The Sharpness Theorem

Most students of strategy and strategic thinking will find their way to the work of Henry Mintzberg. From him, we gain an elegant statement that serves to powerfully focus our study of strategic thinking. He writes, “The real challenge in crafting strategy lies in detecting the subtle discontinuities that may undermine a business in the future. And for that,” he continues, “there is no technique, no program, just a sharp mind in touch with the situation.”[i] I have taken to calling the Mintzberg quote as the “sharpness theorem” and it is an effective introduction to strategic thinking.[1] It yields at least three notable principles:

A strategic thinker is “a sharp mind in touch with the situation.” Mental keenness is an essential characteristic of strategic thinking. The emphasis is on alertness for patterns and anomalies in the specific situation and not on universal methodology.

The ability to detect nuance is essential.

Detecting subtle discontinuities” is the “real challenge” of strategy. A discontinuity is a break in a trend. A discontinuity should cause your confidence in a prediction to significantly decline. In strategy work, a discontinuity is a difference in the environment that expresses itself over time. A common result is the disruption of the status quo.

A discontinuity transforms a linear phenomenon into non-linear. By contrast, linear thinking is a mindset that emphasizes understandability, predictability, and coherence. That becomes the criteria for whether something makes sense or not.

An ongoing task for the strategic thinker is noticing discontinuities and then proactively addressing emerging threats and the opportunities.

Good strategy is “crafted.” The word craft should suggest to you a design-oriented sensibility. It is a reasoning approach that emphasizes finding and capturing proprietary knowledge that is useful for creating strategy. Importantly, word craft connotes action.

Conventional thinkers tend to tell you that strategy is planned. The basis for any planning (and it is the limitation as well) is that the future can be predicted. The subtle mistake is that people confuse goals (what is wished for) for situational analysis (what is really happening).

Do you agree?

[1] This definition of theorem applies: an intelligible product of contemplation and something that can be proved.

[i] Henry Mintzberg, Crafting Strategy, Harvard Business Review, July 1987

Gregs new book available now

Why strategic thinkers embrace subjectivity (and are skeptical of objectivity)

Patterns & Strategic ThinkingStrategic advantage comes from possessing a proprietary insight; it means that you know something valuable that others do not appreciate. These insights are “facts” that belongs to you and not to others. That proprietary insight gives you an advantage over your rivals.

Now, if you don’t feel comfortable that an insight is a fact, consider that it is a hypothesis that you want to prove and enhance.  One good example is Starbuck’s growth from a stand-up only coffee bar to a social lounge. By the time that rivals figured out that Starbucks was doing something different, it was already established.

Reality is socially constructed

Imagine one person saying this to another, “I’ll telephone you tomorrow at six o’clock.”  Does that mean 6AM or 6PM? What if the person is in a different time zone? You can’t understand the “truth” of the fact of six o’clock without considering the context of social/cultural conventions like time zones or AM-PM.

Thus, time is subjective.

The overvaluing of objective truths

You’ve probably heard the story about black swans. As Nassim Nickolas Taleb writes,

“before the discovery of Australia, people in the Old World were convinced that all swans were white, an unassailable belief as it seems completely confirmed by empirical evidence. The sighting of the first black swan…. illustrates a severe limitation to our learning from observation or experience and the fragility of our knowledge”

Whenever we hear about objective truths, we’re likely in the realm of conventional knowledge. There is no opportunity for gaining advantage in that space. Facts are not as clear cut as we tend to assume. When we are in a hurry, or not considering the context and the culture, it is easy for our minds to overlook things that will turn out to be important.

Instead, the strategic thinker looks for interesting and small signals: the discontinuities that can be exploited by a good strategy.

The microskill of contextualization

Contextualization is the act of understanding the themes and patterns of the particular situation. A competent strategic thinker notes the particular policies, institutions, worldviews, and circumstances that shape a given moment in time. In other words, the “truths” that are useful to a strategic thinker are those that are shaped by context. To say that competitive advantage is important means entirely different things to a philanthropy, military unit, entrepreneur, or mayor of a small city.

Subjectivity is good. Do you agree?

