Strategic thinking is thinking about the actions needed to address the biggest issues facing an organization. It also leads to deciding strategies to ensure the improved performance of the organization over the next few years.
Recent writers on strategy often draw a strong boundary between strategic planning and strategic thinking. They usually define strategic planning as being primarily a mechanistic process of analysis. In this perspective, thinking strategically emphasizes creative synthesis. the focus is coming up with innovative or industry disrupting strategies.
I have not been able to find any generally accepted definition of strategic thinking. Nor is there concensus on its role in the organization. I have not seen any agreement on what is competent practice or method in strategic thinking. However, its proponents seem to be agreed that traditional modes of strategic planning do not work. This is on the grounds that it produces strategies that are only partially implemented or not at all.
By reducing strategic planning to a narrowly conceived piece of analytical work, devoid of any creativity, this ‘strategic planning’ is a creature of their imaginings rather than the stuff of real management activity.
This is not to deny that some planning processes called ‘strategic’ are anything but ‘strategic’.
Some writers qualify their views by saying that strategic thinking and strategic planning are different, yet linked and complementary processes. The implication remains that strategic thinking is superior to strategic planning. This suggests that the role of strategic thinking is to innovate. It creates leadership visions to lead the organization to strategies that are more vital. Some even talk of reinventing the industry.
Some give the role to strategic planning of implementing these strategies developed out of the strategic thinking process. In this view, strategic planning is seen as little more than project management or work scheduling. In effect, this view accepts the common confusion between strategic planning and business planning.
I have dealt with such confusions at length in Definition of strategic planning.
Setting up strategic thinking and strategic planning in opposition to one another in this way seems unhelpful to me; it adds confusion in a field where thought is already somewhat fragmented.
As this view is becoming so prevalent, I will spend a little more time examining it and showing how the Argenti approach to strategic planning and management overcomes the shortcomings alluded to by this view.
It is true that much of what goes under the banner of strategic planning may appear mechanistic and excessively analytical. It is possibile such processes may stifle rather than encourage clear thinking and innovation.
However, what much so-called strategic thinking leans to is a particular style of strategy. This is ‘thinking’ that is aiming at major innovations or even industry disruptions. This type of strategy may be fine in certain situations for some specific organizations. Such strategic thinking may pre-empt the choice of strategies. While innovation may be an appropriate strategic priority for many firms and quite a few industries at a given time, it is not a universal strategic stance for all organizations at all times.
This interpretation of strategic thinking as creative and innovative is commonly associated with visionary leadership. I would argue that it is a leadership accountability common to all managers to encourage improvement and innovation, regardless of the work unit involved. It does not follow that all organizations need to be especially innovative or industry disruptive to be successful.
The strategic thinking view of the world starts with the reasonable assumption that we cannot predict the future. It then tends to imply that the great visionary leader can somehow see the future in some broad outline. This is set against the views of strategic planners who delude themselves that they can control the future if only they just collect and analyze enough data.
My view is different from both of these. It sees a useful role for forecasting in the planning process. It also brings a creative synthesis into the strategy making phase of the strategic planning process, and this certainly involves thinking strategically about strategy.
A forecast is simply an opinion about what might happen in the future. It also usually requires quantifying these opinions. However, it should openly accept that all forecasts are subject to error. The longer the planning horizon the greater the errors are likely to be. I think we should insist on showing these possible errors in planning discussions and documents. In practical terms, the Simply Strategic Planning approach enables this by a method of stating and recording a bracket of forecasts. These are based on range of opinions from those managers best placed to understand the history of the organization’s performance and the drivers of its likely future performance.
Effective strategic planning further undertakes systematic review of possible changes in the environment of the organization. This is by sampling opinions with supporting evidence about trends and signals likely to affect future performance. This is done in the strengths, weaknesses, opportunities, and threats (SWOT) stage of the strategic planning process.
In the popular ‘strategic thinking’ view lower-level managers have a voice in strategy-making, as well as greater latitude to respond opportunistically to developing conditions. This is set against the straw man characterization of strategic planning. Strategic planning is described as obtaining the needed information from lower-level managers, and then using it to create a plan which is, in turn, disseminated to, or by implication ‘imposed’ on managers for implementation. This is perhaps a half-truth.
My view of corporate strategic planning is essentially top-down, that is, a strategic plan should never be built up by simply adding together the plans of the company’s constituent parts. This does not mean that the corporate plan should be prepared with no regard to the parts. That would be absurd. It does mean that any part that does not fit may be discarded, rather than the corporate entity having to accommodate all the parts whether they fit or not.
