Welcome to Chapter Fourteen of the Playing to Win/Practitioner Insights (PTW/PI) book club. In the spirit of a book club discussion, I have responded to all previous comments and will continue to do so. Of the 37 all-star pieces out of the 260 in the series, the randomizer picked as the fourteenth chapter What is Strategic Thinking? This one is from the second biggest category – help on understanding the context for strategy. You can find the whole PTW/PI series here.
My Reflections on This Piece
This piece made me particularly happy. I wanted to step back from the nuts and bolts to ask the meta question: what is strategic thinking? I don’t see it is a particular set of analyses or a particular process that makes one’s thinking notionally ‘strategic.’ I see it as evidenced by a set of characteristics that make the thinking strategic. I think it is important if we apply the modifier strategic to the activity thinking, we need to be specific about what makes it different than just plain business thinking.
That having been said, when I go meta on a topic, it not infrequently lands with a restrained response – or even a thud. This one didn’t and was one of the most well-received of all 260 pieces. Since I write to help readers, that always makes me happy.
In the original piece, I discussed the following four key characteristics of strategic thinking.
1) Seeks to Influence What is not in Your Control
The object of the thinking of a strategist must be customers because the customer is the variable that is not in your control. If instead, the object of your thinking is optimizing your organization or, heaven forbid, maximizing shareholder value, you aren’t thinking strategically.
First and foremost, your objective function is to compel desired customer action through the choices you make on the variables that you do control.
2) Consumes Information Omnivorously
The second characteristic follows from the first. The object of strategy is to influence behavior of customers in the future. But all data comes from the past and since the future is not identical to the past, strategists cannot rely solely statistically significant quantitative data to make their decisions.
Instead, strategic thinking must be omnivorous when it comes to information, whether quantitative, qualitative, metaphorical, or analogic. Non-statistically significant data of all sorts can and should be rigorously considered to make strategic decisions about the future.
3) Leverages Abductive Reasoning
In business (and the rest of the modern world) students are taught only two forms of logic and then further socialized to rely on only these two forms when making decisions. They are taught and socialized to use deductive logic — reasoning from general principles to a specific conclusion – and inductive logic — reasoning from specific data to a general principle. Those are the only two forms of logic considered admissible in making decisions.
A strategic thinker needs to utilize the third and untaught form of reasoning: abductive logic, or inference to the best explanation, as conceptualized and named by the great American pragmatist philosopher, Charles Sanders Peirce. To create a future that doesn’t exist today, strategists need to pay attention to his assertion that you can’t use inductive and/or deductive logic to come up with any new idea.
4) Considers Multiple Variables Simultaneously
Strategic thinking must consider many variables simultaneously, yet modern business teaches to break down problems into functionally siloed chunks and solve the sub-problems sequentially.
Yet as the greatest management thinker of all-time, Peter Drucker, said, “There are no marketing decisions, no finance decisions, no tax decisions. There are only business decisions…There are no specialty results. There are only business results.” This fabulous talk he gave at the Rotman School on June 12, 2002, during which he made this point convincingly, is well worth viewing.
Mindful Practice
If you are not mindful, you will follow your teaching and socialization, which is that you are in control of all the strategic variables, you must limit yourself to statistically significant quantitative data to inform your decisions, you can depend on the inductive and deductive logic to make all decisions rationally and rigorously, and you can work through your strategy decisions sequentially, one variable at a time. That teaching and subsequent organizational socialization is the tide – a tide that seeks to prevent you from being a strategic thinker.
It is a very sad feature of the modern world of business (and the world in general) that most who want to be adept at strategic thinking are trained to revere and embrace these four disqualifiers when they should be rejecting them.
This means that if you want to be a strategic thinker you must be mindful – and vigilantly so. You are largely on your own against the tide. If you aren’t, the strong tide will wash you out into the sea.
Practice thinking about customers. Put yourself in their shoes. Think about what is compelling to them – not to you. And certainly not what is easiest for you.
Use all sorts of data. Do not give statistically significant quantitative data higher weight than qualitative, metaphorical, or analogic insights. When contemplating decisions about the future, recognize that using statistically significant quantitative data is as dangerous as it is useful.
Don’t deduce or induce answers. Make inferences to best explanation. Recognize that there aren’t right and wrong answers, just answers that are more and less effective.