Five Tips for Recognizing and Avoiding Incompetence

Over the years, I’ve encountered hundreds of executives and managers who were absolutely sure that they had a strategy, and similarly were confident that that they were good strategic thinkers. Their actual performance shows that their confidence is unjustified.

The Dunning-Kruger effect is the phenomenon of incompetent people who act and believe as if they were competent. Let’s take a moment to see some evidence of the Dunning-Kruger effect in the real world. This video is hilarious. It is from the TV program Jimmy Kimmel Live and involves an interviewer asking people at the South-by-Southwest festival their opinions on some non-existent bands. Notice how confidently they provide their opinions!

Writes David Dunning, in an article titled, “We Are All Confident Idiots,”

Incompetence does not leave people disoriented, perplexed, or cautious. Instead, the incompetent are often blessed with an inappropriate confidence, buoyed by something that feels to them like knowledge.

This is because our minds develop by accumulating and associating random bits of knowledge. People are not ignorant, they are misinformed:

An ignorant mind is precisely not a spotless, empty vessel, but one that’s filled with the clutter of irrelevant or misleading life experiences, theories, facts, intuitions, strategies, algorithms, heuristics, metaphors, and hunches that regrettably have the look and feel of useful and accurate knowledge. This clutter is an unfortunate by-product of one of our greatest strengths as a species. We are unbridled pattern recognizers and profligate theorizers. Often, our theories are good enough to get us through the day, or at least to an age when we can procreate. But our genius for creative storytelling, combined with our inability to detect our own ignorance, can sometimes lead to situations that are embarrassing, unfortunate, or downright dangerous.

The Jimmy Kimmel Live video seems like harmless fun. But it shows up in business and government. To see another scary-but-funny example of the Dunning-Krueger effect, watch this analysis of Donald Trump’s answer in a December 2015 debate for the Republican nomination for the US presidency.

The Dunning-Kruger effect is a paradox. Dunning writes,

The trouble with ignorance is that it feels so much like expertise.

Strategic Thinking Tips

A competent strategic thinker will recognize that the Dunning-Kruger effect exists in all areas of life, including strategy making.

Tip 1 – Watch for overconfidence in others.

Tip 2 – Don’t be afraid to say, “I don’t know.”

Tip 3 – Find a colleague to be your strategic thinking partner. Each of you have a responsibility to be a devil’s advocate to the other. This article gives you some develops the idea that strategy making is similar to jury duty.

Tip 4 –  Use the prospective hindsight technique. It involves imagining a future outcome (disaster or delight), and then asks the question “What happened to cause that outcome?”  More can be found in this article.

Tip 5 – Don’t assume that a person’s training or education has been remembered or practiced. I know a senior executive who gets upset when people don’t manage projects well.  “They’ve been trained,” he says, as if it is a definitive declaration. The fact is that they attended a 2-day awareness session and got no follow up support from their organization.

What other examples do you have to share?  

Expectations Casting

 

Fly CastingForecasting and backcasting are common techniques for understanding the future. They have specific meanings. Forecasting is an extrapolation of current data into the future. When I identify a trend, I can choose to forecast that trend to continue. Back casting is the selection of a future  scenario and then identifying the variables that would be needed to bring about that future scenario. An example: I wonder if  a presently-strong company will fail in the future; I identify the premises and arguments that explain what would cause that failure.

Neither of those two concepts quite captured what I wanted to explain about strategic thinking, so I made up a new phrase, Expectations Casting. I’ll use the analogy of casting a fly fishing line to introduce it. In fly fishing, it is the weight of the line that provides the momentum that allows the fisherman to get his fly to the a target. A single cast is not feasible if the target is far off. The fisherman begins by feeding out a little line, and then swishes his rod slightly forward and then back, releasing a little bit of line to extend the distance of each cast. Eventually, the fly fisherman allows the line to fully extend and settle on the target.  It may take several iterations of backward and forward to reach the desired target.

Like a fly fisherman casting his line back and forth, expectations casting is an iterative cycling of looking retrospectively into the past, and then prospectively into the future. The back casts are reviews of your knowledge and memory, typically tied to a short passage of time. The forward casts involve the use of your imagination.

Like casting fly line, you start with a short manageable line, and feed it forward in a controlled way.

