Emily Dickinson on Strategic Thinking

THE BRAIN is wider than the sky,For, put them side by side, The one the other will include With ease, and you beside.

• This blog post first appeared in the Management Help Library.  For more from this great resource, go to http://managementhelp.org/blogs/strategic-planning/

Emily Dickinson’s greatest accomplishment, I think, is that she taught us to wonder. In Part One of her series called Life, the poet has us thinking about the vastness of our collective brain. As of late, the scientists and mathematicians have caught up with this sage poet.

Emily Dickinson on Strategy

Scientists have estimated the number of unique and disparate “thoughts” that a person can conjure. By estimating the number of possible neural networks, known as Hebbian webs these deep thinkers have estimated that you and I are capable of thoughts numbering ten to the millionth power! Contrast this number, by the way, to the number of atoms in the known universe, estimated at a mere ten to the 87th power… Yes, in a way of thinking, our brains are larger than the known universe. As Dr. Seuss said… “Oh the thinks you can think!” An even better poet, Dickinson, continues in her poem called Life:

The brain is deeper than the sea, For, hold them, blue to blue, The one the other will absorb, As sponges, buckets do.

And who out there thinks the biggest and grandest thoughts? Why, I’d have to say it is the readership of this column! Strategists, strategic planners, strategic decision-makers and the like…

Remember that strategy is about the big picture. Strategic thought is consideration of the long term future and the vast competitive environment around each person, company or organization.

C.K. Prahalad and Gary Hamel have suggested that strategic thinkers do three things:

1. They think about the large-scale competitive environment around them.
2. They think about the future.
3. They engage others in doing the same, resulting in a “deeply shared, well-tested view of the long-term future.

To continue your train of strategic thought, do this:

• Engage those around you in conversations about the future. What will happen next in your industry or competitive space?
• Talk to technologists and futurists about the ways changing technology will affect your industry.
• Study enterprises outside of your immediate industry. Look at how competitive advantages wax and wane. Consider ways that your own advantages could erode or disappear.
• Talk about strategy and how even the most well-considered plans may change as circumstances and competitive dynamics change.

The brain is just the weight of God, For, lift them, pound for pound, And they will differ, if they do, As syllable from sound.

5 Essential Books for Strategic Thinkers by Mark Rhodes

Good Strategy Bad Strategy

good strategy bad strategy book

This fresh approach to strategic thinking, just published in 2011, begins with tales of battles at sea in the days of Napoleon and continues to explain what kinds of strategies have made the difference for modern companies like Apple, Wal-Mart, Cisco, Starbucks and Wells Fargo.  Author Richard Rumelt shows that many recent high profile failures such as those of Lehman Brothers and Enron resulted not just from a poor strategy or a poorly defined strategy, but from a misunderstanding of what strategy is in the first place!  One acquaintance showed incredible ignorance by saying to Rumelt "“Strategy is never quitting until you win.”  Attitudes like that, of course, can only lead to wasted resources and eventual failure.

As Rumelt says, "The core of strategy work is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors."

Strategy Safari

Strategy Safari Book, Mintzberg

I have often been asked what book I would suggest to someone wanting an introduction to the world of strategy.  This is always the book I suggest, the eminent strategist Henry Mintzberg and his associates Ahlstrand and Lampel do a masterful job of explaining, in plain language, the various approaches to strategy.  My favorite section is the authors' treatment of Michael Porter's "Positioning School" of strategic thought.  While staying "fair and balanced" in explaining Porter's methodology, you can almost taste Mintzberg's poor regard for such a deliberate and plodding approach, which stands antithetical to Mintzberg's own bent to strategy: the Emergent Approach.

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Strategy, by B.H. Liddell Hart

strategy by liddell hart

The book now called, simply, Strategy, is essential reading for any student of the art and science of strategy-making.  Author B.H. Liddell Hart is the best example I know of who not only chronicled history, but shaped it.  In 1929, he published The Decisive Wars of History. Although Hart was a Briton, it is known that his work had greater impact on the pre-WWII military thinking among the German military than on his own countrymen. Among others, the German general Hans Guderian read and digested Hart’s work, which influenced his designs for employing tank (panzer) warfare in execution of the “blitzkrieg” strikes that quickly took the European lowland countries and France.

