Developing strategic thinking Essay

Introduction My research interest in strategic thinking started in 1993 when I interviewed 35 senior executives for a longitudinal study on the changes in strategic planning and strategic management in large organisations between 1982 and 1993. These senior executives were responsible for strategic planning, strategic management or corporate development in 35 of the 100 largest manufacturing companies in Australia. The interviews lasted between three and four hours and one of the questions I asked concerned the problems that they had experienced with their strategic planning or strategic management approach in the preceding five years. The main problem identified by the majority of senior executives was strategic thinking. Interestingly, strategic thinking was a problem regardless of whether the companies had a formalised strategic planning system or used a non-formalised approach. For example, one senior executive from a company with a formalised strategic planning system stated: Our senior exec utives tend to get carried away by details and lose their strategic perspective. Abstract Lack of strategic thinking by senior managers has been identified as a major shortcoming in organisations. Draws on concepts in management and psychology to present a framework that can be used to remedy this situation. Argues that strategic thinking needs to be addressed at two different, but interrelated levels: the individual level and the organisational level. Organisations that successfully integrate strategic thinking at these two levels will create a critical core competency that forms the basis of an  enduring competitive advantage. Europe, East Asia, Australia, New Zealand and the United States† (p. 242). The ability to think strategically, however, is crucial to remaining competitive in an increasingly turbulent and global environment. Considering that the average life expectancy of US Fortune 500 companies is only between 40 and 50 years (de Geus, 1997) and that only 49 percent of the 100 largest manufacturers in Australia in 1982 were still among the top 100 manufacturers in 1993 (Bonn and Christodoulou, 1996), the need for strategic thinking has never been greater. This paper presents a framework that can be used to increase strategic thinking in organisations. It argues that strategic thinking needs to be considered at two different, but inter-related levels. Organisations that successfully integrate strategic thinking at these two levels will create a critical core competency that forms the basis of an enduring source of competitive advantage. The debate on strategic thinking There is no agreement in the literature on what strategic thinking is. A number of authors have used the term interchangeably with other concepts such as strategic planning or strategic management. Wilson (1994) for example notes that: Similarly, a senior executive from a company without a formalised planning system reported: It is a major challenge to get our decision makers to think in strategic rather than operational terms. This lack of strategic thinking is not restricted to organisations in Australia. As research from the Institute of Directors in London has shown, 90 per cent of directors and vice-presidents â€Å"had no induction, inclusion or training to become a competent direction giver of their business† (Garratt, 1995a, p. 242). According to Garratt (1995a), this percentage â€Å"seems to hold good in The current issue and full text archive of this journal is available at http://www.emerald-library.com/ft This continuing search for improvement 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 (p. 14, italics in original). Other authors have focussed on strategic management processes and either stated explicitly that good strategic planning contributes to strategic thinking (Porter, 1987) or assumed implicitly that a well designed strategic management system facilitates strategic thinking within an organisation (Thompson and Strickland, 1999; Viljoen, 1994). Mintzberg (1994) suggested a clear distinction between strategic thinking and  concepts such as strategic planning. He stated that â€Å"strategic planning is not strategic thinking† (p. 107) and argued that each term focuses on a different stage in the strategy development process. In his view, strategic planning focuses on analysis and deals with the articulation, elaboration and formalisation of existing strategies. Strategic thinking, on the other hand, emphasises synthesis, using intuition and creativity to create â€Å"an integrated perspective of the enterprise† (p. 108). He claimed that strategic planning is a process that should occur after strategic thinking. Garratt (1995b) argued along similar lines. He defined strategic thinking as a process by which senior executives â€Å"can rise above the daily managerial processes and crises† (p. 2) to gain a different perspective of the organisation and its changing environments. Heracleous (1998) made the distinction between strategic planning and strategic thinking by an analogy to single-loop learning and double-loop learning. In his view, the former is analogous to strategic planning, the later to strategic thinking. He claimed that single-loop learning involves thinking within existing assumptions and taking actions based on a fixed set of potential action alternatives. Double-loop learning, in contrast, challenges existing assumptions and  develops new and innovative