Suggestions for the practice of expectations casting

  • Start by making a short retrospective cast of 3 months into the past. Ask yourself, “What in the last 3 months has been interesting, exciting and significant?” Here is a variant that turned out to be very fruitful for me, What’s the most interesting idea I’ve found by participating in social media?” (The answer was finding data on showing that personnel recruiters regarded strategic thinking as a very difficult-to-find skill.)
  • I find it helpful to review the “lab book” that I keep for ideas. I make it a practice to write down interesting things and patterns.
  • I put them into categories. Here are some: career/business, family, personal finances, personal health, community, society.
  • Identify and ask powerful questions (the purpose is to stimulate insights). An example is, “What might happen in next three months?”
  • Which of your observations might qualify as a pocket of the future (POTF)? A POTF is a thing that is presently low in prevalence, but have the potential to increase in prevalence and the potential to be seen by our future selves as significant. We are especially concerned with those trends that would change in a non-linear fashion.
  • Record them in a lab book, and allow room for capturing strategic thinking reflections.
  • It is generally better to pick just one expectation. Relax and take a walk to mull over your speculations. What is the nature of a future opportunity with a given person, client, technology? Record your thoughts, especially if an insight occurs.
  • Repeat, with a longer iteration. Look back 6 months, and look forward 6 months. Then 9 months, then a year. Etc.

The purpose of the expectations casting is to generate a portfolio of educated guesses about the future. Part of the value is in the number of guesses, and part of the value is in the mental process of retrospection and prospection. As with most strategic thinking practices, it is essential to search for powerful questions and to budget time to record and reflect.

I find that I slip into a trap when making educated guesses. I’m basically an optimist, so I am biased to believe that markets will keep going up and that people will love my ideas. I have to put a little extra mental effort into making sure I’ve considered the non-optimistic scenario. Too, I find it’s easier to declare my wishes than my expectations. I need to discipline myself to say, “Here’s what I expect to happen, and here’s my probability estimate.”

Do you think that expectations casting can help you become a better strategic thinker?

Orient Your Strategic-Thinking Map

strategic thikning beaconAll students of strategic thinking occasionally feel just a little lost and frustrated. I imagine the topic of strategic thinking as a map – albeit a fuzzy and dynamic map – with salient landmarks that help you navigate through the subject. Even with the best of maps, you can find yourself wandering about when you’re in the field for the first time. Fortunately, with experience, the landmarks seem familiar and expected. The exploration seems more natural.

This article describes one “beacon” and two “cues” that will help you develop and improve your conceptual map of strategic thinking. By way of introduction, consider these three questions that apply to any orientation:

  • Where am I now?
  • Where should I be headed?
  • What other landmarks are relevant?

Where am I now? (Find Orientation Cues)

An orientation cue helps you locate your position on a larger field of concepts.

Too often, people look for “best practices” on the basis that the external environment is predictable and obvious (which it is not). Instead, a strategic thinker will be sensitive to nuance and relationships. I like Dave Snowden’s Cynefin framework. It takes as a starting point the idea of disorder and diagnosing whether you are in a simple system (causes and effects are obvious and linear), a complicated system (an expert is needed to analyze and design a solution), or a complex situation (the ultimate solution will emerge and each experts brings a distinctive view of the problem).

Pay attention to the current discourse; the conversations you are having with your colleagues as well as with your internal thought process. If the conversations are about productivity, quality, and efficiency, then you likely to be practicing operational (rather than strategic) thinking.

Where should I be headed? (Find Navigational Beacons)

A navigational beacon gives you a point to navigate towards. When you lose sight of a navigational beacon, you practice a kind of “dead reckoning” towards the beacon, making course corrections when you sight the beacon.

The two most useful beacons of strategic thinking are the future and success. By definition, strategic thinking is concerned with “success in the future.” Does your organization have a diagnosis of its strategic situation and policies for addressing that situation (these are essential elements of good strategy)? What threats and opportunities are present? How far into the future are you looking? What metrics are you using beyond basic financial measures?

What other landmarks are relevant? (Find Associative Cues)

An associative cue is an object or concept that contains useful navigational information. It helps you know what to do and what to think about next. In the past, I’ve written that insights are the secret sauce of strategy, so they are an example of an associative cue; when you have an insight, you should consider their use in the design of strategy.

