Strategic Thinking at the Top

Strategic thinking is generally considered important to a company’s performance.1 Indeed, some have advocated for companies to develop the strategic thinking of their executives as a core competency. But how exactly should organizations accomplish this? Past studies on the subject have been limited, typically focusing on singular teaching methods, experiences or planning processes.2 As such, the research has yielded little insight into the broader picture of how individuals tend to acquire expertise in strategic thinking. What types of work experiences, for example, are more important than others, and do they need to follow any specific chronology?

To answer these and other questions, I conducted a study that identified executives who were considered the top strategic thinkers in their industry.3 (See “About the Research.”) The study then investigated the totality of experiences (educational, job related or other) that contributed to the high ability of those individuals. In addition, the research investigated the different ways in which the executives acquired their expertise in strategic thinking — a process that typically took more than a decade.

The data showed that strategic thinking arises from 10 specific types of experiences — for instance, spearheading a major growth initiative or dealing with a threat to organizational survival. Moreover, executives appear to gain their expertise in strategic thinking through one of three developmental patterns. These findings help demystify the process by which strategic thinking is learned, offering important implications for management development and the practice of strategy.

Defining Strategic Thinking

First, though, what exactly is “strategic thinking”? Although numerous books and articles purport to cover the subject, they typically deal more with strategic planning and strategic management. According to Henry Mintzberg, the management guru, “Many practitioners and theorists have wrongly assumed that strategic planning, strategic thinking and strategy making are all synonymous, at least in best practice.”4 To avoid any confusion, my study used the following definition: Strategic thinking is a distinctive management activity whose purpose is “to discover novel, imaginative strategies which can rewrite the rules of the competitive game; and to envision potential futures significantly different from the present.”5 Furthermore, strategic thinking was specified as being conceptual, systems-oriented, directional (linking the future with the past) and opportunistic.6

A related question is whether strategic thinking is an innate skill or one that can be acquired. This question is at the heart of every discussion of individual abilities. But even those leadership theorists who believe in inherent mental processing capabilities7 note that such abilities must be enhanced as part of management development. My study was concerned with identifying the experiences that contributed to the development of expertise in strategic thinking, not with measuring any levels of cognitive functioning. As such, the nature-versus-nurture argument was moot to this research. Interestingly, the study participants volunteered views that spanned the nature/nurture spectrum, with most falling somewhere in the middle. It should be noted, however, that even the individual with the strongest pronature view felt that experiences were still necessary to develop a person’s strategic thinking ability. And most participants felt that without some “hard-wiring,” learning to think strategically would be more difficult but not impossible.

Ten Contributing Experiences

The study identified 10 experiences that contributed to the development of a person’s ability to think strategically, and those experiences represented four levels of interaction: personal, interpersonal, organizational and external. (See “Ten Experiences That Contribute to the Ability to Think Strategically.”) Every executive did not benefit from all 10 experiences, and no two executives had the same set of experiences. But each individual described at least one experience at each of the four levels of interaction.

Family Upbringing/Education

“Family upbringing” and “education” are grouped together because the study participants discussed them interchangeably; the two types of experiences typically occurred simultaneously, reinforcing one another. One aspect noted was the value of exploring different perspectives, for example, through travel and exposure to different cultures as well as through debate training and practice of the Socratic method.

General Work Experiences

The participants cited experience in a variety of organizational types and locations, which provided exposure to numerous strategic issues and familiarity with a breadth of strategies. The most important factor here was the responsibility for significant projects (for example, implementing the merger of two organizations, evaluating a business for sale or turning around an organization that was facing bankruptcy) and the freedom to make most, if not all, of the decisions related to those initiatives.

Becoming a CEO

This experience is somewhat paradoxical. Many boards want individuals who already have expertise in strategic thinking as their CEOs. But many of the study participants cited becoming a CEO as important to the development of their strategic thinking because, with that promotion, they gained access to important information (for instance, the views of important external parties) which enabled a “big picture” view of their business. [Note: All the individuals that the study identified as experts in strategic thinking were CEOs, even though this attribute was not a criterion in the selection process.]

Being Mentored

Many executives have mentors, but not all mentors help others to develop their strategic thinking. Those who do are individuals who are in frequent contact with the executive (at least once daily), providing immediate feedback. Moreover, their influence starts early in an executive’s career, within a few years of that individual’s first job, perhaps as a first boss.

Being Challenged By a Key Colleague

Colleagues played an important role by challenging the thinking of the executives. Individuals performing this role worked very closely with the executive, for example, as his boss, board chairman or organization’s vice president of planning. In general, the interactions were private and spontaneous, with a wide range in tone from relaxed, informal conversations to highly aggressive, confrontational exchanges.

