A Strategic Mindset Results from Strategic Thinking

A main benefit of strategic thinking is that it creates a strategic mindset that is cognizant of several principles:

  • All organizational members contribute to strategic thinking and have a means to contribute to what to do and what not to do. Organizational leaders do their best strategy work by finding ways to involve as many organizational members as possible.  Strategy is everyone’s job.  Strategic thinking is more than the CEO’s responsibility or that of a strategy department.  Delegated strategy to a specific part of the organization could lead to bad outcomes!
  • Analytics, focus, and emergence are central to generating organizational value.  Strategic thinking can be thought of as a dynamic resolution of design (intended) and emergent decisions.  The strategist not only thinks about strategy through detailed analysis but acts as a means of knowing.
  • Strategists are focused on choosing among the various sources of competitive advantage based on an organization’s history and competencies, its market dynamics, and the expected internal and external responses to its moves. Strategy (a pathway to get from the current state to a future state mainly by creating a market positioning and the support of that positioning) is a major source of this competitive advantage.  An example of other sources may be protected intellectual property, regulatory protection, such as with monopolies, or location.
  • Organizations use various planning and control systems as illustrated in Figure 6. This picture of planning shows that organizations use at least four types of approaches to exploring the future and for conceptualizing strategy:  Strategy as perspective, strategy as positioning, strategy as defining competencies, and strategy as getting the job done, including its operational effectiveness.  Strategists (be they consultants, managers, individual contributors, or other organizational stakeholders) use the four success criteria explained earlier and the organizational pattern in the figure below.  These criteria can be used to categorize these planning approaches (1) think about the organization’s purpose and perspective to define its focus, (2) decide on how it should be positioned in the markets in which it wants to play (external analysis), (3) identify what are its main internal activities or competencies, and (4) decide on how it will implement its strategy.
  • Build on the past to understand the future.[i] Organizations are different from markets. Organizations have a history and develop competencies and reputations that help to predict how they will act in the future. Organizations have memories.  Effective analysts study an organization’s history as part of the strategy development process.
  • Existing theories and methods lead to norms; outliers refine knowledge. We must pay attention to unique market signals, disruptions, and potential changes in the ecosystem in which organizations operate. We tend toward the average of all data to suggest a strategy. To engage in richer strategic thinking, this outlier principle encourages strategists to pay attention to unusual data, unusual opportunities, and unusual disruptions (see, for example, the Blue Ocean method).[ii]
  • There are lots of human biases for every strategy decision and therefore strategic thinking and behavior are under constant review and in search for alignment or fit among all organization elements. This fit relates to making sure the “hard” side of the organization (defined strategy, structure and systems) fit with the softer side (organizational skills, management style, the shared values and culture, technology,[iii] human resources and product and service value propositions).
  • A focus is more than a set of goals. It is a set of guiding principles and expected outcomes related to how the organization will act and where it will act.
Control Systems and Strategy: Four Ways to Think Strategically

Dual Structure Companies [iv]In 1990, 15 companies used a dual structure (dual nationalities); today only six remain including BHP. A British-Australian mining firm and Carnival, a British-American union. These types of companies typically resulted from a cross-border merger. They agreed to operate as a single enterprise yet remained incorporated and retained distinct share listings in their home countries. They used this structure for tax reasons, so that regulators would look more favorably on the unions, and to access local capital markets where institutional investors were required to invest within their own countries.

These enterprises are quickly eroding with globalization and more access to diverse capital markets. They are also disappearing because investors view dual structures as lacking in transparency.

These components of a strategic mindset help executives and other stakeholders in and around the organization make decisions about what is organizationally worthwhile. All told, an organization’s strategy, when it adheres to the effectiveness criteria, increases the likelihood that key managers can tell a compelling story to those who provide resources and realize this story to gain competitive advantage. To tell this story, analysts and managers alike have to be confident that the developed strategy will be effective. To be effective, a strategy must have focus, take into account external and internal data, and be able to be implemented.

Common Fallacies When Doing Strategic Thinking

Strategists, leaders, managers, and employees fall into traps that prohibit them from engaging in effective strategic thinking. I’ll cover ten traps that apply to most organizations.

