Developing a Winning Business Strategy: The Art of Strategic Thinking

The Challenge of Translating Business Insights into Strategic Plans

Imagine being a top student in your class, well-versed in business models, but still struggling to address challenges and devise effective plans. This scenario is more common than you might think.

Crafting a successful business strategy is a complex task that often involves making critical decisions. Many business leaders find themselves overwhelmed by details, leading to what Richard Rumelt calls a “bad strategy” characterized by superficial trends, ambitious goals, and fancy diagrams that lack substance.

While various business frameworks exist, such as those by Prahalad and Hamel, Kim and Mauborgne, or Porter, the real challenge lies in translating these theories into actionable business plans.

This article aims to bridge the gap between abstract strategic visions and real-world scenarios by offering a systemic approach to developing and managing strategies, as proposed by Stanford’s business school professors, Jesper Sørensen and Glenn Carroll.

The Problem with Current Strategic Thinking

According to a McKinsey Quarterly Survey, only 28% of executives considered their strategic decisions to be good. Sørensen and Carroll attribute this lack of confidence to a lack of disciplined reasoning among business leaders. Despite their knowledge of various strategy frameworks and case studies, many struggle to apply them effectively in daily decision-making.

The key missing element in the training of business strategists is a systematic approach to thinking that can help them develop and evaluate strategies effectively.

Three Strategic Leaders, Three Challenges

Strategy formulation is no longer a once-a-year exercise but a continuous process that blurs the lines between strategy and execution. Three industry examples illustrate the challenges faced by strategic leaders in today’s dynamic business environment.

Kelly at Southwest Airlines

Southwest Airlines’ CEO, Gary Kelly, faced the challenge of reinventing the company’s strategies amid tough competition. The decision to introduce new fees for advance seat assignments raised questions about the company’s longstanding open seating policy and its impact on operational efficiency.

Earp at AB InBev

AB InBev’s VP of Marketing, Pedro Earp, grappled with the company’s lack of presence in the craft brewing segment. His strategic decision to acquire craft breweries raised concerns about AB InBev’s role in fostering innovation within the industry.

Fields at Tableau

Tableau’s VP of Product Marketing, Ellie Fields, navigated the challenge of launching a free version of the software to attract a broader audience. This strategic move required careful consideration of product design and market positioning.

How to Approach Strategic Thinking: Three Stages

Regardless of the specific challenges faced by strategic leaders, the key to success lies in logical reasoning and strategic thinking. Sørensen and Carroll propose a three-stage approach to developing effective strategies.

First Stage: Visualize with Strategy Maps

Strategy mapping involves linking ideas, resources, and actions to create a visual representation of a strategy. By visualizing the causal relationships between different elements, strategists can better understand the underlying dynamics of their decisions.

Second Stage: Formalize Logic for the Strategy

Formalizing the logic of a strategy involves translating strategic arguments into a formal, logical representation. This stage ensures the coherence and validity of the assumptions underlying the strategy.

Third Stage: Constructive Argumentation

The final stage of strategic thinking involves open and constructive argumentation. By encouraging debate and discussion, business leaders can refine their strategies, gain stakeholder buy-in, and foster a culture of continuous improvement.

By incorporating these three stages into their strategic planning process, business leaders can enhance their strategic thinking capabilities and make more informed decisions.

Skills Business Strategists Need but Aren’t Taught

While business schools focus on case studies and frameworks, they often overlook essential skills like logical reasoning and argumentation. Developing these skills can help business leaders articulate and evaluate strategic decisions more effectively.

By honing their strategic acumen and embracing a systematic approach to strategic thinking, business leaders can navigate the complexities of today’s business landscape with confidence and clarity.