Strategic Thinking and Strategic Planning - Two Pieces of the Same Puzzle

7/28/2019 Strategic Thinking and Strategic Planning - Two Pieces of the Same Puzzle

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Strategic Thinking and Strategic Planning: Two Pieces

of the Same Puzzle

By

Tim M. Lowder

Saint Leo University

June 14, 2009


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Abstract

An organizations strategy consists of many factors that form a formula orroadmap to provide guidance concerning the organizations goals, how it will go aboutattaining these goals, and the tactics and policies that are needed to attain those goals

Porter (1980). Thus, one can ascertain that there are many components of strategy.Managements understanding and use of strategy as a tool to ensure business successhas been an important issue for many decades. This papers purpose is to determineestablish the critical components of strategic management. To accomplish thispurpose, the analysis first compares and contrasts the relationship between strategicplanning and strategic thinking and their relationship to strategic management. Second,the paper evaluates the strategic management process within the framework of itsstrategic planning and strategic thinking components. Third and last, the analysismakes conclusions as to the critical role of strategic management in organizationalsuccess.


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Introduction

An organizations strategy consists of many factors that form a formula or

roadmap to provide guidance concerning the organizations goals, how it will go about

attaining these goals, and the tactics and policies that are needed to attain those goals

Porter (1980). Thus, one can ascertain that there are many components of strategy.

Managements understanding and use of strategy as a tool to ensure business success

has been an important issue for many decades. This papers purpose is to determine

why strategic management is critical to organizational continuity and survival. To

accomplish this purpose, the analysis first compares and contrasts the relationship

between strategic planning and strategic thinking and their relationship to strategic

management. Second, the paper evaluates the strategic management process within

the framework of its strategic planning and strategic thinking components. Third and

last, the analysis makes conclusions as to the critical role of strategic management in

organizational success.

Dimensions of Strategy

Throughout the past 30 years, the definition of strategy has become very

fragmented because of narrowly specialized academics and consultants (Hambrick &

Fredrickson, 2005). Consequently, according to Hambrick and Fredrickson (2005),

when executives call everything strategy, and end up with a collection of strategies,

they create confusion and undermined their own credibility (p. 52). Mintzberg (1994),

premises that management must comprehend the difference between strategic planning

and strategic thinking in order to fully understand the meaning of strategy. As it has


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been traditionally practiced, strategic planning is really strategic programming which

represents the articulation or spelling out of strategies and visions (Mintzberg, 1994,

1990). Conversely, strategic thinking focuses on intuition and creativity from an open

systems perspective and hinges on the creation of synthesis between the organizations

structure and its strategies (Bartee, 1971; Kast & Rosenzweig, 1972; Mintzberg, 1994,

1990; Scott, 2004). Consequently, the analysis must define strategy to understand its

implications for an organization.

Before proceeding in the analysis, it is imperative to define the strategy concept.

To define strategy one must research its Greek derivative strategos, which means the

art of the general. A generals responsibilities demonstrate the importance and scope of

the term strategy. The general of an army is solely responsible for the orchestration

and comprehensiveness of their armys strategy and its elements and pieces in forming

a coherent whole (Conger, Spreitzer, & Lawler, 1999; Hambrick & Fredrickson, 2005).

Thus, strategy is a comprehensive, fully integrated, collective set of choices established

by the organizations leadership. Next, the analysis will evaluate the components of

strategic management including strategic planning or orchestration and strategic

thinking or comprehensiveness (Hambrick & Fredrickson, 2005; Mintzberg, 1994).

Dimensions of Strategic Management

Strategic management is about understanding the development and

implementation of strategy, ensuring that the organizations structure is in alignment

with its strategy, and understanding the implications of these factors for organizational

success or failure. It is about strategic planning and strategic thinking, and


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orchestration and comprehensiveness (Hambrick & Fredrickson, 2005; Mintzberg,

1994). Throughout the strategy process, strategic management involves distinguishing

between strategic planning, which focuses on attaining the right information and

developing a mission and vision, and strategic thinking, which focuses on aligning the

organizations structure with its strategic plan to create synthesis (Mintzberg, 1994).

Modern organizations operate in a dynamic, ever-changing environment that forces the

organizations structure to evolve and become extremely complex. Strategic

managements paradigmatic construct has experienced the same dynamic

environmental influences and has evolved to remain viable (Bremer, 1988; Herrmann,

2005; Mintzberg, 1994).

