Strategic planning is nothing new, the earliest roots of conscious strategy formation are often traced back to early military tactics in long-gone civilizations. Also, early merchants applied some of these techniques in their approach to success in early markets. With the rise in thriving markets and global information technology there are contributing factors to the evolution and research of strategic theories, TSoT has adapted tools for analysts focused on strategic planning for team systems.
As applied to organizations, early strategic planning theories were often task based and followed a rigid list of actions to end up at a specific goal. These early theories did not incorporate continual assessment of external environments and systems, internal resources and allocation, or the possible need for quick change in team strategy. Early strategic planning did not include the development of continuous strategic thinking skills that combine the abilities to see system issues in the bigger context of the interrelated markets and broader supersystems.
This lack of flexibility and adaptability left gaps where many organizations became unable to compete in rapidly changing markets because they were not able to change courses of action and strategic methods quickly enough to keep up. Technological changes and the rise of globalization have led to a marketplace that changes much faster than it did even one generation ago, and techniques that might have had a solid success rate in the past need to be far more flexible and open to rapid change today.
Classical theory tends to view strategic planning as important only for executives and top decision makers in organizations, believing that a micro-focus on technical skills is at the forefront of the common industry. This top-down approach could work, and did work marginally in some cases in the past, but it lacks input from some of the people most aware of how the team systems actually work. In a static environment, those at the top know from past experiences or the research of others the best approach to remaining competitive. In a fast-changing environment, a more flexible approach that utilizes the knowledge of all levels becomes almost essential. As strategic theories evolve, an emphasis on strategic thinking has begun to develop. Methods for applying strategic principles not only at top levels but also across organizational levels have emerged.
As mentioned several times a key of TSoT is that systems must be defined by IFRs, and these must link back into higher-order systems that are defined by a strategic context.
Newer theories of strategy formation emphasize strategic thinking skills over mere strategic planning methods. Although both are important, each on its own can quickly become largely useless conceptual theory or analytical rigor without direction. The skills of strategic thinking blend creative conceptualization with analytical rigor.
As markets become more complex, decision making becomes a more difficult task, and the skills of strategic thinking are designed to help managers and workers function within constant change in order to create strategy and implement actions that orient an organization while remaining flexible enough to the change and the roles of people.
Three examples of newer strategic formation theories are appreciative inquiry, the executive evolution approach, and systems thinking as strategy, which outline methods that rely on strategic thinking skills and more conceptual integration of strategy versus a straight analytical approach.
Appreciative inquiry is a qualitative approach to strategy formation that emphasizes discussion and participation. This approach encourages organizations to focus on positive aspects of the supersystem, such as the best practices, rather than on fixing problems. The original appreciative inquiry involves four phases: Discover (collect and share common and differing capacities of the stakeholders), dream (envision the image of possibility/better world), design (discuss what needs to be done, institutionalize the vision), and delivery (inspire action). The focus on the positive encourages more active engagement in the planning process from employees at all levels, while it still addresses potential weaknesses, which are framed in terms of ways to make things even better, rather than problems.
There are several different theories of rationale for strategic planning. Three important ones focus on slightly different areas of planning. The direction rationale asserts that strategic planning develops a direction for systems. Future shaping rationale says that a strategic plan helps a system to shape its own future, and the big-picture rationale states that strategic planning creates a context in which a system operates. These are all true and important rationales for strategic planning. With the combined skills of strategic planning and strategic thinking, all three of these rationales can be obtained through the process of strategy formation and execution in organizations.
Stakeholder buy-in to the IFRs that we identify is another important result of strategic planning. Stakeholders, those with some sort of investment in the systems, include potential key decision makers and influencers within the organization. Engaging stakeholders in the formulation of system-level IFRs helps to foster commitment to the strategy and the system. They also provide insights, knowledge of the system on a macro level, and ideas that may have been otherwise overlooked. The implementation of system strategy in the supersystem helps these factors to function outside of the system, resulting in better competitive positioning in the marketplace.
Systems thinking as applied to management looks at organizations and markets as an organism or ecosystem of interrelated parts instead of focusing only on specific parts. The complex nature of systems was originally outlined in organic systems as a method for understanding natural and social phenomena, but it has been applied to management in recent years in search of a general systems theory for managers. Debate about general systems theory for managers rages on, with proponents advocating this wider way of looking at strategy as the only realistic way of understanding the market in a changing world and with traditionalists preferring the simplicity and clarity of older theories.
