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Strategic Thinking
A Discussion Paper
Eton Lawrence
Personnel Development and Resourcing Group
Research Directorate,
Policy, Research and Communications Branch,
Public Service Commission of Canada
April 27, 1999
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Table of Contents
"Without achieving the kind of detailed understanding of
strategic thinking that we have today of strategic planning, we risk
introducing yet another appealing concept to the strategy lexicon that has
little relevance to practising managers" (Liedtka,
1998).
The purpose of this paper is to clarify some of the salient issues surrounding
the concept of strategic thinking. For example, what is strategic thinking?
How do we recognize it? Is it different from strategic planning? If so,
is it a replacement for strategic planning? Can strategic thinking and
strategic planning be accommodated within the same strategic management
regime?
Current research suggests that strategic planning and strategic thinking
are different sides of the same coin and each one on its own is necessary,
but not sufficient for an efficient strategic management framework. Therefore,
strategic thinking and planning must work hand-in-hand in order to reap
maximum benefit.
What is Strategic Thinking?
There is a lack of clear understanding of just what is meant by the term
strategic thinking and this, in turn, has lead to considerable confusion in the
strategic management arena. Thus there exists a clear need to precisely define
strategic thinking so that this management paradigm can be objectively embraced
and appropriately situated within the strategic management context (Liedtka,
1998).
Some authors, Ian Wilson (1994) for one, have suggested that strategic
thinking is merely thinking about strategy. According to him, "The
need for strategic thinking has never been greater . . . This means continuing
improvement (in strategic planning) has profoundly changed the character of
strategic planning so that it is now more appropriate to refer to it as
strategic management or strategic thinking." This attempt to define
strategic thinking as some kind of new and improved version of strategic
planning leads to considerable confusion in attempting to elucidate the full
implications of strategic thinking in its purest sense.
Henry Mintzberg (1994), one of the leading authorities in the area of
strategic management, by contrast, clearly emphasizes that strategic thinking is
not merely "alternative nomenclature for everything falling under the
umbrella of strategic management". It is a particular way of
thinking with specific and clearly discernible characteristics. In explaining
the difference between strategic planning and strategic thinking, Mintzberg
argues that strategic planning is the systematic programming of pre-identified
strategies from which an action plan is developed. Strategic thinking, on the
other hand, is a synthesizing process utilizing intuition and creativity whose
outcome is "an integrated perspective of the enterprise." The problem,
as he sees it, is that traditional planning approaches tend to undermine, rather
than appropriately integrate, strategic thinking and this tends to impair
successful organizational adaptation.
These sentiments are echoed by two other leading theorists in the field,
Prahalad and Hamel (1989), who describe traditional approaches to planning as
"form filling." They refer to strategic thinking as "crafting
strategic architecture" but emphasize Mintzberg's general themes of
creativity, exploration, and understanding discontinuities.
For Ralph Stacey (1992), strategic thinking is ". . . using analogies
and qualitative similarities to develop creative new ideas . . . (and) designing
actions on the basis of new learning." This differs from strategic planning
which focuses on following pre-programmed rules. Raimond (1996) follows a
similar line of reasoning by dividing strategic thinking into two modes:
"strategy as intelligent machine" (a data-driven, information
processing approach) and "strategy as creative imagination." The
former would be what we would generally consider strategic planning, while the
latter would be strategic thinking. This dichotomy between the creative versus
the analytic is pervasive in the discussions on the subject of strategic
thinking and strategic planning.
In general then, it can be argued that strategic thinking involves thinking
and acting within a certain set of assumptions and potential action alternatives
as well as challenging existing assumptions and action alternatives, potentially
leading to new and more appropriate ones.
The Liedtka
Model of the Elements of Strategic Thinking
Following the Mintzberg model, Liedtka (1998) developed a model which
defines strategic thinking as a particular way of thinking, with
very specific and clearly identifiable characteristics. Figure 1 illustrates
the five elements of strategic thinking.
The first element is a systems perspective. A
strategic thinker has a mental model of the complete system of value creation
from beginning to end, and understands the interdependencies within the chain.