Another tip for associative cues in the strategic thinking map is to stay attuned to the emotional tenor of the discussions: Are people feeling frustrated? Tired? These would be cues to approach the strategic situation with a fresh perspective.

Finally, the search for associative cues gives us a way to build the reflective competence essential for developing competence in strategic thinking. What patterns have you observed? Notice the number and nature of the questions that have been posed. If you are reflecting on the specifics of your situation, you’re not thinking strategically.

What other examples of beacons and cues might be found in a strategic thinking map?

Strategic Thinking Landmarks: Orienting Your Mental Map

StrategicThinkingLandmarks

If you are a regular reader, you are following me because you have accepted the invitation (and the challenge) of  a journey to become a competent strategic thinker. There is much to know, and it can feel a bit overwhelming, much like it would feel being immersed in a new culture.

The above graphic shows 19 strategic thinking landmarks. I consider them the salient landmarks of a mental map.  I encourage you to take select a handful and relate them to your own experience and study.  Too, you can relate them to other articles that I’ve written; such as last month’s article was on high-quality questions. I encourage you to return to that article and review the questions, which will reinforce other landmarks such as interestingness and salience of details. By examining that earlier article in a new light, you are practicing recursive learning.

Associative Cues

I’ve organized them (in the graphic) to show natural groupings. For example, open-mindedness and playfulness are both qualities of a person’s approach to and processing of a situation. As a mental map, as associative cue helps us to organize concepts that have relationships, thereby helping us to learn a new terrain. There are also two other ways that we can organize landmarks: orientation cues and navigational beacons.

Orientation Cues

When a landmark serves as an orientation cue, it helps the person know where they are on the map.  The above map started with seven landmarks, drawn from the introduction of my in-progress book. I started with the landmarks of imagination: I asked the reader to imagine him or herself in the future and asked the reader to imagine that the benefits were sufficient to make a commitment to learning. I used the analogy of visiting a new city, where the problem/opportunity was to learn about the city. I explained that the salience of things helped us to orient ourselves.  As part of the introduction, I mentioned that there are several limiting beliefs about strategy and about strategic thinking.

The remaining eleven landmarks arose through my exercise of analogous reasoning.

Navigational Beacons

Landmarks also give us a target to aim for. Three of the can’t-fail landmarks for encouraging your own strategic thinking are that of interestingness, high-quality questions and sensitivity to context.

(In this article, I assumed that the label on each of the landmarks are self descriptive. Feel free to comment below or contact me if you would like me to elaborate on the specifics.)

I encourage you to experiment with these landmarks and add your own.  Let me know how this helps you with your journey to becoming a competent strategic thinker.

Improving the Quality of Your #StrategicThinking Questions

what are good questionsOne of the most powerful tools in the strategic thinker’s toolbox is the ability to pose high-quality questions. A high-quality question is better than a good question.

Here is an example of a good question: What is going on here? Asking this question would certainly encourage a person to look a little deeper into the situation. It could be made a high-quality question by adding specificity. These are better questions:

  • What is interesting about what is going on here?
  • How are power relationships changing?
  • What relevant things are being overlooked by most people?
  • What are patterns in the evidence and what assumptions being made about those patterns?
  • What are the future implications of what we see today?

Good questions are conversation starters, but they don’t typically encourage answers that are specific to your context and to your ability to secure your fundamental interests. Above, I made a good question better by adding some of the specifics of strategy: interestingness, power, overlooking things, patterns, and future implications.

Here is another example: A good question is to ask about strengths and weaknesses.  A better question (and one of my favorites) is, What could your competitor do to put you out of business? A high-quality questions points you towards insights that are specific and meaningful to your organization.

Good questions are conversation starters, whereas high-quality questions require and provoke deeper thought. Do you agree?

Introducing Strategic Thinking into Operations? Five Themes to Emphasize

HROStrategic thinking competency is essential for assuring the long-term success. Its complement is operational thinking, which is thinking that is concerned with productivity, process, and error-free work. Although they are complements, there is often conflict as the short-term goals of production leave little room for new realities from the external world and for holistic, long-term, thinking.

