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Have You Ever Known the Boundary?

The context of the strategic thinking


By DM Chaminda Dassanayake
Lecturer Department of Tourism & Hospitality Management, Faculty of Management Studies, Rajarata University of Sri Lanka, Mihintale. dmcdassanayake@gmail.com, 0716 838 724

Abstract The highly complex organizations and the business environment do not provide a comfortable platform to strategies to implement and achieve their targets as expected. Therefore, highly programmed, premeditated, inflexible strategies are no longer been effective in todays context. The concept of strategic thinking has come in to the action to overcome the problems which are associated with strategic planning. But it is still a problem to identify the nature of strategic thinking and its context in the strategic management process. The purpose of this paper is to construct a critical analysis of the concept of strategic thinking by examine past studies and archival information associated with the concept of strategic thinking, and it looks at the key elements involved in the strategic management context. At the end it emphasizes the important of strategic thinking rather than strategic planning in todays context and provides a conceptual outline which will elaborate the contributing and associating elements in strategic thinking process.

Introduction Did your strategy work as you expected? Can you assure that a strategy formulated based on on-hand information and future predictions will perfectly work on tomorrow? Can you plan your strategies to be totally suited for tomorrow circumstances? Will there be anything new on tomorrow to the things you have

already thought of? Finally, can you program the modern dynamic business world in advance?

In an environment characterized by instability and uncertainty, capacity for innovative different strategic thinking rather than highly programmed strategic planning will be the key to creating and sustaining competitive advantages. Organizations should posses perfect strategy related competencies and should understand the context within which the strategies are being formulated, implemented as well as controlled. The purpose of this paper is to elaborate the importance of the role of strategic thinking in creating and sustaining competitive advantages for organizations operating in highly competitive and dynamic business environment and analyze the key elements associated with the concept. This study is mainly based on archival information gathered from past studies. The paper will discuss and contrast between strategic planning and strategic thinking, the methodology of the study, discussion of strategic thinking with associated elements, recommendations & conclusions respectively. Background -Strategic Planning vs. Strategic Thinking Even though the terms strategic planning and strategic thinking has been using interchangeably in most occasions in the strategic management literature; it is worthwhile to contrast between two terms initially and then to highlight the significance of the role of strategic thinking in modern complex business environment rather than strategic planning. To Heracleous (1998), Strategic planning is often used to refer to a programmatic, analytical thought process, and strategic thinking to refer a creative, divergent thought process. As Mintzberg (1994), Strategic planning is about breaking down a goal into steps; determine how the steps could be implemented, and identifying the possible consequences of each step. At this definition, the strategic planning produces highly programmed and structured set of actions with less flexible nature with a low level ability to face unexpected environmental changes. The expected results will only be achieved if the predictions are perfectly fit with the future events.

Strategic thinking, on the other hand, as Mintzberg (1994) highlighted, is a complementary and critical addition to the process of strategic planning,

implementation and management. And it is often described as a reflective dialogue about the future so that one can avoid pitfalls as well as take advantage of opportunities. In another way, strategic thinking is ability to think systematically, with a whole system perspective which often exceeded what the organization is currently engaged in. Thinking strategically will be interesting when compared with highly programmed strategic planning and it is a creative and powerful skill that energizes people and prepares the person and their organization for the unknown future. To Mintzberg (1994), the essence of strategy making is the process of learning as we act. Formal system can never internalize, comprehend, or synthesize hard information. Strategies can develop inadvertently, without the conscious intention of senior management, often trough a process of learning. Learning plays a critical role in strategy making, while Strategic planning is identified as strategic programmingarticulating and elaborating strategies that already exist. Strategic thinking holds the point of regularly scanning the organizations external environment for significant changes and trying to understand implications of these programs, organization structures, staffing etc. Strategic thinking is not as detailed as strategic planning. Strategic thinking implies predicting a general shape of what the future might bring; i.e., financial trends or significant political events. Literature Review This section of the paper will discuss the some of the conceptual aspects of strategic thinking as well as strategic planning using researches and studies done on the subject. According to Liedtka (1998), Strategic thinking includes five elements (Figure 01); i.e., systems perspective (sees vertical linkages like relationship between corporate, business level, and functional strategies to each other, to the external context, and to the personal choice; and horizontal linkage like connection across departments and

functions, and between communities and suppliers and buyers), intent-focused (pursuing goals with psychic energy), intelligently opportunistic (be responsive to opportunities), involves thinking in time (uses both an institutions memory and its broad historical context to well about creating its future), hypothesis driven (generating and testing hypothesis).

