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?

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  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.
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Enhancing (and Correcting) Your Understanding of Strategic Thinking

Strategic thinking before & afterThe nearby graphic is a “before and after,” prepared by workgroup from my How to Think Strategically Workshop in offered a few months ago in St. Paul. (The before is on the left and the after is on the right.) Both of them were developed in response to this question, What is strategic thinking about? In developing the graphics, the groups were given time to brainstorm and asked to narrow them to the top answers.

As you can see in the left side “before,” the group answered the question of What is strategic thinking about? with outcomes, transformation, focus, collaboration, planning, vision, and risk. This is a very respectable set of answers, but it could easily have been the answer for the question, What is project planning about? This is typical of many people’s understanding of strategy: it’s mentally categorized alongside the word plan. The word plan connotes the ideas of structure, alignment, prediction, and goals, which distract from an accurate understanding of strategic thinking.

The right-hand drawing was after a morning of seminar discussions and presentation. The same team relooked the question of what is strategy about, and came up with a much better set of criteria: Alert for opportunities, know [your] competitors, evaluate options, problem solving, re-framing, and insights. This “after” diagram clearly shows their understanding had become more accurate.

I particularly liked how labeled the graphic, “Making sense of the world around you.” That sense-making activity ties closely to the ideas of reframing and insight that are noted on the graphic. A strategic thinker looks at a situation with the intent to clearly and accurately perceive the situation. What is happening? is an important question. Supplementing that situational analysis is a recognition that there are always competitors (or substitutes); strategy is more than a set of aspirations.

As the strategic thinker gets a feel for the current situation, there are a two more questions that can energize their minds: What might happen? And What can we do about it?

Do you agree?

A Manifesto for Excellence in Strategic Thinking

Strategic Thinking Manifesto BadgeThere are two good reasons for you to read this article. First, a manifesto can help make strategic thinking more prevalent in your culture. Given the confusion in the field of strategic thinking, a manifesto is in order. Second, the practice of writing one will sharpen your own capabilities to communicate clearly to integrate divergent viewpoints.

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Manifestos are a literary genre. Generically, they are a tool for making public a set of ideas and advocate for those ideas. Some manifestos are radical in nature, and call for the overthrow of the status quo.  Since strategic thinking needs to be better socialized in organizations, and since the status quo leads to stagnation, the manifesto can be powerful. A manifesto is a call to action; a rejection of conventional ways of doing things.

A Simple Formula for a Manifesto

According to Tristan Tzara, “To launch a manifesto, you have to want A, B, & C and fulminate against 1, 2, & 3.”  It’s a nice straightforward template.  We first identify the kinds of things we want (Tzara’s ABC) and then register our complaints about the current state (Tzara’s 123). The final step is combining the 123s with the ABCs.

A Short List of Desirable Things (Tzara’s ABCs)

By definition, strategic thinking has an orientation towards “success in the future” (see the first article in this blog for the definition of strategic thinking). The word success is multidimensional in meaning. Here is a short listing of desirable things that people would want for the future of their organizations:

Survive and thrive. To win the game. Create wealth for shareholders. Avoid disruption. Be creative: express self and solve problems. Collaborate. Get things done in the here and now. Principles. Leave a better world for our descendants. Hope. Prestige. Coherence. Fairness. Social responsibility. Quality. Enlightenment. Transparency. Accountability.

A comment:  Strategy involves advancing the organization’s interests. All of the above are generically in the interests of most organizations, most of the time.  Because strategy is a kind of specialized problem solving, strategies must establish the relative prioritization of those interests given its current reality.

Social Responsibility is One of Several Interests

Notice many of the items in the above list, for business organizations, fall into the category of social responsibility. This is good news for strategic thinking, because current trends to expand the scope of organizational interests beyond financial metrics means that people are going to be more open minded and flexible in their values.

