What is Strategic Thinking?
As you may know from Simplified Strategic Planning, strategy is the course or direction of an enterprise. In business, this revolves around three basic questions:
- What do we sell?
- To whom do we sell it?
- How do we beat – or better yet, avoid – competition?
Strategic thinking is a specific approach to thinking that relates directly to these questions. While there are many different approaches to strategic thinking, here are some that we have seen to be productive in strategic planning:
- Systems Thinking
- Understanding How People Think
- Understanding the Nature of Your Assets
All three of these approaches present some difficulty to most managers because they require a mindset that is distinct from the mindset required for optimal tactical performance – that is, the way managers think about their business on a day-to-day basis.
The first approach, systems thinking, could be the subject of an entire book – or even series of books. It basically involves conceptualizing your organization as a part of a larger system. This is one of the most concrete approaches to what some call “big picture” thinking – seeing your organization as a consumer of inputs and a producer of outputs. In strategic planning, it’s critical to understand that some inputs – such as demand for your product, or price sensitivity – will affect your organization in ways that are beyond your control. It’s also important to recognize that some things you do (investments, training, supplier choices and so on) will have an effect on important inputs. The thing that makes systems thinking difficult for many is the fact that – in a dynamic environment – your outputs will change your inputs, and over a long period of time this effect will have a dramatic impact on the success of your organization.
The second approach, understanding how people think, can be as important as systems thinking. In Simplified Strategic Planning, we devote substantial bandwidth to the concept of specialty/commodity thinking, because it is one of the little-understood concepts, which can make or break an organization. You might see this approach as a version of systems thinking that applies to specific groups in your system (i.e.… customers, suppliers), but it is also important to recognize that organizations and markets as systems are defined by the way the people in those systems think. In other words, the way a group of customers thinks about their willingness to spend money will affect the functioning of the market system of which they are a part.
The third approach to strategic thinking, understanding assets, is one we have been exploring with clients extensively in the past ten years. Again, some of the greatest benefit from good strategic thinking comes from penetrating analysis of one of the least understood facets of this approach, the strategic competency. Unlike other assets, strategic competency clearly appreciates with greater use, meaning that a strategic plan based upon a well-defined strategic competency can yield increasing returns over time.
These are three of the most critical and conceptually difficult facets of strategic thinking we tackle on a daily basis with our clients. How are you using these ideas in your organization? What challenges do you see in their use? If there is anything we might do to help in this area, please contact us. If you are interested in learning more about how to have your employees think more strategically and align their actions with the corporate strategy please click here to listen to our webinar on strategic alignment.