“High Reliability Organizations (HRO)”*  are organizations that operate reliably. They have five characteristics: preoccupation with failure, reluctance to simplify operations, sensitivity to operations, commitment to resilience, and deference to expertise. I suggest that we adopt those five values as a way to open the door to strategic thinking.

Preoccupation with failure. For a manufacturing plant manager, failure might be with a machine breaking down or a fire in a warehouse. For a sales manager, failure might be the loss of a client or sale. Like death, people often avoid discussing risk and failure in their discourse. The HRO culture recognizes that failure is both frequent, understandable, and often predictable. Often the margin between a near miss and an accident is small. Thus, a HRO is capable in risk management practices: it senses and responds to near misses and weak signals as opportunities for learning.

Strategic thinkers enlarge the discussion to enterprise failure and nudge the timeline out from the day-to-day. History shows that disruption is frequent. Failure is more common than most people recognize.

Reluctance to over-simplify operations. All people like simplicity, but often over-simplification leads to poor decisions. HRO’s don’t depend on simple rules of thumb. They challenge the assumptions, and accept change as a constant. Note this quote (attributed to Oliver Wendell Holmes, Sr.),

“I wouldn’t give a fig for the simplicity on this side of complexity; I would give my right arm for the simplicity on the far side of complexity.”

Strategic thinkers look for that simplicity on the far side of complexity. They do this by developing a nuanced understanding of the organization, especially the numerous interfaces with the external environment. HROs are willing to err on the complexity because small errors cascade and magnify into greater problems.

This means that managers should be aware of their own assumptions and challenge them. They should see data from the organization.

Sensitivity to disorder. Economies and societies are densely interconnected and a small issue in one area can cascade and spiral into threats or opportunities elsewhere.

Strategic thinkers don’t try to contain and rule disorder, because that often causes other problems to crop up, Whack-A-Mole style. Instead, ambiguity is seen as a field of weak signals that might present an opportunity or might be a signal of trouble.

Commitment to resilience. A HRO knows that mistakes and the unexpected are inevitable. Conventional thinkers try to avoid making mistakes. HROs take it a step further, and make sure that they can absorb a setback, learn from it, and strengthen the organization.

The similar concept for strategy is that of agility and adaptability. Strategic plans are bunk, and the idea of predictability is a tired, antiquated operational thinking concept.

Instead, you need to take the small pockets of the future as signals for learning. You should work on reconfigurations that are flexible and adaptable.

Deference to expertise. The question that drives reliability is, “Who has the best view of reality?” It is a more helpful question than “Who has the most experience with solutions?” This is a subtle-but-important point, as operational thinkers often confuse experience with expertise. Routine exposure to a system often leads to an intuitive feel for the system, but most system failures involve unexpected, novel failures. Further, those failures tend to occur at the interface with other systems. Catastrophic failures tend to occur through a chain-link series of failures.

A HRO does not give the “say” to the most experienced person, because much experience is simply repetitive. Instead, it says that some people know more about the situation because they have detached from the situation to understand the essential principles in action. They have a more specific understanding of reality.

How do you recognize expertise? Here are some ideas:

  • Start with people who have expertise in their field. As those experts who they know and believe to have knowledge relevant to the situation. This is a wisdom-of-crowds approach, where you are selecting the wisdom of other experts.
  • Look for the presence of diagnostic skills. Do they ask questions? Do they explicitly consider what they don’t know?
  • Rather than “thinking outside the box,” do they have the courage to look deeply into different boxes?
  • Can they emotionally detach from the problem? Can they imagine the perspective of a totally different stakeholder?

Conclusion

We don’t want to eliminate operational thinking, we want to balance it with strategic thinking. Operational thinkers are necessary to the success of an organization, but are sometimes hostile to the playful imaginations of strategic thinkers. The idea of emphasizing High Reliability Organizations is consistent with their values: a perfect system is a reliable system.

No operations person can be against reliability. Build a story that says that reliability is enhanced by failure proofing, resilience, expertise, reluctance to oversimplify, and sensitivity to disorder. Make that story a part of the conversations.

