strategic thinking

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Strategic Thinking

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Shahnawaz AdilAssistant Professor, Department of Business Administration

Course Advisor: ManagementIn-charge: Library AffairsModerator: http://groups.yahoo.com/group/IUGC_LRC_A

(IUGC official resource centre)

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The paradox of Logic and Creativity The Rational Thinking perspective – logic The Generative Thinking perspective –

Creativity Defining the issues: Cognition and Reasoning

The nature of Cognition The nature of Reasoning

Important keywords used… References

Learning Outcomes

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Quotes When you have eliminated the impossible,

whatever remains, however importable, must be the truth. (Sherlock Holmes, Arthur Conan Doyle 1859-

1930; English novelist)

Imagination is more important than knowledge. (Albert Einstein 1879-1955; German-American

physicist)

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The paradox of Logic and Creativity

The Rational Thinking perspective – logic The Generative Thinking perspective –

Creativity

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Strategy can be broadly conceived as a course of action for achieving an organization’s purpose.

It is therefore, usually argued that managers need strategies to solve the complicated, often wicked, problems with which they are confronted.

Strategic Problem usually have a negative connotation to some, it is not intended to denote only troublesome situations. It is a more general term, that refers to any challenging

situation encountered by an organization that demands a re-consideration of the current course of action, either to profit from observed opportunities or to respond to perceived threats.

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Problem-Solving The term problem-solving also has a connotation

to many, namely, finding the optimal (mean: best/finest) answer to a puzzle.

However, there might not be one best solution. Therefore, problem-solving should not be interpreted as the activity of finding the solution to a problem, but as the activity of finding a solution.

The following topics deal with the mode of thinking employed by people when confronted with strategic problems.

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Strategic Problems / Thinking:

Two central issues Two issues will be central to the

discussion on strategic thinking: First, how do people define strategic

problems – how are problems identified and conceptualized?

Second, how do people actually solve strategic problems – how are potential solutions generated, evaluated and decided on?

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Strategic Problems / Thinking:

Two central issues (cont’d…) On both issues it is of interest to know

what people really do (descriptive) and to know what people should do to be successful (prescriptive).

Both an understanding of what is commonly done, and what leads to the best results, is of importance.

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Strategic Thought Process Question: What is the fundamental

nature of strategic thought processes? Question: How does the mind of

strategist work and how should readers themselves think strategically?

Opinions on this matter differ considerably, both among practitioners and theorists (who will jointly be referred to as strategists throughout this session).

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Strategic Thinking:Two opposed positions…

On the one hand, there are strategists who argue that strategic thinking is one of the most advanced forms of analytical reasoning, requiring the consistent (mean: reliable and steady) and rigorous (mean: exact/thorough/precise) use of logic – i.e. rational thinking perspective.

On the other hand, there are strategists who argue that the essence of strategic thinking is the ability of break through orthodox (mean: traditional) beliefs, requiring the use of creativity – i.e. generative thinking perspective.

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Strategic Thinking:Two opposed positions… (cont’d…)

Based on these two extremes, it seems that disagreements between strategists revolves around the question whether strategic thinking is primarily logical or creative.

These two factors are opposite and might be (partially) contradictory.

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Rational thinking versus generative thinking

perspective

Emphasis on Logic over creativity

Creativity over logic

Cognitive style Analytical IntuitiveReasoning follows

Formal, fixed rules

Informal, variable rules

Nature of reasoning

Computational Imaginative

Direction of reasoning

Vertical Lateral

Rational Thinkingperspective

Generative Thinking Perspective

To be continued…

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Rational thinking versus generative thinking

perspective

Value placed on Consistency and rigor

Unorthodoxy and vision

Reasoning hindered by

Incomplete information

Adherence to current ideas

Assumption about reality

Objective, (partially) knowable

Subjective, (partially) creatable

Decisions based on

Calculation Judgement

Metaphor Strategy as science

Strategy as art

Rational Thinkingperspective

Generative Thinking Perspective

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Rational Thinking perspective explained…

Logic

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Rational Thinking perspective

Strategists employing rational thinking perspective argue that strategic thinking is predominantly a ‘logical activity’.

To deal with strategic problems the strategist must first consciously and thoroughly analyze the problem situation.

Data must be gathered on all developments external to the organization, and this data must be processed to pinpoint the opportunities and threats in the organization’s environment.

