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Critical Thinking vs Strategic Thinking: Which is Better?

Dive into the world of "Critical Thinking vs Strategic Thinking" and discover which is the superior mindset for success. Gain insights into what critical thinking and strategic thinking entail. Uncover how critical and strategic thinking can complement each other and by the end, you'll have a clearer understanding of which thinking style suits your objectives best.

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In reality, both can complement each and be used together to get better outcomes. Want to know how? Read this blog to learn about the key differences between Critical Thinking vs Strategic Thinking. Also, understand how they can be used together to drive success. 

Table of Contents   

1) Understanding Critical Thinking and Strategic Thinking  

     a) What is Critical Thinking? 

     b) Exploring Strategic Thinking    

2) Difference between Critical Thinking vs Strategic Thinking  

     a) Focus and emphasis  

     b) Mindset and approach  

     c) Timeframe and scope    

     d) Application and outcomes    

     3) Complementary nature of Critical Thinking and Strategic Thinking  

4) Conclusion  

Understanding Critical Thinking and Strategic Thinking   

Before exploring the difference between the two and which is better, it is essential to understand both. Let's have a brief look at both the skills: 

What is Critical Thinking?  

Critical Thinking is a systematic and objective approach to analysing and evaluating information. It involves gathering evidence, questioning assumptions, and applying logical reasoning to form well-informed judgments. Key components of Critical Thinking include the following:  

a) Information analysis : Gathering and examining information from various sources before forming opinions or making decisions.  

b) Objective evaluation : Assessing evidence for reliability and validity, identifying biases, and detecting fallacies in arguments.  

c) Problem-solving : Breaking down complex problems, considering alternative perspectives, and generating practical solutions.  

By developing Critical Thinking skills, individuals become more effective problem solvers, make informed decisions, and achieve a broader understanding of the world. 

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Understanding Strategic Thinking   

Strategic Thinking is a process that involves a proactive and forward-looking approach to planning, goal setting, and decision-making. It goes beyond immediate problem-solving and focuses on long-term implications, patterns, and connections. Strategic Thinking encompasses several key elements:  

a) Planning and goal setting : Strategic Thinking emphasises the creation of a roadmap for achieving desired outcomes. It involves setting clear goals, defining strategies, and outlining steps to reach those objectives.  

b) Vision and foresight : Strategic thinkers can envision future possibilities and anticipate challenges and opportunities. They consider long-term implications and trends to make decisions that align with the desired outcomes.  

c) Pattern recognition : Strategic thinking focuses on identifying patterns, trends, and interrelationships among various factors. They can understand the underlying connections to get an overview of a situation.  

d) Risk assessment and opportunity evaluation : Strategic Thinking involves assessing potential risks and rewards associated with different actions. It allows individuals to make calculated decisions by weighing the potential benefits against potential drawbacks.  

Strategic Thinking is particularly valuable in planning and navigating uncertain or complex situations. By adopting a strategic mindset, individuals can anticipate challenges, adapt to changing circumstances, and take advantage of emerging opportunities. 

Difference between Critical Thinking vs Strategic Thinking   

Focus and emphasis   

Critical Thinking primarily focuses on analysing and evaluating information objectively. Its main emphasis is on logical reasoning, evidence assessment, and identifying biases or fallacies in arguments. Critical Thinking ensures accuracy, clarity, and sound judgment in decision-making and problem-solving.  

Strategic Thinking prioritises planning, goal-setting, and long-term vision. It looks beyond immediate analysis and focuses on understanding patterns, connections, and future implications. Strategic Thinking aims to align actions and decisions with long-term objectives and effectively navigate complex or uncertain environments. 

Mindset and approach   

Critical Thinking involves a mindset of scepticism and intellectual curiosity. It encourages individuals to question assumptions, challenge conventional wisdom, and seek evidence-based conclusions. Moreover, Critical Thinking is more analytical and fact-based, aiming to uncover the truth and make well-reasoned judgments. 

On the other hand, Strategic Thinking involves a mindset of forward-thinking and creativity. It encourages individuals to explore future possibilities, envision desired outcomes, and think holistically about the bigger picture. The Strategic Thinking approach is more visionary, seeking to develop plans and strategies that align with long-term goals and capitalise on emerging opportunities. 

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Timeframe and scope   

Critical Thinking tends to focus on immediate issues and problems at hand. It involves analysing a situation in detail, gathering relevant information, and evaluating it objectively. Additionally, Critical Thinking is crucial for making informed decisions in real time and solving specific problems effectively. 

In contrast, Strategic Thinking takes a broader and more long-term perspective. It considers the larger context, trends, and potential future scenarios. Considering these factors allows for assessing risks, anticipating challenges, and developing plans encompassing multiple aspects of a situation. Strategic Thinking also provides a roadmap for achieving long-term objectives and navigating complex environments. 

Application and outcomes   

Critical Thinking is highly valuable in situations that require objective analysis, such as evaluating evidence, assessing arguments, or identifying flaws in reasoning. It is crucial for making informed decisions based on facts and evidence, especially in scientific research, critical analysis, or logical problem-solving. 

Complementary nature of Critical Thinking and Strategic Thinking   

Critical Thinking and Strategic Thinking are complementary approaches that enhance decision-making, problem-solving, and planning. While Critical Thinking provides a solid foundation of analysis, objectivity, and evidence evaluation, ensuring accuracy in strategic plans. Strategic Thinking adds creativity, foresight, and a long-term perspective, encouraging individuals to envision desired outcomes and adapt to changing circumstances. 

By integrating Critical and Strategic Thinking, individuals balance short-term needs and long-term goals. They can analyse problems effectively and consider broader contexts. This combination fosters adaptability, agility, and robust, well-informed and forward-thinking decision-making. 

Conclusion   

While there are some fundamental differences between Critical Thinking vs Strategic Thinking, both are valuable thinking styles that can be developed and applied to improve decisions and solve problems. So, embrace the power of Strategic & Critical Thinking in your process and lead yourself to success. 

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Critical Thinking vs Strategic Thinking: Unpacking the Difference

Hello there! In today’s article, we will be discussing two essential thinking styles: critical thinking and strategic thinking. While both are critical for making balanced and informed decisions, they differ in their approaches.

Critical thinking involves assessing information objectively, breaking it down into parts, and evaluating the logic and reasoning behind it. Strategic thinking , on the other hand, focuses on longer-term planning, anticipating future challenges, and making proactive decisions.

Let’s dive deeper into the differences between critical thinking and strategic thinking and explore how both contribute to better decision-making.

We will also examine the  importance of critical thinking in decision-making , and provide tips on how to develop these skills.

Understanding Critical Thinking

Hello there, my fellow readers! Up first in this discussion of Critical Thinking vs. Strategic Thinking is a topic that’s very close to my heart – critical thinking.

I’ve come to appreciate the value of  critical thinking skills . Let’s dive in and explore what critical thinking is and how we can develop it.

Firstly, let’s define what critical thinking means.

Critical thinking is a cognitive process that involves analyzing, evaluating, and synthesizing information to make informed decisions. It’s an essential skill that helps us approach problems and decision-making with a logical and objective mindset.

Now that we’re on the same page, let’s talk about  developing critical thinking  skills. It’s important to note that critical thinking is not a natural talent but a learned skill. With practice and dedication, we can all develop our critical thinking abilities.

One of the first steps to  developing critical thinking  is to gather information from various sources and analyze it thoroughly.

It’s crucial to evaluate information objectively and question assumptions and biases. By doing this, we can make informed decisions based on logic and reasoning.

Another essential skill for critical thinking is problem-solving. We need to identify problems and create logical solutions by considering all possible outcomes and analyzing the pros and cons of each solution.

Finally, critical thinking involves active listening and effective communication. By actively listening to others and communicating our thoughts and ideas clearly, we can better understand different perspectives and collaborate effectively to make informed decisions.

Overall,  developing critical thinking  skills is essential for making sound and informed decisions.

By gathering information, analyzing it objectively, problem-solving, and effective communication, we can enhance our critical thinking abilities and become more effective decision-makers.

Exploring Strategic Thinking

When it comes to decision-making, strategic thinking involves taking a long-term approach and considering all potential outcomes. This thinking style requires analyzing future scenarios, identifying potential obstacles, and making proactive decisions.

As such, there are various techniques and examples to illustrate strategic thinking in action.

Thinking Outside the Box

One of the main components of strategic thinking is creativity . Embracing new and innovative ideas can help you develop unique solutions to problems and anticipate future challenges. By thinking outside the box, you may be able to identify opportunities that you would have otherwise missed.

Anticipating the Future

Another key component of strategic thinking is anticipating future scenarios. This involves considering a variety of factors, including technological advancements, changes in the market, and shifts in consumer behavior. By keeping your finger on the pulse of these trends, you can prepare yourself for potential changes and adapt to new circumstances.

Proactive Decision-Making

Strategic thinking also involves making decisions proactively, rather than simply reacting to situations as they arise. By taking a proactive approach, you can identify potential obstacles early on and take steps to prevent them from becoming larger issues down the line. This can help you stay ahead of the curve and maintain a competitive edge.

Real-Life Examples

Examples of strategic thinking can be found across various industries and professions. For instance, a marketing team may use strategic thinking to develop a long-term plan for promoting a new product. Alternatively, a CEO may use strategic thinking to expand the company’s offerings to new markets or identify potential mergers or acquisitions. Regardless of the specific application, strategic thinking is an essential tool for success in today’s fast-paced and ever-changing world.

Comparing Critical Thinking vs Strategic Thinking

As we’ve explored, critical thinking and strategic thinking are two distinct approaches to decision-making, each with its own unique qualities.

While critical thinking involves analyzing and evaluating information to make informed decisions, strategic thinking focuses on long-term planning and proactively anticipating future scenarios.

One of the main differences between critical thinking and strategic thinking is that critical thinking tends to be more reactive, while strategic thinking is proactive.

Critical thinking is often used to evaluate and respond to immediate problems or challenges, while strategic thinking is used to prepare for future challenges and opportunities. Another key difference is that critical thinking is more focused on analyzing and evaluating information, while strategic thinking is more concerned with synthesizing information and developing a big-picture perspective.

Critical thinking relies heavily on logic and objective analysis, while strategic thinking involves creativity, intuition, and future-oriented thinking.

Despite these differences, both critical thinking and strategic thinking are valuable approaches to decision-making and are often used in combination to achieve the best possible outcomes. By leveraging the strengths of each approach, individuals can become more effective and well-rounded thinkers.