Strategic Managements Emergence

Strategic management is initially traced to the 1960s and its conception is linked

to the concept of strategic adaptation developed through case studies (Herrmann,

2005). As organizations have evolved and adapted to environmental factors out of the

necessity for stability and continuity, so has strategic management. Throughout this

emerging and evolutionary developmental process, strategic management has shifted

from one paradigmatic construct to another. This evolution is demonstrated by the

historical and shifting paradigmatic constructs and approaches that focused on

administration, information processing, organic and mechanistic, process-oriented and

behavioral, structures and sub-systems, contingency theory, resource-based, and

contingent designs, to name a few (Bowen & Sharma, 2005; Cesaroni, Minin, &

Piccaluga, 2005; Devanna, Fombrun, & Tichy, 1981; Herrmann, 2005; Linnarson, 2005;

Mintzberg, 1990).


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Strategic management is an emerging and evolving construct that is contingent

on environmental change. To assist in the adaptability to environmental factors, it

becomes essential that the strategist view strategic management within an open

systems perspective. As new strategies are developed and executed, a primary goal of

strategic management is ensuring the alignment of the organizations structure with its

strategies. The organizations structure must be flexible as it evolves and adapt both

internally and externally to changing environmental forces. This important role of

strategic management entails the use of strategic thinking. strategic thinking focuses on

intuition and creativity from an open systems perspective and hinges on the creation of

synthesis between the organizations structure and its strategies (Bartee, 1971; Kast &

Rosenzweig, 1972; Mintzberg, 1994, 1990; Scott, 2004).

Alignment of the organizations structure with its strategy allows the

organizations sub-systems to attain maximum inputs, deliver maximum throughput, and

thus generate maximum outputs which in essence creates systems synergy wherein the

whole is greater than the sum of its parts (Asoh, 2004; Hannah, 2006). First, the paper

addresses the strategic planning or orchestration component of strategic management.

Second, the paper addresses the strategic thinking or comprehensiveness component

of strategic management. The paper analyses both strategic management components

based on their specific roles in the strategy process.

Strategic Planning

Claver, Gasco, Llopis, and Gonzalez (2001), provide an excellent example of the

strategic planning process that incrementally addresses strategic issues involving

current strategy, environmental analysis, internal analysis, gap analysis, strategic


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alternatives, resource considerations, and strategic choice (pp. 469470). In the first

step of the strategic planning process, the strategist must assess the organizations

current strategy and current resources (Bowen & Sharma, 2005; Herrmann, 2005;

Powell, 1992). Key issues to address during this first step include the current strategys

successes and/or failures and the strengths and weaknesses of the companys current

resources. In other words, are current strategies and current resources supporting or

diminishing the companys objectives? In the second step, the strategist must perform

a complete analysis of environmental forces that encompasses looking at political and

regulatory influences, economic factors and influences, societal and cultural influences,

and technological innovations (PEST Analysis) (Mintzberg, 1990; Porter, 1980; Noel M.

Tichy, 1983). The third step in the process evaluates organizational strengths,

weaknesses, opportunities, and threats (SWOT Analysis) (Bremer, 1988; Mintzberg,

1990; Regner, 2003). The organizations strengths and weakness include internal

organizational factors to address, whereas the opportunities and threats represent

external environmental factors in the organizations periphery. The SWOT Analysis also

incorporates knowledge attained during the first two steps in the strategic planning

process discussed earlier.

During the fourth step in the strategic planning process, the strategist often uses

Porters Five Forces Model of Competition. The Five Forces Model diagnoses the

competitive environment and identifies rivalry between competing sellers, companies

offering substitute products, suppliers of resource inputs, buyers, and potential new

entrants (Porter, 1979). Fifth, the strategist must ensure that they perform a thorough

analysis of the organizations value chain to address the required resources required for


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strategy execution. Sixth, the strategist must ensure that the requirements of the

strategic plan and its outcomes enhances shareholder value and is ethically feasible.

These steps represent many of the micro and macro elements that a strategist uses

during the actual strategic planning process and ensures the comprehensiveness

component of the strategy (Hambrick & Fredrickson, 2005).

Earlier, the analysis stated that strategic planning is only one component of

strategy. According to Mintzberg (1994), this phase of the strategic process represents

programming and a great deal of effort remains to carry out this programming. During

the seventh and last phase of the strategic planning process, the strategist must

compile the information and formulate the execution component of the strategic plan.

The strategist must take the information gathered during the programming phase to

synthesized and organized it into an integrated and comprehensive set of tactics that

can be executed and measured throughout the strategy execution phase (Mintzberg,

1994). This execution phase of the strategic process represents the orchestration

component of the organizations strategy and will be more thoroughly addressed in the

next section (Hambrick & Fredrickson, 2005).