Monitoring Results/Benchmarking

The participants cited the importance of their involvement in monitoring the operational and market performance of their organizations. Such efforts were usually extensive and fairly sophisticated. Market data, for example, were often segmented by geography and demographics, with information on purchaser preferences and use, and views of competitors detailed by the various market segments. Other key data tracked each market segment’s stated preferences in relation to the actual behavior of those customers.

Doing Strategic Planning

The development of strategic thinking ability is enhanced by participation in strategic planning processes with three characteristics. The first is having planning sessions with management teams on a regular basis, often monthly or quarterly. The second is preparation for these sessions, such as the required reading of materials that help focus people’s thinking and provide a sense of the meeting’s purpose. The third is the formal output of the planning process: often an overall plan followed by business-unit goals and tactical plans. But even less structured output — establishing a general direction and immediate next steps, for example — can help develop an executive’s strategic thinking.

Spearheading a Major Growth Initiative

These projects must involve significant complexity, be both capital and labor intensive and require at least a year to complete. Examples include establishing a new program (developing the business case, obtaining regulatory approval, overseeing facility construction and recruiting staff), acquiring an organization (identifying, negotiating with and acclimating the new group) and building a new facility (that is, overseeing its construction). As with the category of general work experiences, the freedom to make important decisions makes these projects valuable to the development of strategic thinking ability.

Dealing With a Threat to Organizational Survival

The types of threats that most contribute to the development of strategic thinking are those that involve attempts at control by another entity, which occur repeatedly and that could have a severe impact on the executive’s organization. Such experiences typically force a major rethinking of issues that strike at the core of the individuals involved, substantially sharpening their focus.

Vicarious Experiences

This category includes interactions with others in similar roles, with the frequency of contact being an important factor. Usually, the contact is maintained for several years with a wide range of frequency: The interaction could occur monthly for a few hours, quarterly for one day or three days twice annually. In many cases, the regular contact is enhanced by small group interactions and social time, for example, a monthly professional meeting of CEOs that includes sessions in which people break into smaller groups (perhaps geared toward specific topics) followed by dinner with ample time for networking opportunities. The study participants also noted the benefit of vicarious experiences gained through indirect means, such as by reading business publications.

Generally speaking, each of the 10 experiences took place over a significant period of time, often in excess of one year, and required considerable responsibility on the part of the executive — usually the individual had to perform tasks that were materially new to him. Some of the experiences catalyzed others, but they did not occur in any specific order (except for the obvious categories of “family upbringing/education,” “being mentored,” and “becoming a CEO”).

In addition to the 10 experiences, the study identified two other important factors. The first was personal characteristics, specifically, being methodical, balanced, goal-oriented, curious, receptive to criticism, detail-oriented, a perfectionist and a maverick. The second was a supportive work environment, including the presence of a strong management team that frees up the CEO’s time to focus on strategic issues and contributes to his thinking. Also of importance was the attitude of the board, particularly regarding failure. As one executive explained, “When you do … make a mistake, they’re worried about fixing the problem, not fixing the blame.” Neither of these factors is sufficient to develop strategic thinking ability without the requisite experiences described earlier, but they may amplify the value of those experiences.

The Overall Developmental Process

The development of an executive’s ability to think strategically develops gradually over a considerable amount of time. Most participants in the study said they took more than 10 years to acquire their expertise, and during that time their confidence grew as they became more comfortable dealing with increasing levels of business complexity and ambiguity. Interestingly, the executives described their development in a manner consistent with one of three distinct patterns. The patterns, which can best be understood through graphic maps that were created with the participants, provide valuable insights into how expertise in strategic thinking is acquired.

Pattern 1

The first pattern reflects a repetitive process of using past experiences to consider alternative perspectives. (See “Pattern 1: The Development of Understanding.”) One executive described the process this way: There’s a solution to every problem, and if you can’t come up with it, you need to look at the problem from a different angle. The key ingredient here is a natural curiosity that fuels the executive’s search for greater understanding, thus expanding his ability to think strategically. The result: The executive learns to see all sides of an issue and is able to alter the angle from which he views a problem to search for a better solution. In this manner — through the exploration of different perspectives repeatedly over time — the executive develops expertise in strategic thinking.

Pattern 2

This pattern includes the three major steps of a logical planning process — understanding where you are, determining where you want to be and detailing how to get there — with each step informed by information, experience (both actual and vicarious) and discussion. (See “Pattern 2: The Practice of Rational Planning.”) Key features include the use of data to fuel thinking and the repeated application of the three steps, no matter how big or small the issue, with expertise in strategic thinking acquired after years of honing the practice.

Pattern 3

The final developmental pattern is portrayed as the tackling of bigger and bigger business challenges, with the executive’s ability to think strategically growing continuously over time. (See “Pattern 3: The Completion of a Hierarchy of Challenges.”) Key features include modest initial activity followed by a step-like progression. The catalysts to movement can be either positive or negative: opportunities to build new services as well as pressures from financial losses, takeover attempts and other challenges to survival. Expertise in thinking strategically is acquired by meeting and effectively dealing with the challenges, with each experience improving the executive’s ability.