The trick is to be subtle with the introduction of novel ideas; through repetition they will seem familiar and become part of the culture. What else do you recommend?

*See, Managing the Unexpected by Wieck & Sutcliffe page 10

Three Diseases of Strategic Thinking

Three Strategic Thinking DiseasesThe most important, critical activity of strategy making is that of diagnosing the situation. A mistake in diagnosis will lead to poor strategy and results. This article describes three shortcomings that get in the way of good strategic diagnosis. I found them in Daniel Kahneman’s closing remarks in his book, Thinking Fast and Slow.

Anchoring – We’ve all experienced anchoring when in bargaining over price. Someone offers a price, and the agreement settles someplace near that price. Anchoring is common in establishing project due dates and budgets; those initial anchors may be totally infeasible! The mind gives disproportionate weight to the first information it receives, regardless of the realism of that information.

Here’s an example from earlier in my career. My employer had experienced two very good years of growth, and the prior year our sales were up 35% over the previous year. The CEO entered into a planning meeting and said this, “We grew 35% last year, so our target growth for this year is 35%.” Anchors like this are intuitive, and ignore relevant factors like industry growth rate, competitive responses, and the state of the economy.

Here’s another example. At the time of Wal-Mart’s founding, the conventional wisdom was that a full-line department store needed a population base of at least 100,000. Sam Walton was able to buck this conventional wisdom by redefining the business as a network of stores with an integrated supply chain. Related to conventional wisdom is the concept of a “best practice,” which leads to thoughtless copying of others. Seldom does a good strategy arise from copying the practices of others.

Narrow framing – Humans put boundaries on problems, whether they recognize it or not. When a person frames narrowly, they bring their attention to an isolated part of a situation. When people narrow frame, they tend to look at their own situation fail to appreciate their interactions with others. Narrow framing is the opposite of holding a big picture.

As an example, Kahneman described the experience of his colleague Richard Thaler, who was meeting with a group top managers of 25 divisions of a large company.

He asked them to consider a risky option in which, with equal probabilities, they could lose a large amount of the capital they controlled or earn double that amount. None of the executives was swilling to take such a dangerous gamble. Thaler then turned to the CEO, who was also present, and asked for his opinion. Without hesitation, the CEO answered, “I would like all of them to accept their risks.”

The CEO’s broader frame allowed him to make a decision that implicitly understood that the gains would cancel out the losses and shareholders would do better. The division managers naturally had a risk-adverse mindset; the problem came when each narrow framed on their own condition instead of elevating their perspective.

Many incumbent organizations have stagnated. This is because localized decisions lead to conservative decisions. Opportunities are missed.

By contrast, competent strategic thinkers are aware of the difference between narrow and broad framing and strive to continually analyzed decisions through risk policy that benefits the whole. Strategy itself can be thought of a centralization of certain policies that create impact across the entire organizational system.

Excessive coherence – The idea that strategy is a plan is another way to say that the various elements of a strategy “make sense.” Coherence is the characteristic of a story that indicates that it “hangs together” in the memory so that it seems natural and logical. Excessive coherence is when a person reads too much into a situation, finding causes and relationships where none exist. Excessive coherence explains the halo effect where jump to conclusion that a particular person has extraordinary powers because of their affiliations or past successes.

Most people are familiar with the concept of groupthink where an entire group convinces themselves of the correctness of a strategy. Group social norms – a kind of social coherence – provides reinforcement to the story.

Overconfidence is one of the biggest flaws in strategic thinking. Excessive coherence, that is, belief in the story, leads to overconfidence.

Instead, competent strategic thinkers look for disconfirming evidence and alternative explanations for those signals that are ignored by others.

What are shortcomings should we be aware of?

Knowing History: A Strength or Weakness of Strategic Thinkers?

Historical ThinkingOne of the most important things we can do to advance strategic thinking is identifying and removing misconceptions. In this article, I want to challenge popular advice: being well read in history develops strategic thinking. I’m defining “well read” as having read and account of the characters and events of history. A well read person can explain what happened and why that specific event happened. Too many people have a superficial knowledge of facts. This results in a mindset, explained by historian Robert Crowley(1):

We are left with the impression that history is inevitable, that what happened could not have happened any other way, and that drama and contingency have no place in the general scheme of human existence.