  1. Strategic thinking is embedded in an excellent strategic planning process. This is probably the most common fallacy.  Planning is only a small part of the overall strategic thinking process. Slavish obedience to planning processes makes for ineffective strategy. Strategic thinking organizes disparate information into a coherent set of ideas that can be discussed by organizational members. This organizing may or may not come from the planning processes.[v] Be especially wary of strategic thinking that starts with a budget!
  2. Objective and precise are the keys to success.This fallacy denies the subjective opinions of executives and customer-facing people. Strategists often believe that their job is to weed out subjective ideas and only consider objective information. This idea is a fallacy. Lots of great information resides in the opinions of key organizational people, especially those with lots of experience. Good analysts find ways to marry the subjective with the objective.
  3. You can predict the future. Strategists get carried away with analytical techniques. For example, net present value requires analysts to project future cash flows to decide on whether to make a strategic investment. These cash flow projections are just that– guesses about the future. They are not reality. Be cognizant of these guesses and check yourself turning probabilities into certainties; or turning correlations into causality.
  4. Strategy means important. Managers often say that they need to make a strategic decision meaning an important decision.  Strategy is important yet strategic decisions are about defining a pathway from a current state to a future state with market positioning and supporting that positioning. Avoid the term’s misuse.
  5. Strategic thinking is focused on organizational growth and performance improvement. This fallacy is common because organizations are in constant search for adding organizational value.  While a strategy may result in new growth the ultimate goal is to overcome a challenge that faces an organization.When a leader characterizes an organizational challenge as under-performance it sets the organization in motion for bad strategy.  Under-performance is a result– the challenge is why performance is occurring.

    A challenge is an obstacle to value creation and how to create a theory of change, finding ways to overcome the challenge. An effective strategy is a pathway to substantially higher performance not just a resource allocation plan.

  6. You can copy from others. Analysts and managers often look to those organizations performing well and believe if they could only do the same actions, position in the same markets, or house the same businesses, they would increase organizational value.  Nothing could be further from the truth.  Market positioning and support of that positioning happens within context, within a specific organization. This organization has a history and unique goals. Copying without adapting to this context will lead to bland and ineffective actions and strategy. Don’t copy from others. Learn from them!
  7. Long on goals, short on actions and guiding principles. Bad strategy stops at collecting external and internal data and creating a focus with no implementation process defined;
  8. Lots of fluff; superficial statements of the obvious or unnecessary complexity. For example, be on the alert for “Our strategy is to be the best in our market;” [vi]
  9. Does not face an obstacle– only meant to change things.
  10. Keeping all options open with no clear customer, product, service, or ways to create or capture value. Watch out for this lack of clarity as it signals poor focus and little resolution of core organizational issues.
Does Strategy Matter?

What do you think of these ideas? Some managers and leaders believe that strategy and strategic thinking are a waste of time.  These people believe that a well-managed, well-functioning organization as evidenced by motivated employees, dedicated to company success, will create the greatest organizational value.  They watch for opportunities and take them.  They pursue customers and do not need to create a specific, constraining strategy.  They look for profitable business wherever they find it.  As a manager told me, “If I spend the time on doing work rather than strategic thinking I will continue to be successful.”  This brief introduction to strategic thinking presents information that disagrees with this manager. What do you think? Does the manager make some good points?

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[i] This is Bayes Theorem.

Let A1, A2, … , An be a set of mutually exclusive events that together form the sample space S. Let B be any event from the same sample space, such that P(B) > 0. Then,

P( Ak | B ) =P( Ak ∩ B )

P( A1 ∩ B ) + P( A2 ∩ B ) + . . . + P( An ∩ B )

Note: Invoking the fact that P( Ak ∩ B ) = P( Ak )P( B | Ak ), Baye’s theorem can also be expressed as

P( Ak | B ) =P( Ak ) P( B | Ak )

P( A1 ) P( B | A1 ) + P( A2 ) P( B | A2 ) + . . . + P( An ) P( B | An )

The sample space is partitioned into a set of mutually exclusive events { A1, A2, . . . , An }.

Within the sample space, there exists an event B, for which P(B) > 0.

The analytical goal is to compute a conditional probability of the form: P( Ak | B ).

You know at least one of the two sets of probabilities described below.

P( Ak ∩ B ) for each Ak

P( Ak ) and P( B | Ak ) for each Ak

[ii]  W. C. Kim and R. Mauborgne (2005). Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant.  Cambridge, MA:  Harvard Business Review Press.

iii] Technology refers to the ways in which we get work done.

iv] Dual Structure Companies: Twin Troubles. The Economist.  March 10, 2018: 69.

v] H. Mintzberg (1994). The Rise and Fall of Strategic Planning.  New York, New York: Free Press.

[vi] R. P. Rumelt (2011). Good Strategy, Bad Strategy. New York, New York: Crown Business.

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