The three patterns reflect how executives described the ways in which they learned to think strategically. They illustrate both what occurred (specifically, the 10 experiences) and how the executives approached those experiences (namely, by considering different perspectives, by using a planning model or by just diving in and doing what was needed). The salient point here is thatall the executives in the study described their development in a manner that was consistent with one of the three patterns.

Improving Strategic Thinking

The study results have a number of implications for companies in their efforts to improve the strategic thinking of their executives. The important thing to remember, though, is that any development program must be highly individual because no two people will absorb the same experience in exactly the same way. Nevertheless, some general guidelines do apply. Experiences that contribute most to the development of strategic thinking tend to take place over a year or more and require significant responsibility on the part of the individual — usually the performance of a task that is materially new to that person. Moreover, it’s crucial to remember that the development of expertise in strategic thinking takes at least a decade, during which time many of those experiences must be continually repeated. With all this in mind, the following approaches should benefit companies in their efforts to develop the strategic thinking of their managers.

Include Strategic Thinking As a Formal Component of Management Development Programs

One of the most remarkable findings of the study was the tacit expectation that an executive would, all of a sudden, think strategically upon becoming a CEO. But, clearly, if companies want expertise in strategic thinking they must take the necessary steps to nurture this ability. Management development programs should identify specific experiences (spearheading a growth initiative, for instance) and target their inclusion in the careers of high-potential executives. Although individual in nature, such experiences should, taken together, cross all four levels of interaction: personal, interpersonal, organizational and environmental. Moreover, each experience should contain the necessary attributes (being mentored, for example, must include frequent contact and immediate feedback). Finally, the experiences should be preceded by a briefing on strategy theory and vocabulary (if needed) to ensure that the executive understands key concepts that will help him obtain the maximum benefits from those experiences.

Require Executives to Develop the Strategic Thinking of Their Subordinates

Because strategic thinking develops gradually over a long period of time, and because general work experiences and being mentored are two important experiences during this growth, superiors are in a key position to influence their subordinates’ development. As such, companies should include this responsibility as a part of an executive’s performance review: What projects and roles have you given your subordinates to develop their strategic thinking? Are these assignments of sufficient size, and have your subordinates been given the requisite freedom to act? And have your efforts resulted in noticeable improvements in their strategic thinking, however subjectively determined?

Encourage Early Participation in Strategic Planning and Benchmarking Activities

These two experiences contribute significantly to important procedural knowledge related to strategic thinking. Without this knowledge, executives can waste considerable time by attempting strategy development or implementation in inefficient or inappropriate ways. Of course, companies will find it impractical for all their managers to be involved in every strategic planning activity. Nevertheless, executives can also be encouraged to participate in strategic planning with other organizations, for example, with subsidiaries, professional associations, community groups or small, local businesses.

Support Activities That Incorporate Experiential Learning

Interestingly, with respect to the development of strategic thinking, the study participants attributed little value to graduate professional programs. Thus, when managers do undertake such programs, the curriculum should incorporate experience in addition to the teaching of theory, for example, through the inclusion of opportunities to do strategic planning and benchmarking, discussion of vicarious experiences (perhaps by having experts mentor novices) and assignments that broaden an individual’s perspective through observation, dialogue and debate.

Maximize the Benefits of Strategic Planning Sessions

Companies should hold strategic planning sessions on a regular basis (monthly or quarterly, for example), and those meetings should have a high degree of process regularity, with an emphasis on preparation: reviewing materials and thinking about specific questions that are provided in advance. In addition, the meetings should include content that expands people’s perspectives (for example, comparative market information from another industry or the viewpoint of a constituency that is seldom heard). During these sessions, the company should ensure that the participants (not the planning staff or outside consultants) perform the information synthesis and interpretation. After all, the firm wants to develop the strategic thinking of the participants and not necessarily that of the staff or consultants. Staff members could, however, provide valuable input into management development plans, because they might be able to identify specific aspects of strategic thinking that are lacking in individual executives.

BUSINESS SCHOOLS AND OTHERS INTERESTED in management education and development have vigorously debated how best to teach strategy to future leaders. Some experts have questioned whether the topic should be taught at all — or at least whether it should be taught to managers. Often missing from the debate, however, has been any in-depth discussion of how individuals learn to think strategically in the first place. What specific experiences are important and how do they contribute? Moreover, what are the different ways in which people absorb those experiences to develop the ability to think strategically? Without adequate answers to these questions, it’s no wonder that schools have had trouble teaching strategy to students — and that many companies have difficulty developing the strategic thinking of their executives.