A Not-So-Short List of Things to Complain About (Tzara’s 123s)

Back to Tzara’s formula for a manifesto. He says a manifesto describes the things – a litany if you will – that we fulminate against. Consider these facets of the current condition:

Failed states and institutions. Short term, selfish behavior. Lack of integrity. Bureaucracy. Sloppy language and terms drained of meaning. Mediocrity. Existing power structures preserve the status quo. Desire for predictability. Excesses of functionalism and synoptic planning. Dogma. Disruption. Polarization in organizations and in society. Narrow, silos focused on strategically-irrelevant activities. Reasoning backward. Nepotism. Multitasking. Isolation and self-doubt. Firefighting and crisis management. Waste, sloth, and inefficiency. Distractions.

They are the current state.  Let’s quickly review current practices about strategic thinking. For most individuals and organizations, there is mediocrity and dysfunction. Most of them have to do with sloppy language. Consider:

  • Some people (erroneously) declare strategic thinking as the front end of the strategy process. First you think about things, and then make plans.
  • Some people (erroneously) use it as a label for their plea to “think about” strategy.
  • Some people (erroneously) use it as an excuse to introduce tools and frameworks of strategy analysis and strategy making.

Now, to top that off, the word “strategy” has been drained of meaning. For some, it is the goal or the vision. For some strategy is the steps to an objective. For some, it is an inspirational mission and vision.  Hence, the value of Richard Rumelt’s practice identifying good strategy so as to distinguish from bad strategy (bad strategy being the norm for most organizations).

I don’t know about you, but the current state of strategic thinking is populated by lazy people, cowards, charlatans, and the misinformed.  It makes me angry, and it believe that competency in strategic thinking and clarity of good strategy is a fight worth fighting!

Putting it All Together into A Manifesto

Following Tzara’s formula and the items listed above, we now have a template.  Here is what you write for the first part of the manifesto:

The current state of the world is ____ (select from your 1-2-3 list).  You continue with a statement that you find the current state unacceptable. If you want, reject it outright (the Latin roots of the word manifesto translate into “hostile hand”). This is unacceptable to us.

As you establish the current state is unacceptable, you move forward with a call to action. That is where the A-B-C list is helpful. You select from those “interests.” that are most basic, perhaps referring to them as original (first principles). In political discourse, you’ll find often reference to God in some (USA’s Declaration of Independence or Martin Luther King Jr’s Letter from a Birmingham Jail) or rationality (again, the Declaration of Independence and add to that Communist Manifesto). In artistic discourse, you’ll simply note that the prior state lacks truth or integrity.  In business, you’ll often find the reference point the founder’s values (care for the customer, frugality, excellence).

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Here my first cut at a manifesto:

A Manifesto for Strategic Thinking

Current practice in strategic thinking and strategy-making  is poor. Those leaders of organizations who hold misconceptions about strategy and strategic thinking are putting at risk the future of their organizations, and are not fulfilling their fiduciary obligations to shareholders and social responsibilities to stakeholders.

History shows our organizations and institutions are constantly under threat of disruption. If we are incumbents, we need to overcome the stubbornness of the status quo. If we can ethically gain advantage for ourselves by disrupting the status quo, we should take advantage of opportunities presented to us.

Board of Directors should replace leaders who can’t competently practice strategic thinking and can create good strategy. Corporate Governance should audit for good strategy and not just supporting verbiage for budgetary projections.

Leaders at all levels must invest in learning and practicing strategic thinking. People at all levels need to have a clear understanding of what good strategy is and is not. Further, they need to clearly understand what strategic thinking is and is not

With clear and reasonable understanding of the foundation concepts, any person can practice strategic thinking. In working with their organizations, they can develop and implement good strategy. It simply takes courage to identify and face up to challenges, the willingness to invest resources, and combine the resources with action.

Yanshevsky writes, “The author of a manifesto sees himself first and foremost as a researcher, an inventor, a discoverer.” Do you agree?  

Strategy is Not One Right Answer

In a recent HBR blog post, Roger Martin poses and answers a question: Why Do Smart People Struggle With Strategy? The answer he gives is this: because there is no right answer.

