Avoiding mediocre strategic thinking by better understanding strategy

Mediocre strategic thinking produces mediocre strategy. Strategic thinking is an individual capacity, a style of thinking that can be developed, but is often hindered by the beliefs of others.

Here are four causes of mediocre strategic thinking (and there are certainly more that could be described):

1. Overlooking the significance of rivalry.

As organizations grow in size and complexity, they specialize and turn over responsibility for sales, deal making, and customer service to specialists. As those individuals lose touch with customers and markets, they shift their focus to  the rules, process, and tasks of their work. Eventually, strategy devolves to become a kind of goal setting.

Even more important, many managers give up on trying to understand why competitors are making inroads. They complacently believe in the superiority of their employees, products, and business models. Rivals (and substitutes) want your markets and profits, and they sneak up on you.

Making people aware of competition was one of Louis V. Gerstner Jr’s big challenges in turning around IBM. Here is how he expressed his frustration to a senior management team in 1994:

You know, I have received literally thousands and thousands of email messages since I’ve been in this company, and I’ve read every one. I want you to know that I cannot – I cannot – remember a single one that talked with passion about a competitor. [Comment: My reading of the entirety of Gerstner’s book, Even Elephants Can Learn to Dance, shows me that he meant the word “passion” as anger towards an external threat.] Many thousands of them talked with passion about other parts of IBM. We’ve got to generate some collective anger here about what our competitors say about us, about what they’re doing to us in the marketplace. This competitive focus has to be visceral, not cerebral. It’s got to be in our guts, not our heads. They’re coming into our house and taking our children’s and our grandchildren’s college money. That’s what they’re doing.

When was the last time you visited or talked to a customer? When was the last time you checked the feed on your organization’s (and your competitor’s) social media? What does your organization do to frustrate the customers?

2. Confusing Strategy with “Steps To”

It is a gross oversimplification to say that strategy is the “steps to” the a goal. Strategy is not like a road trip with an established path. Strategy is more like the process of curing a disease.

Strategy making resembles the process of becoming a medical doctor. Novice physicians (newly-graduated MDs) often practice “backward reasoning” and jump from initially presented information to a diagnosis to search for data that supports their initial impression. Many business people use this same kind of backwards reasoning. I recently read the remarks of a General Motors Vice President explaining that chess masters pick their end goal (the checkmate) and work back from it. Not only is that an example of backwards reasoning, it’s an erroneous declaration; research shows that chess masters develop their games through patterns and react to the patterns established by their opponents. (You can find more on chess and strategy described in this article).

Expert business strategists, expert medical doctors, and chess masters employ “forward reasoning.” As they enter into a situation, they take note of symptoms and patterns. Then, they develop several possible diagnoses or ploys. They dig deeper into the data and use it to determine which hypothesis best fits the data.

3. Over-valuing Ordered Perfection

Strategy making is an inherently messy, ambiguous process. Let’s consider the early step of environmental scanning, where we see signals – strong and weak – from existing customers, prospective customers, competitors, and regulators. What do they all mean?

As a general rule, people don’t like ambiguity. It causes them stress and they try to eliminate it if they can and ignore it if they can’t. One way of eliminating ambiguity is the famous use of mission, vision, and values statements. These can be useful tools; however, don’t waste time with endless word-smithing and polishing.

Good strategy isn’t about perfect statements of intent. Instead, good strategy focuses on finding insights in the signals and developing useful guidance for exploiting those insights. It involves educated guesses about a range of important things: the current situation, the future situation, the intentions of competitors and stakeholders, the values of stakeholders, and power.

Good strategic thinkers tolerate ambiguity. They are open to experimenting with the business model and learning from those experiments.

4. Elitism

Too often, those people invited to strategy making sessions are invited because of their status, not because of their ability to contribute to the hard work of making strategy. Last Autumn, I learned that a Human Resource Vice President of a snow-belt-based company, on behalf of the CEO, was planning a strategy retreat in the Bahamas. The invitees to the session were the CEO’s top team. It seems likely that this strategy meeting was an excuse for a selected inner circle of managers to escape a cold Toronto winter. They’ll come back with a vision and a suntan, but I wonder if they will come back with anything the helps them address their organization’s challenges.

Another large, family-owned firm faced a similar problem. Many family members had inherited stock in the company and felt that gave them the right to demand board membership and to have their uninformed (and often selfish) views and opinions considered by the Managing Committee.

While top managers typically have a broader view of the organization, it does not hold that only they are exclusively best qualified to provide open-minded thinking and fresh perspective. While company owners are legitimate stakeholders, they often attention seekers. Status and privilege are not the characteristics of strategic thinkers,

Instead, look for every way you can to get customer insights, next generation perspective, and the voice of the technology into your strategy discussions.

Final Thoughts

Strategy making is a form of problem solving; not just a goal-setting or budgeting exercise. Strategy is about advancing the organization’s interests. To do it well you have to ask some basic questions:

• Have we defined and committed to our basic organizational interests?
• As we consider the future, what are the most important problems,issues, and opportunities that affect our interests?
• Have we looked for weak signals outside of the normal discourse of our organization?
• Are we alert for “pockets of the future” that are presently around us?

As you avoid these four causes of mediocre strategic thinking, you should migrate towards this advice from the respected academic, Henry Mintzberg:

“The real challenge in crafting strategy lies in detecting subtle discontinuities that may undermine a business in the future. And for that there is no technique, no program, just a sharp mind in touch with the situation.”

Do you agree with this list? What other causes would you add?