Peter Senge (1990) also stresses the significance of mental models in
influencing our behaviour. According to him:
New insights fail to get put into practice because they conflict with
deeply held internal images of how the world works, images that limit us to
familiar ways of thinking and acting. That is why the discipline of managing
mental models - surfacing, testing, and improving our internal pictures of how
the world works - promises to be a major breakthrough . . .
The mental model of how the world works must incorporate an understanding of
both the external and internal context of the organization. According to James
Moore (1993) these mental models must lead to the perception of a business in a
context larger than that of the industry in order to facilitate innovation. As
he puts it:
I suggest that a company be viewed not as a member of a single industry but
as part of a business ecosystem that crosses a variety of industries.
In a business ecosystem, companies co-evolve capabilities around a new
innovation: they work co-operatively and competitively to support new
products, satisfy customer needs, and eventually incorporate the next round of
innovations.
Thus the ability to manage in these converging arenas requires that we think
strategically about the alliances we make within these competing networks and
how we position ourselves within this ecosystem.
In addition to understanding the external business ecosystem in which a firm
operates, strategic thinkers must also appreciate the inter-relationships among
the individual internal parts that, together, constitute the whole, as well as
the fact that the whole is greater than the sum of its parts.
Senge (1990) uses the term systems thinking to describe the same
phenomenon, and suggests that it is arguably the most critical of the five
disciplines of the learning organization. He advocates that systems thinking is
what makes all other types of learning work in harmony and points out that a
fundamental problem for business organizations is the failure to see problems as
elements of systems failures because "most of an organization's
problems are not unique errors but systems issues."
The systems perspective enables individuals to clarify their role within the
larger system and the impact of their behaviour on other parts of the system, as
well as on the final outcome. This approach addresses, therefore, not only the
fit between the corporate, business, and functional levels of strategy, but very
importantly, the person level. According to Liedtka (1998):
It is impossible to optimize the outcome of the system for the end
customer, without such understanding. The potential for damage wrought by
well-intentioned but parochial managers optimizing their part of the system at
the expense of the whole is substantial.
Thus, from a vertical perspective, strategic thinkers see the linkages in the
system from multiple perspectives and understand the relationship among the
corporate, business, and functional levels of strategies to the external
context, as well as to the personal daily choices they make. From a horizontal
perspective, they also understand the connections across departments and
functions, and between suppliers and buyers.
The second element of strategic thinking is that it is intent-focussed
and intent-driven. Hamel and Prahalad (1994):
Strategic intent is our term (that) implies a particular point of view
about the long-term market or competitive position that a firm hopes to build
over the coming decade or so. Hence, it conveys a sense of direction.
A strategic intent is differentiated; it implies a competitively unique point
of view about the future. It holds out to employees the promise of exploring
new competitive territory. Hence, it conveys a sense of discovery.
Strategic intent has an emotional edge to it; it is a goal that employees
perceive as inherently worthwhile. Hence, it implies a sense of destiny.
Direction, discovery, and destiny. These are the attributes of strategic
intent.
Liedtka (1998) puts it this way:
Strategic intent provides 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. In the disorienting swirl of change, such psychic energy may well be the
most scarce resource an organization has, and only those who utilize it will
succeed.
Therefore, strategic thinking is fundamentally concerned with, and driven by,
the continuous shaping and re-shaping of intent.
The third element of strategic thinking is intelligent
opportunism. The essence of this notion is the idea of
openness to new experience which allows one to take advantage of alternative
strategies that may emerge as more relevant to a rapidly changing business
environment. Mintzberg (1999) sees this approach as underscoring the difference
between emergent strategy and deliberate strategy.
In practising intelligent opportunism, it is important that organizations
seriously consider the input from lower level employees or more innovative
employees who may be instrumental in embracing or identifying alternative
strategies that may be more appropriate for the environment. For example,
Intel's predominant role in the microprocessor industry was largely the result
of a renegade band of scientists acting in defiance of senior management's
stated strategic objectives. Given this, one can well imagine the loss to
industry if the focus is only on rigidly defined and mandated top-down
strategies to the exclusion of other emerging strategies and voices of dissent!
