Insight-based approaches to strategic thinking
When the great scientist Albert Einstein was asked what the most important step was in developing the theory of relativity, he replied “Figuring out how to think about the problem.”
The concept of strategic thinking did not play a large part in the cultural context of the business world until the late twentieth century. From the Industrial Revolution through the 1950s, operational thinking reflected the new mass production enterprises that dominated the marketplace. Management was based on clearly defined laws, rules, and principles. The central values of pragmatism and methodology suited the aspirations and reflected the practices of the day.
Strategic business thinking was born out of the growing complexity and rapid change that characterised the business world of the late twentieth century. Although operational thinking was still important, organisations needed to be able to respond to rapid change and business complexities.
The new emphasis was on understanding how the business environment was changing and would change, and in developing organisational decisions responsive to these changes. These are known as insight-based approaches to strategic thinking.
Operational vs Strategic Thinking
One of the main differences between operational and strategic thinking involves the concept of planning. Long-range plans set out operational procedures for achieving a goal. Strategic planning works toward a vision. Long-range planning is based on the presumption that current knowledge about future conditions is sufficiently reliable to enable the development of plans. Strategic planning is an adaptive system that uses information to assess and co-evolve with the business environment.
Operational and strategic thinking place different levels of emphasis on the quantitative (measurable) and the qualitative (unmeasurable). These are also known as hard and soft influences.
A qualitative approach to strategy is visionary, conceptual, and flexible, in contrast to a quantitative approach, which is practical, linear, specific, and implementable. Operational and strategic thinking are not mutually exclusive. The analytical and practical techniques of operational thinking form a base for the innovation and vision of strategic thinking.
Effective leaders know that operational thinking is the foundation of doing business, but true visionaries realise that strategic thinking accommodates the complexities of the modern business world.
To understand and create effective strategy, it is important to have a balance between creativity and control. Comparing operational and strategic thinking:
- Quantitative thinking is linear; Qualitative thinking is nonlinear
- Quantitative thinking involves the head; Qualitative thinking involves the heart
- Quantitative thinking is verbal; Qualitative thinking is visual
- Quantitative thinking involves analysis; Qualitative thinking involves synthesis
- Quantitative thinking is explicit; Qualitative thinking is implicit
Strategic Thinking is Nonlinear as well as Linear
Linear thinking involves creating sequential relationships between things. It is logically patterned and deals with rules, analysis, and cause-effect predictability. Nonlinear thinking is about inter-connectedness and involves intuitive assessments, creativity, innovation, and a holistic view of the organisation. Linear thinking is important for organisational purposes. Nonlinear thinking involves imagining how events might affect a goal, then devising effective responses.
Strategic Thinking Engages the Heart as well as the Head
The heart of strategy is the essential nature of the organisation. In essence, it is what gives meaning to existence. The heart of the organisation encompasses its mission and values. These are the principles that create the philosophy and ethical framework that facilitates strategic decision-making. The head governs intellect and involves reasoning from evidence. The heart governs emotion and is important for inspiration and motivation.
Strategic Thinking is Visual as Well as Verbal
As small children, human beings conceptualise and communicate visually before they ever develop verbal skills. As they grow older and develop language, they begin to think in words instead of images. Strategic thinking involves making the transition from verbal thinking back to visual thinking. Strategic leaders have the capacity to influence and organise meaning for the organisation by creating shared imagery. Verbalisation is important for imparting procedural knowledge. Visualisation enables leaders to use concrete means to understand and explain abstract concepts using images, metaphors, and models.
Strategic Thinking Requires Synthesis as well as Analysis
Analysis involves deconstruction – breaking down something into its constituent elements. Synthesis involves creation – reconstituting a whole from its parts, seeing the design, and understanding how the pieces fit together. Strategy plans for future action. By its nature, analysis is applied in the present. Only synthesis can identify possibilities for the future. Therefore, synthesis and analysis are needed to plot a course from the present to the desired future.