In the next sections, we will explore the importance of critical and strategic thinking in decision-making, as well as strategies for developing and improving these thinking skills.

The Importance of Critical Thinking in Decision Making

As a professional coach,  my  decision-making process is critical to creating well-informed and objective sessions and workshops.

In any situation,  I  am tasked with assessing information, analyzing its relevance, and drawing logical conclusions. This is where critical thinking plays a crucial role.

The  importance of critical thinking in decision-making  cannot be overstated. It enables us to evaluate information objectively, research thoroughly, identify biases, and consider multiple perspectives. With these skills,  I  am equipped to make well-reasoned and rational decisions.

At its core, critical thinking is about asking questions, challenging assumptions, and seeking out evidence.  I  find it useful to break down problems into smaller parts, analyzing each aspect separately before bringing them together to form a complete picture. This approach helps me avoid making snap decisions based on incomplete information.

Without  critical thinking skills ,  I  risk falling prey to cognitive biases, misinterpreting data, and making poor decisions.

By cultivating a critical thinking mindset,  I  am better equipped to navigate complex situations and make informed choices.

The Benefits of Strategic Thinking

As I explored earlier, strategic thinking is a valuable mindset that can enhance decision-making processes in various settings. Here are some of the key  benefits of strategic thinking :

Overall, strategic thinking can help individuals and organizations to become more agile, innovative, and effective in accomplishing their goals.

Strategies for Critical Thinking:

Being a critical thinker is a valuable skill that can set you apart in your personal and professional life. Here are some  critical thinking strategies  to help improve your decision-making abilities:

• Ask questions:  One of the key skills of critical thinking is being able to ask thoughtful questions. When faced with a problem or decision, take the time to ask questions that will help clarify the situation and potential solutions.
• Be an active listener:  Listening actively involves giving your full attention to the person speaking, asking follow-up questions, and checking for understanding. This will help you gather more information and identify potential biases or assumptions.
• Use logical reasoning:  Logical reasoning involves thinking through a problem step by step and considering the implications of each solution. This helps you avoid making impulsive decisions or jumping to conclusions.

By incorporating these  critical thinking strategies  into your daily life, you can develop a more thoughtful and objective approach to decision making.

Enhancing Strategic Thinking Abilities

Developing strategic thinking skills is essential for effective decision-making. Here are some practical tips to improve your strategic thinking abilities:

• Embrace creativity:  Incorporating creativity into problem-solving processes can spark new ideas and lead to innovative solutions. Take a break from traditional thinking methods and consider new perspectives.
• Embrace ambiguity:  The ability to tolerate and manage ambiguity is crucial to strategic thinking. By accepting uncertainty and ambiguity, we can approach problems with a more open and adaptable mindset.
• Foster a future-oriented mindset:  Strategic thinking requires a forward-thinking approach. Consider the long-term implications of decisions and anticipate future challenges.

By following these tips, you can develop your strategic thinking abilities and become a more effective decision-maker.

Improving Critical Thinking Skills

Developing  critical thinking skills  takes practice, but it can be done. Here are some strategies to help improve your critical thinking:

• Ask effective questions:  Asking the right questions can help uncover hidden assumptions and biases. Encourage critical thinking by asking open-ended questions that require thoughtful responses.
• Listen actively:  Active listening is essential to critical thinking. By listening actively, we can gain a better understanding of opposing viewpoints and improve our ability to evaluate arguments.
• Use logical reasoning:  Logical reasoning is the backbone of critical thinking. Use logic to evaluate arguments and identify fallacies.

By applying these strategies, you can improve your critical thinking skills and become a more well-rounded thinker.

Applying Critical and Strategic Thinking in Everyday Life

Developing critical thinking skills and  strategic thinking techniques  can enhance not only your professional life but also your personal relationships and problem-solving abilities.

By applying these thinking styles, you can become a more effective communicator, better understand others’ perspectives, and make informed decisions.

In Personal Relationships

When interacting with friends or family, critical thinking skills can help you identify and overcome potential conflicts. By actively listening and asking thoughtful questions, you can gain a deeper understanding of others’ feelings and perspectives. Strategic thinking, on the other hand, can help you plan for the future of your relationships and make proactive decisions to strengthen them.

In Problem-Solving

Problem-solving requires both critical and strategic thinking. With critical thinking skills, you can analyze the situation objectively, question assumptions, and consider multiple perspectives. Strategic thinking, on the other hand, can help you anticipate future challenges and develop proactive solutions.

In Career Advancement

Employers value employees who possess strong critical thinking and strategic thinking skills. By demonstrating these skills in the workplace, you can stand out as a valuable asset to your team. Additionally, strategic thinking can help you plan for your long-term career goals and make informed decisions about your professional development .

Overall, developing critical thinking skills and  strategic thinking techniques  can enhance various aspects of your life. By applying these thinking styles in everyday situations, you can become a more effective and well-rounded thinker.

Key Takeaways:

• Critical thinking and strategic thinking are both essential approaches to decision-making.
• Critical thinking involves analyzing and evaluating information objectively to make informed decisions.
• Strategic thinking focuses on long-term planning and anticipating future scenarios.
• Both skills are vital for making sound and rational decisions.
• Critical thinking and strategic thinking have unique qualities.

Q: What is the difference between critical thinking and strategic thinking?

A: Critical thinking involves analyzing and evaluating information to make informed decisions, while strategic thinking focuses on long-term planning and proactive decision-making.

Q: How can I develop my critical thinking skills?

A: Developing critical thinking skills involves practicing effective questioning techniques, actively listening, and using logical reasoning to assess information objectively.

Q: What are some examples of strategic thinking?

A: Examples of strategic thinking include anticipating future scenarios, considering multiple perspectives, and making decisions that align with long-term goals and objectives.

Q: What are the fundamental differences between critical thinking and strategic thinking?

A: Critical thinking is centered around analyzing and evaluating information, while strategic thinking focuses on making proactive decisions and considering long-term implications.

Q: Why is critical thinking important in decision-making?

A: Critical thinking is vital in decision-making because it allows us to assess information objectively, identify biases, and consider multiple perspectives, leading to more sound and rational decisions.

Q: What are the benefits of strategic thinking?

A: Strategic thinking offers benefits such as improved problem-solving abilities, increased adaptability, and better preparedness for future challenges.

Q: What strategies can I use to improve my critical thinking skills?

A: Strategies for improving critical thinking skills include practicing effective questioning techniques, actively listening, and engaging in logical reasoning.

Q: How can I enhance my strategic thinking abilities?

A: To enhance strategic thinking abilities, it is important to embrace creativity, be comfortable with ambiguity, and cultivate a future-oriented mindset.

Q: How can critical and strategic thinking be applied in everyday life?

A: Critical and strategic thinking are applicable in personal relationships, problem-solving scenarios, and career advancement opportunities.

Q: What is the importance of understanding the difference between critical thinking and strategic thinking?

A: Understanding the  difference between critical thinking and strategic thinking  allows individuals to apply the appropriate approach depending on the situation, resulting in more effective decision-making.

In conclusion, when it comes to  critical thinking vs strategic thinking , both approaches have their unique strengths and play important roles in decision making.

It’s essential to understand the differences between these thinking styles and their practical applications. By improving both critical thinking and strategic thinking skills, we can become more effective problem-solvers and decision-makers. Critical thinking allows us to analyze information objectively and make rational decisions, while strategic thinking encourages us to plan for the long term and anticipate future challenges.

Remember, critical thinking and strategic thinking are not mutually exclusive. Instead, the two styles complement each other.

By embracing both, we can become more well-rounded thinkers and make better-informed decisions.

So, whether you’re applying these thinking styles in your personal relationships, professional life, or problem-solving, always remember to utilize both critical and strategic thinking to achieve success.

Looking to boost your skills and creativity ? Come join us at GK Liggans where it is all about building skills and creative mindsets in life, work, and leadership.

I'm a certified coach and multi-creative artist who loves to live, work, and lead with creativity while helping others do the same. Passionate about making your professional development easy. It's all about the right mindset, skillset, and toolset.

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Ideas and insights from Harvard Business Publishing Corporate Learning

Strategic Thinking: Because Good Ideas Can Come From Anywhere

As part of our update to the Harvard ManageMentor Strategic Thinking topic, we asked Mason Weintraub, Director of Digital Engagement at Oxfam America, about the importance of strategic thinking. Here’s what Mason had to say:

I often think I’m expected to have all the answers about what to do with digital strategy. But the reality is that I lead a very talented team, and one of the ideas that we have tried to engender on the team is that good ideas can come from anywhere.

“Good ideas can come from anywhere.” Most of us recognize the wisdom embedded in that statement, yet we still see strategy as the realm of our organization’s senior leaders. That may be because of our tendency to equate strategic thinking with strategic planning. Although these practices are related and equally necessary for organizational success, they are actually quite distinct.

Strategic planning vs. strategic thinking

In strategic planning, leaders gather data and decide on the path the organization will take to achieve its goals. With strategic thinking, employees at all levels and in all functions continually scan for new ways to contribute to the organization’s success. They apply those insights as they carry out organizational priorities and provide input to the overall strategy. In this way, strategic thinking is part of everyone’s job – whatever their role or level of responsibility.

Why is this ability to think strategically especially important now? Today’s organizations are more dispersed and less hierarchical than ever before. With the pace of change continuing to rise, it’s no longer feasible for people to wait for “orders from above.” All employees must keep an eye on the future, not just react to what’s happening in the present. They need to look beyond their functional areas to become aware of the bigger context in which they operate. And they have to be agile learners who identify opportunities by challenging their own and their team’s assumptions about how things work in their organization and industry.

Becoming a strategic thinker

With strategic thinking taking on even greater importance in organizations, we’ve made key updates to the Harvard ManageMentor Strategic Thinking topic. The content we’ve added is geared to helping people boost their productivity and effectiveness by making strategic thinking a habit, and includes practical ways that enable them to do so.

One practice is simply making the time to think strategically – something that’s not always easy in today’s fast-paced business settings. Another involves inviting dissent on your team. To make strategic decisions, you need people on all sides of an issue to speak their minds. By letting team members know that speaking up is an important part of their jobs, you free them to provide important input.

Other strategic thinking practices are useful for training yourself to see opportunities and threats well before they happen. For example, most of us are comfortable using convergent thinking – analysis, logic, and reasoning – to come up with the “best” option from a set of choices. We tend to be less adept at divergent thinking, which involves generating lots of ideas with the goal of finding innovative solutions. This isn’t an either-or process: When you first diverge as a team to generate ideas and then converge on a path forward, you improve your ability to design and implement strategic actions.