According to Hamel (1997):
If you want to create a point of view about the future, if you want to
create a meaningful strategy, you have to create in your company a hierarchy
of imagination. And that means giving a disproportionate share of voice to the
people who have until now been disenfranchised from the strategy making
process. It means giving a disproportionate share of voice to the young people
. . . (and) . . . to the geographic periphery of your organization - because,
typically, the farther away you are from headquarters, the more creative
people are: they don't have the dead hand of bureaucracy and orthodoxy on
them. And it means giving a disproportionate share of voice to newcomers.
As well, Mintzberg (1999) feels it is very hard for a CEO or prospective CEO
to say to a board, "Well, we are evolving our strategy. It's
emerging." The board wants the strategy to be "nice and clear" as
do the stock-market analysts, who are part of the same problem. But "nice
and clear" often means:
You've precluded 99 percent of the people in the organization from having
an impact on strategy. . . And so a healthy strategy system in any company is
one in which there's a tremendous amount of communication and interaction
around ideas and possibilities - from the ground, from middle management, from
senior management - weaving back and forth, in and out.
The fifth element of strategic thinking is referred to as thinking
in time. According to Hamel and Prahalad (1994), strategy is not
solely driven by the future, but by the gap between the current reality and the
intent for the future. According to them:
Strategic intent implies a sizeable stretch for an organization. Current
capabilities and resources will not suffice. This forces the organization to
be more inventive, to make the most of limited resources. Whereas the
traditional view of strategy focuses on the degree of fit between existing
resources and current opportunities, strategic intent creates an extreme
misfit between resources and ambitions.
Thus, by connecting the past with the present and linking this to the future,
strategic thinking is always "thinking in time."
Neustadt (1986) states that:
Thinking in time (has) three components. One is recognition that the future
has no place to come from but the past, hence the past has predictive value.
Another is recognition that what matters for the future in the present is
departures from the past, alterations, changes, which prospectively or
actually divert familiar flows from accustomed channels . . . A third
component is continuous comparison, an almost constant oscillation from the
present to future to past and back, heedful of prospective change, concerned
to expedite, limit, guide, counter, or accept it as the fruits of such
comparison suggest.
In a nutshell, strategic thinking connects the past, present, and future and
in this way uses both an institution's memory and its broad historical context
as critical inputs into the creation of its future. This oscillation between the
past, present, and future is essential for both strategy formulation and
execution. Charles Handy (1994) feels we need both a sense of continuity with
our past and a sense of direction for our future to maintain a feeling of
control in the midst of change. From his perspective then, the real question is
not what does the future we are trying to create look like, rather it is
"having seen the future that we want to create, what must we keep from that
past, lose from the past, and create in our present, to get there."
The fifth element of the strategic thinking recognizes the process as one
that is hypothesis-driven. Like the "scientific
method" it embraces hypothesis generation and testing as core activities.
According to Liedtka (1998) this approach is somewhat foreign to most managers:
Yet in an environment of ever-increasing information availability and
decreasing time to think, the ability to develop good hypotheses and test them
efficiently is critical . . . the ability to work well with hypotheses is the
core competence of the best strategy consulting firms.
Because strategic thinking is hypothesis-driven, it circumvents the
analytical-intuitive dichotomy that has dominated much of the debate on the
value of formal planning. Strategic thinking is both creative and critical,
although accomplishing both types of thinking simultaneously is difficult,
because of the requirement to suspend critical judgement in order to think more
creatively.
Nonetheless, the scientific method is able to accommodates both creative and
analytical thinking sequentially through its use of iterative cycles of
hypothesis generating and testing. Hypothesis generation poses the creative
question, " What if . . .?" Hypothesis testing follows up with the
critical question, "If . . . then." and evaluates the data relevant to
the analysis. Taken together and repeated longitudinally this process allows an
organization to pose a variety of hypotheses, without sacrificing the ability to
explore novel ideas and approaches. The effect is an organization that can
transcend simplistic notions of cause and effect and pursue life-long learning.