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Rational Thinking perspective (cont’d…)

Furthermore, the organization itself must be appraised, to uncover its strengths and weaknesses and to establish which resources are available.

“A problem well stated, is the problem half solved”

Charles Kettering 1876-1958; US electrical engineer and inventor Once the problem has been defined, a number of

alternative strategies can be identified by matching external opportunities to internal strengths.

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Rational Thinking perspective (cont’d…)

Then, the strategic options must be extensively screened, by evaluating them on a number of criteria, such as consistency, consonance, advantage, feasibility, potential return and risks.

The best strategy can be selected by comparing the scores of all options and determining the level of risk the strategist is willing to take.

The chosen strategy can subsequently be implemented.

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Rational Thinking Perspective Prerequisites…

The type of intellectual effort requires well-developed analytical skills.

Strategists must be able to rigorously, consistently and objectively comb through huge amount of data, interpreting and combining findings at arrive at a complete picture of the current problem situation.

Possible solutions requires critical appraisal and all possible contingencies must be logically thought through.

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Rational Thinking Perspective Prerequisites…

Advocates of the rational perspective argue that such thinking strongly resembles the problem-solving approach of chess grand masters. They also thoroughly assess their

competitive position, shift through a variety of options and calculate which course of action brings the best chances of success.

Therefore, the thought process of chess grand masters can be used as an analogy for what goes on in the mind of the strategist.

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Rational Thinking Perspective: Bounded Rationality

In reality strategists often have to backtrack and redo some of these steps, as new information becomes available; or chosen strategies do not work out.

Strategists attempt to be as comprehensive, consistent and rigorous as possible in their analyses and calculations, but of course they cannot know everything and their conclusions are not always perfect.

Even with the most advanced forecasting techniques, not all developments can be foreseen.

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Rational Thinking Perspective: Bounded Rationality (cont’d…)

Even with state-of-the-art market research, some trends can be missed.

Even with cutting-edge test marketing, scenario analyses, competitive simulations and NPV calculations, some selected strategies can turn out to be failures.

Strategists are not all-knowing, and do make mistakes – their rationality is limited by incomplete information and imperfect cognitive facilities.

Yet, strategists try to be as rational as possible.

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Simon (1957) refers to this as bounded rationality – ’people’ act intentionally rational, but only limitedly so’.

This coincides with Ambrose Bierce’s famous sarcastic (mean: ironic) definition of logic as ‘the art of thinking and reasoning in strict accordance with the limitations and incapacities of human misunderstanding.’

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The (boundedly) rational strategist must sometimes improvise (mean: manage) to make up for a lack of information, but will try to do this as logically as possible.

Inferences (mean: conclusion as a result of a thought process) and speculation (mean: free thinking without limitations) will always be based on the facts as known.

By articulating assumptions and explicitly stating the facts and arguments on which conclusions have been based, problem definition and solutions can be debated within the firm, to confirm that they have been arrived at using sound reasoning.

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The alternative to a rational approach

It is often pointed out i.e. to be irrational and illogical, which surely cannot be a desirable alternative for the strategist.

Non-rational thinking comes in a variety of forms: Emotions Routines & habits Intuitions

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The alternative to a rational approachEmotions…

Feelings such as love, hate, guilt, regret, pride, anxiety, frustration, and embarrassment, can all cloud the strategist’s understanding of a problem situation and the possible solutions.

Adherents (mean: supporters/believers/proponents) of the rational thinking don not dispute the importance of emotions –the purpose of an organization is often based on ‘personal values, aspirations and ideals’, while the motivation to implement strategies is also rooted in human emotions.

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The alternative to a rational approach Routines & habits…

Routines are programmed courses of actions that originally were deliberately conceived, but are subsequently internalized and used automatically (March and Simon, 1993).

Habits are programmed courses of actions that have developed unconsciously.

Humans approach many everyday problems by reverting to routine and habit, which is a good thing, because conscious deliberation would cost too much time and effort.

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The alternative to a rational approach Intuitions…

In a general term, intuition is the opposite of formal analysis (Von Winterfeldt and Edwards, 1986).

Intuition is informal and synthetic. Informal means that the reasoning is largely

unconscious and based on assumptions, variables, casual relationships not explicitly identifiable by those doing the thinking.