Don’t let the future surprise you

The future will undoubtedly look a lot different from today. No one can predict tomorrow, but by identifying different scenarios, you and members of your team stretch your thinking about what opportunities and threats might emerge, how they might impact your organization, and what you can do about them. You learn to enact truly meaningful change rather than make incremental improvements. And it all begins with strategic thinking.

How do you foster strategic thinking throughout your organization?

Janice Molloy is a content researcher with Harvard Business Publishing Corporate Learning. Email her at  [email protected] . 

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Strategic thinking: the pathway to the top.

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stepping stones across a pond.

It is a tale as old as time: a qualified candidate is ready to be promoted, but it never seems to happen. What if this common problem that leaders experience could be solved with one overlooked leadership quality?

If you want to ensure that you will be considered for higher-level positions, I suggest you focus on your strategic thinking skills. In addition, you ought to consider how well you transmit your interest in your organization's strategy to those around you.

Zenger Folkman's research confirms that others' perceptions of poor or absent skills in thinking strategically could be a significant anchor holding you back.

The majority of leaders have a sharp focus on operational, tactical, and interpersonal issues. They get projects done on time, solve difficult problems, delve into new technology, and resolve spats between subordinates and other groups. They assume that the successful execution of these activities puts them in contention for a higher-level position. Unfortunately, they are wrong.

Three Studies on Strategic Thinking

1.     Several years ago, a highly respected client organization executed a significant downsizing. They let go over 100 executives whose average tenure was 17 years. They asked us to analyze the data we had gathered before the layoffs to understand what caused these executives to get derailed.

We discovered that one of the most significant issues for the terminated group was the difference in their ratings of effectiveness on the leadership quality, “Strategic Vision.” Each of the executives had participated in a 360 feedback assessment where their manager, peers, direct reports, and others rated their effectiveness on a series of leadership competencies. The total population of leaders we assessed had an average score on Strategic Vision at the 54 th percentile. The group who was terminated scored at the 32 nd  percentile. Written comments about these leaders included comments such as, “Operations-oriented, not strategic” or “Handled narrow roles well, but floundered in organizational navigation and setting strategic direction.”

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2.     A second study we conducted was in a different firm. It involved 379 managers, of whom 116 were designated as having the highest potential. The graph below shows the difference in the effectiveness ratings from the 360 on the leadership quality “Strategic Perspective.” A group of senior executives had classified all the leaders as to whether they were in the category of “High Potential," “Promotable," or “Develop in Place.”

Note that the High Potential group was rated significantly higher on their effectiveness at Strategic Perspective than the Promotable group (T-Value = 5.607, sig. 0.000). To further verify our conclusions, we analyzed the data employing an experimental design where only 50% of the leaders were randomly selected for the analysis. The difference remained statistically significant (T-Value = 3.882, sig. 0.000).

Zenger Folkman Research Strategy and Degree of Potential

3.     In a third, much larger study, we again analyzed 360-degree feedback results from 100,856 leaders, comparing them based on their organizational hierarchy level. It is clear from the graph below that Top Managers were rated substantially higher on Strategic Perspective than Senior Managers (T-Value = 22.90, sig. 0.000). Once again, an experimental design randomly selecting 50% of the sample indicated that the results remained statistically significant (T-Value = 16.722, sig. 0.000). Upon analyzing all of the 19 leadership qualities evaluated, we discovered that Strategic Perspective was the leadership quality that most powerfully separated Top Managers from Senior Management. It showed the largest and most statistically significant difference between the two groups.

Zenger Folkman Study Strategic Perspective and Position

These three studies show that a key characteristic that is highly correlated with promotion is the ability to think strategically. It does not differentiate leaders at other levels in the organization. For example, the number one leadership quality differentiating individual contributors from supervisors is Taking Initiative. But for senior leaders, the one competency that helped them stand out was Strategic Perspective.

Developing Strategic Perspective

Strategic thinking involves thinking about larger, macro issues, in contrast to the microfocus that many tend to take. Strategic thinking means seeing how the industry and the broader economy function. It also includes thinking long-term in contrast to near-term.

Being more strategic begins with a change in thinking. Instead of only focusing on operational, tactical, and interpersonal issues, begin to ask yourself tough questions such as, “Why do we operate in this particular way?”, “Why are our competitors doing so well?”, “Is there some organization out there that could disrupt our business?”, and “What changes in the future will have a significant impact on our business?”

To help us understand what leaders with high strategic thinking skills were doing differently, my colleague Jack Zenger and I looked at data from over 100,000 leaders. We sought to understand what else those who were most strategic were doing that helped them build that skill. We discovered five skills we call companion behaviors to Strategic Perspective. Leaders who were the most competent at Strategic Perspective were also very competent at these skills. We infer that improving these skills will help every leader become more strategic.

1.      Communicate Powerfully . This includes listening, gathering, and, most notably, sharing information. The leaders rated the highest on strategic perspective brought strategy into almost every conversation to connect what they are doing to what the organization needs to do to succeed.

2.      Foster Innovation . The world is changing. Disruption is everywhere. Ideally, leaders will disrupt their own business before a competitor disrupts it for them.

3.      Focus on the Customers . Customers know things you do not know and see things you do not see. This is probably the least intuitive of these correlated behaviors. Getting out of the office and visiting customers has profound outcomes. Customers help you be a great success if you listen to them, understand their current needs, and anticipate needs in the future.

4.      Inspire and Motivate . If a strategy is to be more than words and assumptions, others need to believe in it and implement it. The ability to inspire and motivate others is a vital part of making any strategy successful.

5.      Establish Stretch Goals . Stretch goals help make strategies concrete. When employees accomplish stretch goals, their engagement increases and their self-confidence goes up. The organization moves one step further toward success.

Changing Other’s Perceptions of Your Strategic Thinking

The late Peter Drucker observed that career success does not merely depend on someone doing a good job. Bosses and colleagues need to know that the person is doing a good job. In the case of strategic thinking, it is equally as crucial for others to perceive that the executive possesses that quality as it is actually to possess that quality.

I heard of a case recently in which a coach advised a woman executive, who had received lower ratings on her strategic thinking skills, to consciously make some changes in the language she used in management meetings. It was suggested by the coach that the executive introduce her comments in management meetings with phrases such as: “I think this would better support our strategy if we…” Or, “How does what’s being suggested align with our strategy for this department?" This rather simple change in language had a positive outcome. A year later, a repeat 360-degree feedback showed a dramatic improvement in her colleagues’ assessments of her strategic perspective.

If a lower-level employee were to become so focused on the company strategy that they failed to accomplish their operational goals, this could negatively impact their career. But when a higher-level executive is only focused on operational execution rather than strategy, not only will that negatively impact their career, but it will also impact the organization's success.

If you want a different ending to the story of your career, start thinking more about strategy. Ask yourself, do others perceive me as a strategic leader? Take a look at these companion behaviors, incorporate them into your routines, and resolve to be the leader who can see and communicate the whole picture.

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Strategic Thinking Definition, Skills, Examples, and Steps

Published: 29 January, 2024

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Welcome to Digital Leadership, where we are committed to harnessing emerging technologies and innovative business models to better serve customers. As experts in innovation and digital transformation, our mission is to guide organizations in creating value for all stakeholders, supporting them from strategic conceptualization to effective execution. The ability to think strategically is a cornerstone for success, strategic thinking centres on discovering and cultivating distinctive opportunities to enhance organizational value.

Digital Leadership’s expertise in strategy and execution, invites business entrepreneurs to delve deeper into the realms of strategic thinking for enduring success. We provide Strategic Management Consulting services to empower businesses to elevate their strategic acumen and navigate the complex landscape of value creation . Through collaborative initiatives, we guide organizations in unlocking unique opportunities and ensuring enduring success in today’s dynamic business environment.

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This article delves into the intricacies of strategic thinking , outlining its definition, key characteristics, and its vital role in both leadership and business. We will explore the steps to develop strategic thinking skills and provide real-life examples to illustrate its application. As we navigate through this exploration, we will differentiate strategic thinking from strategic planning and highlight its significance in digital transformation strategy.

What is Strategic Thinking?

Strategic thinking is centred on identifying and cultivating distinctive opportunities that can generate value for your organization. It asserts that even non-statistically significant data in various forms deserves thorough consideration to inform decisions about the future. It is a multifaceted concept that goes beyond mere planning. It involves the ability to analyze situations, anticipate future trends, and make informed decisions that contribute to an organization’s long-term success.

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The UNITE Perspectives On Strategy – A Framework For Strategic Thinking

Strategic thinking is a crucial element of effective leadership, involving the ability to envision and plan for the future while navigating the complexities of the present. It goes beyond day-to-day tasks, focusing on long-term business goals and adapting to dynamic environments. Strategic thinking and strategic planning, while interconnected, serve distinct roles in organizational development and decision-making. Strategic thinking is a continuous and dynamic mental activity that envisions the future, identifies opportunities, and fosters innovation. It emphasizes creativity, adaptability, and a proactive mindset, laying the conceptual foundation for an organization’s direction.

Strategic planning is a systematic process that translates strategic thinking into actionable plans. It involves setting specific goals, defining measurable objectives, and outlining the steps and resources needed for implementation. While strategic thinking explores possibilities and challenges assumptions, strategic planning focuses on specific actions, resource allocation, and timelines. Strategic thinking is future-oriented and adaptable, providing the vision upon which strategic planning builds the roadmap for organizational development. Both are essential components, working collaboratively to navigate the complexities of the business landscape.

At Digital Leadership, strategic thinking is perceived as the art of proactively shaping an organization’s future. This involves anticipating challenges, recognizing opportunities, and aligning resources effectively. To delve deeper into the intricacies of strategic thinking and its role in crafting innovative business strategies , explore the insights provided in our book, “How to Create Innovation.” It serves as a comprehensive guide, offering valuable perspectives on navigating the dynamic landscape of strategic decision-making and fostering a culture of innovation within your organization.