Figure 01: The Elements of Strategic Thinking

Source: Liedtka (1998)

Further he highlights that in order to incorporate strategic thinking into planning process, however, it should be organized three discrete aspects of process; repertoirebuilding, managing the strategic issues agenda, and programming. As Heracleous (1998) summarized the ideas of well known strategic management philosophers -Henry Mintzberg & Michael Porter; Mintzberg believes that strategic thinking & planning involve distinct thought process, the former being creative and the latter analytical; whereas Porter believes that strategic thinking is achieved by utilizing analytical tools. The underplaying issue with regard to these two views seems to be a focus on different aspects of strategy. Mintzberg, for example, sees strategies as patterns in a stream of decisions and actions, which may be deliberate at times, emergent at other times, or mixed, and mostly based on managerial intuition and creativity. Porter on other hand, being highly analytical, sees strategies as particular configurations of the value chain which are ideally unique and sustainable, providing strategic positions which cannot be easily copied by competitors. Porters contributions have tended to focus on the cross-sectional rather than longitudinal problem, however,

and Mintzbergs contributions have tended to focus on the longitudinal rather than cross sectional problem.

Figure 02: Strategic Thinking & Strategic Planning

Source: Heracleous 1998

Finally, as Heracleous (1998) exhibited (Figure 2), strategic thinking & strategic planning are interrelated in a dialectical process, where both are necessary for effective strategic management, and each mode on its own is necessary but not sufficient. To Wilson (1998), strategic planning which arisen early 1970s is still effective in todays business world, but with some changes. He gave two massages from his article titled strategic planning for the millennium: resolving the dilemma, first, a major reason for the erratic history of strategic planning has been managements futile search for a single silver bullet, coupled with a misunderstanding of the holistic nature of strategy; and second, if we are to get best out of strategic planning , we must recognize that it requires a sustained commitment, an understanding of its complexity, and a harnessing of strategic opposites. But his views also align with the core idea of strategic thinking and he tries to develop the concept of strategic planning without touching the word thinking. Finally we can say that his ideas are laid up somewhere between planning & thinking.

Gilmore & Camillus (1996) introduced seven fundamental principles for strategic planning so as to make it strategic thinking; i.e., prototyping (there is no final plan), explicit communication (successful exchange of information about concepts, needs, plans, decisions, assessments or opinions as well as underlying assumptions), inclusion (employing more widespread, on-going participation of people in the process), Modularization with interconnection (sub divisions), Win-win incentives (motivate participants), sequencing variety generation and variety reduction (try to surface all potentially pertinent information), and flexible infrastructure (flexibility of

infrastructure). These seven principles try to modify the strategic planning process towards a strategic thinking process, but it seems that, it tries to program the strategic thinking process too; then it will not really harvest the benefits of strategic thinking. Methodology This study is purely based on archival information of past studies & publications. The paper takes the nature of a literature review on the topics of strategic thinking and planning. But it is not merely a literature survey. In fact, it describes the nature of strategic thinking and strategic planning under different authors viewpoints and critically evaluate among different ideas and findings of researches. This paper takes the ideas of different well known writers in the field through a comprehensive analysis of their publications and studies. As we described in the first part of this paper, a brief introduction on the concepts of strategic thinking and strategic planning is drawn in the background, and a critical evaluation on the concepts has been given by using past studies under the literature review section. In the discussion part, it will describe all the elements which are critical to encourage a perfect strategic thinking practice which is necessary to achieve and sustain competitive advantage in complex business world. Furthermore, in the discussion, real world examples are given as nature of case studies or incidents to elaborate the concept in more meaningful way and recognize it in a practical manner.

Discussion So far, we have investigated among the concepts of strategic planning and strategic thinking, and have realized that the strategic thinking is far ahead in strategic management process so as to achieve and sustain competitive advantages in a highly competitive business environment. So it is important to further study on the topic of strategic thinking, its context and the contribution for a perfect strategy which can overcome most of the strategy related problems in the business world. Strategic thinking should be a continuous process rather than only an annual strategic planning process. Whether a company has one person, a group, or everyone doing strategic thinking, the important are that it is being done continuously and that the opportunities, alternative strategies, or different business models or periodically shared with other key people in the company (Abraham, 2005) According to the Mintzberg (1994), strategic planning often spoils strategic thinking, causing managers to confuse real vision with the manipulation of numbers. So this confusion lies at the heart of the issue: the most successful strategies are visions, not plans. Therefore, as Mintzberg, planners should make their contribution around the strategy making process rather than inside it. They should supply the formal analysis or hard data that strategic thinking requires, as long as they do it to broaden the consideration of issues rather than discover one right answer. This idea of Mintzberg gives a tremendous value to the strategic thinking. The highly competitive business world can not be programmed. There is no exact answer for a particular issue which is viable long-lasting, the answer which works on todays context will not be viable on tomorrow. Therefore, a strategy must be a nature of flexible and non-programmed.