Synthetic means that the thinker does not aim at unraveling (mean: untie/unknot/loosen) phenomena into their constituents parts, but rather maintains a holistic view of reality.

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The alternative to a rational approach Intuitions… (cont’d…)

Intuition is not necessarily irrational. If intuition is viewed as a set of unconscious

and uncodified decision rules largely derived from experience (Simon, 1987), intuitive judgments can be quite logical.

Decision rules based on extensive experience are often correct, even if they have been arrived at unconsciously. For example, Simon argues that even chess grand

masters make many decisions intuitively, based on tacit (that is unarticulated) rules of thumb, formulated through years of experience.

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The alternative to a rational approach Intuitions… (cont’d…)

Unconscious does not mean illogical and therefore most proponents of the rational perspective do not dismiss intuition out of hand.

However, intuitive judgments are viewed with great suspicion, as they are difficult to verify and infamously unreliable (Hogarth, 1980; Schwenk, 1984).

Where possible, intuitive reasoning should be made explicit – the cognitive map in the strategist’s head should be captured on paper (Eden, 1989), so that the reasoning of the strategist can be checked for logical inconsistencies.

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Rational Thinking Perspective:Conclusion…

In short, advocates of the rational thinking perspective argue that strategic thinking should not be based on emotions, routines, habit or pure intuition, but on explicit logical reasoning, just like a science.

Scientific methods of research, analysis, theorizing, and falsification are all directly applicable to developing strategy.

Consequently, the best preparation for strategic thinking is to be trained in the scientific tradition.

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The Generative Thinking

perspective explained…

Creativity

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The Generative Thinking perspective

Strategists taking a generative thinking perspective agree that logic is important, but stress that logical reasoning is often more a hindrance than a help.

The heavy emphasis placed on rationality can actually stifle (mean: suffocate/choke) creativity.

While creativity is essential for generating novel (mean: new/fresh) insights, new ways of defining problems and innovative solutions (Baden-Fuller and Stopford, 1992)

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Therefore, proponents of the generative perspective argue that strategists should not get too caught up in rational approaches to strategic thinking, but should nurture creativity as their primary cognitive asset.

The generative thinking perspective is based on the assumption that strategic problems are wicked (Rittel, 1972).

It is believed that strategic problems cannot be easily and objectively defined, but that they are open to interpretation from a limitless variety of angles.

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The same is true for the possible solutions –there is no fixed set of problem solutions from which the strategists must select the best one.

Defining and solving strategic problems, it is believed, is fundamentally a creative activity.

As such, strategic thinking has very little in common with the thought processes of the aforementioned chess grand master, as was presumed by the rationalists.

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Playing chess is a tame (mean: disciplined/cultivated) problem.

The problem definition is clear and all options are known.

In the average game of chess, consisting of 40 moves, 10¹²º possibilities have to be considered (Simon, 1972).

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This makes it a difficult game for humans to play, because of their limited computational capacities.

Chess grand masters are better at making these calculations than other people and are particularly good at computational short-cuts – recognizing which things to figure out and which not.

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However, even the best chess grand masters have been beaten at the game by highly logical computers with a superior number crunching capability.

Garry Kimovich KasparovWorld Chess Champion1985–1993 (undisputed)1993–2000 (Classical)

e.g. Garry Kasparov is widely known for being the first world chess champion to lose a match to a computer, when he lost to Deep Blue (chess-playing computer developed by IBM) on 11 May 1997.

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For the poor chess grand master, the rules of the game are fixed and there is little room for redefining the problem or introducing innovative approaches.

Engaging in business strategy is an entirely different matter.

Strategic problems are wicked. Problem definitions are highly subjective

and there are no fixed solution sets.

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It is, therefore, impossible to ‘identify’ the problem and calculate an ‘optimal’ solution.

Opportunities and threats do not exist, waiting for the analyst to discover them.

A strategist believes that a solution can be viewed as an opportunity and sees that certain factors can be threatening if not approached properly.

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Neither strengths and weaknesses be objectively determined – a strategist can employ a company characteristic as a strength, but can also turn a unique company quality into a weakness by a lack of vision.

Hence, SWOT analysis actually has little to do with logical analysis, but in reality is nothing less than a creative interpretation of a problem situation.