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Strategic Thinking Skills

Enhancing strategic thinking skills is crucial for effective decision-making and leadership. Here are key skills compiled from various sources:

• Active Listening: Engage attentively to comprehend diverse perspectives.
• Analytical Skills: Utilize data and insights to make informed decisions.
• Implement the Plan: Execute strategies efficiently to achieve business goals.
• Observing and Seeking Trends: Stay vigilant to identify emerging patterns and trends.
• Question Everything: Foster a questioning mindset to challenge assumptions.
• Strategic Thinking: Cultivate the ability to envision and plan for the future.
• Understand the Consequences: Evaluate potential outcomes and impacts.
• Articulate Your Goals Clearly: Clearly express your objectives for better alignment.
• Being Creative: Embrace creativity to generate innovative solutions.
• Communicate Clearly: Convey ideas and strategies with clarity.
• Consider Opposing Ideas: Encourage diverse viewpoints for comprehensive decision-making.
• Critical Thinking: Assess information objectively to make well-founded decisions.
• Get Other Perspectives: Seek input from different sources to broaden your understanding.
• Learn and Improve: Embrace a continuous learning mindset for personal and professional growth.
• Vision and Purpose: Align decisions with a clear vision and overarching purpose.
• Prioritization: Effectively prioritize tasks and goals based on strategic importance.
• Adaptability: Be flexible and adapt strategies to changing circumstances.
• Ask Strategic Questions: Pose insightful questions to deepen strategic insights.
• Be Aware of Bias: Recognize and mitigate personal biases in decision-making.
• Analysis: Break down complex situations into manageable components for analysis.
• Scenario Planning: Anticipate potential scenarios and plan accordingly.

These skills collectively contribute to developing a robust strategic thinking mindset, essential for navigating complex business landscapes.

How to Develop Strategic Thinking Skills

Acquiring the art of strategic thinking is a developed skill, not an innate talent. This section outlines practical steps to guide individuals in enhancing their strategic thinking skills . Tailored for aspiring strategic thinkers and leaders, these steps offer valuable insights to successfully navigate the complexities of the business landscape.

(1) Pose Thoughtful Queries for Strategic Insights

Challenge conventional wisdom by formulating insightful questions that stimulate critical thinking, fostering a deeper understanding of issues and encouraging innovative solutions.

(2) Observe, Reflect, and Stay Informed

Allocate time to observe industry trends and changes, reflecting on these observations to gain valuable insights that inform strategic decisions.

(3) Embrace Diverse Perspectives Through Opposing Ideas

Foster a culture that values diverse viewpoints, actively seeking and considering opposing ideas to formulate well-rounded and robust strategic plans.

(4) Invest in Continuous Learning and Professional Development

Systematically refine strategic thinking skills through continuous learning. Enroll in courses, workshops, or programs dedicated to enhancing strategic thinking.

(5) Master Your Organization and Industry Dynamics

Acquire in-depth knowledge of your organization, industry, and market sector to make informed strategic decisions based on a comprehensive understanding of internal and external factors.

(6) Prioritize Strategic Thinking with Dedicated Time

Schedule specific time slots for focused strategic thinking in your routine. Utilize this time to address fundamental questions about your organization’s direction, challenges, and opportunities.

(7) Effectively Communicate Strategic Insights to Influence

Cultivate strong communication skills to articulate strategic insights clearly. Effective communication is pivotal for gaining support and buy-in for proposed strategic initiatives.

By systematically incorporating these steps into your professional journey, you actively develop and refine your strategic thinking skills. This intentional approach empowers you to confidently navigate the complexities of strategic decision-making.

Strategic Thinking Examples

Strategic thinking manifests in various scenarios, demonstrating its impact on organizational success. Below are real-life examples showcasing how strategic thinking has influenced key decisions and outcomes:

• Distinguish between urgent and important tasks to allocate resources efficiently and achieve optimal outcomes.
• Strategically allocate resources based on the prioritization of tasks, ensuring maximum efficiency and effectiveness.
• Systematically analyze customer feedback to identify trends and insights, informing strategic decisions for product enhancements and customer satisfaction.
• Develop a strategic roadmap by setting both long-term and short-term business goals aligned with the organization’s overarching vision.
• Utilize past sales data to derive insights, identify patterns, and inform strategic decisions for future product development and market positioning.
• Conduct thorough market analysis to identify gaps and opportunities, allowing for strategic entry or expansion into specific market segments.
• Evaluate the alignment between products and market demands, ensuring a strategic fit that resonates with the target audience.
• Develop and implement a deliberate brand positioning strategy that aligns with market trends, consumer preferences, and organizational values.

These examples showcase how strategic thinking is applied across various facets of business operations. By integrating these practices, organizations can foster a strategic mindset, leading to informed decision-making and sustainable success.

In a real-world scenario, imagine a tech company facing fierce market competition and disruptive technological shifts. A strategic thinker in the managerial role would first pinpoint the challenges: intense competition and the impact of tech disruptions. By actively analyzing industry trends and asking crucial questions, such as how to stand out in a crowded market, strategic thinking takes shape.

Encouraging team discussions to gather diverse perspectives ensures a comprehensive understanding of potential strategies. Crafting innovative solutions collaboratively, like exploring unique product features or strategic partnerships, follows. Proactively anticipating future challenges and formulating contingency plans showcase the hands-on nature of strategic thinking.

Effective communication of the strategic vision is crucial. Aligning stakeholders, fostering commitment to the plan, and conveying a well-defined vision are integral. This example highlights that strategic thinking is not just theory; it’s a practical skill with tangible outcomes in navigating complex business landscapes.

What is Strategic Thinking in Leadership

Strategic thinking in leadership goes beyond day-to-day decision-making; it involves a comprehensive approach to envisioning and navigating an organization’s future. It’s the capability of leaders to analyze the current landscape, anticipate future challenges and opportunities, and formulate innovative strategies to drive the organization toward success. Here’s a deeper exploration of what strategic thinking entails in leadership:

• Visionary Leadership: Strategic thinking leaders possess a visionary outlook, setting a clear and inspiring direction for the organization’s future.
• Long-Term Planning: Instead of focusing solely on immediate concerns, strategic leaders plan for the long term, considering sustainable growth and evolution.
• Adaptability: Leaders who think strategically are adaptable, and ready to adjust strategies in response to changing circumstances and market dynamics.
• Risk Management: They evaluate risks meticulously, making calculated decisions that balance potential rewards with potential pitfalls.
• Innovation Advocacy: Encouraging innovation is a key aspect. Strategic leaders foster a culture where novel ideas are valued, leading to continuous improvement.
• Decision-Making: Strategic thinking leaders make decisions based on a holistic understanding of the organization’s goals, industry trends, and competitive landscape.
• Collaborative Approach: They understand the importance of collaboration, seeking input from diverse teams to enhance the quality of strategic decisions.
• Communication Skills: Effective communication is paramount. Leaders articulate the strategic vision in a way that inspires and aligns the entire organization.
• Alignment with Values: Strategic leaders ensure that strategic initiatives align with the organization’s core values and mission.
• Continuous Learning: Leaders committed to strategic thinking engage in continuous learning, staying informed about industry advancements and emerging trends.

In essence, strategic thinking in leadership is about proactively shaping the organization’s future, and making informed choices that lead to sustained success and relevance in a dynamic business environment.

Key Characteristics of Strategic Thinking

Strategic thinking is a multifaceted skill encompassing various key characteristics that contribute to its effectiveness. These attributes set strategic thinkers apart and form the foundation for navigating complex business landscapes. Here are the key characteristics of strategic thinking:

• Forward-Thinking: Strategic thinkers have a future-oriented mindset, anticipating trends, challenges, and opportunities to proactively shape the organization’s destiny.
• Analytical Acumen: The ability to analyze vast amounts of information, discern patterns, and derive meaningful insights is crucial for strategic thinking.
• Innovative Vision: Strategic thinkers embrace innovation, seeking novel solutions and envisioning possibilities that disrupt conventional norms.
• Adaptability: Recognizing the dynamic nature of the business environment, strategic thinkers are adaptable and agile in responding to changes and uncertainties.
• Holistic Perspective: They consider the bigger picture, understanding the interconnectedness of various elements within and outside the organization.
• Risk Assessment: Strategic thinkers evaluate risks objectively, weighing potential rewards against potential drawbacks and making informed decisions.
• Long-Term Orientation: Rather than focusing solely on short-term gains, strategic thinkers prioritize long-term objectives and sustainable growth.
• Open-Mindedness: Embracing diverse perspectives and being receptive to new ideas fosters a climate of creativity and robust strategic planning.
• Effective Communication: Strategic thinkers communicate their vision and plans clearly, ensuring alignment and understanding throughout the organization.
• Results-Driven: Ultimately, strategic thinkers are driven by results, aiming to create lasting value and impact for the organization’s stakeholders.

These key characteristics collectively empower individuals to think strategically, guiding organizations toward success in today’s dynamic and competitive business landscape.

Strategic Thinking in Business

Strategic thinking in the realm of business is a dynamic and critical process that involves the exploration and refinement of existing business models . This approach entails a comprehensive evaluation of the strengths and weaknesses inherent in the current model. By strategically thinking, businesses can foster innovation, identify new revenue streams , optimise operational processes, and adjust to the evolving demands of the market. This strategic perspective is essential for staying competitive and ensuring long-term success in the business landscape.

Applying Strategic Thinking to Business Models

Strategic thinking serves as a catalyst for transforming and optimizing traditional business models. This process entails a meticulous examination of the current model, pinpointing both its strengths and weaknesses. Through strategic thinking, businesses can unleash innovation by exploring novel revenue streams, refining operational processes, and adapting to the ever-changing landscape of market demands. This application of strategic thinking is instrumental in steering businesses towards resilience, growth, and sustained success.

The Business Model Canvas becomes a crucial tool in the strategic thinking process. It provides a visual framework for understanding, designing, and reinventing business models. By leveraging the canvas, organizations gain insights into key components such as value proposition , customer segments, channels , and cost structures. This clarity enhances strategic decision-making and fosters a more agile and adaptive business model.

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The significance of strategic thinking in digital transformation.

In digital transformation, strategic thinking holds immense significance. It serves as the guiding force that shapes and directs the course of digital initiatives. It ensures a holistic approach, considering not only technological aspects but also the broader implications on business models, processes, and customer experiences. By strategically navigating the complexities of the digital transformation strategy , organizations can leverage emerging technologies effectively, enhance operational efficiency, and stay ahead in the competitive digital landscape. The application of strategic thinking becomes a linchpin for organizations aiming to achieve meaningful and sustainable digital transformation outcomes.

Real-Life Examples of Strategic Thinking in Business

To illustrate the tangible impact of strategic thinking, let’s delve into real-life examples where organizations successfully applied this approach to achieve remarkable outcomes.