While I agree with Martin that GOOD strategy probably does not have one right answer, I think he missed some important points.

Smart People can be Good Operations Thinkers, but Can’t Think Strategically

I think the reason for the struggle is that many smart people in organizations quickly become accomplished managers and executives. They run operations, find right answers, and get results.

I call these smart people operational thinkers. It’s mostly a learned skill, but there are some personalities that lend themselves to that domain. Operational thinkers, as a general rule, value productivity and prefer those tools and models that enhance productivity.  As a result (and over time), they learn a set of workplace skills that take them far in their careers: a value on planning, a keen sense of responsibility for production, the ability to get along with their peers (not hurt their feelings unless absolutely necessary), a desire for orderliness, the value of experience in a given domain (and the intuition that comes with the recognizing the patterns of that domain), a liking of process and a dislike of ambiguity, and a preference for use of deduction in a problem solving.

As a consequence of their accrued organizational power, operational thinkers are privileged to participate in discussions about long-term plans and budgets. As they do this work, they conflate the word strategy with strategic (as in strategic decision) and with the word plan. Long-term plans and budgets, while necessary for coordination of activities, are often confused for strategy, which is a kind of problem solving involving the interests of the organization in the face of dynamic and potentially disruptive change.

Strategy involves Inverse Problems, not Direct Problems

Direct problems as typical of operations work and inverse problems are typical of strategy work. Direct problems are well defined and inverse problems are ill defined.

Here is an example of a direct problem that a client company regularly faced: It would pay premium pricing to air-freight relatively inexpensive parts from China. The reason this problem was that product designers did not identify long-lead time items and communicate their needs to the procurement team. The solution was training and incentives to create new behaviors. Here we see effect (expense of air freighting parts) and we can easily find the cause (lack of knowledge, skill, and incentive). Well-defined and direct problems have a clear path to a solution.

Goal setting is an example of a direct problem.

Strategy are inverse problems, such as “what markets do we want to be in, and how might we prevail?” Inverse problems are ill-defined problems in the sense that there are numerous possible causes, possibly more than solution, and the ultimate goal may change as circumstances change.Simple solution are not likely to exist.

Instead, inverse problems require holding a lot of information in mind, tolerating ambiguity, and searching for insights. This is a doubly-difficult job because of organizational politics and culture.

Do you agree?

Seven Suggestions for Creating Clever Strategy

Clever StrategyWhat do you do if you don’t have high-quality strategic resources but want a good strategy?  The answer is to create a clever strategy. Here is my definition of a clever strategy,

A clever strategy is one that blends action with limited resources to produce an effective result.

The starting condition for a clever strategy has to do with stretch goals and with resources that are inadequate in some way. It’s the classic challenge for entrepreneurs. The appropriate thinking style is imaginative, pragmatic, and pattern-oriented.

Here are my suggestions for stimulating clever strategy:

  1. Don’t fixate on stretch goals. Mentally detach so that you can concentrate on the ways and means to get to that goal. The essence of cleverness is “Get more out of less;” to turn the “ordinary to the extraordinary.” Perfect strategy is not the goal; instead be satisfied with any progress towards your goal.
  2. Evaluate the resources that are presently available to you. If they are unexceptional in quantity or quality, you have a signal that you will need cleverness. Carefully examine the resources and ask yourself, “How might I reuse, repurpose, recycle, reconfigure, and adapt them?”
  3. A sense of playfulness and sense of humor can spark ingenuity, so have some fun. A new environment can help.
  4. Try lots of ideas. More unconventional ideas tend to spark clever strategy.
  5. Try to jam together “opposite ideas,” which often leads to a phenomenon called creative desperation.
  6. The concept of hacking can helpful. “The essence of a hack is that it is done quickly and is usually inelegant,” explains the Tech Model Railroad club at MIT (a group that was partially responsible for the internet).
  7. Use your imagination to anticipate the future. Keep in mind hockey great Wayne Gretzky’s quote, “Others skate to where the puck is now. I skate to where it’s going to be.”