Are inventions possible in the highly programmed strategic planning process?


Invention takes a considerable value in the process of strategic thinking. As Mintzberg highlighted, real strategic change requires inventing new categories, and not rearranging old ones. The step by step highly programmed strategic planning will not

support to make inventions. In the case of Polaroid camera, one day in 1943, Edwin Lands three-yearold daughter asked why she could not immediately see the picture he had just taken of her. Within an hour, this scientist conceived the camera that would transform his company (adopted from Mintzberg, 1994). In this case Lands vision was the synthesis of the insight evoked by his daughters question and his vast technical knowledge. The invention or different thinking goes also with the blue ocean strategy (Kim & Mauborgne, introduce acquiring business a 2004) new which way of of
BOX 01: THE STORY OF CIRQUE DU SOLEIL Cirque du Soleil is Canadas largest cultural exports company founded in 1984 by a group of street performers. Cirque has staged dozen of productions seen by some 40 million people in 90 cities around the world. In 20 years Cirque has achieved revenues that Ringling Bros. and Barnum & Baily- the worlds leading circus took more than a century to attain. What is the secret that Cirque du Soleil had to have such growth even in an unlikely setting (steadily decreasing audience & increasing cost) for the industry? The tagline for one of the first Cirque production is revealing we reinvent the circus. Cirque did not make its money by competing within the confines of the existing industry or by stealing customers from Ringling and the others. Instead it created uncontested market space that made the competition irrelevant. It pulled in a whole new group of customers who were traditionally noncustomers of the industry- adults and corporate clients who had turned to theater, opera, or ballet and were, therefore, prepared to play several times more than the price of a conventional circus ticket for an unprecedented entertainment experience. (Extracted from Kim & Mauborgne, 2004)

rapid in

growth

the

modern

business world. The blue ocean strategy thinks in a different way to having rapid growth and sustainability by creating uncontested make the market space,

competition

irrelevant, create and capture new demand, break the value cost tradeoff etc. Cirque du Soleil (Box in 01) the has been

successful

industry

because of inventions. Do you think that highly programmed strategic planning provides an appropriate platform to inventions? No, if it is so, the management of Cirque du Soleil would struggle to penetrate the existing market and compete with other companies in the industry so as to implement their existing plans. The strategic thinking approach only will support this kind of inventions and, therefore, we can say that the blue ocean strategy is also a

one side of the strategic thinking and it proved a path for business to overcome problems in modern complex environment.

Should we recognize emergent strategies?


According to Mintzberg (1994), a strategy can be deliberate as well as emergent. Deliberate strategies can realize the specific intentions of senior management. Emergent means that a convergent pattern has formed among the different actions taken by the organization one at a time. As he further described, strategies can develop inadvertently, without the conscious intention of senior management, often through process of learning and, as he believes, all viable strategies have emergent and deliberate qualities. As Stacey (1996), the ability of people in groups, organizations and societies to exercise foresight depends upon the dynamics of these groups. Complex adaptive systems produce order of a changeable and diverse kind that comes about in a spontaneous, emergent way. Such order has not been programmed in and there is no blue print, grand design or plan. This spontaneous self organizing activity, with its emergent order, is vital for the continuing evolution of a system and its ability to produce novelty. A model depicting the forms of strategy, developed by Mintzberg, is shown in figure 03.

Figure 03: Forms of Strategy

Source: Mintzberg, 1994

BOX 02:

NATIONAL FILM BOARD (NFB)

The NFB of Canada is a federal government agency, famous for its creativity and expert in the production of short documentaries. In an occasion, it founded a filmmaker on a project that unexpectedly ran long. To distribute his film, the NFB turned to heaters and so inadvertently gained experience in marketing feature-length films. Other filmmakers caught on to the idea, and eventually the NFB found itself pursuing a feature-film strategy- a pattern of producing such films. (Extracted from Mintzberg, 1987)

How we can justify the NFB (Box 02) case under the more deliberate strategic planning approach? The strategy of making feature-length films has come without the senior management involvement and without a proper plan. But it has worked successfully in the market. So the strategy which has been emerged is also being important and an organization should allow or consider the emergent strategies as well and make a proper atmosphere to grow this type or strategy.

