Rich Horwath is here to provide a step-by-step guide to increasing our strategic thinking skills and become among the top executives. Strategic thinking is defined by Horwath as the generation and application of business insights on a continual basis to achieve competitive advantage. He suggests that strategic thinking should be part of our daily activities. That way, we are continually looking for insights and exploiting opportunities.
Strategy—What is it?
Horwath states that 90% of executives have actually had little to zero training in strategy. Because of this, here are a number of different interpretations of what ‘strategy’ actually is. Therefore to discover what strategy is, we should first consider what it isn’t.
- Strategy is not an aspiration or goal. The “what” you’re trying to achieve should never be confused with “how” you will achieve it, which is the strategy.
- Strategy is not the application of best practice. Trying to be better than instead of different from the competition is not a strategy. Best practices erode advantage because if more than one company is using a best practice, the necessary differentiation of strategy fades away.
- Strategy is not cautious. Being tentative and restrained and afraid to make trade-offs is not a strategy. If you aren’t willing to assume risk, make trade-offs, or upset somebody you don’t have a strategy.
With all these in mind, Horwath defines strategy as “the intelligent allocation of limited resources through a unique system of activities to outperform the competition in serving customers.”
Gaining Insight
Horwath suggests that the first step to achieving strategic thinking is to gather insight. Strategic insight is a new idea that combines two or more pieces of information to affect the overall success of the business, and lead to a competitive advantage. Strategists need to build their thinking around insights and how to discover them.
Horwath suggests that there are a few areas where we can seek out insight. Strategic development needs to be carried out in a specific context. The goal is to find changes in the context of the business and use the resulting insights to exploit opportunities. Additionally, we should also use customers as an insight source. Customers may not be able to express their desires, but their behaviors often provide the key insights that uncover them. Finally, ask questions. Questions stimulate thinking in new ways by posing mental barriers that make us stop and evaluate.
Allocating Wisely
The second stage is allocation. Discussions of strategy effectively boil down to how to allocate limited resources to maximize business potential.
Most businesses with lesser strategic thinking tend to focus on tangible resources: those that can be counted. But much greater value is held within the intangible. While people are your biggest asset, they are also your biggest liability if we don’t capture and use their tacit knowledge.
The key to effectively allocating resources lies in our ability and willingness to make trade-offs. Making trade-offs is one of the most difficult tasks for managers, and we rarely make them. Instead, we hedge our bets and try to be everything to everyone.
Putting it Into Action.
The Third and final stage is action. When it comes to putting things into action, we need organizational discipline. Often, we assume that once a sound strategy has been formulated, the rest will take care of itself. But in nearly every case, poor execution can be attributed to one of the following factors:
- Faulty Strategy
- Unclear resource requirements
- Poor communication
- Weak accountability
Putting things into action requires a plan to support the strategy and it is worth clarifying the difference between goals and strategies, and between objectives and tactics.