What Are The Eight Dimensions of Strategic Thinking?

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What Are The Eight Dimensions of Strategic Thinking?

I would like to describe a model for developing an effective strategic planning process. Most organizations do a poor job at planning and even poorer at execution. One of the major reasons that most strategic development plans fail is that most strategy models are one or two dimensional.

SWOTs, Boston Consulting Matrix and the famous 7S model are all deficient in that they are not comprehensive and holistic. Most models oversimplify the Zeitgeist that is out there. The reality that organizations face is constant shifting and changing. It is not static. An analogy to illustrate my point might be as follows.

A compass has four basic directions. You and some friends decide to go hunting. However, your compass is broke and will only indicate one direction. Since, this is the only direction that works, you decide to go look in this direction for your intended quarry. Perhaps you get lucky or perhaps not. Undoubtedly, you would have had better luck if you were not restricted and could hunt in all four directions. Of course, this is more time consuming and sometimes not useful. It is not useful, if you are sure that the quarry you are seeking could not possibly be in a particular quadrant. In addition, the more directions you have to look the more complex your life gets. That is what makes strategy like a combination between Chess and Poker. You have emergent dimensions and predictive dimensions of reality that all will impact your chosen goals and objectives.

It seems to me that many people confuse or at least misunderstand what strategic planning is all about. This is surprising since there are many books on strategic planning. Unfortunately, each author is usually selling or promoting his or her own brand or method of strategic planning.

For instance, for many years, the current rage has been the Vision-Mission-Objectives method. Everywhere you look there are books on how to create a vision, how to create a shared vision, identifying the difference between a mission and a vision etc. The focus of most of these books is on copying a strategy, not on understanding the theory of strategic planning. I will explore the concept of strategy with you in this article and hopefully give you some basic principles which will help you to create your own customized strategic planning process. The best advice in strategic thinking is that you cannot copy others, you have to create something that fits the unique circumstances that your organization is in.

Thus, let’s start at the beginning by understanding the purpose of strategic planning. Strategic planning is a means to an end. In a business, the paramount goal or objective is to add value. Value is anything that will help make a customer or stakeholder’s life easier. An organization’s strategy is a fundamental commitment that is reflected in the organizations purpose, mission or goals. Strategic planning or strategic development is all about finding the best means to accomplish these goals. However, as my mother always said: “There is more than one way to skin a cat”.

During the late 80’s and early 90’s, Total Quality Management was perhaps the most popular strategy to emerge for helping organizations to add value and to achieve increased organizational competitiveness. More recently, social media, IT and sophisticated data analysis systems have been seen as the best means to create and add value in an organization. However, many managers treat these tools as ends in themselves. Thus, I have heard managers say: “We did TQM” or “We did Lean” or we are doing “Big Data.” They do not understand that these tools are only one of a number of strategies that can add value or that no single system will in perpetuity provide all the value that is needed in a dynamic competitive environment.

 

Since 1900, there have been at least 14 major strategies that organizations have pursued (some of these have been pursued simultaneously). Beginning with 1900 and in approximate sequence these include:

1. Monopolization (dominate the market)

2. Financial Strategies (find the tax loopholes) 2

3. Empirical Modeling (study successful traits of successful organizations and imitate them)

4. Vertical Integration (purchases and acquisitions to find economies of scale)

5. Horizontal Integration (takeovers, and mergers to buffer the company from market downturns)

6. Strategic Forecasting (predict where the market will be going and be there first)

7. De-conglomeration (sell off to achieve strategic focus)

8. Total Quality (be the lowest cost and highest quality producer)

9. Create the Future (forget prediction, get a vision and make it happen)

10. Strategic Alliances (get a partner or get close to the customer)

11. Core Competencies (know thyself and what you do best)

12. Redesign (Optimize the organizational system)

13. IT Systems (streamline and computerize)

14. Big Data (Analyze the data for competitive advantage)

 

I will apologize if I have left any out or oversimplified any of these strategies. The point I am trying to make is that since 1900 there have been a variety of “means” pursued by organizations to enhance competitive position. Each of these means have their particular strengths and weaknesses. However by merely copying a strategy and not understanding its strengths and weaknesses, organizations limit their options. Thus, they are more likely to be overwhelmed by their competitors.