Have you applied any of these seven suggestions? What else do you suggest?

Brilliant Strategy: How to Recognize It

brilliant strategyWhat is a brilliant strategy? an executive asked of me. Thinking quickly, I used the gemstone analogy and said a brilliant strategy is recognized by contrasting its results with other strategies.  It noticeably shines and stands out.

I followed that brief definition with an example. I mentioned the Oakland A’s professional baseball team of the early 2000s. It was an organization with limited resources that was able to consistently get better results than its rivals; its brilliance was manifested in the contrast with conventional baseball strategy. The book Moneyball explains this well.

Unpacking the Analogy

Afterwards, I wondered to myself: The gemstone-to-strategy analogy seems reasonable. I wonder if it is a strong or weak analogy? Did I get the details right? So, I did what all of us do. I went to Google and typed in “What makes a diamond brilliant?”  I learned that brightness and contrast are two basic factors that drive the brilliance of a diamond.

  • Brightness in a diamond refers to the light projected through the crown of the diamond. It is achieved by cutting the diamond so light entering from the sides is reflected upward. A diamond cutter sets the angles in the stone to maximize the light moving through the crown. That’s a straightforward task, but it entails tradeoffs of weight (carats) which affects the marketability of the diamond. In other words, you could have a diamond that is cut to maximize the objective measure of weight (“Oh look at this 1-carat diamond!) or to a more subjective parameter (“Wow, that diamond really sparkles!”).
  • Contrast in a diamond has to do with the placement of bright facets next to darker facets. We make something dull seem brighter by placing it next to something dark. Consider the contrast of a chess board.

I also learned that I hadn’t asked the right question, the idea of “sparkle” is also relevant. It’s not enough for a diamond to look good in a display case or in a jewelry store, it needs to dazzle out in the real world. As the diamond moves around, it catches light on all its facets; some reflect white, others reflect colors. The interactions are the phenomena that cause sparkle. The descriptors of fire and scintillation help us to understand sparkle.

  • Fire in a diamond refers to the prism effect: splitting a beam of light into flashes of spectral colors.
  • Scintillation is how the diamond sparkles when it moves. It is a dynamic quality, but is designed by considering size, number, and symmetry of facets

Brilliant Strategy

Diamonds are cut from raw materials; they are deliberately designed. The diamond cutter must consider a number of variables when cutting a diamond. They include the original shape of the rough stone, location of internal flaws, the preservation of carat weight, and popularity of certain shapes among consumers.

Likewise, strategy is a design that is fashioned from resources and insights. The analogy holds up: A raw stone is analogous to resources, the cut is the action, and the competitive element is the fact that a customer can make a choice.

If a diamond can be deliberately designed for brilliance, so can a strategy. Here is how the sub-elements of brightness and contrast would be expressed for strategy:

  • Brightness in strategy is the way that the firm leverages resources to achieve focus.  The Moneyball strategy practiced by the Oakland A’s baseball team was focused: the team would acquire players who were undervalued by the market for their abilities to get on base, and trade or sell those players who were overvalued.
  • Contrast in strategy is making decisions on what you are not going to do. The A’s were willing to accept mediocre (or worse) defensive capabilities from a player to gain the advantages of the player’s bat. The book devotes an entire chapter to highlight the experience of Scott Hatteberg – an able hitter – as the team placed him in the unfamiliar position of first base.  In order to maximize offense, the team was willing to accept his weak defense.

Now, what about sparkle? These qualities are more elusive and subjective. It seems that large stones have more opportunity to design for sparkle, so the idea of sparkle might be something that is true for grander strategy.

