Strategic thinking has been recognized as one of the important approaches to developing business strategy. The literature indicates an increasing number of scholars and strategists are acknowledging strategic thinking as a requisite for formulating strategy. The increased interest in this approach resulted from the growing evidence that indicates its ability to develop a more effective business strategy. This approach helps managers to make more effective decisions by keeping and making them more alert to threats and opportunities. By doing so, the strategic thinking approach helps them to formulate more effective strategies that can enhance their organizational performance.
According to Hashim, the strategic thinking approach proved to be useful when various issues concerning the other strategic approaches were raised by scholars and strategists. The issues include the following. First, the acceptance of strategic thinking resulted from the dissatisfaction with the traditional business strategy approach that overemphasized rationality and systematic analysis. Proponents of the strategic thinking approach disagreed with the strong emphasis on analysis and rationality used in the traditional approach.
Second, the promoters of the strategic thinking approach believed that creating an effective business strategy in an uncertain and dynamic business environment required less rationality and systematic analysis, and more critical, creative, and innovative emphasis that the previous approaches lacked. According to them, formulating business strategy in the real business world is about perceiving strengths and weaknesses, envisioning opportunities and threats, and creating the future, for which imagination, intuition and judgment are more important than analysis and logic as emphasized in the other approaches.
Third, when an organization adopts other strategic approaches, it generally follows what has already been tried and proven in the past. However, by adopting the strategic thinking approach, organizations can develop new and innovative business strategies.
Fourth, the strategic thinking approach’s main appeal is the expectation that it will enhance organizational performance through the adoption of new and more innovative strategies. By adopting this approach, managers and employees can achieve a better understanding of an organization’s business, problems, priorities, and operations. This is because the approach allows organizations to be not only efficient but also permits them to be more effective.
Fifth, although this approach may not guarantee organizational success, the process allows proactive rather than the reactive formulation of strategy. For some organizations, this may mean a radical change in their business philosophy. Managers need to be trained in the strategic thinking approach to respond to critical questions and key strategic issues that their organizations often face in an uncertain and dynamic environment before formulating their organizational strategy.
Since its introduction, strategic thinking has become an important approach to business strategy. Scholars, strategists, and researchers consider the approach important because it provides various benefits to organizations. According to Masifern et al., this approach offers the following benefits to organizations:
The organization's day-to-day activities become more aligned with strategy as managers shared a common framework developed from the strategic thinking process;
The common framework allows for better coordination among different departments and levels;
Decision-making takes place at a much faster rate as the strategic thinking process enhances speed, and flexibility, and facilitates decision-making;
The strategic thinking process allows employees at every level to engage in strategic conversation that helps to foster a ‘common language’ and align mental models within the organization.
Strategic thinking also facilitates delegation as expectations are more aligned between managers and subordinates.
Strategic thinking encourages the company to be more innovative through the development of ambitious objectives and innovative strategies.
The strategic thinking approach can best be learned and applied by using a model as presented in Figure 1. Although this model does not guarantee success, it does present a clear and more practical approach to strategy formulation. The following section explains briefly the six major related components of the strategic thinking approach.
Figure 1: The strategic thinking approach model.
Understanding the organization’s present situation and desired future: The starting point for strategic thinking involves understanding the firm’s present situation. This is important because thinking strategically involves not only making sense of the trends, events, and problems faced by the firm but also figuring out how to bring the conditions most advantageous to the firm most creatively and innovatively. In addition, as a long-term expedient thinking process, strategic thinking requires the firm to be future-oriented. Simply put, this approach emphasizes the need to understand the firm’s present situation and also its future direction.
Diagnosing the business domain: The second component of the approach involves diagnosing the business domain of the organization. The diagnosis helps the organization to focus on its internal components as well as the external environment. More specifically, diagnosing the business domain includes observing and understanding the firm’s business, its different internal components (such as its resources, skills, knowledge, technology, structure, operations, and culture), and its relationships with the stakeholders in the external environment.
The diagnosis provides the firm not only a better and clearer view of its business but also permits the firm to have a more comprehensive business outlook. For example, an organization that views itself as part of a larger business system and belonging to more than one value chain has a broader business outlook than a firm that sees itself as only a firm in an industry. Having a wider business perspective is essential to organizations competing in an uncertain and dynamic business environment.
Obtaining insight: Besides allowing a firm to better understand itself as well as providing it with a broader business outlook, the strategic thinking approach also emphasizes the need to obtain insight into the threats and opportunities hidden from the firm. Obtaining insight involves not only thinking critically about the threats and opportunities, but also creatively identifying the needs, wants and key success factors of existing and new customers, markets, products and services, technologies, skills, knowledge, capabilities, resources, business models, and other future requirements, and potential competitive advantage.
Developing foresight: The fourth important component involves developing foresight. Foresight permits the firm to anticipate not only the patterns and trends that are taking place in and around the organization but also to predict what the future of the firm and business would be like. Developing foresight is useful for the purpose of positioning the firm appropriately in the future. In the strategic thinking process, foresight is developed through the construction of scenarios. Scenarios represent written descriptions of some likely future postures, in terms of key variables and strategic issues. Flexibility and alternatives in scenario-building exercises can help an organization to develop more creative ideas and innovative solutions that go beyond what is obvious, as well as those that have already been tried and proven.
Mapping the future direction: Mapping the firm’s future direction is the fifth component of the strategic thinking approach. Organizations need to consider their present as well as future success. The future success of a firm, however, depends on whether it can survive and grow in the long run. Given this, the firm needs to map its future direction. Mapping the firm’s future direction involves applying critically and creatively the inputs obtained from the previous four components of strategic thinking components.
In addition, the future map will assist the organization to focus on important strategic issues such as the target market to be served, technological expertise required, type and level of resources, organizational skills and knowledge needed, and future competitive advantage. In this way, the future direction map not only helps to steer the organization in the right direction but also provides the firm with a more realistic framework for formulating and implementing an effective strategy.
Maintaining focus: The sixth component involves maintaining focus on the organization’s chosen direction. Maintaining focus on the chosen direction requires that the firm monitors its previous assumptions for selecting the specific direction and critically observes whether the strategy being pursued is based on the same assumptions. Meanwhile, the firm is also required to be cautious of the validity of the assumptions as they may change and no longer be relevant and applicable. If the assumptions are no longer applicable and relevant, the firm should be prepared to accept the facts, take corrective measures, and make the necessary changes based on the new assumptions.
As stated earlier, the strategic thinking approach does not guarantee success. However, it does present a more realistic approach to crafting strategy in organizations. By adopting the approach, organizations can better understand themselves, their businesses, and their roles as well as relationships with the stakeholders in the external environment. Importantly, this approach can assist firms to break out of the traditional mindsets and seize opportunities and allows them to utilize a more creative approach to test ideas that can result in various advantages to the organizations.
Comments