Superficial knowledge of events and characters is fine for entertainment, but dangerous if we need to problem solve and create policy. Deeper understanding of the past is needed if we are to make decisions about the future.

Here is my proposition:

Many people enjoy a good historical narrative, but knowing the historical facts does not translate into strategic thinking talent. This is because most histories are written as coherent stories of conflict and competition. The resolution is frequently narrated so that the outcome seems inevitable. Further, most accounts of history severely discount the role of chance. A frequent reader of history comes to accept personal character as vitally important, and overlook chance. This historical-thinking mindset hinders their ability to make futures-ready decisions.

An Example

I know several people (all men) who enjoy reading history books about great historical leaders, wars, and movements. They describe it as an enjoyable hobby. These histories provide coherent, consistent, logical narratives.

These same people are among the first to criticize leaders of business and government.

I’ll illustrate this with Terry who I’ve known well for 20 years. Terry is an avid history reader and is intelligent. When it comes to contemporary affairs of business or politics, though, Terry will frequently criticize with comments like, “they have no commonsense” or “they’re idiots and don’t know what they’re doing!” In the spirit of having a good conversation, I try to get Terry to see if there is room for another point of view. I point out that situation is complex. I suggest that maybe the policy might have benefits that will become more obvious in the future. Usually, my words have little impact. Terry has determined all those business leaders and politicians (it doesn’t matter what political party) are incompetent and it’s settled.

Now, let me add this element to my example: Terry once ran a successful business. Unfortunately, he made some decisions that didn’t pay off. His bank and creditors forced him into personal bankruptcy. Terry’s decisions could also be characterized as lacking commonsense and lacking smarts. Although it ironic that Terry freely criticizes others for their strategic deficiencies but he doesn’t see it in himself. (Of course, it’s no surprise the find stories that protect their egos.)

Little Emphasis on the Role of Chance

Like many books on strategy, histories are written with the benefit of hindsight. The more entertaining story is one of leadership, conflict and decisions. An entertaining story is a coherent story. Readers are drawn towards those stories that “feel right,” and which engage the natural optimism that “it will all work out.”

The role of luck is too-often treated as context. Competent strategic thinking takes us in more nuanced direction. In particular, a strategic thinker recognizes the value of Daniel Kahneman’s note on the importance of luck: (2)

Luck plays a large role in every story of success; it is almost always easy to identify a small change in the story that would have turned a remarkable achievement into a mediocre outcome.

Forecasting & Plans: Is the Future Inevitable?

When you believe that “history is inevitable,” you’re also more likely to rely on trend forecasting. If there was a 10% change in a variable over the past year, you’re likely to assume that this same 10% will apply to the coming year. Your mindset is anchored to a number, and the status quo is often the result.

A similar idea characterizes planning. People create plans as if they will unfold in an inevitable way. There is little consideration for the role of chance.

Historical Thinking and Strategic Thinking

Historical thinking involves reading the works of other historians. As an element of critical thinking, you critique the choice of evidence, the framing of that evidence, the tone and word choice, and the resulting conclusions. Instead of the inevitable “march of history,” historical thinkers look for alternative “second stories” that might equally explain the past.

Strategic thinking is not oriented towards understanding the past, but rather towards making futures-ready decisions that take into account the uncertain shapes of the future and the implications of that future. Here I paraphrase historian David J Staley: (3)

Strategic thinkers understand that surprise, contingency, and deviation from trend lines is the rule and not the exception. Context matters. Strategic thinkers explore alternative possibilities of what might be, rather than definitive predictions of the future.

A good historical analysis, like good strategy, probes into deeper layers.

Do you agree that knowing history does not mean you are a historical thinker? Do you agree that a superficial knowledge of history is a detriment to strategic thinking? What are the strongest and weakest parts of my argument?

~~ ~~

  1. From the introduction to What If? 2: Emininent Historians Imagine What Might Have Been. 2001. Berkely Books.
  2. Daniel Kanneman. Thinking Fast and Slow. Farrar, Straus and Girious ebook
  3. A History of the Future. David J. Staley. December, 2002. History and Theory.