Islamic University in Gaza
Master of Business Administration
Strategic Management Course
Term Paper
Strategic Thinking as a Core Competency
Prepared by: Alaa Ghalayini
Present to: Dr. Majid El Fara
January 2003 Table of Contents
1. Introduction
2. The Debate on Strategic Thinking
3. The Framework of Ingrid Bonn Strategic thinking at the individual level A holistic understanding Creativity A vision of the future Strategic thinking at the organizational level Strategic Dialogue Taking advantage of ingenuity & creativity of employees 4. The Debate on Strategic Thinking System perspective Intent focus Intelligent opportunism Thinking in time Hypothesis driven
5. Conclusion
List of references
2 1. Introduction
The world is changing very rapidly. Business environment is becoming more and more competitive every day. There is a lot of local, regional, and international competition. The existence of Internet, email, advanced communication systems, fast and convenient traveling in aircrafts, space broadcasting TV and Satellite channels are making the world smaller and smaller. Hence, and according to Ingrid Boon (2001), the ability to think strategically is crucial to be competitive in an increasingly turbulent and global environment. Considering that the average life expectancy of US Fortune 500 companies is only between 40 and 50 years and that only 49 percent of the 100 largest manufacturing in Australia in 1982 were still among the top 100 manufacturers in 1993, the need for strategic thinking has never been greater. The following sections discuss the difference between strategic planning and strategic thinking and briefly summarize few strategic thinking models.
2. The Debate on Strategic Thinking
There is no agreement in the literature on what strategic thinking is. Ingrid Boon (2001) summarizes the views of different authors as follows: Strategic planning, strategic thinking, and strategic management are the same (Wilson, 1994) Strategic planning contributes to strategic thinking (Porter, 1987) Well designed strategic management system facilitate strategic thinking (Thompson and Strickland 1999, Viljoen 1994) Mintzberg (1994) made a clear distinction between strategic thinking and strategic planning. He argued that:
3 o Each term (strategic planning and strategic thinking) focus on a different stage in the strategy development process o Strategic planning focuses on analysis and deals with the articulation, elaboration and formalization of existing strategies o Strategic thinking emphasis synthesis, using intuition and creativity to create “an integrated perspective of the enterprise” o Strategic planning is a process that should occur after strategic thinking Hercleous (1998) and Elton Lawrence (1999) argued that strategic planning and strategic are interrelated in a dialectical process and are equally important for effective strategic management.
According to Elton Lawrence (1999), Heracleous viewed of strategic planning and strategic thinking as a single-loop learning and double-loop learning. “Strategic planning is normally used denote a programmatic, analytical thought process carried out within the parameters of what is to be achieved, but does not explicitly question those parameters, and is therefore, analogous to single-loop learning. Strategic thinking, by contrast, refers to a creative, divergent thought process. It is a mode of strategy-making which is associated with re-inventing of the future, the creation of new competitive space as opposed to struggling over slow growth or shrinking markets, for example. A significant deviation from strategic planning, strategic thinking questions the strategic parameters themselves, and thus is analogous to double-loop learning”. This has been represented in figure # 1.
4 Strategic Thinking
Thought Process: The purpose of strategic thinking is to Synthetic discover novels imaginative Divergent strategies which can re-write rules of Creative competitive game; and to envision potential futures, significantly different from the present.
Strategic Management
The purpose of strategic Thought process: planning is to operationalize Analytical the strategies developed Convergent through strategic thinking and Conventional to support the strategic thinking process.
Strategic Planning
Figure # 1 Strategic Thinking and Strategic Planning (Lawrence, E. 1999)
“Discovering and committing to novel strategies which can re-write the rules of the competitive arena, necessitates realizing or suspending at least part of the conventional wisdom and assumptions about the industry recipes, as well as one’s psychological frames in which these recipes are represented, envisioning a number of possible futures, and challenging the existing operating assumptions in which current strategies are built.