Erwin Rommel, the “Desert Fox” is known to have read and savored Hart's books.  Rommel's tank battles with the Allies in northern Africa are often seen as the prototypical Hartian strategic confrontation.  Applications of Hart's insights for modern business are quite evident upon reading Hart's historical accounts and analyses. For example, to truly understand the art of strategic thinking, it is essential to consider Hart’s notion of the indirect approach.

The Lords of Strategy

Until the 1960s, there were few books or business courses available that focused on the notion of business strategy.  Gradually, as the importance of the topic dawned on MBA providers and the business public alike, Strategy evolved as an important discipline of thought for leaders of corporate, organizational and government leaders.  As the field evolved, not surprisingly, so did the cadre of people seeking to make their living teaching and consulting with others in need of better approaches and strategies.  With time, the modern consulting inustry was born.  The Lords of Strategy is the story of the four men who invented corporate strategy as we know it and set in motion the modern, multibillion-dollar consulting industry: Bruce Henderson, founder of Boston Consulting Group Bill Bain, creator of Bain & Company Fred Gluck, longtime Managing Director of McKinsey & Company, and Michael Porter, Harvard Business School professor.

lords of strategy book

The publisher explains that "this book is a revealing account of how these iconoclasts and the organizations they led revolutionized the way we think about business, changed the very soul of the corporation, and transformed the way we work."  Well, it's a little more sickening and depressing than that, if you ask me.  I have personally seen, for example, PPT slides that an eminent strategy consulting firm used to goad Enron into "out-of-the box" and "break-through thinking."  We all learned, of course, that simply thinking out-of-the-box can lead people into "breaking through" ethics and morals. Enron paid for this "anything goes" approach with its very existence.  The consulting company that egged them on, though, is not only still at it, but is doing quite well for themselves.

Nonetheless, if you'd like to learn how today's consulting industry came to be the way it is, then I am sure you will find The Lords of Strategy to be compelling, if disturbing, reading.

Wired for Thought

wired for thought book

If you are interested in the notion of strategic thinking, then you are certainly interested in the brain, the organ that allows you to think about things, strategic or otherwise.  Author Jeffrey Stibel applied his life-long fascination with neurology and brain science in order to  found a series of highly successful businesses.  In each case, he applied knowledge about how the brain works to thinking about how the internet should work, since, as he writes "the internet is a brain."

Stibel explains his fascination with the brain and neurology as a metaphor for thinking about the future of the internet:  "When I began to study the emergent internet as a whole, I had trouble fining areas where there were not analogies to the brain.  It finally dawned on me that if I wanted to build internet companies, I needed to know everything I could about the brain."

What is a Strategic Leader? A Person of Imagination by Mark Rhodes

Recent attention to the Recommendations of the 9/11 Commission remind us of their key finding: A failure to "connect the dots" and imagine what was being planned by the terrorist community was an important contributing factor to the September 11 attacks.  The Commission concluded that "the most important failure was one of imagination."

While the notion of imagination is generally treated in a light-hearted, Disneyesque fashion, what the Commission was saying that in the pre-9/11 world, our country’s leadership lacked the kind of strategic thinking it would have taken to keep us to have a truly effective defensive strategy in place.  That in mind, the graphic above and text below show the capabilities necessary for strategic leaders. 

Strategy and Decision Strategic leaders make sound decisions.  They frame issues for their organization and insist that facts and data are gathered and considered. They facilitate a decision-making process by involving a diverse and appropriate set of people.  They make sure that the organization learns experience and adapts the decision-making process based on this learning.

To master strategy in an industry or competitive domain, the strategic leader must immerse him or herself in the four domains of strategic thinking:

• Emergent Strategy and Imagination
• Deliberate Strategy and Strategic Planning
• Outward Focus
• Inward Focus:  Builds Core Competence

Emergent Strategy and Imagination Strategic Leaders excel by imagining and exploring new opportunities and innovative ways of doing things.  They think strategically, which means they are thoughtful about the long-term future and are insightful about the competitive landscape surrounding the organization they lead.

