Playing To Win
What is Strategic Thinking?
The Four Key Characteristics
A reader (Deependra) asked me an intriguing question this week. At first, I thought I had answered his question thoroughly enough in previous writings. But upon further reflection, I realized that his was a different angle on subjects I have discussed. So, I decided to write my 33rd Year III Playing to Win Practitioner Insights (PTW/PI) piece: What is Strategic Thinking: The Four Key Characteristics. You can find the previous 143 PTW/PI here.
A Bit of Context
I have delved into what makes for a great strategist before, describing the mindset do’s and don’ts and enumerating the requisite skills. I also discussed becoming a better strategist, which primarily involved gaining comfort in the adoption of the mindset do’s.
But they didn’t answer the core question: what is strategic thinking? If we are going to apply the modifier strategic to the activity thinking, what makes it different than just plain business thinking? Upon reflection, I think there are four characteristics that make strategic thinking sufficiently unique and distinctive that it is a question worth answering — hopefully for more than just strategy geeks like me!
The Four Key Characteristics of Strategic Thinking
1) Seeks to Influence What is not in Your Control
Strategic thinking recognizes that the fundamental task of strategy is to influence the variable that the strategist does not control, and in the direction that the strategist desires. As I have pointed out, the company controls lots of variables: how many employees to hire, how much office space to rent, how much advertising to run, how much to invest in R&D, and so on (scientists would call these the dependent variables). But it doesn’t control the customer (the independent variable). The customer does whatever it wants, whenever it wants, however it wants. Great strategic thinking produces choices that compel the customer to do what the strategist hopes and wishes.
2) Consumes Information Omnivorously
Strategic thinking requires facility with a different kind of information than is normally used in business decisions. The object is to influence behavior of customers in the future. That means that there is no data because all data comes from the past. There is no data about the future. Thus, a strategic thinker needs to be comfortable with something other than statistically significant quantitative data. Strategic thinkers know that if they can’t depend on statistically significant quantitative data, they have to make decisions based on something else. They become skilled at thinking and deciding based on a wide variety of information that is not statistically significant and often not quantifiable either.
One important form of qualitative information is analogy/metaphor, which Aristotle called the highest form of thinking: “The greatest thing by far is to have a command of metaphor…it is the mark of genius.” (Aristotle, Poetics) Steve Jobs used the calligraphy he learned at Reed College to inform his vision for the look and feel of Apple user interfaces. He had no quantitative data to inform his decisions, and certainly nothing statistically significant. But he had the power of metaphor.
Strategic thinking is omnivorous when it comes to information, whether qualitative, quantitative, metaphorical, or analogic. It assumes that non-statistically significant data of all sorts can and should be rigorously considered to come up with decisions about the future.
3) Leverages Abductive Reasoning
Strategic thinking must employ a form of logic that isn’t taught in the formal education system. Students are taught two forms of logic in the formal educational system — and not only are they taught these two, but they are also taught that these are the only forms of logic that are worthy of use. It is a lie, but it is widely taught.
Students are taught to use deductive logic — reasoning from general principles to a specific conclusion. All humans are mortal (general principle). Barack Obama is a human (specific information). Therefore, Obama is mortal (specific conclusion). And they are also taught to use inductive logic — reasoning from specific data to a general principle. We interviewed 1000 customers, and they preferred delivery certainty over food quality (specific data), so delivery certainty is the most important variable in customer decisions (general principle).
Students are not taught abductive logic, which is the inference to the best explanation — i.e., what is the most probable conclusion we can reach based on the data at hand. My date is checking his/her iPhone all dinner long (data on hand). This date isn’t going very well (best explanation).
As the great American pragmatist philosopher, Charles Sanders Peirce, pointed out, you can’t use inductive or deductive logic to come up with a new idea. But the world is full of new ideas, so there must be a third form of logic, which he termed abductive logic, the use of which is an essential characteristic of strategic thinking.
4) Considers Multiple Variables Simultaneously
Strategic thinking must consider many variables simultaneously, not sequentially. That includes variables concerning customers, competitors, various aspects of the company, and more. Thinking of them sequentially is not strategic. It will cause local optimization of narrow solutions — a marketing solution, a manufacturing solution, etc. As Peter Drucker said, “There are no marketing decisions, no finance decisions, no tax decisions. There are only business decisions.” Sequential thinking on narrow variables will not be able to compel customers to act in the desired way. Is it the power of an integrated set of choices across the various competitive variables that can compel customer action, not a sequence of independent choices.
In sum, strategic thinking entails comfort with using abductive reasoning and non-statistically significant data (qualitative, singular, analogous) on multiple variables to create a model about how you can influence, by actions on things you control, the future behavior of the key thing you don’t control — the customer.
The best friend of strategic thinking is the What Would Have to be True (WWHTBT) question. It enables strategic thinkers to lay out the logic of their strategic choices to assess their confidence that WWHTBT is sufficiently likely to be true to pursue the strategy choice.
That is important to strategic thinkers because they can’t prove in advance that their strategy choices will produce the success that they seek. But strategic thinkers do it regardless — and then stick with it for as long as necessary to enable the desired fruits to grow and ripen. And strategic thinkers recognize that there will always be a downside to their choices — a dark shadow. But that won’t deter them from making the choices that their thinking produces.
The Disqualifiers for Strategic Thinking
There are a parallel set of features that guarantee that you can’t be a useful strategic thinker. If you think you are in control of all the strategic variables, you can’t be a useful strategic thinker. If you limit yourself to statistically significant quantitative data to inform your decisions, you can’t be a useful strategic thinker. If you think that you can depend on the inductive and deductive logic that you were taught to make all decisions rationally and rigorously, you can’t be a useful strategic thinker. If you think you can work through your strategy decisions sequentially, one variable at a time, you can’t be a useful strategic thinker.
Sadly, most who want to be adept at strategic thinking are trained to revere and embrace these four disqualifiers when they should be rejecting them. That is one of the reasons that strategy is becoming the lost art.
Practitioner Insights
Any businessperson can become competent at strategic thinking. Strategic thinking isn’t a dark art, and shouldn’t be described as such, as is often the case. Strategic thinking is a practice. As I have written before: “I have never met a great unpracticed strategist. All the great strategists I know have practiced and practiced to get there.”
Sadly, strategic thinking is not a practice that is either taught or encouraged in the formal business education system. Even sadder, the disqualifiers for strategic thinking are consistently taught and strongly encouraged.
That means that you are going to have to design your own practice routine. Practice focusing on compelling the variable you don’t control rather than happily controlling the variables you do — as if the latter is automatically a productive thing. Collect all sorts of information. Don’t be too choosy. Rather than asking whether it is ‘good data,’ ask what inference you could tentatively draw from it. And then do the same with the next piece and the next one. Keep asking yourself what could best explain the existence of those pieces of information, not what they prove. Proof is not your goal. Practice with making an inference to the best explanation is. And it is practice with making an inference to the best explanation of the whole situation, not just one piece-part at a time. Strategic thinkers don’t have the luxury of working on one piece at a time of the problem of how to compel a customer to take the action you wish. Customers don’t think or act that way. They look holistically at what is being offered.
Conduct real practice on smaller problems where failure won’t be too painful — think strategically, make choices, and see how they work out. On bigger problems, just practice the thinking utilizing the four characteristics and then watch the world unfold and use that new information to judge how your answers would have worked if you would have put them into action. In due course, you will get better and more confident in your strategic thinking.