• Apple Inc.: Apple’s strategic thinking is evident in its continuous innovation and product development. The introduction of the iPod, iPhone, and iPad showcased a forward-thinking approach that revolutionized the consumer electronics industry.
• Amazon: Amazon’s strategic thinking is exemplified in its customer-centric model and diversification. The company started as an online bookstore and strategically expanded into diverse product categories, cloud services (AWS), and even original content creation.
• Tesla: Tesla’s strategic thinking is embodied in its pursuit of sustainable energy solutions. The decision to focus on electric vehicles, solar energy, and energy storage reflects a long-term vision that goes beyond automotive manufacturing.
• Netflix: Netflix’s strategic thinking is evident in its shift from a DVD rental service to a global streaming platform. Embracing digital disruption, Netflix strategically invested in original content creation, transforming the entertainment industry.
• Google: Google’s strategic thinking is showcased in its commitment to innovation. From dominating the search engine market, Google expanded into diverse areas such as online advertising, mobile operating systems (Android), and artificial intelligence.

Differentiating Strategic Thinking from Other Types of Thinking

Thinking is a multifaceted cognitive process that varies across different contexts and objectives. Let’s delve into the distinctions between strategic thinking and other types of thinking:

• Strategic Thinking: Involves envisioning the future, identifying opportunities, and devising plans to achieve long-term goals.
• Critical Thinking: Focuses on analyzing, evaluating, and forming judgments about information or situations, emphasizing logical reasoning.
• Strategic Thinking: Emphasizes planning and decision-making for achieving organizational objectives, often involving a systematic approach.
• Creative Thinking: Involves generating novel ideas, solutions, or approaches, fostering innovation and unconventional thoughts.
• Strategic Thinking: Encompasses a holistic view, considering the overall direction and positioning of the organization.
• Analytical Thinking: Concentrates on breaking down complex problems into smaller components for in-depth examination and understanding.
• Strategic Thinking: Primarily concerned with defining goals, formulating plans, and aligning resources to achieve a predefined vision.
• Design Thinking: Centers around a human-centric approach, empathizing with end-users, and iteratively prototyping solutions for complex problems.
• Strategic Thinking: Focuses on organizational strategy, often involving hierarchical planning and coordination.
• Systems Thinking: Considers the interrelated components and relationships within a system, emphasizing holistic understanding and feedback loops.
• Strategic Thinking: Involves dynamic, adaptive, and non-linear planning, considering various scenarios and external influences.
• Linear Thinking: Follows a sequential and step-by-step approach to problem-solving without necessarily accounting for broader systemic factors.
• Strategic Thinking: Concentrates on forward-looking planning, often in a structured manner, to gain a competitive advantage.
• Lateral Thinking: Encourages unconventional and creative approaches to problem-solving, challenging traditional thought patterns.

Understanding these differences is crucial as it highlights the versatility of thinking processes and underscores the need for a well-rounded cognitive toolkit, incorporating strategic thinking when long-term planning and vision are paramount.

In conclusion, strategic thinking is the compass that guides businesses through the complexities of today’s ever-evolving landscape. By developing and nurturing strategic thinking skills , organizations can pave the way for sustained success and create value for everyone they serve. At Digital Leadership, we are passionate about empowering organizations to embrace strategic thinking. If you’re ready to elevate your strategic approach, contact us today for a transformative journey from strategy to execution.

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5 minute read

Review any list of sought-after skills for leaders today, and you’re certain to find a range of advanced thinking skills, including critical thinking and strategic thinking, among them.

Given the current state of business and work, this makes sense. Jobs are becoming increasingly complex and functions more interconnected, meaning decisions or solutions in one area can have broad impact in others. Good decision making and the ability to craft solutions to complex problems are what move an organization forward. As a result, organizations routinely look for these skills when making hiring decisions. Terms like analyze, innovate, reason, ideate, evaluate, decision making, and problem solving are common on job postings and among core competencies. The higher someone moves in the organization, the more critical such skills become.

It’s no wonder, then, that our clients are consistently looking to build these skills among their leadership teams. Most often, they summarize these needs as either critical thinking or strategic thinking . The ability of leaders to do both can greatly affect business outcomes. When decisions are based upon erroneous, partially false, or incomplete information and when leaders fail to think clearly about the full implications of their actions, the consequences can be dire for employees, customers, stakeholders, organizations, and even communities. The need to develop these skills, then, is a given.

“Knowing how to think empowers you far beyond those who know only what to think.” —Neil deGrasse Tyson

One thing we’ve discovered is that our clients often use these terms interchangeably, or they refer to one when they may mean the other. In fact, in researching the content for our Critical Thinking and Strategic Thinking courses, I found that happens a lot, depending on the source. Indeed, there is overlap, but the distinction is important for us to make sure we’re addressing the intended learning needs.

According to Richard W. Paul, founder of the Foundation for Critical Thinking, “Critical thinking is thinking about your thinking while you’re thinking in order to make your thinking better.” In other words, it’s an active, continuous process of gathering, synthesizing, and analyzing data to inform decisions and solutions. The “thinking about your thinking” part, as Paul puts it, is about identifying biases and testing assumptions that can muck up the works. Critical thinking focuses on identifying root causes of problems, considering alternative perspectives, weighing possibilities, and coming to a conclusion or choice. Leaders use critical thinking to navigate all manner of routine and high-stakes challenges and opportunities.

Critical thinking, then, can be considered a tool that enables strategic thinking. Strategic thinking is future-oriented and typically applied in the context of planning how best to achieve a specific goal or outcome. Critical thinking practices of gathering and analyzing data to inform choices and conclusions apply, but typically in the consideration of a long-term prospect. Thus, strategic thinking’s purview considers not just the next move but also the one after that, and the one after that, and so on. Pros versus cons, strengths versus weaknesses, risks versus opportunities, and what-ifs and contingencies are usually part of the process. Leaders use strategic thinking when plotting the “how” of an initiative or goal.

Of course, both of these are essential to a leader’s success. Talking clients through our approach to each of these skills, how they’re related, and how we’ve distinguished them from a learning perspective helps us ensure we’re offering solutions that are the right fit for their needs. In other words, we inform and support the critical thinking process that helps them think strategically about how to invest their learning resources to achieve optimal results—how meta!

Developing and honing the ability to think critically and strategically takes time. Leaders committed to “knowing how to think” and “thinking about [their] thinking while [they’re] thinking” (as the two of top thinkers I quoted earlier implied) will make a big impact on their personal and organization success.

Terri Schell

Practice leader, learning & development.

Terri has spent more than 15 years in various learning roles, including facilitation, instructional design and development, and management. Learning content creation is her jam. She is passionate about building relevant, engaging, and practical learning solutions that make leaders and workplaces better.  Terri recently led the development team for a new e-learning course that supports work-life alignment .

If you enjoyed this blog, please check back regularly for additional insightful and informative posts. If you prefer to be notified when a new post is live, please sign up below to receive Dion Leadership email alerts.

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Make Time for Strategic Thinking Every Day

If you believe that only senior executives need to think strategically, think again. No matter what level you’re at, strategic thinking is a critical skill — one that can always be improved. To hone your capacity to see the big picture, start by making sure you have a solid understanding of the industry context and […]

If you believe that only senior executives need to think strategically, think again. No matter what level you’re at, strategic thinking is a critical skill — one that can always be improved. To hone your capacity to see the big picture, start by making sure you have a solid understanding of the industry context and business drivers. Make it a routine to explore the internal trends in your day-to-day work. Pay attention to the issues that get raised repeatedly, and synthesize the common obstacles your colleagues face. Be proactive about connecting with peers in your organization and in your industry to understand their observations of the marketplace, and share this information across your network. Take the time to understand the unique information and perspective that your job function contributes to the company. Thinking at this higher level will position you to be more strategic in your role.

Source: Adapted from “4 Ways to Improve Your Strategic Thinking Skills,” by Nina Bowman

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Insight • November 6, 2019

Three Types of Thinking and Why They’re All Important

By Krista Gerhard

How often do you think about thinking ?  For most of us, the answer would probably be, “not very.”  As we manage our lives and do our jobs, we tend to employ different approaches to thinking without really being aware of it.  For the most part, that works. 

However, the times keep on changing and it’s becoming increasingly important for us to be more conscious of how we think, and to develop our thinking skills.  This is especially important if you work in a Learning & Development (L&D) role because you’re also responsible for developing those skills in others and helping them succeed in this changing world. 

In this article, we will define three very important types of thinking:  Critical, Strategic, and Entrepreneurial.  In subsequent articles, we will go into more detail about how L&D can use—and teach—all three forms of thinking.

Multiple types of thinking skills are becoming more important

In its Future of Jobs Report, the World Economic Forum shares its 2022 Skills Outlook .  This is a listing of the top skills that employers will demand in the global economy of 2022.  Let’s take a look at the top 10 growing skills:

• Analytical thinking and innovation
• Active learning and learning strategies
• Creativity, originality and initiative
• Technology design and programming
• Critical thinking and analysis
• Complex problem-solving
• Leadership and social influence
• Emotional intelligence
• Reasoning, problem-solving and ideation
• Systems analysis and evaluation

It’s interesting that at least 7 of the top 10 hinge on one or more forms of thinking mentioned above.  For many roles, individuals will need to be proficient critical, strategic, and entrepreneurial thinkers.

Critical, strategic, and entrepreneurial thinking:  What’s the difference?

Critical thinking.

We’ve written before about critical thinking , including the link between critical thinking and confidence.  However, we didn’t offer a definition.  Well, here it goes: 

Critical thinking is an effortful and continuous analysis and revision of one’s thinking processes and output for reasoning and logic and to eliminate bias in order to increase the probability of a desirable outcome. 1

Wow!  That’s a mouthful.  It basically means that critical thinkers actively think about how they think! They gather, synthesize, and evaluate information in order to make decisions; however, they do so in a way that uses logic and reason.  Plus, they consciously work to avoid falling prey to various cognitive biases that can cloud their judgement.  At its heart, critical thinking is analytical and logical.

Strategic Thinking

Strategic thinking is a mental process that is applied when one is trying to achieve some goal or set of goals.  Whereas critical thinking is all about analysis, logic and reason, strategic thinking is about planning.  It involves being able to understand cause and effect and seeing several steps ahead in order to achieve some desired outcome. 

Strategic thinking does not exist in a vacuum.  Strategic thinkers typically must employ solid critical thinking skills to analyze and understand their current situations, then layer in strategic thinking to forge a path forward.  When thinking strategically, a person should also use critical thinking to discern the likely outcomes of one planned action versus another.

Entrepreneurial Thinking

Entrepreneurial thinking can also be called creative thinking.  It involves seeing things differently than most other people.  Entrepreneurial thinkers are able to identify opportunities that others may miss.  They’re also able to see problems and develop solutions that others might consider “outside the box.” 