5 According to Heracleos, Strategic thinking and strategic planning are interrelated in a dialectical process, where both are necessary for effective strategic management, and each on its own is necessary but not sufficient. The tools that one uses at each stage of the strategic management process are not important in themselves but as the means of encouraging the creative and analytical mindset. There ideally needs to be a dialectical thought process of being able to diverge and then converge, being creative and then seeing the real-world implications, and being synthetic but also analytical.
Lynch (2000, p. 780) argues that “strategic planning is no substitute for strategic thinking, it merely formalizes the strategy process in some organizations. More specifically, the plan will integrate the activities of the organization and specify the timetable for the completion of each stage”.
According to Elton Lawrence (1999), Leidtka argued that strategic thinking and strategic planning are interrelated using the model (figure # 2) based on disruption and creation of alignment.
6 Strategic Thinking: Disrupting Alignment
Current Desired Reality Future
Strategic Planning: Creating Alignment
Figure # 2 -Strategic Making as Creating and Distributing Alignment (Lawrence, E. 1999)
According to Ledtka: “a broadened view of the strategy-making process would incorporate both strategic thinking and strategic programming as related activities, each valuable in its own right in an ongoing process of creating and disrupting the alignment between an organization’s present and its future. An appropriately reconstituted strategy-making framework would build in the possibility of institutionalizing a process that continually examines the tension between the creation of the alignment
7 necessary to support efficiency and effectiveness and the disruption of alignment necessary to foster change and adaptability. Strategic, as its best, disrupts alignment by creating a gap in the minds of managers between today’s reality and a more desirable future. This, in turn, opens the gap that is the driving forces behind strategy-making aimed at change. Translating the strategic intent into new institutional behavior, however, necessitates strategic programming (i.e., the realignment of structures, systems, processes, and skills around the new intent in a way that begins to close he gap that strategic thinking opened. Once closed, a new gap is opened in an iterative and ongoing cycle of strategic thinking and strategic programming”.
3. The Framework of Ingrid Bonn (2001)
Bonn framework is based on the argument that strategic thinking should take place at two different levels: the individual level and the organizational level. Bonn argues “strategic thinking requires a dual- level approach that investigates the characteristics of an individual strategic thinker as well as the dynamics and processes that take place within the organizational context in which the individual operates”.
3.1 Strategic thinking at the individual level
Strategic thinking at the individual level consists of three main elements: A holistic understanding of the organization and its environment Creativity A vision for the future of the organization
8 3.1.1 A holistic understanding of the organization and its environment Bonne argued “a crucial element of strategic thinking is the ability to take a holistic perspective of the organization and its environment. This requires an understanding of how different problems and issues are connected with each other, how they influence each other and what effect one solution in a particular area would have on other areas”.
Taking a holistic approach needs that strategic thinkers needs to distance themselves form day-to-day operational problems and to see how problems and issues are connected to the overall pattern that underlies particular details and events. “Such an attention to the underlying structures of complex situations requires thinking in terms of processes rather than events to enable a reconciliation of apparent contradictions and the development of innovative solutions”. Strategic thinkers need to be familiar with the dynamics of the organization life: how organizations and managerial actions change over time and what and how the feed back processes that lead to such change.
It is also important to understand that “organizations are components within large and complex systems such as markets, industries and nations. Strategic thinkers need to understand how organizations are embedded within this wider context and how they are influenced by the dynamics, interconnection and interdependency of these systems”.
3.1.2 Creativity For Bonn Strategy is about ideas and the development of novel solutions to create competitive advantage. Strategic thinker must search for new
9 approaches and envision better ways of doing things. A prerequisite for this is creativity. Bonn summarizes the following concepts for creativity: Creativity is the ability to question prevalent concepts and perceptions Creativity is recombine or make connection between issues that may seem unconnected Creativity is how people approach problems and solutions – their capacity to put existing ideas together in new combinations Creativity is challenging “tyranny of the given” Creativity is questioning the prevailing beliefs or mental models in the organizations. Mental models are “deeply ingrained assumptions, generalizations, or even pictures or images that influence how we understand the world and how we take action”. They are often tacit and beneath out level of awareness; yet, they have strong influence on organizational behavior.