One of the key rules of strategy is to have as many options available as possible. As a means or algorithm to discover options for planning, I have identified what I call the Eight Dimensions of Strategic Thinking. These dimensions come from both academic theory and my personal consulting experience. I have spent over twenty years teaching Strategic Development at both the Ph.D. level and MBA level in several universities in Minnesota. I have read numerous textbooks and business books on strategy as well as the more famous works by Sun Tzu, Clausewitz, Machiavelli, Ohmae, Porter and many other theorists over the years. More importantly, I have had firsthand experience doing strategic planning in health care organizations, manufacturing organizations, industry associations, non-profits and government organizations for more than twenty five years now.

If your organization will take the time to examine where it is at and where your competitors are at on each of these dimensions, you will be able to achieve a more focused, effective, dynamic and robust strategic planning process. There is no right or wrong place to be on any dimension; however I believe an effective organization should pursue a balanced posture in respect to each of the continuum represented by each dimension. Each of these dimensions is not so much a place to look for a specific strategy as a means of looking at the challenges and opportunities that surround you.

A key function of strategic planning should be to identify as many of the uncertainties as possible. Strategic planning cannot eliminate all of the uncertainties of the future but it can help an organization be better prepared to meet these uncertainties. Any organization which takes the time to continually examine its strategic posture in respect to the eight dimensions (while not eliminating all uncertainties or blind spots) will eliminate many of its blind spots and be in a much stronger position to control its future rather than to just react to what the future brings.

Unfortunately, there are no shortcuts in the model. Only by examining all eight dimensions will you be able to find the challenges, threats and opportunities that are out there. You need to study and measure your organization in respect to all eight dimensions and this is a time consuming and never ending task. The nature of competition, customer preferences, technology shifts and cultural changes provoke ongoing and never ending changes in the challenges that organizations face.

Strategic development is in essence a task of continually monitoring these changes and adopting strategies to deal with them.  I will briefly describe each of these dimensions and try to demonstrate with some practical examples the implications of each. It is essential to understand that every organization has a strategy either by default or design. Design is not always better than default however an organization that is unaware of its key strategies is surely operating with many potential blind spots.

For instance, one organization I know of was pursuing a somewhat informal strategy of buying every competitor it could. Recently, it achieved what some might think was an enviable state of market dominance. Within a very short time of achieving this state, it found that some government officials had been notified by customers who were concerned that they now had no market choice. This organization is now facing the possibility of having to break up what they spent considerable time and energy to develop.

The Eight Dimensions are:

1. Continuous – Discrete

2. Emergent – Predictive

3. Internal – External

4. Competitive – Cooperative

5. Growth – Development

6. Historical – A-Historical

7. Tangible – Intangible

8. Innovate – Improve

 

Continuous – Discrete

Strategic planning should a continuous ongoing process, management should always be planning. If you think it funny that Komatsu has a 200 year plan you are missing the point. The point is we should always be looking at the options and possibilities that the future might bring. On the one hand, the future will present us with many possibilities that are discrete. A battle is a discrete event in what may or may not be a long-term process. Organizations face many discrete events which call for unique planning focused on short-term possibilities. Continuous events involve major market or business changes that will have long-term impact on your organization.

Blockbuster missed the obvious while Red Box and Netflix saw the future. Video stores and video tapes are a thing of the past. Like dinosaurs, they are not likely to return again. Long-term changes do not generally happen overnight. Companies that miss these changes simply have their heads in the sand. Organizations must balance continuous with discrete planning.

Once a year planning sessions for the next fiscal year should be discarded in favor of a continuous planning process. Responsibility needs to be allocated to such events as: environmental scanning, scenario development, competitor analysis, customer profiling, information technology, key technology developments, core competencies and how they are impacted by technology changes, strategy deployment and new government and environmental policies.

Here are some key questions for assessing your current efforts in this dimension:

How do we do our strategic planning?

Is strategic planning an event or is it part of a continuous process?

What are the continuous changes that are affecting the business world?

What are the discrete changes that may have short-term impacts which we can capitalize on?

Emergent – Predictive

Many people suppose that all planning is predictive, that planning is always about anticipating what is going to happen. In actuality many strategies deal with emergent events. For instance, people falsely assume that chess is about prediction. Nothing could be further from the reality of a chess match. For instance, in a chess game one is continually faced with unexpected moves. Your opposition is always trying to predict what you will do and surprise you. Each side is, in effect, trying to cancel out the advantages that the other side has obtained (perhaps through a prior study of the market). This means that one must be equally prepared to deal with events in real time. Because a chess player may be thinking five moves ahead does not mean that he/she can or will be able to make each of those moves. You have to plan to take advantage of the unpredictable as well as the predictable. If you are walking down the street and you see five dollars lying on the sidewalk, you would certainly pick it up.