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The Generative Thinking perspectiveLimitations of Logic…

The major limitations, according to the proponents of generative thinking perspective, is that it entraps strategists in the current orthodoxy (mean: accepted belief (view)/prevailing attitude/convention).

Logical reasoning can be an intellectual straight-jacket.

Being logical means engaging in consistent reasoning based on a number of accepted theories, ideas and assumptions about reality.

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The Generative Thinking perspectiveLimitations of Logic… (cont’d…)

When a group of people share such premises that shape how they view specific situations or problems, it is said that they have a common paradigm (e.g. Kuhn, 1970).

Prahalad and Bettis (1986) speak of the dominant logic within a group, while others speak of a shared cognitive map (e.g. Weick and Bougnon, 1986) or belief system (e.g. Noorderhaven, 1995)

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The Generative Thinking perspectiveLimitations of Logic… (cont’d…)

Rational thinking then, is nothing other than interpreting problems and selecting solutions in accordance with the prevailing paradigm.

Breaking out the status quo (mean: the existing state of affairs) requires that strategists question and contradict established wisdom.

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To find innovative ways of defining and solving problems, it is imperative that strategists think creatively – they must make leaps of imagination, that are not logical from the perspective of the current paradigm.

Strategists must be willing to leave the intellectual safety of generally-accepted concepts to explore new ideas, guided by little else than their intuition.

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De Bono (1970) refers to such generative, frame-breaking reasoning as literal thinking, as opposed to vertical thinking, which remains neatly within the existing paradigm.

To proponents of the generative thinking perspective, it is essential for strategists to have a slightly contrarian (Hust et al., 1989), revolutionary predisposition (Hamel, 1996). Contrarian: a person who takes an opposing view,

esp. one who rejects the majority opinion, as in economic matters.

Predisposition: tendency/ inclination/ temperament

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Strategists must enjoy the challenge of thinking ‘out of the box’, even when this is disruptive of the status quo and not much appreciated by those with their two feet (stuck) on the ground.

As Picasso once remarked, every act of creation is first of all an act of destruction’ –strategists must enjoy the task of demolishing old paradigms and confronting the defenders of these beliefs.

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The Generative Thinking perspectiveConclusion

In short, advocates of the generative thinking perspective argue that the essence of strategic thinking is the ability to creatively challenge ‘the tyranny (mean: dictatorship/autocracy) of the given’ (Kao, 1996) and to generate new and unique ways of understanding and doing things.

As such, strategic thinking closely resembles the frame-breaking behaviour common in the art.

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In fields such as painting, music, motion pictures, dancing and architecture, artists are propelled by the drive to challenge convention and to seek out innovative approaches.

Many of their methods, such as brainstorming, experimentation, openness to intuition, and the use of metaphors, contradictions, and paradoxes, are directly applicable to developing strategy.

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Consequently, the best preparation for strategic thinking is to be trained in the artistic tradition of creativity and mental flexibility.

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CONCLUSION The Rational Thinking perspective – logic The Generative Thinking perspective –

Creativity

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Conclusion The question within the field of Strategic

Management is, therefore: Whether strategic thinking is primarily a

rational activity or has more to do with ingenuity and imagination. Should strategists train themselves to follow

procedural rationality – rigorously analyzing problems using scientific methods and calculating the optimal course of action?

Or should strategists boldly think out of the box – inventing entirely new course of action?

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Conclusion Not all strategists give the same

answers to these questions. This places readers in the position that

they themselves must think about the nature of strategic thinking.

Together, logic and creativity present a paradox that strategists, and prospective strategists, must come to terms with.

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Defining the issues:Cognition and

Reasoning The nature of Cognition The nature of Reasoning

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Defining the issues:Cognition and Reasoning

As we have seen, the disagreement between the two extreme points of view revolve around two major issues:

The nature of Cognition – ‘the human ability to know’.

The nature of Reasoning – ‘the thought process leading to knowing’.

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The Nature of Cognition

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The nature of Cognition The mind of the strategist is a complex

and fascinating apparatus, that never fails to astonish and dazzle on the one hand, and disappoint and frustrate on the other.

We are often surprised by the power of the human mind, but equally often stunned by its limitations.