3.1.3 A vision for the future “ Strategic thinking should be driven by a strong sense of organisational purpose and a vision of the desired future for the organisation. A genuine vision – as opposed to the popular “vision-statement “ – conveys a sense of direction and provides the focus for all activities within the organisation”.
Bonn summarizes what a genuine vision and its importance: A genuine vision convey a sense of direction and provide the focus for activities A picture or image people carry in their heads and harts A vision that is shared throughout the organization
10 o Fosters a commitment rather than compliance o Creates a sense of commonality that permeates the whole organization o Inspire people’s imagination and provides a focus that allows individuals to contribute in ways that make the most of their expertise and talents It is not only the content of the vision, but its authenticity as well as the consistency with which it was translated into everything that the organization does, its objectives, strategies, polices, systems, structure s and underlying processes It helps to achieve superior performance in the long-term
3.2 Strategic thinking at the organizational level
“The organization level provides the context in which individual strategic thinking can occur. Organisation need to create the structures, processes and systems that: 1. Foster ongoing strategic dialogue among the top team, and 2. Take advantage of the ingenuity and creativity of every individual employee.”
3.2.1 Strategic Dialogue In order to have a fruitful strategic thinking process, managers need time for both reflection and exploration. Major decision, key issues, learning something new, change or clarify key organizational roles needs time. “Organizations must create the time and space for senior managers to engage in dialogue about strategic issues, insights and ideas on a regular basis. Strategic thinking requires senior management teams to learn how
11 to explore complex and conflictual issues together. Collective strategic dialogue – if it is done in a constructive way – takes advantage of the synergistic potential of several minds to be more insightful than a single mind. Through this continuous process, executives engage in a social discovery process in which continued communication builds an increasingly complex and realistic understanding of key information and preferences.
Bonn encourages companies to establish what he calls a Strategic Thinking Forum to encourage new input into the strategic dialogue process among senior managers. The strategic Thinking Forum should comprise managers from different disciplines and different levels of the organization. The forum meets regularly for an appropriate period of time. The members of the forum should be selected based on the following criteria: Successful track required as line managers Their innovative ideas Their reputation of being outspokenness
The forum should focus on exploring issues that will be of strategic importance for the organization within the next five to ten years. The ideas that were established by the forum should be presented to senior management during management retreat. With time this will:
Raise corporate awareness Facilitate collective learning Facilitate shared understanding of the organizational challenges Build commitment for strategy implementation
12 3.2.2 Taking advantage of the ingenuity and creativity of employees “ In addition to fostering strategic dialogue among the top, organizations must create an environment in which all employees are encouraged to participate in the development of innovative ideas and strategies”. It has been found that visionary companies placed great emphasis on designing organisational structures, processes and mechanisms that stimulated improvements and change. The challenge for senor management is to design and establish work environment where everyone is encouraged to explore new ideas and to come up with improvements and innovations. Employees will be most creative when they feel motivated mainly by: Interest Satisfaction Challenge of the work itself and not by external pressure
13 4. The Framework of Jeanne Liedtka (Lawrenc, E. 1999)
Liedtka developed a model which defines strategic thinking as a particular way of thinking, with very specific and clearly identifiable characteristics (Figure # 2)
System Intent Focus Perspective
Intelligent Thinking in Opportunism Time
Hypothesis Driven
Figure # 2 Jeanne Liedtka Model (Lawrence, E. 1999)
4.1 System Perspective “ Strategic thinker has a mental model of the complete system of value creation from beginning to end, and understands the interdependencies
14 within the chain…. The mental model of how the world works must incorporate an understanding of both the external and internal context of the organization”. There is a need to understand the external business ecosystem in which a firm operates, strategic thinkers must also appreciate the inter-relationships among the individual internal parts that together, constitute the whole, as well as the fact that the whole is greater than the sum of its parts.
The system perspective enables individuals to clarify their role within the larger system and the impact of their behavior on other parts of the system, as well as on the final outcome. This approach addresses, and functional levels of strategy, but very importantly, the person level.