Emergent strategies take advantage of those short term changes in the world that offer major opportunities to organizations that can move rapidly. The problem with most large organizations is that they soon become calcified and lack the ability to adapt to emergent trends. The paradox of planning is that only by trying to predict the unpredictable will an organization be able to eliminate many of the uncertainties that the future will surely bring. People that cannot understand such paradoxes generally do not make very good strategic planners.

Here are some key questions for assessing your current efforts in this dimension:

Do we try to predict the future or do we just respond to events?

What data do we collect to predict the future?

How do we use the data in our planning process?

How effective is our long-term planning?

What kinds of prediction do our competitors do?

Are we too bureaucratic and rigid to take advantage of short-term opportunities?

Do we have the ability to spot short-term opportunities?

Internal – External

Strategies can deal with the organization itself (internal strategies) or with the environment (external strategies) that the organization operates within. For instance, Core Competencies is a method for better understanding your own organization’s knowledge, skills and abilities and perhaps outsourcing the rest; while TQM, Six Sigma and Lean Manufacturing are methods for removing waste and non-value-added activities from within an organization.

Contrast these strategies with such externally focused strategies as Empirical Modeling, Benchmarking, Best Practices or Strategic Alliances. These latter are all methods for looking outside your organizations. Organizations need to follow Sun Tzu’s dictum that: “If you know only yourself you will win as many battles as you lose, if you know only your enemy you will also win as many battles as you lose. But if you know both yourself and your enemy, you will never lose any battles”. Peter Drucker has said that the demise of most organizations comes about because their “Zeitgeist” or view of reality no longer matches the reality that is out there. Organizations that fail to look outward or cannot look outward without pre- existing biases will not survive.

The automobile industry in the US shed market share largely because they were still focused on design over reliability while the Japanese correctly saw that consumers were equally if not even more concerned with reliability.

Here are some key questions for assessing your current efforts in this dimension:

How well do we understand our own strengths and weaknesses?

What do we do best?

What do our competitors do best?

Do we focus all our energy internally or externally?

What kinds of a balance do we have in respect to these two perspectives?

Competitive – Cooperative

Organizations that see the world only in terms of competition are severely limiting their possible options. It has long been part of political and military strategy to create advantageous alliances. Beginning with supplier partnerships and moving into customer partnerships and even alliances with competitors, more and more organizations are beginning to recognize that there needs to be a balance between competition and cooperation. Only pursuing one perspective probably leads to an extreme that is in the long-run counterproductive.

Many organizations have formed partnerships with suppliers and moved to single source supplier networks. W. E. Deming advocated such partnerships in his famous 14 Points for Management. He averred that reducing the amount of suppliers for any one item would improve quality and reduce costs. Edward De Bono created the strategy of Co-Opetition as cooperation between competitors. Cooperating to compete may sound confusing, but the reality is that good competitors make the market stronger and provide more value for their customers. Too many companies are afraid of the old anti-trust laws and are still acting as though it were the 20th century. There are pros and cons to both competition and cooperation. Supplier partnerships and customer partnerships take a considerable amount of time and energy to develop.

Furthermore, as James Bryan Quinn notes in his book “The Intelligent Enterprise”, suppliers and competitors who acquire your capabilities may be in a position to do an end run around you to your customers. It is naive to suppose that cooperation is not without its potential disadvantages or that one should only expect the best when in a partnership. Nevertheless, only pursuing a competitive strategy can mean missing many opportunities for mutual benefit.

Here are some key questions for assessing your current efforts in this dimension:

Are we only looking at a competitive strategy?

Do we form strategic alliances?

How do we identify possible beneficial alliances and mergers?

Do we examine and protect ourselves from the possible down sides of a cooperative strategy?

Growth – Development

Organizations typically pursue growth strategies through gaining market share, increased revenue and such as strategies mergers, acquisitions, takeovers and buyouts. Each of these strategies will lead to growth and possibly competitive advantage. However, the other side of the coin is development. When an organization ignores its development, it risks losing any long-term ability to capitalize on the advantages that growth may provide. It may thus end up in a worse competitive position.