Top-down means the strategy is right for the whole; the dog wags the tail. The process of strategic planning advocated here requires inclusion of managers other than members of the corporate management team.
In practice, this has particularly important implications for groups of companies or large divisionally structured non-profit organizations, as illustrated here.
It is essential to start a corporate strategic plan for a group with a group strategic plan. This will answer such questions about the group as whether -
These are all matters that relate to the group as a corporate whole.
Only when these group issues have been addressed should the divisions, and then the profit centres, start to prepare their plans.
For example, a group issue may the declining performance of a particular member of the group. This may or may not be addressed by improvement programs from within the subsidiary, the group head quarters, or by merging the division with another, spinning it out on its own, or winding it up altogether. These are decisions to be taken at the corporate level, rather than by the subsidiary on its own.
The divisional strategic plans will be made with the intended result of the group plan firmly in mind. Part of the result of the group plan will be a statement of the intended role for each division or profit centre in the group, and so the output of the corporate level plan becomes part of the input of the subsidiary plan, rather than the other way round. Top-down, not bottom-up; the tails do not wag the dog.
There is a corresponding rationale for a top down order of developing the corporate strategic plan for a unitary organization, where parts of the organization develop their own functional plans to take into account the targets and strategic role, if any, assigned to the part in the corporate strategic plan.
Despite this apparent driving from the top, there is scope for involvement in the process by managers and staff outside the corporate management team.
In the planning process, a central activity is the strengths, weaknesses, opportunities, threats (SWOT) analysis. In the Argenti Strategic Planning Process, at least all of the managers at one remove from the CEO become engaged in the process. In turn, as a normal part of their accountability these managers would be expected to consult and communicate with their own work groups. This ensures that the best information and ideas available are brought into the process. This is the ‘bottom up’ aspect of the process, even though primary responsibility is exercised in a top down fashion.
Those who support a ‘strategic thinking’ approach to strategy making tend to emphasize synthesis over analysis.
As they also see strategic planning as primarily analysis without the synthesis, they view proponents of strategic planning as opponents of organizational change.
Both characterizations are probably exaggerations. A few may hold these views in their black and white form, however, many practicing managers will hold a view that embraces a degree of organizational change, and yet also be alert to the risks of a change for change sake.
A sound process of strategic planning is designed to accommodate the reality that managers vary in their general outlook. It provides for the optimists, the pessimists, the status quo protectors, the radical innovators, the risk averse, and the adventurers!
Those organizations that see strategic planning in terms of an annual ritual may engage in excessive analysis. The problem is with the institutionalizing of the process as a calendar driven rather than issue and performance driven one. The concept of strategic planning itself does not necessitate such an approach.
There is an inextricable link between corporate strategy and organizational change. The development of corporate strategies involves thinking. The thinking involves finding strategic options appropriate to the organization’s situation in terms of the elephant sized issues it faces. The implementing of the strategies selected from among these options inevitably requires some organizational change.
The nature and extent of change will vary with the organization, the type of strategies, and the funding available for associated change impacts such as training.
However, it seems to be a distraction to focus on what is more important, innovation or evaluation, analysis or risk management etc. A well-designed strategic planning process such as the Argenti process of strategic planning will provide the requisite tools and directions to suit each organization.
Properly handled, and dare I say thoughtfully employed the strategic planning process can be a great catalyst for organizational changes that will yield improved corporate performance, even if some observers might judge the changes as insufficiently innovative!
Promoters of the strategic thinking approach argue that because many other members of the organization have been involved in the development of strategy, that they all understand the Big Picture. They understand the connection between their roles and the functioning of that broader strategic picture, as well as the interdependence between the various roles that comprise the system.
This is contrasted with the over analytical, hierarchical ‘command and control’ world supposed to go with strategic planning, lower level managers need only know their own role well. This, it is presumed, leads to preoccupation with ‘empire building’ and ‘turf protection’ at the unit level, resulting in sub-optimum corporate level performance.
All of which may well be true to some degree in some organizations. In my experience these results may well be as often associated with poorly designed organizational structures of managerial accountability, managers not competent for their roles, and many other causes of sub-optimum performance, rather than because the organization has opted for ‘strategic planning’, as against ‘strategic thinking’.