Liedtka (1998) states that, "Taken together, these five elements
describe a strategic thinker with a broad field view that sees the whole and the
connections between its pieces, both across the four vertical levels of strategy
and the horizontal elements of the end-to-end value system."
In summary, Leidtka (1998) states:
The strategic thinker remains ever open to emerging opportunities, both in
service to the defined intent and also in question as to the continuing
appropriateness of that intent . . . Firms who succeed at embedding a
capability for strategic thinking throughout their organizations will have
created a new source of competitive advantage. Their whole (holistic) system
perspective should allow them to redesign their processes for greater
efficiency and effectiveness. Their intent-focus will make them more
determined and less distracted than their rivals. Their ability to think in
time will improve the quality of their decision-making and speed of
implementation. A capacity for hypothesis generation and testing will
incorporate both creative and critical thinking into their processes.
Intelligent opportunism will make them more responsive to local opportunities.
The combined effects of these is the creation of a capacity for strategic
thinking that meets what Day (1994) refers to as the three fundamental tests for
a strategically valuable capability:
- they create superior value for customers,
- they are hard for competitors to imitate, and
- they make the organization more adaptable to change.
Liedtka (1998) suggests that these three discrete, but inter-related
elements, when taken together can lead to significant positive outcomes in
organizations, provided there is the accompanying supportive strategic planning
context to encourage and enable the implementation of the fruits of this type of
thinking.
Is Strategic
Thinking Compatible With Strategic Planning?
"It all comes down to the ability to go up and down the
ladder of abstraction, and being able to see both the big picture and the
operational implications, which are signs of outstanding leaders and
strategists" (Heracleos, 1998)
Traditional notions of strategic planning have come under severe attack by
many in the business community. Strategic planning often takes an already agreed
upon strategic direction and helps strategists decide how the organization is to
be configured and resources allocated to realize that direction. Because of
this, one of the most common critiques of strategic planning is that it is
overly concerned with extrapolation of the present and the past as opposed to
focussing on how to reinvent the future (also referred to as "strategic
intent" or "strategy as revolution" (Hamel and Prahalad, 1994).
Fahey and Prusak (1998) for example, have identified this predisposition to
focus on the past and the present rather than on the future as one of the eleven
deadliest sins of knowledge management. Also by being too over-focussed on
analysis and extrapolation rather than creativity and invention, strategic
planning tends to create the illusion of certainty in a world where certainty is
anything but guaranteed. Strategic planning is normally used to denote a
programmatic, analytical thought process carried out within the parameters of
what is to be achieved, but does not explicitly question those parameters, and
is therefore, analogous to single-loop learning.
Strategic thinking, by contrast, refers to a creative, divergent thought
process. It is a mode of strategy-making which is associated with re-inventing
of the future, the creation of new competitive space as opposed to struggling
over slow growth or shrinking markets, for example. A significant deviation
from strategic planning, strategic thinking questions the strategic parameters
themselves, and thus is analogous to double-loop learning. The
elements of each strategic approach are summarized in Figure 2. According
to Heracleos (1998):
Discovering and committing to novel strategies which can re-write the rules
of the competitive arena, necessitates relaxing or suspending at least part of
the conventional wisdom and assumptions about the industry, the industry
recipes, as well as one's psychological frames in which these recipes are
represented, envisioning a number of possible futures, and challenging the
existing operating assumptions in which current strategies are built.
This sharp dichotomy frequently established between the analytic aspects of
strategy-making (strategic planning) and the creative aspects (strategic
thinking) in the literature leaves one with the impression that these two
strategy-making approaches are incompatible with each other. However, to many of
the leading theorists and practitioners, both are required in any thoughtful
strategy-making process. For example, in as much as thinking about the future
may be important, there can be little doubt that processes have to be put in
place to enable managers to attend to strategic issues amidst the day-to-day
crises. Therefore, we cannot merely abandon all attention to the process of
strategy formulation. After all, the creative, ground-breaking strategies
emerging from strategic thinking still have to be operationalized through
convergent and analytical thought (strategic planning). At the same time,
planning is vital but cannot, by itself, produce unique strategies that will
challenge the industrial boundaries and redefine industries, unless it
stimulates the creative mind set in the process, as is the case of using
alternative scenarios for the future.
