinking understands the causality reflected in the theories of organizational change --
    Strategic thinking is thinking about why and how organizations become what they become. See causality.
    • rationalist cause - rationalist free choice - decision making
    • efficient cause - associated with analytical thinking , part-whole thinking - which seeks to understand the whole through understanding the parts
    • formative cause - associated with systems thinking - which seeks to under the whole through the interaction of the parts
    • transformative cause - associated with responsive processes thinking - the dynamic interaction that results in both continuity and transformation

    Strategic thinking encompasses phenomena of interest to strategy and organizational change. See strategy. --

    • populations of organizations
    • dynamics - what drives change
    • paradox - irresolvable differences
    • emotion
    • interaction and interconnection
    • degree of detail
    • strategist perspective -- objective observer or participant inquirer

    Strategic thinking considers the questions that define approaches to strategy formation...and the implications of the answers (Stacey) --

    1. How does the theory understand the nature of human interacting and relating?
      • Does the theory take a systematic or a process perspective?
      • How does the theory deal with dynamics?
      • What is the nature of causality of the theory?
    2. What theory of human psychology, that is ways of knowing and behaving, does each theory of strategy and organizational change assume?
      • How does the theory deal with the relationship between the individual and the group?
      • How does the theory deal with the question of emotion?
      • How does the theory deal with the question of power?
    3. What methodology underlies each theory of strategy and organizational change?
      • Does the theory take the position of objective observer or a pre-given reality?
      • Does the theory take the position of the reflexive, participative enquirer seeking to understand a constructed reality?
    4. How does each theory of strategy and organizational change deal with the possible paradoxical nature of the population of organizations and groupings of people?
      • Are opposing ideas seen as ...
        • dichotomies - a whole split into two non-overlapping parts, typically viewed as opposites
        • dualisms or dualities - two conflicting ideas brought into one system of belief, the existence of opposites 'things' making up a whole, where the thing is either one or the other 'thing' but not simultaneously both.
        • paradoxes - conflicting opposites simultaneously existing without being resolved. The genuine simultaneous coexistence of two contradictory movements.

Strategic thinking is thinking about the theories of strategy (Stacey) --

  • systemic theories
    • strategic choice theory
    • learning organization theory
    • psychodynamics theory
  • responsive processes
    • variation arising from complex responsive processes

Strategic thinking is thinking about decision making --
Strategy only becomes real when a decision to act is made. Whether these decisions are analytical, based on hunches, a placing of strategic bets ... it is a decision. Decisions and the process used to make them should be monitored and improved like any other process of the business organization. See decision, decision theory, and organizational action.

Strategic thinking is thinking about who to engage --

  • multiple disciplines
  • multiple levels
  • diversity in thinking
  • diversity of experience
  • diversity of positions
  • customers
  • suppliers
  • partners
  • dynamic network(s)

Strategic thinking as learning --
Strategic thinking is analogous to double loop learning in comparison to strategic planning which can be equated to single loop learning. See learning levels of for a further discussion of levels of learning and types of learning.

Building strategic thinking --
There are many ways to approach building strategic thinking skills.

  • Develop an awareness of what suckers people are for narratives and the lack of critical thinking applied to a ""good story.""
  • Understand the human tendency towards inductive reasoning at the expense of considering a broader range of facts and critical reasoning.
  • Probability...
  • Uncertainty...
  • Scenario planning
  • Scenario learning
  • Scenario thinking
  • Futures methodology
  • Advantage thinking ...