Is explicit knowledge alone sufficient for a perfect strategy?


The knowledge both tacit & explicit plays an imperative role in strategic thinking process. As Brockmann & Anthony (2005), explicit knowledge is not enough for making a perfect strategy and it will cover only a part of the required strategic Tacit knowledge decision for
BOX 03: SAM STEINBERG The steinberg chain was built and run for more than half a century by a man named Sam Steinberg. In 1952, with arrival of the first shopping centre in Montreal, Steinberg realized he had to redefine his business almost overnight. He knew he needed to control those shopping centers and that control would require public financing and other major changes. So he reoriented his business. The ability to make that kind of switching in thinking is the essence of strategic management. And it has more to do with vision and involvement than it does with analytical techniques. Sam Steinberg was the epitome of the entrepreneur, a man intimately involved with all the details of his business, who spent Saturday mornings visiting his stores. As he told; Nobody knew the grocery business like we did. Everything has to do with your knowledge. I knew merchandise, I knew cost, I knew selling, I knew customers, I knew everything, and I passed on all my knowledge; I kept teaching my people. That is the advantage we had. Our competitors could not touch us. (Extracted from Mintzberg, 1987)

making. is

knowledge

remarkable to fill this gap. The tacit knowledge is

possessed

through

experience, intimacy and by understands and it is hidden and can not be easily

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accessed, therefore, can not be shared with others. As Mintzberg (1987) explains, the kind of knowledge involved in the case (Box 03) is not intellectual, not analytical reports or abstracted facts & figures, but personal knowledge, intimate and understanding. Facts are available to any one, this kind of knowledge are not. By the side of our topic, what is the importance of knowledge in the process of strategic thinking? As the example of Sam Steinberg, the both aspects of knowledge are applicable; i.e., tacit as well as explicit. Then only an organization can make a strategy which will more adoptable with the changing environment.

Is Organizational learning & knowledge management important?


Our craftsman tries to make a freestanding sculptural form. It doesnt work, so she rounds it a bit here, flattens it a bit there. The results look better, but still isnt quite right. She makes another and another. Eventually, after days or months or year, she finally has what she wants. She is off on a new strategy As Mintzberg (1987) visualized above in his article- Crafting Strategy, it is clear that any organization can develop and realize their strategies through past experiences. So how it relates with strategic thinking? If the organization has proper learning environment through its past strategies as well as activities, it will provide a sound base for a better strategy in next time. According to (Stacey, 1992), strategy making process is successful when they are based on designing actions on the based on new learning rather than following pre programmed rules. Strategic thinking is not an intellectual exercise in exploring what is like to happen- it is using analogies and qualitative similarities to develop creative new ideas.
BOX 04: Motorola Inc. Specific targets are indispensable if people are going to learn, change their behavior and improve their performance. Motorola Inc. of Schaumburg, Illinois, has a specific goal: to provide customers what they want, when they want it, with Six Sigma quality and best-in-class cycle time. (Extracted from Taylor, 1997)

As shown in the box 04, Six sigma means 3.4 defects per million. Learning and Kaizencontinuous improvement have been the foundation of Motorolas successful drive to

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improve quality, and the company won the first Malcolm Baldridge National Quality Award in 1998. So it is clear that successful strategies are made with proper organizational learning. Knowledge management, on the other hand, also goes with the organizational learning with respect to the strategic thinking process. According to Tavakoli & Lawton (2005), strategic thinking is the cognitive process that can and should precede strategic decisions and actions, whether arrived at through planning or emergent action. Here, knowledge management may be able to play a significant role in developing a core competency in strategic thinking in organizations by identifying, capturing, storing and transferring current and relevant experiences and insights throughout the organization. To Drew (1999), building knowledge dimensions in to the use of strategy tools is a first step towards developing and implementing knowledge- based strategy.

How competencies affect strategic thinking?


In the process of strategic management, it is necessary to identify and develop the competences our own. Then it should be leveraged with the strategies. The strategic thinking process goes with the competencies and leveraging it with the strategies. According to the Post (1997), competencies and capabilities are not given to firm but need to be built from within it.
BOX 05: Baan As early as 1981, Baan started to develop its industrial approach to software development. At a time when the market for customized software was very lucrative, the firm started to manufacture software as a product composed of generic components. The founder of the company, Jan Baan, believed that would disappear. Just as in other industries, customers would prefer standard products if available at the desired quality level. Software would become a commodity manufactured and distributed on the basis of industrial principles. The company incorporated acquired knowledge into its product during process of continuous innovation and improvement. The results of this effort were economies of scale, reduction of software delivery time and advanced reliable solutions. (Extracted from Post, 1997)