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The nature of Cognition Please note that for the discussion at

hand it is not necessary to unravel (mean: untie/unknot/loosen) all of the mysteries surrounding the functioning of the human brain, but a short overview of the capabilities and limitations of the human mind will greatly help strategists to take on strategic business decisions.

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The nature of Cognition The human ability to know is referred to as

Cognition. Knowledge that people have is stored in their

minds in the form of cognitive maps, also known as cognitive schemata.

These cognitive maps are representations in the mind of an individual of how the world works.

A cognitive map of a certain situation reflects a person’s beliefs about the importance of the issues and about the causes and effects relationships between them.

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The nature of Cognition Cognitive maps are formed over time through

education, experience and interaction with others.

It is clear that people are not omniscient – they do not have infinite knowledge. The cognitive abilities of humans are limited.

These cognitive limitations are largely due to three factors: Limited information processing capacity; Limited information sensing ability; and Limited information storage capacity.

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Three Cognitive Limitations

1.Limited information processing capacity

As was clear in the chess example cited earlier, humans do not have unlimited data processing abilities.

Thinking through problems with many variables and huge amounts of data is a task that people find extremely difficult to perform.

Approaching every activity in this way would totally overload a person’s brain.

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For this reason, humans hardly ever think through a problem with full use of all available data, but make extensive use of mental shortcuts, referred to as cognitive heuristics (Janis, 1989).

Cognitive heuristics are mental ‘rule of thumb’ that simplify a problem, so that it can be more quickly understood and solved.

Cognitive Heuristics focus a person’s attention on a number of key variables that are believed to be most important, and present a number of simple decision rules to rapidly resolve an issue.

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The set of possible solutions to be considered is also limited in advance.

The specific cognitive heuristics used by individuals are rooted in their cognitive maps.

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2. Limited information sensing ability Human cognition is also severely handicapped

by the limitations of people’s senses.

While the senses – touch, smell, taste, hearing and seeing – are bombarded with stimuli, much of reality remains unobservable to humans.

This is partially due to the physical inability to be everywhere , all the time, noticing everything.

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2. Limited information sensing ability However, people’s limited ability to

register the structure of reality is also due to inherent superficiality of the senses and the complexity of reality.

The human senses cannot directly identify the way the world works and the underlined casual relationships.

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2. Limited information sensing ability Only the physical consequences of complex

interactions between elements in reality can be picked up by a person’s sensory system.

Therefore, the mental representations of the world that individuals build up in their mind are based on circumstantial evidence.

Cognitive maps are formed by inferring casual relationships, making guesses about unobservable factors and resolving inconsistencies between the bits of the information received.

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2. Limited information sensing ability

Hence, the model of reality constructed in the minds of individuals are highly subjective.

In turn, people’s cognitive maps steer their senses – while cognitive maps are built on past sensory data, they continuously direct which information will be sought and perceived.

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2. Limited information sensing ability

A person’s cognitive map will focus attention on particular phenomena, while blocking out other data as noise, and will quickly explain how a particular situation should be perceived.

In this way, a cognitive map provides interpretive filter, aiding the senses in selecting and understanding external stimuli (Johnson and Scholes, 1993)

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3. Limited information storage capacity

Another human cognitive shortcoming is poor memory.

People have only a limited capacity for storing information.

Remembering all individuals, events, data, places and circumstances is beyond the ability of the human brain. e.g. Evidently, while on our way to office, we see a

number of people, vehicles, movements, signboards, etc. but in fact, we actually don’t remember when we arrive at the workplace and then try to recall.

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Therefore, people must store information very selectively and organize this information in a way that it can be easily retrieved when necessary.

Here again, cognitive heuristics are at play –’rules of thumb’ make the memorization process manageable in the face of severe capacity limitations.

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Such heuristics help to simplify complex clusters of data into manageable chunks and help to categorise label and store this information so that it can be recalled at a later moment.

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The nature of Cognition (cont’d…)

With these limitations, humans can never be as perfectly rational as computers.

Even when people try to be as rational as possible – that is, they avoid emotional, routine and intuitive behaviour – they will still be hindered by these three cognitive limitations.

Two types of problems, in particular, confront the boundedly rational thinker: Cognitive Biases Cognitive Rigidities

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1. Cognitive Biases As we discussed earlier, cognitive heuristics are

mental shortcuts, needed to cope with limited information processing and storage capacity.