Practice trying to think holistically. It is more challenging than sequentially – which is why most thinking is sequential not holistic. But the only way to make good strategy choices is consider all the features together.
And recognize that part of thinking strategically is recognizing that strategy isn’t about perfection. It is about learning and getting better. So, predict what your strategy choices will produce, then assess true performance against prediction, and adjust. And rinse and repeat. That is what a real strategic thinker does.
Reader Comments
This was another middle-of-the-series post (#136) and it was far enough along to have twenty comments – a goodly volume. This was an extremely well-liked piece with lots of nice praise: excellent piece; loved this piece; an insightful post; an incredible piece; and these insights are invaluable.
It also received an assessment of beautifully written, which provides encouragement to me on my quest to keep on improving my writing quality. And since the series is subtitled Practitioner Insights, I love when I get a comment of this sort: This piece is perhaps one of the most useful for practitioners.
In terms of substantive comments, Kim said I love the tie-in to the WWHTBT question, which I argue is the best friend of strategists in that it enables them to lay out the logic of their choice so that they can evaluate its relative strength. Thanks for commenting on that tie, Kim.
Erin commented enthusiastically about Peirce:
I’m a huge fan of Charles Sanders Peirce; he was so brilliant and doesn’t get the recognition he deserves! I think part of what makes abductive logic so helpful is the recognition of its imperfection. It can provide the best explanation so far, but by definition it is not based on great data (either in quantity or how it’s obtained, usually). Thus, a good strategist/abductive logician is also quick to revise their belief based on new data.
I love her point about the Peirce’s pragmatic view that you must be open to revising your view based on data that is produced in the wake of – and often because of – your choice.
And Erik leveled a thoughtful criticism:
You might be too critical of statistical significance. The real issue arises when statistical significance evaluates unreliable data, like human surveys or polls. David Ogilvy pointed out that consumers often misalign their feelings, thoughts, and actions. However, using statistical methods on behavioral data proves more effective. The strength of analogies and metaphors could stem from their emphasis on behavior over opinions.
While human desires remain consistent, with the pursuit of status being dominant, the symbols of status are fluid and vary with culture. That may be why past data is unreliable. But Jeff Bezos and Warren Buffett both agree that asking “What’s not going to change” can be more important than wondering what’s going to change, which can lead to unproductive rabbit holes.
Good point, Erik. Balance on this question is important. I am not always balanced!
Finally, Oleg asked:
Based on the proposed characteristics, can we state that Sherlock Holmes was a master of Strategic Thinking?
Good question. I am not a Sherlock Holmes reader. I have watched a few of the movie adaptations, but I will need others to weigh in on this.
Without further ado, the original article…
Chapter Fourteen
A reader (Deependra) asked me an intriguing question this week. At first, I thought I had answered his question thoroughly enough in previous writings. But upon further reflection, I realized that his was a different angle on subjects I have discussed. So, I decided to write my 33rd Year III Playing to Win Practitioner Insights (PTW/PI) piece: What is Strategic Thinking: The Four Key Characteristics. You can find the previous 143 PTW/PI here.
A Bit of Context
I have delved into what makes for a great strategist before, describing the mindset do’s and don’ts and enumerating the requisite skills. I also discussed becoming a better strategist, which primarily involved gaining comfort in the adoption of the mindset do’s.
I have always loved your work on characterizing strategic thinking. Back before you popularized design thinking, I was leading the strategy practice at a design firm that you visited and observed how my group applied this thinking to consumer research. To that end, I’ve found you to be very insightful and would like your opinion about a long-nagging question.
I have always felt Pierce’s definition of abductive thinking to be missing one thing. In practice, we always were doing what I would call the hypothetical parallel to inductive and deductive reasoning. For example, If inductive reasoning goes from specific data to general principle, the equivalent would be using specific information from consumer research to hypothesize a general principle about their motivations and behaviors to anticipate their reactions to a proposed type of solution. On the other side, if deductive reasoning goes from general principle to the specific, the equivalent would be using general information from consumer research to hypothesize the specific concepts and solutions themselves. My question then is, would it be fair to say there should be abductive AND adductive reasoning to make the hypothetical thinking more complete?
So, if AI is based on past data, AI can’t make inferences, the AI can’t provide us strategic thinking?