solutions, leading to potentially more appropriate actions. Heracleous argued that like single-loop learning and double-loop l earning, strategic planning and strategic thinking are interrelated in a dialectical process and are equally important for effective strategic management. This article supports the view that strategic thinking and strategic planning are two different concepts and that strategic planning is a process, which takes place after strategic thinking. My analysis in the following sections demonstrates that strategic thinking manifests itself at two different levels: the individual level and the organisational level. This approach integrates the micro domain’s focus on individuals and groups with the macro domain’s focus on organisations and their context. In other words, it acknowledges the influence of individual characteristics and actions on the organisational context and vice versa, the influence of the organisational context on individual thinking and behaviour. As Chatman et al. (1986) have argued: When we look at individual behaviour in organizations, we are actually seeing two entities: the individual as himself and the individual as representative of this  collectivity . . . Thus the individual not only acts on behalf of the organization in the usual agency sense, but he also acts, more subtly `as the organization’ when he embodies the values, beliefs, and goals of the collectivity. Thus, understanding strategic thinking requires a dual-level approach that investigates the characteristics of an individual strategic thinker as well as the dynamics and processes that take place within the organisational context in which the individual operates. For instance, to obtain an accurate picture of the effects of differing leadership styles on strategic thinking, we can look at their impact on individual managers and on the way they influence the wider organisational climate, culture and structure. Strategic thinking at the individual level Strategic thinking at the individual level comprises three main elements: 1 a holistic understanding of the organisation and its environment; 2 creativity; and 3 a vision for the future of the organisation. Each of these  elements will be addressed in the following sections. A holistic understanding of the organisation and its environment A crucial element of strategic thinking is the ability to take a holistic perspective of the organisation and its environment. This requires an understanding of how different problems and issues are connected with each other, how they influence each other and what effect one solution in a particular area would have on other areas. As Kaufman (1991) has expressed it: Strategic thinking is characterized by a switch from seeing the organization as a splintered conglomerate of disassociated parts (and employees) competing for resources, to seeing and dealing with the corporation as a holistic system that integrates each part in relationship to the whole (p. 69). Taking a holistic approach requires the ability to distance oneself from day-to-day operational problems and to see how problems and issues are connected to the overall pattern that underlies particular details and events. Senge (1990) has called this approach â€Å"systems thinking†. He argued that: We must look beyond personalities and events. We must look into the underlying structures which shape individual actions  and create the conditions where types of events become likely (p. 43). Such an attention to the underlying structures of complex situations requires thinking in terms of processes rather than events to enable a reconciliation of apparent contradictions and the development of innovative solutions. Mastering complexity in organisations also requires managers to be familiar with the dynamics of organisational life. Stacey (1996) argued that managers need a thorough understanding of how organisations and managerial actions  change over time and of the feedback processes that lead to such changes. This includes being sensitive to the subtle interactions between the different parts of the organisation and understanding the structural causes of behaviour and their effects on other parts of the organisation. Finally, a holistic view requires recognition that organisations are components within large and complex systems, such as markets, industries and nations. Strategic thinkers need to understand how organisations are embedded within this wider context and h ow they are influenced by the dynamics, interconnection and interdependency of these systems. Strategy is about ideas and the development of novel solutions to create competitive advantage. Strategic thinkers must search for new approaches and envision better ways of doing things. A prerequisite for this is creativity, in particular the ability to question prevalent concepts and perceptions (de Bono, 1996) and to recombine or make connections between issues that may seem unconnected (Robinson and Stern, 1997). According to Amabile (1998), creative thinking refers to â€Å"how people approach problems and solutions  ± their capacity to put existing ideas together in new combinations† (p. 79, italics in original). This involves challenging the â€Å"tyranny of the given† (Kao, 1997, p. 47) by questioning prevailing beliefs or mental models in the organisation. Senge (1990) has described mental models as â€Å"deeply ingrained assumptions, generalizations, or even pictures or images that influence how we understand the world and how we take action† (p. 8). He argues that such models are often tacit and beneath our level of awareness, yet they have a strong influence on organisational behaviour: . . . 