Strategic thinking — practical guide

This is a skill that can be learned

This is a skill that can be learned

Steve Jobs, Jeff Bezos, and Elon Musk are exceptional strategic thinkers. But it doesn’t mean that strategic thinking is an innate gift that only few people possess by a lucky chance. On the contrary, everyone can learn to think strategically if they are persistent and consistent. As with any skill, this one cannot be mastered overnight, but if you invest enough time and effort, you can also become a great strategist.

The world as a Value Chain, or Connecting the Dots

Our world is a large, massive Value Chain. For instance, oil companies produce oil — it is the beginning of many Value Chains. On the opposite ends of these chains are many products — from petrol for your car to your smartphone’s cover. A combination of soil, seeds, and fertilizers will, at the end of the day, become vegetables or a piece of bread on your table. Of course, before that, they will go through many other links of the chains — processing plants, distribution and logistics companies, retail chains, etc. Every link of every chain adds some value to the raw materials, semi-finished products, or goods it receives from a previous chain’s link. Invisible value chains are providing us with services or information.

If we, simplifying it a little bit, visualize a value chain as a succession of links, you will see that goods or information move from the left end of the chain to the right one, from raw materials to products for the end users. And money, vice versa, travels in the opposite direction, from end users to raw materials suppliers. And every link gets its cut, depending on the value it added to deliverables a previous link provided.

Some Value Chains are called external; they connect independent actors in complicated systems. Some chains are internal — these are business processes performed inside an organization. Look at any thing around you — it made a long journey to your room through a number of internal and external value chains.

Strategic thinkers are often considered to be people who can foresee the future and look many years ahead with their mental vision. It is not necessary. They connect the dots — they see how small modifications will change the value chains in their industry. They are not only curious enough to see minor but potentially crucial changes, and they immediately ask themselves a question: “How do they influence my business and my domain? Are they threats or opportunities for my business?”.

What do these shifts change? They change external and internal value chains. Appearing of the Internet changed many external chains — one can buy a pair of jeans or even a car on a manufacturer’s website. Software development shortens many internal value chains. For instance, many firms benefit from the ability to get rid of analytical departments as parts of procurement processes because the algorithms make all the calculations.

Exercise:

Form a habit of having regular strategic meetings with your team — at least once a month. Between them, every team member should do their homework — to notice several signals of changes, perhaps minor but relevant to your industry. They can find them in articles or at industrial conferences and exhibitions. They may hear of them from customers, suppliers, or competitors. These may be changes related to technology, customers’ habits, competitive environment, legislation — whatever. Trust your gut feelings, and don’t limit yourself.

Discuss the following questions during this strategic meetings:

1. What shifts might these changes bring to our industry’s external or internal value chains in the long run?

2. Are they opportunities or threats? How can we use them to make our business stronger?

3. What adjustments do we need to make to our internal value chain to use the opportunities or avoid the threats?

Do it regularly, and you’ll outcompete your rivals.

Customers first

Any company has only one source of income — customers’ payments. And customers, in turn, pay only when they want to. And they do if a product or service fulfills their needs and do it better than other solutions available in the market.

Jeff Bezos doesn’t believe in market research. Steve Jobs said that “customers don’t have a vote”. They see business as an act of pure creation. It looks inspiring — if we forget for a second that for every successful businessperson, there are hundreds who were creative but failed. So, I wouldn’t recommend you follow Bezos’s or Jobs’s path (unless you have generous investors with bottomless pockets).

Some companies rely on customer research, but I believe that decisions related to the most crucial task for every firm — customer value creation — can’t be outsourced, even in part. To think strategically, you need to know as much about your consumers as possible. Insights into your customers are the most powerful source of inspiration.

Exercise

Form a habit of visiting your customers as often as possible. Don’t do it alone — all your team members must do it once in a while; even a chief accountant should. Find a way to persuade your customers to let you look at how they live, work, and solve their day-to-day tasks. Ask many questions, but also observe. I have seen many disruptive business ideas born as a result of noticing insignificant details of customers’ routines.

Strategic thinking as a system

Paul McCartney is one of the most prolific composers ever. I have heard that he has an employee whose job is to listen to tons of music recorded worldwide and make a compilation of the best songs for Sir Paul. And he, supposedly, listens to them, not to copy or steal interesting ideas — it is a source of inspiration for him. I don’t know if it is true, but if it was, I wouldn’t be surprised.

Thinking strategically doesn’t mean having magical insights from time to time. Every book on creative thinking underscores that the most creative people are the most informed ones. They learn a lot, read a lot, and see a lot. All the successful entrepreneurs are very curious — they use any opportunity to learn something new. They collect plenty of data of different kinds in their brains that then, seemingly by chance, is converted to brilliant ideas. The volume of information matters.

Invest enough time and effort in horizon scanning, emerging issues analysis (read my article on the topic here), and trend-watching. You don’t need a big team for this task. If you have a couple of analysts who spend their working days collecting, clustering, and filtering trends and weak signals of change somehow relevant to your industry and the culture in which your business operates. Discuss this information during strategic team meetings.

Form these valuable habits, and your strategic thinking skills will improve significantly.

Follow me on Twitter. Watch video versions of these articles on YouTube.