Russell Ackoff has said in “Creating the Corporate Future” that: “Most managers see growth as an objective that is second only to survival. To be sure they speak of corporate development, but they normally think of it as equivalent to corporate growth. Growth and development are not the same thing. Growth can take place with or without development, and development can take place with or without growth.” Ackoff defines growth as an increase in size and development as a process by which an organization increases its ability to satisfy its needs and those of its customers. Development cannot be achieved merely by buying or selling other organizations. I have heard many managers repeat the common wisdom: “We must grow or die”. I have answered this bit of wisdom with the comment “Yes but grow without development and death is equally likely”.

At the very least, growth without development will only create a large bureaucracy which will be unable to deal with market and competitive changes. Perhaps, if your organization is protected or lives in a monopoly position, the strategy of growth can be sustained without development. For most organizations, growth without development can be seen as a slow spiral downward into decreased profits and declining market share as now competitors come in to gain advantage in areas formerly dominated by the “market leader.”

Here are some key questions for assessing your current efforts in this dimension:

Are we managing growth or being driven by growth?

What are our development needs and how well are we meeting them?

How do our competitors balance growth and development?

Why do we want to grow and how does this fit with our vision and mission?

Historical – A-Historical

Many managers believe that there is little value in studying the past. “It is Ancient History.” The famous philosopher Santayana noted that “Those who forget the past are condemned to repeat it.” We see his dictum over and over again in numerous examples of companies and organizations that refuse to learn from past mistakes and continue to repeat them. On the other hand, many organizations are more than ready to try to emulate the latest “best practices” that are being heralded as labor savings or productivity enhancing. Companies are often criticized for their flavor of the day or “Program of the Month”. Yesterday, it was One Minute Management. Then it is on to Total Quality Management. This is soon followed by Lean Manufacturing and now Big Data. The list of half-completed and half-hearted programs is disheartening for many employees. Rather than never-ending improvements, most organizations seem to engage in never-ending programs. W. E. Deming warned of the dangers of failing to understand the differences between analytic and enumerative studies.

Dr. Deming summarized the distinction between enumerative and analytic studies as follows:

Enumerative study: A statistical study in which action will be taken on the material in the frame being studied.

Analytic study: A statistical study in which action will be taken on the process or cause-system that produced the frame being studied. The aim being to improve practice in the future. In layman’s terms, you cannot predict the future from the past. However, you can better understand the future by studying the past. Again, this is one of those paradoxes that confront anyone engaged in strategic planning. The answer lies in understanding the theory behind what you are doing and not simply copying. It is important to balance a study of the past including failures and successes with a study of the future opportunities and threats that confront the organization. Strategy that only looks at SWOT’s will miss examining the problems and failures that are often like a hidden cancer in the organization. Unless these past failures can be made transparent, the organization will have less opportunity to capitalize on the opportunities that the future presents.

Here are some key questions for assessing your current efforts in this dimension:

Do we examine our failures as well as our successes?

Do we really understand what works and what doesn’t work?

Do we examine the successes and failures of our competitors?

How much time do we spend studying the past?

Are we always firefighting?

Do we really understand why our company was and has been successful?

Intangibles – Tangibles

This dimension is partially concerned with the products and services an organization has to offer. Products providing the tangibles and services the intangible. I said partially above because I believe that simply describing a product-service dimension would hide much value that we contribute to our customers. There are other intangibles and tangibles that organizations often offer their customers which are not strictly products or services in the traditional view.

For instance, Nordstrom’s is known for providing excellent customer service and McDonalds for its quality low-cost food. But both of these organizations are also providing intangibles that are at least important as their primary products and services. When I go to McDonalds, I know it will be clean and its product quality consistent. When I go to Nordstrom, I know its product quality is high and I feel that someone will really want to help me find what I need. I am not only paying for convenience but I am paying for some ineffable qualities at both McDonald’s and Nordstrom. Marketers refer to the extended product that Is a bundle of products wrapped in a web of services.

Ineffable characteristics of an organization embody many qualities that are missed by marketers and customers alike. However, the customers know when they are there and when they are not. The Internet provides an example of the reverse where services are wrapped in a bundle of products. Many organizations on the web provide trial products, papers, research, software and other goods in an effort to entice the consumer to buy more. I may give you a low cost printer so that I can make my profit on selling you replacement ink cartridges. Software programs are now marketed in the Cloud. You no longer get a physical disk but you have access to upgrades and other amenities that a simple disk could never have provided. Organizations need to balance thinking about both the intangibles and tangibles they provide. What value are they adding for their customer? But even more importantly they need to think about the intangibles and ineffable qualities that they are not providing for their customer.