Systematic strategic planning such as the Argenti process helps managers to address issues such as poor structures of managerial accountability, and others which may be obstacles to corporate performance improvement. They also presuppose that a CEO, who embarks on strategic planning, will accept responsibility for the impacts on the organization that changes to strategy entail. This also requires them to be sure that they do have the competently staffed requisite managerial organization in place to carry out both the development and implementation of strategic shifts.
If not they may have to address this lack of appropriate managerial structure and competence in role as the number one elephant issue!
Another sort of distracting discussion I am warning against is the pointless fight over whether the process of ‘strategic thinking’ is more important than the product of the strategic planning process, in the form of the strategic plan.
The process is important and the plan is important. Arguing the relative importance of each seems a waste of valuable management time and attention. Have a well designed process that results in a useful product, and ensure that the ongoing process of results monitoring flows into a properly authorized and agreed set of modifications to the plan as reality may require.
Thinking, including ‘strategic thinking’ is required throughout the planning process, and the plan as product should reflect this thinking. The process is important and the plan is important. The process adds value and the product is of value.
The process-product confusion arises because of a legitimate concern with how the process is carried out rather than with the process itself. The criticism is often about the lack of consultation with affected parties or stakeholders. A well-designed process, such as Argenti strategic planning, builds in extensive involvement of key players such as the managers responsible for implementing the strategies and aligning other activities with them. It also connects governance to the process to ensure that interests of Intended Beneficiaries and other interest groups are taken into account.
Therefore, the strategic thinking view is simply asking that the relevant parties be involved in the process, and they are further arguing that the process itself could and should increase commitment to execution, insight for further work and stronger cooperation among those involved. All this is fine, and is what systematic corporate strategic planning can enable. However, saying this does not require us to denigrate the usefulness of the plan as an outcome of the process.
The plan is the visible embodiment of the commitments made in the course of the planning process, and the formalizing of the charter with the governing body. It represents the open acceptance on the part of the managers of their accountability for achieving the strategic objectives by implementing the strategies.
The plan itself is vital in not only setting direction, and providing a warrant for assignment of responsibilities, and allocation of resources, it gives us the standards and benchmarks for reviewing the implementation of the strategies embodied in the plan. It also provides a common language with which to communicate about priorities, and to review performance.
Proponents of strategic thinking in their opposition to strategic planning argue that the control of the execution of strategy as well as its development relies on a pervasive sense of strategic intent embedded in the minds of managers across the whole organization. This inner light of strategic thinking guides their choices on a daily basis in the management of strategic projects. Such an approach makes it difficult to monitor strategy execution in ways that can give corporate management a clear idea of how things are going. This viewpoint is sometimes associated with an anti-hierarchical stance on the nature of organization and management. It is a rejection of ‘command and control’ management. I have dealt with this under Organizational Effectiveness.
Because of these views, the strategic thinking approach perceives strategic planning as exercising undue control through measurement systems. It is true that some of the more elaborate and bureaucratic systems of analysis and control associated with say extremely large military and government agency planning seems to assume that organizations can measure and monitor a vast array of variables both accurately and quickly, and make sensible decisions on such a basis. Sadly, such excessive preoccupation with detailed measurement and reporting may lead to the opposite, namely an organizational paralysis.
However, a properly designed strategic planning system gives most of the elements required for the effective implementation of strategy, while taking into account the psychological and political realities of organizations.
This is done by effectively engaging with the right people throughout the process. It is done by employing a systematic monitoring system that is consistent with the analysis of small number of critical factors involved in designing the strategies and aligning these with a clear set of accountabilities for strategic initiatives, in a coherent system of strategic management.
If an organization adopts the very systematic monitoring system, which should be integral to the application of the strategic planning process, they will be well on the way to what is called ‘strategic management’. This will mean that instead of waiting until something dramatic happens before reviewing the corporate strategic plan for their enterprise, they plan continuously.
In essence ‘Strategic Management’ consists of the following features, most of which are already designed into the Argenti Process of Strategic Planning.
Strategic management, then, consists of an integrated system composed of many of the features described in the Argenti System. The organization systematically and deliberately watches what is happening to itself and to the world outside and systematically and deliberately reacts to trends and events quickly — even, perhaps, while they are still emerging.
The monitoring stage is something else as well. It is not just the final stepping-stone in the corporate planning process, it is also the first in the next stage to strategic management where a team of executives continually act as corporate planners for their organization, constantly scanning the environment for new trends and events, continually thinking about the long-term future direction for their organization. This is ‘strategic thinking’ indeed, and it is greatly facilitated by a well designed strategic planning process.
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