Entrepreneurial thinking also doesn’t exist in a vacuum.  An entrepreneurial thinker must think critically about the ideas that he or she generates.  Otherwise, they run the risk of developing “flashy” ideas that are unworkable in the real world.  They must also think strategically when working to bring the best entrepreneurial ideas to reality.

Here’s another important point:  critical, strategic, and entrepreneurial thinking skills can be taught.  Sure, most people will have differing natural aptitudes for various types of thinking. For example, Person A might naturally be more “entrepreneurial” in their thinking whereas Person B might be more inclined to think critically.  However, people can learn to use all three types of thinking.

Coming next…

In upcoming articles, we’ll explore two different aspects of all this that will be relevant to L&D professionals.  First, we’ll take a look at how L&D can use critical, strategic, and entrepreneurial thinking to improve the way L&D engages with its stakeholders and increase its effectiveness.  Second, we’ll dive into how L&D can help improve its learners’ critical, strategic, and entrepreneurial thinking skills.

• Halpern, D. F. (2014). Thought and knowledge: an introduction to critical thinking. New York: Psychology Press. Note: This definition is a compilation of various definitions from pages 8 and 9 in the source listed including one obtained via consensus from among 500 policy makers, employers and educators.

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The Ultimate Guide to Understanding Strategic Thinking vs. Strategic Planning

In today's rapidly changing business landscape, it is essential for organizations to adopt a proactive approach to achieve their goals and objectives. This is where strategic thinking and strategic planning come into play. While both terms are often used interchangeably, they have distinct meanings and purposes. In this ultimate guide, we will delve into the essence of strategic thinking and strategy planning, highlighting their differences and exploring their significance in various aspects of business management.

Decoding the Essence of Strategic Thinking

Strategic thinking is a cognitive process that involves envisioning future possibilities, evaluating the current state of affairs, and formulating innovative strategies to achieve desired outcomes. Unlike operational thinking, which focuses on day-to-day tasks, strategic thinking takes a broader perspective and emphasizes long-term success. It enables individuals and organizations to adapt to changing circumstances, identify opportunities, and overcome challenges.

When it comes to strategic thinking, there are several key elements that contribute to its effectiveness. One important aspect is the ability to think analytically. Strategic thinkers have a natural inclination to analyze data, identify patterns, and draw meaningful insights from complex information. This analytical mindset allows them to make informed decisions based on a thorough understanding of the situation at hand.

Essential Skills for Strategic Thinkers

Developing strong strategic thinking skills is crucial for individuals aspiring to leadership roles and organizations aiming to stay ahead of the competition. Effective strategic thinkers possess a combination of analytical, creative, and critical thinking skills. They have a knack for identifying patterns, trends, and opportunities, while also considering potential risks and constraints. Furthermore, they are excellent communicators, collaborators, and forward-thinkers.

Creative thinking is another vital skill for strategic thinkers. It involves the ability to generate new ideas, think outside the box, and explore alternative solutions. By embracing creativity, strategic thinkers can come up with innovative strategies that differentiate their organizations from competitors and drive sustainable growth.

The Impact of Strategic Thinking on Decision Making

Strategic thinking has a profound influence on decision-making processes within organizations. By considering multiple perspectives and potential outcomes, strategic thinkers can make informed choices that align with organizational goals and values. Moreover, they are adept at prioritizing and allocating resources strategically, which optimizes efficiency and helps organizations navigate complex environments.

Another aspect of strategic thinking that greatly impacts decision making is the ability to think critically. Strategic thinkers are skilled at evaluating information, questioning assumptions, and challenging the status quo. This critical mindset allows them to identify potential pitfalls, anticipate obstacles, and make proactive adjustments to their strategies.

In conclusion, strategic thinking is a powerful cognitive process that enables individuals and organizations to thrive in today's dynamic and competitive landscape. By combining analytical, creative, and critical thinking skills, strategic thinkers can envision the future, make informed decisions, and drive long-term success. Embracing strategic thinking is essential for those who aspire to leadership roles and organizations that strive to stay ahead of the curve.

Demystifying Strategy Planning

While strategic thinking lays the foundation for success, effective strategy planning is the roadmap that guides organizations towards their desired destination. Strategy planning involves translating abstract concepts and ideas into concrete action plans that can be executed by individuals and teams. It involves identifying objectives, setting targets, allocating resources, and formulating strategies to achieve specific goals.

Key Steps to Effective Strategy Planning

1. Assessing the Current Reality: To develop an effective strategy, it is essential to have a clear understanding of the organization's current strengths, weaknesses, opportunities, and threats. This involves conducting a thorough analysis of both internal and external factors that impact the organization's performance.

2. Defining Objectives and Goals: Strategy planning begins with defining clear and measurable objectives that align with the organization's mission and vision. These objectives serve as a guidepost for decision making and resource allocation.

3. Formulating Strategies: Once objectives are established, strategic planners develop strategies to achieve them. Strategies outline the broad approach and actions that need to be taken to reach the desired outcomes.

4. Resource Allocation: Effective strategy planning requires allocating resources such as budget, personnel, and technology strategically. This ensures that the necessary tools and support are available to implement the chosen strategies.

5. Implementation and Evaluation: Strategy planning is an ongoing process that involves both implementation and evaluation. It is crucial to monitor progress, reassess strategies when necessary, and make adjustments to ensure that goals are being achieved.

6. Communication and Collaboration: In addition to the key steps mentioned above, effective strategy planning also involves fostering a culture of communication and collaboration within the organization. This includes creating channels for open dialogue, encouraging feedback, and promoting cross-functional teamwork.

7. Risk Assessment and Mitigation: A comprehensive strategy planning process also includes assessing potential risks and developing mitigation strategies. This involves identifying potential obstacles or challenges that may arise during the implementation phase and proactively planning for them.

By expanding the scope of strategy planning to include communication and collaboration, organizations can enhance their ability to execute strategies effectively. This ensures that all stakeholders are aligned, informed, and engaged in the strategic planning process, leading to increased buy-in and commitment.

The Significance of Strategic Thinking in Product Management

In the realm of product management, strategic thinking plays a critical role in ensuring the success of products and services. Product managers are responsible for identifying market opportunities, defining product strategies, and guiding the development and launch of new offerings. Strategic thinking enables product managers to navigate market dynamics, anticipate customer needs, and position products effectively in competitive landscapes.

Moreover, strategic thinking in product management involves not only understanding the current market trends but also forecasting future shifts in consumer behavior and technology. By conducting thorough market research and competitor analysis, product managers can stay ahead of the curve and proactively adapt their strategies to meet evolving customer demands.

The Crucial Role of Product Managers in Organizational Strategy

Product managers are the bridge between the organization's overall strategy and the specific products and services it offers. They collaborate with various stakeholders, including marketing, sales, and engineering teams, to align product strategies with organizational goals. A strong strategic mindset enables product managers to make data-informed decisions, prioritize features, and allocate resources effectively.

Furthermore, product managers also play a vital role in fostering innovation within the organization. By encouraging a culture of creativity and experimentation, product managers can inspire cross-functional teams to think outside the box and develop groundbreaking solutions that drive business growth. This collaborative approach not only enhances product development processes but also cultivates a dynamic and forward-thinking organizational culture.

Differentiating Strategic Thinking from Strategy Planning

While strategic thinking and strategy planning are closely intertwined , it is essential to understand their nuances to leverage their benefits effectively. Let's explore the variances in nature and scope between these two essential components of organizational success.

Analyzing the Variances in Nature and Scope

Strategic thinking is a cognitive process that involves generating ideas, envisioning possibilities, and analyzing potential outcomes. It is a mindset that emphasizes innovation, adaptability, and long-term vision. On the other hand, strategy planning is a systematic and structured approach to translate strategic thinking into actionable plans. It focuses on defining goals, allocating resources, and outlining specific actions required to achieve desired outcomes.

Understanding the Time Horizon in Strategic Processes

Another key distinction is the time horizon associated with strategic thinking and strategy planning. Strategic thinking often takes a long-term perspective, considering future trends, developments, and potential scenarios. It enables organizations to anticipate and prepare for change. In contrast, strategy planning has a shorter time horizon, typically focusing on immediate and medium-term goals. It involves setting targets and developing short-term action plans.

Delving into the Decision-Making Processes

Strategic thinking and strategy planning also differ in their approaches to decision making. Strategic thinking emphasizes understanding complex issues, considering multiple perspectives, and exploring innovative solutions. It involves a more intuitive and exploratory decision-making process. In contrast, strategy planning involves making deliberate choices based on a systematic analysis of available data and resources. It prioritizes structured decision-making to achieve specific goals.

Tools and Techniques in Strategic Thinking vs. Strategy Planning

To support strategic thinking and strategy planning, various tools and techniques are available. Strategic thinking often involves brainstorming, scenario planning, SWOT analysis, and PESTLE analysis. These techniques encourage creativity, insight, and holistic thinking. Strategy planning, on the other hand, may rely on tools like the Balanced Scorecard, Porter's Five Forces, and value chain analysis to guide decision making, resource allocation, and performance measurement.

The Purpose and Objectives of Strategic Thinking

Strategic thinking serves as the foundation for effective strategy planning. It helps organizations anticipate change, identify opportunities, and ensure long-term success. The objectives of strategic thinking include fostering a culture of innovation, promoting adaptability, and enhancing an organization's competitive advantage.

Furthermore, strategic thinking is not limited to a specific group of individuals within an organization. It is a mindset that can be cultivated and encouraged at all levels. By empowering employees to think strategically, organizations can tap into a wealth of diverse perspectives and ideas, leading to more robust strategies and innovative solutions.

Moreover, strategic thinking goes beyond the confines of the business world. It can also be applied to personal development and decision making. By adopting a strategic mindset, individuals can navigate through life's challenges, set meaningful goals, and make informed choices that align with their long-term aspirations.

Inclusivity in Strategic Processes: Why It Matters

Lastly, it is crucial to recognize the significance of inclusivity in strategic processes. Strategic thinking and strategy planning benefit immensely from diverse perspectives and collaborative decision making. Inclusive strategic processes involve engaging stakeholders from different backgrounds, experiences, and expertise. This approach fosters creativity, encourages critical thinking, and ensures a holistic understanding of complex challenges.

As organizations navigate an increasingly complex and competitive business environment, understanding the nuances of strategic thinking and strategy planning is imperative. By harnessing the power of both approaches, organizations can pave the way for long-term success, innovation, and growth. Strategic thinking enables organizations to anticipate change and identify opportunities, while strategy planning provides a structured framework to translate ideas into action. By embracing both strategic thinking and strategy planning, organizations can stay ahead of the competition and achieve their desired outcomes.