Outward Focus: Understanding the Competitive Landscape Strategic leaders are engaged in matters of strategy.  They understand the competitive landscape and the dynamics of industry and regulation that affect the positioning of their organization.  They attend to competitive intelligence and understand the importance of gaining and protecting competitive advantage.

Inward Focus:  Building Core Competence Strategic leaders understand the core competence and key capabilities important to winning and succeeding in their competitive landscape.  They recognize the importance of talent and focus on keeping a competitive team and workforce.  They monitor and attend to performance at the individual, unit and organizational level.

Individual Capabilities

Leadership Strategic leaders determine the course their will business or enterprise will follow over the intermediate and long term future and make this direction clear to others.  they inspire, coach, teach and lead the way. 

Integrity The strategic leader must embody the vision and values of the organization.  As Gandhi said, leaders must "be the change they seek to create."  Leaders of integrity are humble and share credit, they think in terms of learning from experience rather than blaming, they are kind and respectful toward all members of their organization, and they are courageous when ti comes to risk-taking.  They can be trusted to follow through on commitments.

Business Acumen The strategic leader must possess business acumen and drive.  Whether in the for-profit or non-profit world, leaders must understand principles of cost control, revenue generation, stewardship of capital and risk mitigation.

Strategic Intuition by Mark Rhodes

Napoleon Strategic Thinking

Biographers of Napoleon Bonaparte talk about his ability to size up a situation with a single coup d'oeil, (pronounced koo-DOY), meaning “a stroke of the eye” or “glance.”  Napoleon was so knowledgeable about his strategic situation—the landscape, the enemy, available technology, similar situations from the past—that he could understand and respond quickly to ever-changing circumstances. To become a master strategist, you must develop strategic intuition.  Consider Warren Buffett’s masterful ability to see investment gems lying unnoticed in a huge pool of possibilities…. Or Steve Jobs’ ability to rightly intuit the features and qualities of technology that will bring magic to consumers…  Or Oprah Winfrey’s ability to discern what her viewers want to experience and learn about…  In the end, wisdom on this scale cannot be gained through analytical tools or logic… it is a matter of knowing without knowing how you know.

To study the dynamics of decision-making under pressure, Gary Klein lived with firefighters and other emergency or quick-response personnel.  His objective was to understand how people make decisions in the most hectic of moments.   In his book Sources of Power, he concludes that the keys to good spontaneous decision-making are entirely different than what matters when one ponders decisions with time available for analysis and deliberation.   The best decision-makers in chaotic “fog of war” conditions seem able to call on intuition – knowing what to do without knowing why or how they know.

For example, Klein tells the story of one fire captain who entered a burning house, got an odd feeling that something was amiss, and ordered his firefighters out of the structure seconds before it collapsed.  It turned out the source of the fire was in a basement that they did not know was there.  Something about the situation just felt wrong to the captain, and he acted on his intuition, saving the lives of his men.  Intuition, Klein says, is recognizing complex patterns "without knowing how we do the recognizing."

napoleon plotting strategy with map

Pattern recognition, by the way, is a key indicator of whether someone has begun to develop a “Zen” way of knowing about his or her field of expertise.  Master chess players, for example, can take a brief glance at the pieces configured on a chess board, turn around, and accurately recreate the placement of all the pieces on another board.  The rest of us, at best, can remember where one or two pieces are placed.  The difference is that the chess masters look at the board and see a pattern – a story – that they can hold in memory and recall later.  To recreate the board, they just put the pieces into place in order to tell the same story.  This is the basis of intuition.  While the word conveys a bit of magic or mysticism, psychologists say that intuitive knowledge is the result of repeated experience.  The chess master has seen countless configurations on chess boards and gradually learns to see them as a whole experience, pattern of story.  To the master, the pieces are just elements of something larger.  In like manner, a quarterback who intuits where to find the open man or just seems to sense that it is time to get rid of the ball as he’s approached from behind, has achieved masters level pattern recognition.