Everyone uses them for a large part of thinking. They help people to intuitively jump to

conclusions without thorough analysis, which increases speed, but also increases the risk of drawing faulty conclusions.

The main danger of cognitive heuristics is that they are inherently biased, as they focus attention on only a few variables and interpret them in a particular way, even when this is not appropriate (Tversky and Kahneman, 1986; Bazerman, 1990)

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1. Cognitive Biases (cont’d…) For this reason, many academicians urge

practitioners to bolster (mean: strengthen) their intuitive judgments with more explicit rational analysis.

Especially, in the case of strategic decisions, time and energy should be made available to avoid falling prey (mean: victim) to common cognitive biases (e.g. Isenberg, 1984; Schoemaker and Russo, 1993)

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1. Cognitive Biases (cont’d…) Others are quick to point out that without

extensive use of cognitive heuristics, and all the dangers involved, strategists would grind to a halt, overloaded by the sheer complexity of the analyses that would need to be carried out – a situation of rationality gone rampant, usually referred to as paralysis by analysis (Lenz and Lyles, 1985; Langley, 1995).

This has led to an on-going debate on how to balance rational analysis and intuitive jedgment.

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2. Cognitive Rigidities A second problem is that people are

generally not inclined to change their minds – cognitive maps exhibit a high level of rigidity.

Once people’s cognitive maps are formed, and they have a grip on reality, they become resistant to signals that challenge their conceptions.

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2. Cognitive Rigidities (cont’d…)

The mind ‘strives tremendously to bring order, simplicity, consistency, and stability to the world it encounters’.

It is therefore, reluctant to welcome ambiguity presented by contradicting data.

People tend to significantly overestimate the value of information that confirms their cognitive maps, underestimate disconfirming information, and they actively seek out evidence that supports their current beliefs (Schwenk, 1984).

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2. Cognitive Rigidities (cont’d…)

Once an interpretive filter is in place, seeing is not believing, but believing is seeing.

Cognitive rigidity is particularly strong when an individual’s cognitive maps are supported by similar beliefs shared within a social group or organization.

How rigid cognitive maps actually are and how open people can be to evidence and new ideas is, however, an ongoing debate within the fields of (strategic) management and (social) psychology.

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Cognitive Rigidities:main questions…

Do cognitive rigidities present a major problem to strategists?

Do strategists need to ‘change their minds’ in sufficient ways or is it sufficient for strategists to build on their current understanding, with occasional minor adaptations?

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Cognitive Rigidities:main questions…

Must strategists consistently try to break through cognitive rigidities, by creatively generating other ways of understanding the world, or should they progress rationally, by logically extending their existing cognitive maps?

Is it necessary for strategists to be intellectual revolutionaries, overthrowing the established orders, or should they respect accepted knowledge and build on these foundations?

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The nature of Cognition Conclusion

Which interpretation of cognition is right? As unanimity (mean: agreement/accord) is

lacking, readers will have to form an opinion of their own.

Which position in this debate each reader takes will ultimately depend on their view on the nature of reality (which philosophers refer to as the issue of Ontology) and the nature of knowledge (the issue of Epistemology).

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The Nature of Reasoning

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The nature of reasoning Reasoning and cognition are

intimately related – reasoning is the thought process leading to knowing.

As a process, reasoning involves a number of mental activities taking place over time.

In the context of strategy, reasoning is the thought process used to define and solve strategic problems.

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Strategic Reasoning Most strategists, whether of rational or

generative inclination, agree that reasoning about strategic problems can be decomposed into four broad categories of mental activities (see figure on the next slide).

These four elements of Strategic Reasoning are: Identifying; Diagnosing; Conceiving; and Realizing

Realistic Human Thought Process:

an example…

Elements of Strategic Thought Process

1. Identifying(‘What is a problem?’)

2. Diagnosing(‘What is the nature of the problem?’)

4. Realizing(‘What actions should be taken?’)

3. Conceiving(‘How should the problem be addressed?’)

Defining

Solving

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1. Identifying Before strategists can move to benefit

from opportunities or to counter threats, they must be aware of these challenges and acknowledge their importance.

This part of the thought process is variably referred to as ‘identifying’, ‘recognising’ or ‘sense-making’.

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2. Diagnosing To come to grips with a problem,

strategists must try to understand the structure of the problem and its underlying causes.