  • Fire in strategy is increased by having more facets to the strategy. The movie Moneyball didn’t show the fire that the book described. The movie suggested that a wunderkid (Jonah Hill’s character) with a computer was whispering into Billy Beane’s (played by Brad Pitt) ear. That depiction was more Hollywood than the actual story, where the key facets were that the ballclub’s owners gave its General Managers more power than other clubs, the experiences and skills of GM Billy Beane, and the rise of fantasy baseball leagues (which create a cadre of unconventional thinkers who could communicate through the internet).
  • Scintillation in strategy is a dynamic quality. A scintillating strategy is one that is practiced in small and coordinated ways across the entire organization. For Oakland, there were a number of other important behind-the-scenes people who made a significant different. As an example, Scott Hatteberg was extremely uncomfortable playing first base, so the coach Ron Washington encouraged him, allowing him to gain confidence. Scintillation, then, is something akin to what many people call strategy execution: the aligned actions of people in middle management to support (or at least cope with) the discomfort and impositions of the strategy.

Was I Right?

My initial remark that a brilliant strategy is one that has contrast was correct. However, I’ve since learned that I missed the ideas of brightness, fire, and scintillation.

I’m looking for more examples of brilliant strategy. Also, what would you change about this analogy?

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Strategic Thinkers Approach Prediction Differently

Nothing More Dangerous VisionariesIt’s a common New Year’s Eve activity for pundits to look back over the past year, offering speculations about the future. You don’t have to look far to find a prediction of candidates for US President, winners of sporting events, or Apple’s next product announcement. Although these predictions entertain us, belief in their accuracty can lull a person into complacency.

Since (by definition), strategic thinking is focused on success in the future, a competent strategic thinker is interested in the future. The strategic thinker approaches forecasts and predictions with caution. The belief in prediction is wishful; there is not one path the future. Instead, there are countless possible future states. On the other hand, attempting to analyze the countless possible future is inefficient and frustrating.

Many readers have heard of a technique called scenario writing. It’s a good starting point for emphasizing the importance of considering shapes, structures, evidence, and uncertainty as fundamentals of foresight. This contrasts with big dreams, linear timelines and events.

The first step is to selecting two significant sources of uncertainty. The second step is arranging them into a cross to create a 2×2 matrix (of four quadrants). Each quadrant is a scenario. The third step is writing a narrative that answering the question, What events and structures would cause to that particular scenario and what would be your response if the scenario came to be?

An Example: What might be the future of strategic thinking?

I’m a stakeholder in the question of strategic thinking.  I want my efforts in coaching and teaching strategic thinking to reach an audience and have an impact. What might the “future of strategic thinking?”

I’ll examine four scenarios with the above-described approach. To construct the framework, I identify two significant sources of uncertainty. I asked myself the question, what would most affect my ultimate success in achieving impact with my thought leadership. These are what I judge to be the two biggest unknowns:

  • There is a new dominant idea in the management and leadership space. In the past, managers have seen ideas like Excellence, Six Sigma, and Big Data become focal points for training, conferences, and books. Perhaps there will be a big idea, and perhaps not.
  • Economic growth. Perhaps the world or domestic economy grows, or perhaps it contracts.

I named the four resulting scenarios as shown on the nearby graphic. I am somewhat of an optimist, so I think that we will see global economic growth for the next few years. I am less confident in predicting whether there will be a big idea that gets mindshare. I believe that each of the four scenarios in the nearby graphic are equally likely, and this belief shapes the actions that I will take to adapt to the future.Scenarios for Strategic Thinking Futures

As I wrote earlier, a strategic thinker emphasizes shapes and structure, not events and timelines. Here are a few more learnings:

  • The goal of scenario writing is not prediction, but rather to discern the possible states toward which the future might be “attracted.” This is because complex systems can be deterministic, but unpredictable.
  • Look around for current evidence that supports or denies one of the scenarios. This evidence is a faint signal and you have to judge whether it is both plausible and significant.
  • Use analogies, but use them with caution.

Scenario writing requires imagination and discipline. It’s a good tool for enhancing your strategic thinking.

Do you agree that your goal is to seek flexible alternatives of the future?

Gregs new book available now