Moreover, inclusivity in strategic processes goes beyond just involving diverse stakeholders; it also encompasses creating an environment where every voice is heard and valued. When individuals from various backgrounds feel included and respected in the strategic planning process, they are more likely to contribute their unique insights and ideas. This not only enriches the decision-making process but also fosters a sense of belonging and ownership among team members.

Additionally, inclusivity in strategic processes can lead to better risk management and problem-solving. When a diverse group of stakeholders is involved in identifying potential risks and developing strategies to mitigate them, the organization benefits from a wider range of perspectives and expertise. This collaborative approach not only enhances the quality of decision making but also increases the likelihood of successful implementation and outcomes.

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Thinking strategically

In the late 1970s, Fred Gluck led an effort to revitalize McKinsey’s thinking on strategy while, in parallel, Tom Peters and Robert Waterman were leading a similar effort to reinvent the Firm’s thinking on organization. The first published product of Gluck’s strategy initiative was a 1978 staff paper, "The evolution of strategic management."

The ostensible purpose of Gluck’s article was to throw light on the then-popular but ill-defined term "strategic management," using data from a recent McKinsey study of formal strategic planning in corporations. The authors concluded that such planning routinely evolves through four distinct phases of development, rising in sophistication from simple year-to-year budgeting to strategic management, in which strategic planning and everyday management are inextricably intertwined.

But the power of the article comes from the authors’ insights into the true nature of strategy and what constitutes high-quality strategic thinking. The article is also noteworthy for setting forth McKinsey’s original definition of strategy as "an integrated set of actions designed to create a sustainable advantage over competitors" and includes a description of the well-known "nine-box" matrix that formed the basis of McKinsey’s approach to business portfolio analysis.

Ten years later, a team from the Firm’s Australian office took portfolio analysis a step further. Rather than basing portfolio strategy only on metrics of a business unit’s absolute attractiveness, as suggested by the nine-box matrix, John Stuckey and Ken McLeod recommended adding a key new decision variable: how well-suited is the parent company to run the business unit as compared with other possible owners? If the parent is best suited to extract value from a unit, it often makes no sense to sell, even if that unit doesn’t compete in a particularly profitable industry. Conversely, if a parent company determines that it is not the best possible owner of a business unit, the parent maximizes value by selling it to the most appropriate owner, even if the unit happens to be in a business that is fundamentally attractive. In short, the "market-activated corporate strategy framework" prompts managers to view their portfolios with an investor’s value-maximizing eye.

The evolution of strategic management

Frederick W. Gluck, Stephen P. Kaufman, and A. Steven Walleck

A minor but pervasive frustration that seems to be unique to management as a profession is the rapid obsolescence of its jargon. As soon as a new management concept emerges, it becomes popularized as a buzzword, generalized, overused, and misused until its underlying substance has been blunted past recognition. The same fate could easily befall one of the brightest new concepts to come along lately: strategic management.

In seeking to understand what strategic management is, we have conducted a major study of the planning systems at large corporations. This study is unique in that it attempts to pass judgment on the quality of the business plans produced rather than only on the planning process.

We found that planning routinely progresses through four discrete phases of development. The first phase, financial planning, is the most basic and can be found at all companies. It is simply the process of setting annual budgets and using them to monitor progress. As financial planners extend their time horizons beyond the current year, they often cross into forecast-based planning, which is the second phase. A few companies have advanced beyond forecast-based planning by entering the third phase, which entails a profound leap forward in the effectiveness of strategic planning. We call this phase externally oriented planning, since it derives many of its advantages from more thorough and creative analyses of market trends, customers, and the competition. Only phase four—which is really a systematic, company-wide embodiment of externally oriented planning—earns the appellation strategic management, and its practitioners are very few indeed.

It doesn’t appear possible to skip a step in the process, because at each phase a company adopts attitudes and gains capabilities needed in the phases to come. Many companies have enjoyed considerable success without advancing beyond the rudimentary levels of strategic development. Some large, successful enterprises, for instance, are still firmly embedded in the forecast-based planning phase. You might well ask, are these companies somehow slipping behind, or are they simply responding appropriately to an environment that changes more slowly? The answer must be determined on a case-by-case basis.

Phase one: Financial planning

Financial planning, as we have said, is nothing more than the familiar annual budgeting process. Managers forecast revenue, costs, and capital needs a year in advance and use these numbers to benchmark performance. In well over half of the companies McKinsey studied—including some highly successful ones—formal planning was still at this most basic phase.

Note the word formal. Many firms that lack a sophisticated formal planning process make up for it with an informal "implicit strategy" worked out by the chief executive officer and a few top managers. Formal strategic planning, in fact, is just one of the possible sources of sound strategy development. There are at least two others: strategic thinking and opportunistic strategic decision making (Exhibit 1). All three routes can result in an effective strategy, which we define as "an integrated set of actions designed to create a sustainable advantage over competitors."

Phase-one companies, then, do have strategies, even though such companies often lack a formal system for planning them. The quality of the strategy of such a company depends largely on the entrepreneurial vigor of its CEO and other top executives. Do they have a good feel for the competition? Do they know their own cost structures? If the answer to such questions is yes, there may be little advantage to formal strategic planning. Ad-hoc studies by task forces and systematic communication of the essence of the strategy to those who need to know may suffice.

Phase two: Forecast-based planning

Still, most large enterprises are too complex to be managed with only an implicit strategy. Companies usually learn the shortcomings of phase-one planning as their treasurers struggle to estimate capital needs and make trade-offs among various financing plans, based on no more than a one-year budget. Ultimately, the burden becomes unbearable, and the company evolves toward phase two. At first, phase-two planning differs little from annual budgeting except that it covers a longer period of time. Very soon, however, planners become frustrated because the real world does not behave as their extrapolations predict. Their first response is usually to develop more sophisticated forecasting tools: trend analysis, regression models, and, finally, simulation models.

This initial response brings some improvement, but sooner or later all extrapolative models fail. At this point, a creative spark stirs the imaginations of the planners. They suddenly realize that their responsibility is not to chart the future—which is, in fact, impossible—but, rather, to lay out for managers the key issues facing the company. We call this spark "issue orientation."

The tough strategic issue that most often triggers the move to issue orientation is the problem of resource allocation: how to set up a flow of capital and other resources among the business units of a diversified company. The technique most commonly applied to this problem is portfolio analysis, a means of depicting a diversified company’s business units in a way that suggests which units should be kept and which sold off and how financial resources should be allocated among them. McKinsey’s standard portfolio analysis tool is the nine-box matrix (Exhibit 2), in which each business unit is plotted along two dimensions: the attractiveness of the relevant industry and the unit’s competitive strength within that industry. Units below the diagonal of the matrix are sold, liquidated, or run purely for cash, and they are allowed to consume little in the way of new capital. Those on the diagonal—marked "Selectivity, earnings"—can be candidates for selective investment. And business units above the diagonal, as the label suggests, should pursue strategies of either selective or aggressive investment and growth.

Phase three: Externally oriented planning

Once planners see their main role as identifying issues, they shift their attention from the details of their companies’ activities to the outside world, where the most profound issues reside. The planners’ in-depth analyses, previously reserved for inwardly focused financial projections, are now turned outward, to customers, potential customers, competitors, suppliers, and others. This outward focus is the chief characteristic of phase three: externally oriented planning.

The process can be time-consuming and rigorous—scrutinizing the outside world is a much larger undertaking than studying the operations of a single company—but it can also pay off dramatically. Take the example of a heavy-equipment maker that spent nine person-months reverse engineering its competitor’s product, reconstructing that competitor’s manufacturing facilities on paper, and estimating its production costs. The result: the company decided that no achievable level of cost reduction could meet the competition and that it therefore made no sense to seek a competitive advantage on price.

Phase-three plans can sometimes achieve this kind of dramatic impact because they are very different from the kind of static, deterministic, sterile plans that result from phase-two efforts. In particular, they share the following features:

Phase-three resource allocation is dynamic rather than static. The planner looks for opportunities to "shift the dot" of a business into a more attractive region of the portfolio matrix. This can be done by creating new capabilities that will help the company meet the most important prerequisite for success within a market, by redefining the market itself, or by changing the customers’ buying criteria to correspond to the company’s strengths.

Phase-three plans are adaptive rather than deterministic. They do not work from a standard strategy, such as "invest for growth." Instead, they continually aim to uncover new ways of defining and satisfying customer needs, new ways of competing more effectively, and new products or services.

Phase-three strategies are often surprise strategies. The competition often does not even recognize them as a threat until after they have taken effect.

Phase-three plans often recommend not one course of action but several, acknowledging the trade-offs among them. This multitude of possibilities is precisely what makes phase three very uncomfortable for top managers. As in-depth dynamic planning spreads through the organization, top managers realize that they cannot control every important decision. Of course, lower-level staff members often make key decisions under phase-one and phase-two regimes, but because phase three makes this process explicit, it is more unsettling for top managers and spurs them to invest even more in the strategic-planning process.

Phase Four: Strategic management

When this investment is successful, the result is strategic management: the melding of strategic planning and everyday management into a single, seamless process. In phase four, it is not that planning techniques have become more sophisticated than they were in phase three but that they have become inseparable from the process of management itself. No longer is planning a yearly, or even quarterly, activity. Instead, it is woven into the fabric of operational decision making.

No more than a few of the world’s companies—mainly diversified multinationals that manufacture electrical and electronic products—have reached this fourth phase. Perhaps the need to plan for hundreds of fast-evolving businesses serving thousands of product markets in dozens of nations has accelerated evolution at these companies. Observing them can teach executives much about strategic management.

The key factor that distinguishes strategically managed companies from their counterparts in phase three is not the sophistication of their planning techniques but rather the care and thoroughness with which they link strategic planning to operational decision making. This often boils down to the following five attributes:

A well-understood conceptual framework that sorts out the many interrelated types of strategic issues. This framework is defined by tomorrow’s strategic issues rather than by today’s organizational structure. Strategic issues are hung on the framework like ornaments on a Christmas tree. Top management supervises the process and decides which issues it must address and which should be assigned to operating managers.

Strategic thinking capabilities that are widespread throughout the company, not limited to the top echelons.

A process for negotiating trade-offs among competing objectives that involves a series of feedback loops rather than a sequence of planning submissions. A well-conceived strategy plans for the resources required and, where resources are constrained, seeks alternatives.

A performance review system that focuses the attention of top managers on key problem and opportunity areas, without forcing those managers to struggle through an in-depth review of each business unit’s strategy every year.