4.2 Intent Focus
Strategic intent implies a particular point of view about the long-term market of competitive position that a firm hopes to build over the coming decade or so. “Hence, it conveys a sense of direction. A strategic in tent is differentiated; it implies a competitively unique point of view about the future. It hold out to employees the promise of exploring new competitive territory. Hence, it conveys a sense of discovery. Strategic intent has an emotional edge to it; it is a goal that employees perceive as inherently worthwhile. Hence, it implies a sense of destiny. Direction, discovery, and destiny are the attribute of strategic intent”.
According to Liedtka strategic intent provides the focus that allows individuals within organization to marshal and leverage their energy, to focus attention, to resist distraction, and to concentrate for as long as it takes to achieve a goal.
15 4.3 Intelligent opportunism
The essence of the intelligent opportunism is the idea of openness to new experience which allows one to take advantage of alternative strategies that may emerge as more relevant to a rapidly changing business environment. “In practicing intelligent opportunism, it is important that organizations seriously consider the input from lower level employees or more innovative employees who may be instrumental in embracing or identifying alternative strategies that may be more appropriate for the environment”.
4.4 Thinking in time
Strategy is not solely driven by the future., but by the gap between the current reality and the intent for the future. It implies a sizeable stretch for an organization. Current capabilities and resources will not suffice. This forces the organization to be more inventive, to make the most of limited resources. Whereas the traditional view of strategy focuses on the degree of fit between existing resources and current opportunities, strategic intent creates an extreme misfit between resources and ambitions. Hence, strategic thinking connects the past, present, and future and in this way uses both an institution’s memory and its broad historical context as critical inputs into the creation of its future. This oscillation between the past, present, and future is essential for both strategy formulation and execution.
4.5 Hypothesis driven Hypothesis driven embraces hypothesis generation and testing as core activities. According to Liedtka this approach is somewhat foreign to
16 most managers: “yet in an environment of ever increasing information availability and decreasing time to think, the ability to develop good hypotheses and test them efficiently is critical. Because strategic thinking is hypothesis driven, it circumvents the analytical-intuitive dichotomy that has dominated much of the debate on the value of formal planning. Strategic thinking is both creative and critical, although accomplishing both types of thinking simultaneously is difficult, because of the requirement to suspend critical judgment in order to think more creatively.
6. Conclusion
There is no clear distinction between strategic planning and strategic thinking in the literature. Some authors refer to them, as they are the same while other distinguish between them. Yet, especially in the last few years, there is trend among authors to differentiate between them and consider them as two important interrelated steps that senior managers should comprehend and practice (i.e., Mintzberg 1994, Leidtka 1998, Heracleos 1998, Lynch 2000, and Bonn 2001).
Nevertheless, strategic thinking is becoming more and more important for companies to be competitive in our changing turbulent environment. “Strategic thinker remains ever open to emerging opportunities, both in service to the defined intent and also in question as to continuing appropriateness of the at intent…Firms who succeed to at embedding a capability of strategic thinking throughout their organization will have created a new source of competitive advantage. Their whole (holistic) system perspective should allow them to redesign their process for greater efficiency and effectiveness. Their intent-focus will make them more
17 determined and less distracted than their rivals. Their ability to think in time will improve the quality of their decision-making and speed implementation. A capacity for hypothesis generation and testing will incorporate both creative and critical thinking into their processes. Intelligent opportunism will make them more responsive to local opportunities” (Lawrence 1999).
An issue that needs more study is the relation between training and strategic thinking. A as Bonn (2001) suggests that there is a need to investigate if training can enhance the strategic thinking ability of senior managers or not.
Finally, and most importantly, strategic thinking needs that organizations create the required structures, systems, and processes (e.g. culture) that encourage and enhance strategic thinking at all levels of the organizations.
18 List of References
Bonn, I. (2001), “Developing Strategic Thinking as a Core Competency,” Management Decision, Vol. 39, No. 1, pp. 63-71.
Lawrence, E. (1999) ”Strategic Thinking – A Discussion Paper” Research Directorate, Public Service Commission of Canada.
Lynch, R. (2000) Corporate Strategy, 2nd edition, Prentice Hall,
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