Psychologist sometimes call the things that we know intuitively “tacit knowege.”  And we can only use langauge to speak about things that are “explicit.”  Psychologist Bill Snyder says that “Unless we can distinguish between tacit and explicit knowl­edge, we are likely to pay inordinate attention to explicit knowledge and underesti­mate the prevalence and value of tacit knowledge.”

Tacit knowl­edge refers to knowledge that one has but cannot explain.  In coprorate settings, we distinguish between “codifiable” knowledge that can be written down or documented in some way, and non-codifiable knowledge that you can only learn from experience.  This kind of knowledge includes intuitions, values, and basic assumptions  as well as “artistry” or Zen mastery.  Explicit knowl­edge involves knowledge that can be explained and codified.  For example, facts, theories, recipes, standards, and procedures are all examples of explicit knowledge.  It is important to distinguish tacit and explicit knowledge because research indicates that more than half of the knowledge in organizations is tacit.”

How to Develop Strategic Intuition. As Malcolm Gladwell has shown in Outliers, mastery of a field generally takes 10,000 hours of concentration in that knowledge domain. With time and practice, the individual begins learns to recognize patterns where others don’t and begin to recognize gaps in knowledge and begin to make new connections in order to solve or fill in these gaps.  Warren Buffet certainly put the time in to gain his legendary intuition about the world of investments.

Gaining napoleon's coup d'oeil – it – comes from a mix of aptitude and hard, constant, persistent work.

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Strategic Thinking and the Book Industry

If you are interested in the theories of business strategy covered in the blog post below, you may want to read Henry Mintzberg's excellent book,Strategy Safari:  A Guided Tour through the Wilds of Strategic Management.  For example, Mintzberg and his co-authors provide a more lucent (and compact!) description of Michael Porter's Five Forces Model than does Porter himself!

The demise of the cozy and friendly book store was well told in the Meg Ryan/Tom Hanks classic, You’ve Got Mail.  Tom Hanks shows up in character as Joe Fox, and his Fox Books mega-store pounds the quaint little store owned by Kathleen Kelly (Ryan) out of business.  Even as the movie graced screens in 1998, we watched the real life rise of twin titans Borders and Barnes & Noble as they dominated the book seller scene, crushed the small business booksellers, and absorbed the struggling mall vendors Waldenbooks and B. Dalton (remember them?) .

Meg Ryan's book store from You've Got Mail

Don’t you remember places like Ryan’s Little Shop on the Corner, where you could talk to someone who knew every book and would happily fill your order within the week?  We got our answers and stole away to find the book we needed cheaper-- and in-stock-- at Borders, B&N, or -- just as likely -- at Wal-Mart.

But as Ryan’s shop keeper might say, what goes around comes around.  Just this week, Mike Edwards, the President of Borders announced that the company would enter Chapter 11 Bankruptcy.  Battered by poor sales, continuing financial losses and heavy debt, the company will close about 200 of its 642 remaining stores and lay off about 6,000 of its 19,000 workers.

At its peak in 2003, Borders operated 1,249 stores under the Borders and Waldenbooks names, but now it will soon prune itself down to a third of that number. Its annual revenue has fallen by about $1 billion since 2006, the last year it reported a profit.

“You're at war,” Hanks told Ryan. “'It's not personal, it's business. It's not personal it's business.' Recite that to yourself every time you feel you're losing your nerve. I know you worry about being brave, this is your chance. Fight. Fight to the death.”

This week, Borders announced it was losing the war.  Citing reduced customer spending and a lack of liquidity, Edwards says the company "does not have the capital resources it needs to be a viable competitor and which are essential for it to move forward with its business strategy to reposition itself successfully for the long term."

Strategic Thinking

Let’s turn to Michael Porter’s Five Forces model to understand betwixt which rocks and hard places Borders now finds itself.  Porter recently wrote that “ In essence, the job of the strategist is to understand and cope with competition. Often, however, managers define competition too narrowly, as if it occurred only among today’s direct competitors. “In addition to the competitive forces evident in today’s competitive landscape, Porter stresses the importance of the additional four “forces,” as shown in the graphic below.