A motivational system and management values that reward and promote the exercise of strategic thinking.

Although it is not possible to make everyone at a company into a brilliant strategic thinker, it is possible to achieve widespread recognition of what strategic thinking is. This understanding is based on some relatively simple rules.

Strategic thinking seeks hard, fact-based, logical information. Strategists are acutely uncomfortable with vague concepts like "synergy." They do not accept generalized theories of economic behavior but look for underlying market mechanisms and action plans that will accomplish the end they seek.

Strategic thinking questions everyone’s unquestioned assumptions. Most business executives, for example, regard government regulation as a bothersome interference in their affairs. But a few companies appear to have revised that assumption and may be trying to participate actively in the formation of regulatory policies to gain a competitive edge.

Strategic thinking is characterized by an all-pervasive unwillingness to expend resources. A strategist is always looking for opportunities to win at low or, better yet, no cost.

Strategic thinking is usually indirect and unexpected rather than head-on and predictable. Basil Henry Liddell Hart, probably the foremost thinker on military strategy in the 20th century, has written, "To move along the line of natural expectation consolidates the opponent’s balance and thus his resisting power." "In strategy," says Liddell Hart, "the longest way around is often the shortest way home." 1 1. See B. H. Liddell Hart, Strategy , second edition, Columbus, Ohio: Meridian Books, 1991.

It appears likely that strategic management will improve a company’s long-term business success. Top executives in strategically managed companies point with pride to many effective business strategies supported by coherent functional plans. In every case, they can identify individual successes that have repaid many times over the company’s increased investment in planning.

About the Authors

Frederick Gluck  was the managing director of McKinsey from 1988 to 1994;  Stephen Kaufman  and Steven Walleck  are alumni of McKinsey’s Cleveland office. This article is adapted from a McKinsey staff paper dated October 1978.

MACS: The market-activated corporate strategy framework

Ken McLeod and John Stuckey

McKinsey’s nine-box strategy matrix, prevalent in the 1970s, plotted the attractiveness of a given industry along one axis and the competitive position of a particular business unit in that industry along the other. Thus, the matrix could reduce the value-creation potential of a company’s many business units to a single, digestible chart.

However, the nine-box matrix applied only to product markets: those in which companies sell goods and services to customers. Because a comprehensive strategy must also help a parent company win in the market for corporate control—where business units themselves are bought, sold, spun off, and taken private—we have developed an analytical tool called the market-activated corporate strategy (MACS) framework.

MACS represents much of McKinsey’s most recent thinking in strategy and finance. Like the old nine-box matrix, MACS includes a measure of each business unit’s stand-alone value within the corporation, but it adds a measure of a business unit’s fitness for sale to other companies. This new measure is what makes MACS especially useful.

The key insight of MACS is that a corporation’s ability to extract value from a business unit relative to other potential owners should determine whether the corporation ought to hold onto the unit in question. In particular, this issue should not be decided by the value of the business unit viewed in isolation. Thus, decisions about whether to sell off a business unit may have less to do with how unattractive it really is (the main concern of the nine-box matrix) and more to do with whether a company is, for whatever reason, particularly well suited to run it.

In the MACS matrix, the axes from the old nine-box framework measuring the industry’s attractiveness and the business unit’s ability to compete have been collapsed into a single horizontal axis, representing a business unit’s potential for creating value as a stand-alone enterprise (Exhibit 3). The vertical axis in MACS represents a parent company’s ability, relative to other potential owners, to extract value from a business unit. And it is this second measure that makes MACS unique.

Managers can use MACS just as they used the nine-box tool, by representing each business unit as a bubble whose radius is proportional to the sales, the funds employed, or the value added by that unit. The resulting chart can be used to plan acquisitions or divestitures and to identify the sorts of institutional skill-building efforts that the parent corporation should be engaged in.

The horizontal dimension: The potential to create value

The horizontal dimension of a MACS matrix shows a business unit’s potential value as an optimally managed stand-alone enterprise. Sometimes, this measure can be qualitative. When precision is needed, though, you can calculate the maximum potential net present value (NPV) of the business unit and then scale that NPV by some factor—such as sales, value added, or funds employed—to make it comparable to the values of the other business units. If the business unit might be better run under different managers, its value is appraised as if they already do manage it, since the goal is to estimate optimal, not actual, value.

That optimal value depends on three basic factors:

Industry attractiveness is a function of the structure of an industry and the conduct of its players, both of which can be assessed using the structure-conduct-performance (SCP) model. Start by considering the external forces impinging on an industry, such as new technologies, government policies, and lifestyle changes. Then consider the industry’s structure, including the economics of supply, demand, and the industry chain. Finally, look at the conduct and the financial performance of the industry’s players. The feedback loops shown in Exhibit 4 interact over time to determine the attractiveness of the industry at any given moment. 

The position of your business unit within its industry depends on its ability to sustain higher prices or lower costs than the competition does. Assess this ability by considering the business unit as a value delivery system, where "value" means benefits to buyers minus price. 2 2. See Michael J. Lanning and Edward G. Michaels, 'A business is a value delivery system,' on page 53 of this anthology.

Chances to improve the attractiveness of the industry or the business unit’s competitive position within it come in two forms: opportunities to do a better job of managing internally and possible ways of shaping the structure of the industry or the conduct of its participants.

The vertical dimension: The ability to extract value

The vertical axis of the MACS matrix measures a corporation’s relative ability to extract value from each business unit in its portfolio. The parent can be classified as "in the pack," if it is no better suited than other companies to extract value from a particular business unit, or as a "natural owner," if it is uniquely suited for the job. The strength of this vertical dimension is that it makes explicit the true requirement for corporate performance: extracting more value from assets than anyone else can.

Many qualities can make a corporation the natural owner of a certain business unit. The parent corporation may be able to envision the future shape of the industry—and therefore to buy, sell, and manipulate assets in a way that anticipates a new equilibrium. It may excel at internal control: cutting costs, squeezing suppliers, and so on. It may have other businesses that can share resources with the new unit or transfer intermediate products or services to and from it. (In our experience, corporations tend to overvalue synergies that fall into this latter category. Believing that the internal transfer of goods and services is always a good thing, these companies never consider the advantages of arm’s-length market transactions.) Finally, there may be financial or technical factors that determine, to one extent or other, the natural owner of a business unit. These can include taxation, owners’ incentives, imperfect information, and differing valuation techniques.

Using the framework

Once a company’s business units have been located on the MACS matrix, the chart can be used to plan preliminary strategies for each of them. The main principle guiding this process should be the primary one behind MACS itself: the decision about whether a unit ought to be part of a company’s portfolio hangs more on that company’s relative ability to extract value from the unit than on its intrinsic value viewed in isolation.

The matrix itself can suggest some powerful strategic prescriptions—for example:

Divest structurally attractive businesses if they are worth more to someone else.

Retain structurally mediocre (or even poor) businesses if you can coax more value out of them than other owners could.

Give top priority to business units that lie toward the far left of the matrix—either by developing them internally if you are their natural owner or by selling them as soon as possible if someone else is.

Consider improving a business unit and selling it to its natural owner if you are well equipped to increase the value of the business unit through internal improvements but not in the best position to run it once it is in top shape.

Of course, the MACS matrix is just a snapshot. Sometimes, a parent company can change the way it extracts value, and in so doing it can become the natural owner of a business even if it wasn’t previously. But such a change will come at a cost to the parent and to other units in its portfolio. The manager’s objective is to find the combination of corporate capabilities and business units that provides the best overall scope for creating value.

MACS, a descendent of the old nine-box matrix, packages much of McKinsey’s thinking on strategy and finance. We have found that it serves well as a means of assessing strategy along the critical dimensions of value creation potential and relative ability to extract value.

Ken McLeod  is an alumnus of McKinsey’s Melbourne office, and  John Stuckey  is a director in the Sydney office. This article is adapted from a McKinsey staff paper dated July 1989. Copyright © 1989, 2000 McKinsey & Company. All rights reserved.

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Course and Direction

The path to strategic success.

Key Takeaways

Fundamentals of strategic thinking.

Strategic thinking is a comprehensive process that organizations utilize to envision the future and develop operational plans to achieve desired outcomes. It involves looking ahead, analyzing competitive environments, and preparing for potential changes.

Decisiveness in Action: Organizations that excel at strategic thinking are adept at making timely decisions. They weigh risks and benefits confidently and are committed to steering the organization towards its strategic objectives.

Essentials of Systems Thinking

Systems thinking offers an approach to problem-solving that moves away from viewing problems as isolated incidents and towards recognizing the larger network of interrelated parts. It hinges on understanding that the whole is greater than the sum of its parts and emphasizes looking at the patterns of change rather than static ‘snapshots’.

Strategic Thinking in Organizations

Optimizing organizational performance, leadership and strategic decision-making, communication and strategic planning, applications of systems thinking, systems thinking in public health, advances in technology and connectivity.

The proliferation of smartphones and improved connectivity has revolutionized systems thinking applications. These advancements enable a seamless flow of information that informs systems-level analyses in real-time, allowing for more dynamic responses. In urban planning, for instance, traffic flow data can lead to adaptive traffic signal systems that reduce congestion and improve efficiency.

Innovation and Design Thinking

Integrating strategic and systems thinking.

Challenges and Solutions in Thinking Approaches

Effective decision-making in both personal and professional realms hinges on harnessing the appropriate thinking approach. This section unpacks the key variables and details how to navigate the challenges while offering solutions to align diverse thinking approaches to real-world scenarios.

Addressing Complexity and Uncertainty

Aligning long-term goals with immediate actions.

Strategic thinking focuses on setting a clear direction and long-term goals . The challenge lies in aligning these long-term objectives with immediate actions. The solution is to apply a strategic perspective that breaks down large goals into manageable tasks, ensuring that every action contributes to the overarching vision.

Tactical Versus Strategic Perspectives

Frequently asked questions, how do strategic thinking and systems thinking differ in their approaches to problem-solving, can you provide examples where strategic thinking is more applicable than systems thinking, and vice versa, what are the consequences of confusing systems thinking with strategic thinking in an organizational context, in what ways do the goals of strategic planning align or conflict with the principles of systems thinking, how does systems thinking complement strategic planning processes in business management, what distinguishes the methodologies of systems thinking and design thinking when addressing complex challenges.

While systems thinking is centered on recognizing patterns and interrelations within a system, design thinking is more focused on creative problem-solving and user-centered solutions. Unlike systems thinking , design thinking uses a hands-on approach in prototyping and testing to address intricate challenges.

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