As studied by Post (box 05), Baan strove for competence building right from the start. Initially, competence building was technology oriented. Later on, it was also service

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oriented and distribution oriented. This case study shows a firm can leverage competences, thus going through the evolution from a domestic to a global player

The effect of emotional intelligence


Emotional intelligence (EI) is generally accepted to be combination of emotional and interpersonal competencies that influence our behavior, thinking, and interaction with others (Macaleer & Shannon, 2002). As described by Goleman (2002), emotional competencies such as self awareness, accurate self assessment, self confidence, self control, transparency, achievement, adaptability, initiative, organizational awareness, conflict management are essential to be a good leader. As far as we concern about a strategic management process, these qualities are essential to build up a quality strategist. In this context, it is not limit for the senior management but for rest of the employees of the organization, because strategies can be emerged any place or level in the organization. According to Graetz (2002), strategic thinking capabilities can be nurtured and diffused through an organization; it will need business leaders with a high degree of emotional intelligence to lead the way. So it is necessary to an organization develop such emotional competences too to be a successful strategy maker.

Scenario planning, culture, politics & strategic thinking


The case study, done by Graetz (2002), for the Communications Co. illustrates, scenario planning is one tool that many organizations, committed or redesigning the strategic planning process, are using with some access. It requires both left- and right-brain thinking styles. The elements of left brain thinking reflects the planning side of strategy making, while right-brain thinking mirrors the thinking components of strategy making. As Andersen (2000) found Autonomous actions, where managers are authorized to make decisions without top management approval; have positive performance effects in the dynamic and complex computer product industry. Therefore a decentralized organizational setup will more helpful to a strategic thinking climate.

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Strong cultures can either enhance or inhibit the ability of organization to develop and execute effective strategies, depending on the compatibility of the culture with the chosen strategic directions. Organization culture of shared attitudes, values and beliefs, the nature of this system will define appropriate behaviors and shape the decisionmaking process of its senior managers (Bonn & Christodoulou, 1996). There cannot be a transformational (as opposed to incremental) change without major cultural repercussions. Taking Hay (Major international human resource consulting firm) as an example, it has been determined that if the strategic change is to succeed, significant change should take place in the cultural beliefs and assumptions of the organizations (Heracleous & Langham, 1996). According to Peattie (1993), there are also political forces concerned with internal

rivalry and protecting parochial interests, personal power and prospects. These call for caution and retention and selective presentation of information. So the political power of the people, group, or senior management of the organization will effect for the strategic direction of its own. Recommendations Any business organization faces the challenge of achieving and sustaining the competitive advantage in the modern dynamic business environment. In this effort the strategic direction of the organization will be the key factor in facing such challenges. This article recommends the way of strategic direction that is suited for such organizations. Formal planning alone is not the best way for managers develop strategy. If it is so, the strategic direction will limit only a particular area and company will miss the possible opportunities as well as not be able to successfully face the future unexpected situations. Prepared information like facts, figures, forecasts are necessary for strategy formulation; but managers need intuitive understanding of the organization as well as its direction.

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Strategy is not merely a plan for the future activities, but it reflects the past learning and understandings too. Therefore organization should encourage learning within the organization and align and apply learned knowledge with its strategies rather preparing deliberate action plans for the future. And also strategies are not always deliberate and they can emerge over time when senior management as well as its employees innovate and respond to their markets. So it is recommended to develop a proper atmosphere for such innovations and emergent. Emergent things are viable, because they are made naturally rather by an order. The strategies should not anyway be rigid and inflexible. Because we cant predict or forecast future hundred percent

accurately and strategies should, therefore, take the nature of flexible, adoptable and applicable to any uncertain situation. Furthermore, strategists should understand the context within which the intended strategy will be implemented and controlled. A successful strategy is actually an art which had been crafted by, or emerged within the overall context of the organization. So, strategists should support to formulate these strategies by providing information and creating suitable background while in around the picture, not inside it. Finally, the strategy making process is not a stand-alone function which is purely done by senior management in a programmed manner but it should be an integrated one which touches almost all the key elements such as learning, experience, scenarios, knowledge (tacit/explicit), intimacy, culture, innovations, understanding,

participation, forecasting, political power etc. Conclusion The strategic direction of any organization should be able to face the challenges forced by modern complex business world. The output of this paper can answer this problem to most extent. A sound analysis on the overall context of strategic thinking has been drawn in this paper so as to exemplify an overall picture which should be synthesized in the process of strategy formulation. Dealing with hard & soft information,

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