Thus, the essential point here is that strategic thinking and strategic
planning are both necessary and none is adequate without the other, in an
effective strategy-making regime. The real challenge is how to transform today's
planning process in a way that incorporates, rather than undermines, strategy
thinking.
According to Heracleos (1998):
. . . strategic thinking and strategic planning are interrelated in a
dialectical process, where both are necessary for effective strategic
management, and each on its own is necessary but not sufficient. The tools
that one uses at each stage of the strategic management process are not
important in themselves but as the means of encouraging the creative and
analytical mind set. There ideally needs to be a dialectical thought process
of being able to diverge and then converge, being creative and then seeing the
real-world implications, and being synthetic but also analytical.
Leidtka (1998) strongly supports this position and uses a model (shown in
Figure 3) based on the disruption and creation of alignment to illustrate her
point. According to her:
A broadened view of the strategy-making process then, would incorporate
both strategic thinking and strategic programming as related activities, each
valuable in its own right in an ongoing process of creating and disrupting the
alignment between an organization's present and its future.
In addition, Leidtka (1998) suggests that alignment, in this view, is both
necessary and limiting. She points out that both academics and practitioners
have embraced the McKinsey "7S Model" that aligns strategy, structure,
systems, superordinate goals, staff, skills, and shared values, because it is
well-recognized that purposeful, efficient organizational action cannot be taken
if these factors work at cross-purposes with each other. Ironically, however,
once aligned, these factors become a powerful impediment to change. If we then
accept the growing warning that the "only sustainable source of competitive
advantage is the ability to learn faster than your competition" the desire
to develop a capacity for learning, for continuous change, for flexibility and
opportunism, begins to collide head-on with our desire to align the 7S's. The
dilemma is that unaligned, these factors work at cross-purposes; aligned they
drive out potentially needed change.
Therefore, according to Liedtka, an appropriately reconstituted strategy-making
framework would build in the possibility of institutionalizing a process
that continually examines the tension between the creation of the alignment
necessary to support efficiency and effectiveness and the disruption of
alignment necessary to foster change and adaptability. Strategic thinking,
at its best, disrupts alignment by creating a gap in the minds of managers
between today's reality and a more desirable future. This, in turn, opens
the gap that is the driving force behind strategy-making aimed at change.
Translating the strategic intent into new institutional behaviours, however,
necessitates strategic programming (i.e., the realignment of structures,
systems, processes, and skills around the new intent in a way that begins
to close the gap that strategic thinking opened. Once closed, a new gap
is opened in an iterative and ongoing cycle of strategic thinking and
strategic programming. This broadened view of the strategy-making process
is captured in Figure 3.
This notion is admirably summarized by Heracleos (1998):
It all comes down to the ability to go up and down the ladder of
abstraction, and being able to see both the big picture and the operational
implications, which are signs of outstanding leaders and strategists.
Strategic thinking has been gaining increasing popularity in the literature
on organizational planning. However, the lack of clear articulation as to the
nature and implications of this concept has lead to considerable confusion. For
example, strategic thinking has been presented as a somewhat higher order of
strategic planning; as an alternative to strategic planning; and as an approach
that is downright incompatible with strategic planning. Inadequate delineation
of the precise characteristics of this concept has also impeded its
implementation by practitioners and its further development by educators.
Careful review of the emerging body of thought on this subject, however, is
that strategic thinking, properly defined, is not only critical to the survival
of the organization in these times of rapid and accelerating change, but more
importantly, can be effectively accommodated within a progressive
strategy-making regime to support strategic planning. Therefore, what is being
proposed in large measure in this paper is a dialectical framework within which
strategic planning and strategic work in tandem, rather than one in which
strategic planning impedes the flourishing of strategic thinking. Two different
models have been presented to illustrate the feasibility of this proposition,
with a view to assisting both the practising strategists as well as academics.
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Note
The views expressed in this document are those of the authors and do not
necessarily reflect those of the Public Service Commission.
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