business strategy

Introducing Strategic Thinking into Operations? Five Themes to Emphasize

Greg Githens Leave a comment

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

The Six Elements of Strategy: A Pattern Perspective

Greg Githens Leave a comment

Patterns

Because chess is a game of patterns, you could say that a chess Grand Master is an expert with chess patterns.  Similarly, a strategy master is expert with strategy patterns.

The proposition raises an interesting strategic thinking question, “What are the patterns in strategy?” Patterns are regularities, and their presence suggests some kind of predictability. In chess there are opening moves, in entrepreneurialism there are predictable start-up challenges. In chess, you might have several of your valuable pieces captured, in business your customers can defect to competitors.

There seems to be a countless number of patterns of strategy. Instead of a full cataloguing, let’s find the minimum elements that could describe strategy patterns. To keep it simple, I’ll assume that if a chess player plays 10 matches, there were 10 strategies used by her. Now, turning to the idea of strategy being composed of patterns, I believe there are six elements. They are as follows: players, analysis of the situation, degree of relative advantage/disadvantage in position, resources, decisions about deploying the resources, and an overall life cycle of the strategy.

Let’s see if the six-element model – a pattern – holds for the chess analogy. There are two players. The lifecycle starts with the agreement to join in a game, and its endgame is a checkmate or agreement that it is a draw with no winner. In the opening of a chess game, the players are even in terms of advantage and resources. Throughout the game, each player monitors the situation. Each player makes a decision and moves a resource, followed by the other moving a resource. Soon, the players recognize that they are in a position of advantage or disadvantage; and each continues to move resources until the game ends with victory for one of the players, or a stalemate. The six-element model is valid here!

What about the application to strategies with greater consequences than a chess game? The 2012 United States presidential election involved two principal candidates (players), challenger Mitt Romney and incumbent Barack Obama. The lifecycle begins with each’s announcement of candidacy and end with Romney’s election-night concession and Obama’s victory speech.  Each came into the contest with important resources such as the candidate’s experience, dollars, and organization. Each had perceived advantages: Obama’s incumbency and Romney’s business background.  Interestingly, those advantages were often cast as liabilities. Each campaign made decisions about its resources: where should the candidate go to speak, and where should you send a surrogate? Advantage ebbed and flowed throughout the contest, and the final advantage was not clear until late in the evening of Election Day. Again, the six-element model seems to capture the essential elements of strategy.

These six elements appear to be universal to any situation involving strategy. I call them the master pattern of strategy, but the words archetype or template convey similar meanings. I invite you to test them against your knowledge of a business’s strategy, warfare, or other situations. I would be interested to learn if there are any exceptions.

Next, let’s examine each of the six elements, and the patterns within the element.

  • Lifecycle – The lifecycle for a strategy is similar to other lifecycles: beginning, middle, and end. The lifecycle of a game of chess involves phases that I call the phases of the strategy lifecycle for chess: pre-engagement, opening, development, endgame, and post game. For a business strategy, it might be diagnosis of a challenge, formulation of intent, creation of policy and resources, and implementation of decisions. You could also view this lifecycle for a strategy as a subset of the organization’s lifecycle.
  • Players – The players are normally individuals, but could be organizations. Regardless, there are repeating patterns, such as values and habits that guide their decision making. From a strategy perspective, we know that self-awareness is one important skill for the strategist. By extension, the strategist seeks to learn their opponent’s intentions and patterns of behavior, which may yield an advantage. In some cases, each player’s narrative arc, that is, their life story becomes a resource and a link to the lifecycle of a strategy. Examples would include each of the two presidential candidates touting their life story as evidence for their qualifications for the Presidency, Christopher Columbus’ experiences as a sailor and as a mapmaker in Lisbon, and Estee Lauder’s experience as a woman in post-WWI and WWII New York City.
  • Situation – The situation is your subjective assessment of those factors that describe your status or position in the strategic milieu. This element is rich in patterns, with some patterns more relevant to others. For example, weather is a series of patterns. There are trends in the economy. New entrants enter markets. All of these affect the strategist because the context changes, putting the strategist in a new situation. Not to be overlooked are patterns that describe possible future scenarios.
  • Resources – Resources are the source of power. The rook piece in chess has a defined power different from that found in a pawn, and has constraints on how it can move. The rook has flexibilities different from a pawn. In other examples, we can see that inventors gain power by securing patents. Armies have power provided by the skill level and motivation of its soldiers and officers.
  • Relative advantage – Although related to the element of situation, the relative advantage is important enough to warrant its own category. The relative advantage is the real goal of a strategy: to create advantage over something else. This element forces an important question related to context, resources, and decisions: Am I in a stronger or weaker position?
  • Decisions to commit resources – This element involves concepts like movements of resources, reversibility of commitments, and rules (existing and emerging) and constraints. From a pattern perspective, you might consider whether habit and inertia will dominate the decisions, or whether there needs to be breakthrough.

How You Use This as a Tool

Finally, let’s return to the statement that chess grand masters are experts with chess patterns, and the logical extension that strategy masters are experts of strategy patterns.  If you are concerned about strategy in business, it will do you little good to learn chess patterns. (And, for the record, I don’t play chess.)  Instead, you need to learn about your business’s context: its success factors, the competitors, the role of government regulation, and so forth.  Consider making a list of those patterns, and consult and edit your list from time to time, knowing that often entrenched behaviors and wisdom are vulnerabilities that competitors can exploit. Even better, organize that list into a hierarchical map of patterns.

The definition of a pattern as a regularity should stimulate some useful questions: What regularities are present in the industry (seasonality, correlation with GDP)? What regularities do you have in your decision-making or other habits (pricing decisions, talent decisions, meeting management)?

Strategic thinking often involves reframing, which is the practice of taking on new perspectives.  Patterns functions as frames; they give you a sense of structure. They help you make predictions. On the other hand, patterns may also be the source of status quo thinking and make you vulnerable to a competitor who has better insights than you do.

Try applying this six element model to a strategic situation. Does it offer you a better understanding or insights?