Strategic Thinking is Implicit as well as Explicit
Strategic thinking involves two types of knowledge – practical, or explicit, and conceptual, or implicit. Explicit knowledge is fact related. It is formal, systematic, and gained from interpretation of data. It can be learned as distinct steps, as in a formula or checklist. Implicit knowledge is intuitive and interpretive. It is inferred from observable behaviour or performance, and grows from expertise and experience. For example, someone could learn the explicit knowledge of how to build a bicycle from a set of instructions, but only gain the implicit knowledge of how to ride that bicycle from repeated practice. Both implicit and explicit knowledge are important to strategic thinking. Without an explicit knowledge base, strategy will lose any sense of organisational consciousness. Implicit knowledge is necessary for flexibility and innovation.
The most effective leaders think, plan, and act strategically. They realise that the two complementary sides of strategic thinking are both important to determining which strategy will most effectively move an organisation in the direction of its desired state of being.
The Five Strategic Thinking Competencies
Strategic thinking is an essential leadership skill, but one that is often put aside in favour of practical operational knowledge. Successful business leaders focus as much on developing their competencies for strategic thinking as they do on operational knowledge.
In business, a competency is the ability to apply and use a combination of skill, knowledge, ability, and behaviour to achieve an objective. Although many executives and managers understand the basic concepts of strategic thinking, they lack the competencies to use that knowledge to develop and implement strategy.
There are five strategic thinking competencies that are integral to strategic leadership. These competencies are
- Making common sense
- Systems Thinking
Scanning involves assessing an organisation’s strategic situation. This includes an examination of the strengths and weaknesses in the organisation, as well as the opportunities and threats in the industry.
Strengths and weaknesses are internal factors that are usually within the control of the organisation. Opportunities and threats involve external political, economic, social, and technological factors that are generally outside the control of the organisation. This type of assessment is known as a SWOT analysis. Unlike an organisational SWOT, a strategic SWOT analysis involves nonlinear thinking, assessing information at different levels and different points in time. A strategic SWOT analysis does not generate an organisation’s strategy, but it does identify issues that are important to the creation of that strategy.
Visioning is the skill of crafting a vision for an organisation and conceiving the means to achieve that end. A visionary leader understands the concept of connectedness – how the paths from the present, or real, lead to the future, or soon-to-become real. Visioning is one of the most important strategic thinking competencies. The ability of a leader to see and describe an organisation’s desired future is at the heart of the ability to create it.
Re-framing is the ability of leaders to adjust and change the frame of reference through which they view challenges, opportunities, and vision. It is the skill of bringing persons, groups, departments, and organisations into a common frame of reference by developing a spectrum of understanding. Put simply, re-framing is altering the value or perception of something by altering its context.
Strategic decision-makers work in dynamic environments where “change dilemmas” are a fact of life. Unless they have the ability to re-conceptualise and re-frame their own viewpoint and understand that of others, they can lose sight of the organisation’s vision. Re-framing switches to a context that makes the viewpoint relevant.
Making Common Sense
Strategic leadership requires making common sense of complexity. It is the skill of achieving a coherent strategy that makes the organisation’s vision practical and understandable to others. Strategy is more than just giving directions; it is developing a shared understanding of the direction of the organisation. Understanding allows stakeholders to rely on implicit knowledge to interpret policies, implement processes, and set priorities.
Strategies for making common sense include
- Exploring the implications of alternate strategic approaches
- Collaborating with others to draft a common understanding of the vision
- Opening complex issues up to debate
- Treating strategic approaches as possibilities to be explored, rather than positions to be defended
Business and other human endeavours are systems that are bound by interrelated actions. Systems thinking focuses on how things interact with other things within those systems. It looks at social systems, such as business strategy, in the same way as one looks at mechanical systems. Instead of looking at strategy as a whole, and then breaking it down into smaller and smaller components, systems thinking looks at those small components and then expands the view to see how each of those components relates to the strategy as a whole. It constructs, rather than deconstructs.
One example of systems thinking is the approach of total quality management (TQM.) TQM is an inclusive management strategy that builds a business culture that is focused on the continuous improvement of tasks and activities. Activities in TQM include ongoing internal organisational analysis, benchmarking, change control, and progress measurement.
The qualities and competencies that make a strategic thinker are essential to modern business leadership. Modern business leaders must be able to understand the changing forces in the business environment and translate these into flexible strategic solutions for success.
The five strategic thinking competencies are the basis for a strategic approach to evaluating situations, making decisions, taking action, and working toward a vision.