Porter's Five Forces Model

Competitors:

Borders has effectively conceded the brick and mortar book market here in Chapel Hill to Barnes & Noble.  To get our big box book fix, we Tarheels will have to drive an additional four miles east toward a B&N in Durham, or a bit south toward Cary to the B&N sitting just outside the megamall.  For commoditized best sellers, we

’

ve got plenty of options at Wal

-

Mart, Target, and the grocery store.   And of course,

we

’

ll always have Amazon!

And the Kindle.  And the Nook.  And whatever else Steve Jobs is up to

…

Barnes & Noble entered the on-line sales in time to play second banana to Amazon.  Borders didn't open an online store until 2008.  Too little too late.  Big-box bookstores have struggled, as more people buy books online, in electronic form, or at grocery stores or discounters such as Wal-Mart

Substitutes: In Porter’s Five Forces model, substitutes are thought of as challenges from other industries.  In this case, there are a remarkable number of industries beginning to infringe on the turf of the bookseller.  Amazon and the internet, sure, but what about the telephone industry, for goodness sakes?  You can read books on your smart phone now! And why wouldn’t Starbucks begin to feature content for readers next to the featured CDs they already offer.  Why, they could hand you a classic book on a thumb-drive you can start reading before your latte is finished.

Buyers: Clearly, consumer habits are changing, our culture irreversibly affected by innovations in technology.  Next time you fly, walk up and down the airplane aisle and look to see what people are doing.  I see 20% watching movies on laptops, 15% listening to music on their iPhones, 30% reading a book or magazine, and as of today, a full 35% are reading their Kindles, iPads and Nooks.  (Yes, these statistics are entirely made up by the blogger, but the point of my story is nonetheless true.)  Suffice it to say, consumer habits are changing, and changing fast.

New Entrants: Here in the second decade of the 21st century, internet services and electronic book readers are hardly new entrants.  Best guess for the future, look to the Apple iPad.  Once upon a time, a company called Wang enjoyed modest success selling dedicated word processing machines, until consumers realized they could do the same tasks – and so much more – on personal computers.  The makers of Kindle and Nook know this, but as they work to add functionality to their machines, look for the iPad and other tablet computers – not to mention our smart phones – to take market share from the dedicated reading tools.

Suppliers: Some publishers have already stopped shipping books to Borders altogether. But of Porter’s five competitive forces, the supplier base has the least impact on current market dynamics.  The relevant suppliers are the book publishers, authors, artists and other content providers.  Traditional publishers stand to lose along with Borders, and continue to fall into the black hole already populated by the uh, record companies (remember them?)

Back to the Little Shop on the Corner

You May Not Be Interested in Strategy… But Strategy Is Interested in You... Leon Trotsky

So as we see, the game of strategy is being played around us all the time and we are all actors in the play.  As Trotsky said, we may not be interested in strategy, but strategy is interested in us, and will continue to affect our everyday lives.  We can learn from this war over book-selling and apply insights to our own businesses and other endeavors.

Whatever business you are in, the winds of change are blowing your way too.  What to do?

• Anticipate the future. How will changing technology affect you?  What do you need to do to mitigate this threat?

• Set up barriers to entry. How can you lock in your customers and stave off competitive threats?  Perhaps push your strategic approach to greater customer intimacy?

• Attack competitor weaknesses. Come to think of it, there is some room in the Chapel Hill market just now for a little bookshop on the corner.  As you’ve read, Borders has gone away. The wicked witch is dead.A smaller, more nimble competitor can take advantage of still-profitable market fragments.  In fact the up-start competitor enjoys several competitive advantages, as I have written about here:The Strategic Advantage of the Upstart Competitor

Suggested Reading:

strategy safari book

Strategy Safari:  A Guided Tour through the Wilds of StrategicManagement.

Click on the Image of the book for further information provided by Amazon.