Strategic Execution

The strategy process strategic execution phase is as critical to organizational

success as the planning or programming phase. Several essential components created

during the planning phase and used during the execution phase include measurable

plans, programs, and budgets. Emison (2004), presents an excellent model for

strategy execution and emphasizes that the strategist must focus on delegation of

discretion, authority, and accountability and be proactive at building both a learning and


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adaptive environment that can be effectively monitored (p. 56). In addition, to ensure

execution success leadership must enhance cultural awareness, attain total

commitment from management at all levels, establish a supportive management

information system, and establish a model of rewards and incentives to enhance

employee motivation (Claver, Gasco, Llopis, & Gonzalez, 2001; Denis & Rodney, 2002;

Irani, Choudrie, Love, & Gunasekaran, 2002; Yam, Tam, Tang, & Mok, 2005). Strategy

development and execution is a multi-faceted, broad based process that entails every

aspect of the organization and thus, management must have tools in place to ensure

successful execution.

Claver et al., (2001) presents an effective action plan ensuring strategy execution

in a TQM environment that includes analyzing processes, creating and using

communications systems, designing and applying participation methods, providing

training, spreading the culture of quality, making known the objectives and results at

each level, and promoting inter-area knowledge (p. 480). This model addresses the

extremely important issue of enhancing organizational alignment of structure and

strategy. Emison (2004) presents an excellent tool for improvement during execution

phase which is based upon Deweys (1986) pragmatic, five stage process of inquiry,

which includes problem recognition, problem formulation, problem solution, reasoning,

and experiment-testing of ideas (p. 58). Both the approaches discussed above provide

a useful perspective that management can use during the strategy execution phase to

ensure that implementation is occurring at all levels within the organization.

Additionally, these approaches provide a framework for both problem resolution and

quality improvement during the strategic management process. Next, the analysis will


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shift to the strategic management component of strategic thinking or

comprehensiveness.

Strategic Thinking and Comprehensiveness

An open systems paradigm allows the strategist to observe and analyze the

strategy process from both a strategic planning and a strategic thinking perspective

(Bailey, 1994; Mintzberg, 1994; Mockler, 1968; Schonberger, 1973). The component of

strategic management not significantly evaluated thus far is strategic thinking. As

mentioned earlier, strategic thinking requires that the strategist focus on an alignment of

structure and strategy. This fact is extremely important because the new era of ferment

in strategic management is focused on information, knowledge, learning, and innovation

(Herrmann, 2005). These areas of strategic management are critical to organizational

continuity and survival because they directly affect the alignment of the organizations

structure with its strategies and create synergy between the organizational sub-systems

in a manner that minimizes entropy, attains maximum throughput, and enhances quality

throughout the organizations value chain. In the next section, the paper evaluates

several open systems issues and links them to the strategic management issues that

include information, knowledge, learning, and innovation (Herrmann, 2005).

Strategic Management and Innovation

The final strategic management issue to address is innovation. Innovation is very

important if the company desires to adapt and survive in its dynamic environment.

Innovative organizations often attain a significant competitive advantage provided the

market is ready for the product or service offering (Hamel, 2006; Thompson et al.,


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2005). To assure success as an innovator the strategist must move quickly to research

and attain an understanding of the consumers wants and needs in the marketplace.

Innovative organizations remain focused while the company simultaneously scans the

horizon for market trends and developments. Once the company identifies and

validates a market opportunity, the strategist must design and implement an initial

strategic initiative. As discussed throughout this paper, the strategist must take into

account the alignment of the organizations structure with its strategies, address all the

open systems strategic management issues, and ensure that the companys value

chain resources are sufficient to carry out the tactical plan.

Summary

Both organizational structures and strategic management have become

extremely complex because of their adaptation to ever-changing environmental

variables. The ultimate goal of strategic management is developing and executing

strategies focused on organizational continuity and success and ensuring the alignment

of the organizations structure with these strategies. To understand this statement,

there exists distinction between strategic planning or orchestration and strategic thinking

or comprehensiveness (Hambrick & Fredrickson, 2005; Mintzberg, 1994). The strategic

planning component of strategic management represents the articulation or spelling out

of individual strategies and visions (Mintzberg, 1994, 1990). Conversely, the strategic

thinking component of strategic management involves intuition and creativity while

adhering to an open systems perspective that focuses on the alignment of the

organizations structure with its strategies (Bartee, 1971; Kast & Rosenzweig, 1972;


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Mintzberg, 1994, 1990; Scott, 2004). Organizational continuity and survival is

contingent upon understanding these concepts.

First, the strategist must understand that strategy is a broad based formula and

encompasses many multi-faceted elements (Porter, 1980). Second, the strategist must

effectively comprehend the two distinct strategic management components that include

strategic planning and strategic thinking (Mintzberg, 1994). Third, the strategist must

grasp the fact that these two strategic management components are both distinct yet

mutually dependent. In summary, organizational survival is critically dependent on the

strategist understanding of the broad-based nature of strategy and the comprehensive

steps entailed in strategic management from both a strategic thinking and a strategic

planning perspective.


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Documents

Strategic Thinking and Strategic Planning - Two Pieces of the Same Puzzle