What is “strategic thinking”?

How do strategists think?

Strategy is more a way of thinking than a technique

How do strategists think?

In the 50th an American psychologist George Miller worked at the Bell laboratories. He conducted experiments to find out how human memory worked. He discovered that human short-term memory is generally limited to holding seven pieces of information, plus or minus two. He described his findings in the monography The Magical Number Seven, Plus or Minus Two: Some Limits on our Capacity for Processing Information), published in 1956 in Psychological Review.

But then Nelson Cowan from Missouri-Columbia University questioned Miller’s conclusions. For example, he noticed that when people need to memorize, say, a phone number, they subconsciously divide it into several blocks, three o four digits each — we all do so, don’t we? And on 17 of April 2008, the Proceedings of the National Academy of Sciences magazine published the result of his research. Cowan claimed that, regardless of race, sex, or age, a human being is capable of keeping in mind not more than four objects plus or minus one, whether they are numbers, faces, job tasks, or any other aspects of our lives.

Then imagine that you are a participant in the strategic meeting, and an opportunity to expand the business to other countries is being discussed. How many questions do the attendees need to answer to make a considered decision?

• Are there any undiscovered opportunities on the domestic market? Does it make sense to disperse precious resources for foreign markets?

• Is there a demand for our products in other countries? How high is it?

• What about competition in those lands?

• What are potential customers’ price expectations?

• How many recourses will it take to enter whose markets?

• What risks will we face while entering them?

• Do we need to modify our core products for new markets?

This is not the full list, it is only an example, but there will definitely be more than four points. If you, being a human, unable to keep more than four issues in your mind, it means as soon as you start thinking about the fifth or sixth, one of the previous four will drop down from your short-term memory. So, we can’t discuss any decision keeping in focus all the necessary factors if there are more than five of them. What would a strategist think?

Strategic thinking

There is no universally recognized definition of strategic thinking (by the way, the acknowledged definition of business strategy doesn’t exist either). Those are the people; we can use terms we don’t comprehensively understand without a trace of embarrassment. However, some people create transnational corporations, whereas others dream of conquering the world but can’t employ more than a couple of people for years. So, what’s the difference? I made up my own list.

1. They have a mission and motivation. All the founders of large corporations I have met personally have a dream, a vision. They have already earned more money than they need, and, nevertheless, they stay motivated. It may sound grandiloquent, but they do think that their products may change the world for the better. Unfortunately, some of them go too far, and their public speeches periodically resemble Sunday sermons on good and evil in life, but it is forgivable.

2. They don’t forget about their enterprises’ capital objectives and BHAGs (Big Hairy Audacious Goals, as Jim Collins called them). Many businesses start small, in a garage or a kitchen. In the beginning, billionaires from Forbes list sold their products on the streets, wrote code, or unloaded tracks. It is difficult to concentrate on long-term objectives overloaded by day-to-day errands, especially having the brain unable to keep more than five objects in mind. But strategic thinkers never forget to return to substantial issues.

3. They can distinguish the important from the superfluous and focus on the former. In the example above, referring to new market entry, a strategic thinker would ask 4–5 essential questions and make a decision.

4. They are curious people. They read plenty of books and articles, and they never miss a chance to learn from other’s experiences. Brain science tells us that a person’s creative potential depends on the amount of information they keep in their long-term memory rather than a vivid imagination.

5. They are able to overcome the Future Thinking Bias — they are not afraid of the future.

They think big. Imagine people trying to look at the horizon through a rolled newspaper. All they see at every particular moment is a round spot, a part of the horizon. But they don’t stand a chance to see the whole picture acting this way. On the contrary, strategic thinkers always broaden their horizons by learning from everything and everyone that comes their way. In my humble opinion, strategic thinkers are rather curious learners than born geniuses.

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