This part of the thought process is variably referred to as ‘diagnosing’, ‘analyzing’ or ‘reflecting’.

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3. Conceiving To deal with a strategic problem, strategists

must come up with a potential solution.

If more than one solution is available, the strategist must select the most promising one.

This part of the thought process is variably referred to as ‘conceiving’, ‘formulating’, or ‘envisioning’.

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4. Realizing A strategic problem is only really solved once

concrete actions are undertaken that achieve results.

Strategists must therefore carry out problem-solving activities and evaluate whether the consequences are positive.

This part of the thought process is variably referred to as ‘realizing’, ‘implementing’, or ‘acting’.

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The Nature of ReasoningReal contradiction…

What strategists do not agree on, is how each activity is carried out and in what order.

Rational Thinking Perspective:

From the rational thinking perspective, it is logical to start by identifying problems, and then to move from diagnosing to conceiving solutions and realizing them (clockwise movement).


1. Recognizing(‘What is a problem?’)

2. Analyzing(‘What is the nature of the problem?’)

4. Implementing(‘What actions should be taken?’)

3. Formulating(‘How should the problem be addressed?’)

Defining

Solving

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The Nature of ReasoningReal contradiction… (cont’d)

In general, adherents to the rational thinking perspective believe that identifying strategic problems requires extensive external and internal scanning, thorough shifting of incoming information, and the selecting of priority issues.

In the next mental phase, that major strategic problems that have been recognised are diagnosed by gathering more detailed data, and further analyzing and refining this information.

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Once the problem has been properly defined, a strategy can be formulated by evaluating the available options and deciding which solution is the best.

In the final phase of realization, the strategist must ensure the execution of the proposed solution by consciously planning and controlling implementing activities.

Therefore, in the vocabulary of rational thinking perspective, the four elements of the strategic thought process are usually referred to as recognising, analyzing, formulating and implementing.

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Generative Thinking Perspective: Proponents of generative thinking perspective

do not believe that strategists reason in this linear (or actually circular) fashion.

They do not accept that the four categories of mental activities are phases.

In their view, reasoning is usually far more messy, with identifying, diagnosing, conceiving, and realizing intermingled with one another and often going on at the same time.


1. Sense - making(‘What is a problem?’)

2. Reflecting(‘What is the nature of the problem?’)

4. Acting(‘What actions should be taken?’)

3. Envisioning(‘How should the problem be addressed?’)

Defining

Solving

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Keywords… Strategic problem Strategic problems Swot analysis Chess grand masters Bounded rationality Inferences Speculation Emotions Routines & habits Intuitions Cognitive map or Cognitive

Schemata Belief system Deep Blue Orthodox Dominant logic

• Literal thinking• Revolutionary predisposition • Paradox • Procedural rationality • Cognition• Reasoning• Omniscient• Cognitive limitations • Cognitive heuristics • Interpretive filter• Cognitive Biases• Cognitive Rigidities • Paralysis by analysis • Ontology• Epistemology• Strategic Thought Processes

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References (cont’d…)

Baden-Fuller, C.W.F., and Stopford, J.M. (1992) Rejuvenating the mature business, Routledge, London, pp.13-34

Bazerman, M.H. (1990) Judgment in managerial decision making, Second edition, John Wiley, New York.

De Bono, E. (1970) Lateral thinking, Harper and Rowe, New York.

Eden, C. (1989) Using cognitive mapping for strategic options development and analysis (SODA), in: Rosenhead, J., (ed.) Rational analysis in a problematic world, Wiley, London.

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References (cont’d…) Hamel, G. (1996) Strategy as Revolution, Harvard Business

Review, pp. 69-82.

Hogarth, R.M. (1980)Judgment and choice: the psychology of decision, Wiley, Chichester.

Hust, D.K., Rust, J.C, and White, R.E. (1989) Top management teams and organizational renewal, Strategic Management Journal, Vol. 10, pp. 87-105.

Isenberg, D.J. (1984) How senior managers think, Harvard Business Review, pp. 81-90.

Janis, I.L. (1989) Crucial decisions: leadership in policymaking and crisis management, Free Press, New York.

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References (cont’d…) Johnson, G., and Scholes, K. (1993) Exploring corporate

strategy: text and cases, Third edition, Prentice Hall, Hamel Hampstead.

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