A hierarchy of complexity outlines the different levels of real-world system complexity and, although framed in the language of complexity of organic systems, has been applied as a tool for management to assess markets and organizations as dynamic systems.
A system-thinking approach opens the door to applying the scientific method to decision making and strategy formation. The scientific approach of creating hypotheses and testing them through experimentation is very similar to the process of continually applying strategic thinking skills to assess best decisions and actions while maintaining the flexibility to adjust if an action does not work.
This is rather different than the traditional approaches to management teaching, which stresses a focus on individual parts and specific processes within an organization. The study of systems thinking is an important development in management theory and applications because increasingly more complex markets require managers to assess interrelated internal and external environments in order to formulate applicable strategy and implement necessary changes to strategy based on changing forces.
System dynamics have also been applied to markets and organizations as a method for analyzing and determining best strategic formation. System dynamics studies the flow of feedback in systems and resulting behaviors. Traditional system dynamics thinking says that negative feedback processes drive successful systems toward equilibrium as they adapt to their environments.
New theories in system dynamics and strategy propose that strategic methods that create positive change and exist outside of equilibrium will result in more applicably competitive strategies for organizations. Translated into terms for management, organizations that create unique strategies and positive change leading to new markets by predicting future trends in markets and capitalizing on them will be more competitive than organizations that just survive by attempting to adapt within existing markets.
This application of system dynamics mimics the process of strategic thinking, which requires the development of thinking skills that adapt from utilizing negative feedback to creating positive change by predicting and creating the future of markets. As you can gather, this is the approach that we suggest within TSoT.
There are many ideas on what constitutes strategic thinking and how it should be implemented at various organizational levels. Past methods of strategic planning that were formerly process- and task-oriented have developed into the outline of a thought process defined as strategic thinking. Strategic thinking combines creative and analytical thinking skills to help managers ask questions, create ideas, and implement methods that create new value in organizations and the bigger business ecosystem in which they function.
Strategic thinking skills require managers to assess competition, organizational resources, and market trends by analyzing patterns and relationships in order to gain foresight for developing unique strategic plans and solutions. Continuous strategic thinking coupled with effective strategic planning results in organizations that create new value in markets and have the flexibility to reallocate resources and strategy instead of sticking to predetermined plans of action that may quickly become outdated in changing markets. It allows an organization to respond rapidly to changes as, or even before, they occur, rather than struggling to keep up.
Increased research around strategic thinking as applied to management arose out of a rising complexity in organizations and markets that require managers, workers, and executives to view operations in a larger context than just a series of administrative tasks and functions. In the current economy, it is no longer efficient for an organization to only change once it is backed into a corner. Remaining competitive involves predicting future market trends and consumer needs and implementing strategic plans that help the organization to create that future. Strategic management no longer means fixing problems as they arise but instead having the skills to determine issues before they arise and implement solutions to avoid them.
These steps can be tried for practice, but as strategic thinking skills strengthen, many of these steps will happen simultaneously, continuously, or in a cyclical nature.
Traditional business strategy teaches that an organization should position itself in a market and then attempt to keep its hold on that position by acting within market forces. This sets up a dynamic of the organization being a stone in a river of market forces. New business strategy suggests that organizations and the individuals within them develop skills that will help organizations to be the river instead of the stone.
Developing strategic thinking skills requires getting comfortable with change and developing the ability to assess and analyze trends and patterns in constantly changing, complex situations and markets in order to extrapolate the most important information for decision making in any given moment. Strategic thinking is the process of being able to think in a big-picture context, gather and analyze data, and implement solutions based on that data with the ability to change methods as often as necessary. Adaptation and change should be a natural part of doing business rather than an occasional unexpected part.
Conducting SWOT analysis (strengths, weaknesses, opportunities, and threats) provides in-depth information on a system’s strengths, weaknesses, opportunities, and threats. The strengths and weaknesses are focused on the internals of the system, and the opportunities and threats are focused on the environment in which the system exists. A good analyst will prepare a SWOT analysis, even if it is a short exercise, and use the analysis to frame the boundaries for the IFR.