Here are some key questions for assessing your current efforts in this dimension:

What are the primary intangibles and tangibles that we provide?

How do our customers rate them?

How do we compare against our competitors?

How do we find new needs to fulfill for our customers?

How can we change customer responsibilities into opportunities for our organization?

What do we know about our customers’ needs that they do not know?

What do our customers know that we do not about our products and services?

Innovation – Improvement

Many people believe that the difference between improvement and innovation is a matter of degree. I believe there is a much greater difference and that they are on opposite ends of the spectrum. I define improvement as: “Taking something which already exists and making it better”. You take some post-it notes and you improve the glue until they stick even better than they do now. You find a way to help tire tread last even longer than it presently does. You build a higher roller coaster. These are not innovations, they are simply changes since they do not involve a fundamental shift in either processes or technology. I define innovation as: “Creating something new”. An innovation requires a shift in technology or processes. The Internet was an innovation since the technology had to be created for the platform to exist. Computers by themselves could not have created the Internet.

Social Media Marketing is a new paradigm because the technology and processes upon which it is based are fundamentally different than any marketing processes that were ever created. One has to admit thought that there is often a gray area in which old things can sometimes become new things. The Hula Hoop was resurrected from a toy to a piece of exercise equipment, same product but new use.

Xerox has been noted as an organization that passed up many opportunities to capitalize on new products that changed the market place. In the real world, simply improving the old can lead to obsolescence. It has been noted by many writers that the last buggy whip company to go out of business was probably the highest quality and lowest cost of all buggy whip producers. It is wonderful to continually improve products and services but organizations (unless they are monopolies or governments) must not only work on improvements to products and services, they must also work on new products and services.

What many organizations do not understand is that they can only create new products and services if they are working on creating new knowledge. Organizations must put emphasis not only on technical R&D but also on concept R&D. We must continually look for new ideas and concepts that can be lead to new products and services. To do this requires all of the available brainpower that an organization can muster. The organization that enlists all of their people as creative thinkers and as producers of new ideas and concepts will certainly surpass the traditional organization wherein strategic thinking is the sole domain of managers and experts.

Here are some key questions for assessing your current efforts in this dimension:

What is our mix of innovation and improvement?

How much time do we spend on concept R & D?

How do we involve our people in producing innovations as well as improvements?

What are our competitors doing in this area?

Who are our hidden competitors (products and services that can replace our key competencies) and what impact can they have on us?

Conclusions and Rules for Planning

There is a rule that I have labeled as “The Law of Efficient Strategic Planning.” It is something like the Law of Efficient Market Theory. According to the Law of Efficient Market Theory, once something is known about the stock market everybody gets the same information and it nullifies your advantage. The same is true with strategic planning.

Plans have a definite phase wherein they provide maximum competitive advantage. Once the trend is clearly recognized by your competitors, everyone jumps on the bandwagon, thus negating any strategic advantage. That is what makes strategy so much fun. It is dynamic and ever changing. What worked yesterday may no longer work today.

I started this article by saying that I was going to share some principles and rules for creating an effective strategic plan. I would like to close by sharing with you some general rules that I have found helpful in planning. They are as follows:

1. Seek to balance the 8 dimensions of strategy.

2. Do not confuse means with ends, but recognize that means and ends are interdependent.

3. Strategic planning should be a process not an event. It is not a once-a-year three day planning session.

4. All strategies have pros and cons. Seek to understand the limitations and strengths of any strategy you use.

5. Beware of making strategy an end in itself. You must always be clear of your overarching goal or vision and keep it in mind.

6. Strategy must be a creative process. There is no room for fear or a “My way or the highway approach”. Strategy is not a straight line effort. You must be able to cope with a high level of ambiguity.

7. Strategies are never independent of the prevailing economic milieu or what the Germans call Zeitgeist. The past, present and future are all major facets of any successful strategy.

Source: The Eight Dimensions of Strategic Thinking | John Persico – Academia.edu

By | 2017-03-08T15:41:35+00:00 March 29th, 2017|Categories: Management, Marketing, Strategy|Tags: |Comments Off on What Are The Eight Dimensions of Strategic Thinking?