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 (p. 174). Thus, the ability to reflect on mental models and to challenge prevailing assumptions and core beliefs is crucial for the development of unique strategies and action programs. This requires strategic thinkers to understand their own behavioral patterns as well as existing concepts and perceptions within the organisation. Strategists should enjoy the challenge of thinking â€Å"out of the box† and of using imagination and creativity to explore whether there might be alternative ways of doing things. De Bono  (1996) has made this point very clear: Without creativity we are unable to make full use of the information and experience that is already available to us and is locked up in old structures, old patterns, old concepts, and old perceptions (p. 17). Creativity is a process that begins with the generation of ideas. As de Bono (1996) has noted . . . strategy is too often seen solely as a reduction process in which various possibilities are reduced to a sensible course of action (p. 72). Creativity Creative thinking is needed to imagine multiple possibilities and to search for alternatives to conventional approaches. The creative process also involves the selection and development of ideas. Good strategists are able to recognise the potential of a new idea at a very early stage. To visualise the value of an idea that has been put forward by people from different organisational levels might be even more important than the generation of original ideas by the strategist. As Robinson and Stern (1997) have observed: The larger the company, the more likely it is that the components of creative acts are already present somewhere in it, but the less likely it is that they will be brought together without some help (p. 15, italics in original). Finally, there is the need for translating the new idea into practice. Senior management must provide the resources that are needed to implement the idea. As Amabile (1998) has noted: . . . deciding how much time and money to give to a team or project is a sophisticated judgment call that can either support or kill creativity (p. 82) A vision for the future Strategic thinking should be driven by a strong sense of organisational  purpose and a vision of the desired future for the organisation. A genuine vision  ± as opposed to the popular â€Å"vision-statements†  ± conveys a sense of direction and provides the focus for all activities within the organisation. For Senge (1990), a genuine vision is â€Å"a calling rather than simply a good idea† (p. 142, italics in original). In his view, visions are â€Å"pictures or images people carry in their heads and hearts† (p. 206). They represent what one truly wants, based on fundamental intrinsic values and a sense of purpose that matters deeply to the people in the organisation. Evidence for the importance of a clear vision has been provided by Collins and Porras (1998). Their research showed that visionary companies outperformed nonvisionary companies significantly. One dollar invested in a general market stock fund on January 1, 1926 would have grown to 415 dollars by December 31, 1990, while the same dollar invested in a visionary company stock fund would have grown to 6,356 dollars, a difference of over 1500 percent. According to Collins and Porras (1998), the visionary companies did not attain this extraordinary long-term performance because they wrote one of the elegant vision or mission statements that have become popular in recent years. They pointed out that â€Å"Just because a company has a `vision statement’ (or something like it) in no way guarantees that it will become a visionary company!† (p. 201, italics in original). Instead, leaders in visionary companies place strong emphasis on building an organisation that has a deep understanding of its reason for existence and of its core values, those fundamental and enduring principles that guide and inspire people throughout the organisation and bind them together around a common identity. Thomas J. Watson, Jr. (1963), former IBM chief executive, made this point very clear: I firmly believe that any organization, in order to survive and achieve success, must have a sound set of beliefs on which it premises all its policies and actions (p. 5). consistent alignment (p. 229, italics in original). Developing a genuine vision and building it into the very fabric of the organisation must be a central element of the daily work of strategic thinkers. A vision that is shared throughout the organisation fosters commitment rather than compliance and creates a sense of commonality that permeates the whole organisation. It inspires people’s imagination and provides a focus that allows individuals to contribute in ways that make the most of their expertise and talents. Ultimately, as Collins and Porras have shown, a genuine vision helps to achieve superior performance in the longterm. Strategic thinking at the organisational level The organisational level provides the context in which individual strategic thinking can occur. Organisations need to create the structures, processes and systems that: 1 foster ongoing strategic dialogue among the top team; and 2 take advantage of the ingenuity and creativity of every individual employee.