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

Strategic 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?

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?  

The 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?

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?