How to Think Strategically. Greg Githens
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of the organization.
• The third main idea is that managers must confront issues in order to advance the organization’s interests. The concept of an issue can include exploiting opportunities as well as mitigating threats. An essential task is to scan for weak signals and determine the need for further action. The issues may be present-moment battles, or things that loom with future significance. After the issue is identified, it’s characterized, prioritized, and resolved by making decisions and applying resources.
This focus on confronting issues and advancing interests is usefully reinforced by this simple, powerful concept of strategy taught in the U.S. Army War College:
Conceptually, we define strategy as the relationship among ends, ways, and means. Ends are the objectives or goals sought. Means are the resources available to pursue the objectives. And ways or methods are how one organizes and applies the resources. Each of these components suggests a related question. What do we want to pursue (ends)? With what (means)? How (ways)?
Strategy is a relationship among ends, ways, and means.
In the next chapter, I apply these concepts of issues and interests and their relationships with ends, ways, and means and show how to write strategy.
• The fourth main idea characterizing strategy is that some organizational issues have broad and long-term impacts and other issues don’t. This fourth main idea reinforces the first, that strategy is a specialized tool. The issues that are narrower in scope and more day-to-day are usually better handled through operations management, as discussed in the next paragraphs.
Run the business or change the business? I earlier wrote that strategy was a specialized tool for appropriate situations. The inappropriate situations for using strategy are ongoing operations.
A person working in operations is operating a system to deliver results to its customers. A person with an operational focus typically attends to short-term, narrow issues and relies on the managerial tools of goal setting, budgeting, delegation, prioritization, benchmarking, and continuous incremental improvement. Productivity, optimization, and stability are salient values.
In contrast to operations and its emphasis on “running the business,” strategy focuses on “changing the business.” Stated differently, operations involves working “in” the organization whereas strategy involves working “on” the organization’s fit with the external environment.
Balancing action and conceptualization. You can easily find, especially in entrenched operations, people who are openly dismissive of abstract concepts such as the future, competitive fit, or insight. Jerry Rhodes observes, “There is a die-hard attitude that still survives in many managers that thinking smells of the abstract and must be the enemy of action.” They are the people who buy and gift things such as the coffee mug in Figure 1-3 that boldly pronounces, “We have a strategic plan. It’s called doing things.” They are the same people who will say, as an excuse for narrow framing and a short-term orientation, “I’m too busy to think about anything other than what’s right in front of me.”
Figure 1-3. An example of celebrating action over thoughtfulness.
There are undoubtedly good reasons for valuing action, practicality, and simplicity. However, some managers are impulsive, dogmatic, stubborn, and lazy. There must be a role for thoughtfulness and nuance, and elevating these values enhances the cultural embrace of strategic thinking.
Setting the agenda. Numerous broad and long-term strategic issues originate externally to the organization. There are also issues related to the internal capabilities, resources, and aspirations of the organization. Which issues are worthy of being placed on the organization’s agenda for action?
Top management has essential responsibilities for shaping the strategic agenda. One responsibility is to participate in, champion, and sponsor the search for weak signals. Ideally, all members of the organization are encouraged to be curious. With more eyes engaged in scanning the internal and external environment, the organization has available more potentially useful information for its strategy. Ideally, each person also understands the issues and how her contributions align with strategy and with operations. When it’s time to launch a new strategy, people are better able to understand the rationale for the strategy.
A second responsibility is to determine the organization’s core challenge and help stakeholders understand that core challenge.
Third, top management must make the essential decisions about where to focus scarce resources. With this responsibility, top management also has a critical governance function to help guide the decentralized execution of its policy decisions.
While strategy requires a certain amount of centralization in decision making, strategic thinking is not the exclusive responsibility of a “strategic level.” Anyone can think strategically, and if empowered, anyone can act strategically, too. And, as part of a virtuous loop, strategic thinking increases individual empowerment, and empowered individuals are more apt to want to think strategically.
Strategy and Strategic Thinking in Action
Good examples of strategic thinking are easy to find in popular media, history, sports, political campaigns, and elsewhere. The movie and book Moneyball is a story about a brilliant strategy developed by an unorthodox leader willing to challenge conventional beliefs. The movie opens with a challenge to Billy Beane, the general manager of the Oakland A’s professional baseball team. The team is under new ownership, and the new owners are unwilling to continue absorbing financial losses. The owners tell Beane to reduce his payroll.† But he must also find a way to field a winning team.
Since some readers may not know (or care) much about the business model of American professional baseball, a little background will help to explain why Beane innovated the Moneyball strategy. The essence of the game is a contest between the pitcher and the batter. The pitcher throws a ball to a target with velocity and curving movement and the batter swings to hit the pitched ball. If the batter successfully makes contact and places the ball into the field of play, the defensive players attempt to execute a play to keep the batter from taking a position on the base. Each pitch, each swing of the bat, and each struck ball influence the outcome of the game.
The game has many traditions. Since the game’s origination in the 19th century, scorers have constructed a set of metrics, such as runs batted in (RBI). Those indicators became part of the lore of the game and a basis for making business decisions in negotiating contracts. Management pays high salaries to players with high RBIs.
There is a significant disparity between the financial resources of each professional team. This is because some owners have more financial wealth than others, some local markets are more loyal than others, and some teams have a national following as well as a local market. A few so-called superstar players can negotiate and receive extraordinarily high salaries, many multiples better than average players. If the rich teams overpay, they seem not to care; they’re rich.
Given the new owners’ budget restrictions, the Oakland A’s were unable to compete in the marketplace for superstar talent. Their best players obtained lucrative contracts with richer teams such as the New York Yankees or the Boston Red Sox.
Billy Beane believed that his rivals were not valuing talent correctly, and that he could exploit his better knowledge. A growing body of evidence showed that traditional indicators, such as RBI, overvalued the contribution of the hitter and undervalued luck and other factors beyond the hitter’s control. His insight was that conventional indicators influenced teams to overpay their talent. In other words, the marketplace for baseball talent was inefficient. Beane wanted to exploit his rivals’ ignorance (or their complacency; it’s hard to tell the difference). His policy was to secure the contracts of undervalued players and deal away overvalued players.
Oakland’s Moneyball strategy was effective