Strategic thinking, put simply, is the ability to consider the current position of your organization and create unique insights and opportunities that will move the organization forward.
Keep in mind, this is distinct from the process of strategic planning, which happens on a higher level, less-frequent basis.
A Harvard course defines strategic thinking as, “analyzing opportunities and problems from a broad perspective and understanding the potential impact your actions might have on others. Strategic thinkers visualize what might or could be, and take a holistic approach to day-to-day issues and challenges.”
While this might seem like an obvious skill, it isn’t one that is widely held in the workplace. One study reports that a shocking “4-7% of leaders are considered skilled at strategic thinking.”
Still, strategic thinking is critical because it can help organizations remain competitive in an ever-changing global economy. Leaders must have the vision and foresight to develop solutions for the present and future, which is why strategic thinking is increasingly essential for emerging leaders.
In a world where AI is going to make many jobs irrelevant, strategic thinking will be one of the few skills that will never go out of fashion. Human leadership, especially strategic thinking, is one area where AI researchers say there will be consistent ongoing need for positions.
If you’re an emerging leader early in your career, learning strategic thinking is thus all the more critical today.
What is strategic thinking?
The difference between strategic thinking and tactical thinking is that strategic thinking considers the organization’s overarching mission and objectives, while tactical thinking focuses more on the day-to-day details and how to achieve short-term goals
To think strategically, you must understand the bigger picture and develop plans for the future. You must be able to identify potential problems and assess how the organization can capitalize on potential opportunities.
Therefore, strategic thinking involves analyzing a situation from multiple angles, synthesizing and interpreting data, and creating new ideas and solutions that move the organization forward.
It’s also different from problem solving, which is more like fighting the fires that spring up on a day-to-day basis. While problem solving is important for dealing with the inevitable issues that arise, strategic thinking looks beyond these immediate problems and considers the long-term vision and mission of the organization.
Effective strategic thinking requires critical and creative thinking skills, as well as the ability to interpret and analyze data. It also involves the willingness to question assumptions and think outside the box to come up with innovative solutions.
McKinsey provides a pithy summary of the key unique aspects of strategic thinking, writing:
- Strategic thinking seeks hard, fact-based, logical information.
- Strategic thinking questions everyone’s unquestioned assumptions.
- Strategic thinking is characterized by an all-pervasive unwillingness to expend resources.
- Strategic thinking is usually indirect and unexpected rather than head-on and predictable.
By taking a strategic approach, you can identify new possibilities and make decisions that create long-term success.
Strategic thinking enables you to rise above your usual routines and examine the bigger picture. Ask questions, gather and analyze data, and use your insights to make smart decisions and take productive actions. Do this to identify new possibilities and lead your business to long-term success.
What are the key characteristics of strategic thinking?
The key characteristics are:
- A focus on the long-term vision and outcomes for the organization
- An understanding of the current conditions
- An ability to draw meaningful insights from data
- The ability to identify potential problems and capitalize on opportunities
- The willingness to question existing assumptions and think outside the box
- An understanding of the internal and external context
- The capacity to think clearly and analytically
- A commitment to creating innovative solutions
- The ability to make decisions based on the long-term effects
You may notice that there is a big emphasis on data-driven decision making as well as analytical thinking skills. Being able to draw meaningful insights and conclusions from data is a critical component of strategic thinking.
However, it is as much art as science, and creative thinking does play a role. Strategic thinking requires an ability to think unconventionally and come up with new ideas.
Strategic thinkers use intuition and unique creative insights to create breakthroughs for their organization.
Why is strategic thinking important for emerging leaders?
Strategic thinking first plays a critical role in decision making. It gives emerging leaders the ability to analyze a situation, identify potential problems and opportunities, and make well-informed decisions that will have a significant impact on their organization’s success
For instance, the success of any business hinges on the short- an long-term decisions its leaders make. If the decisions aren’t sound and don’t adequately consider the long-term implications, it could lead to costly missteps that can be hard to recover from.
Even if these missteps are minor, when compounded over time, they can lead an organization to fall behind competitors or even completely derail.
Therefore, emerging leaders must develop the skill and confidence in their strategic thinking.
Imagine that a company is considering expanding into a new market. Using a strategic mindset, the leadership team would analyze and interpret data on the potential market, such as market research, customer feedback, and industry trends.
They would also consider the organization’s overarching mission and objectives, and identify potential problems and opportunities that could arise from expanding into the new market.
Here’s where the rubber meets the road on strategic thinking impacting the more granular decision making.
With this information, the leadership team can make an informed decision on whether or not to move forward with the expansion.
They may decide that the potential benefits of expanding into the new market outweigh the risks, and move forward with a well-thought-out plan to enter the market.
On the other hand, if the data and analysis indicate that the expansion may not align with the organization’s mission or may present too many risks, the leadership team may decide to hold off on the expansion or consider alternative options.
Without engaging in this strategic thinking beforehand, the decision making process would have looked something like this:
We need to increase revenue. There is a new market we could expand into, which would mean more revenue for us. Therefore, we should expand into this new market.
When simplified down to this level, such thinking obviously looks silly. However, this is how most leaders actually operate when not thinking strategically.
What are the benefits of strategic thinking for emerging leaders?
The benefits of strategic thinking are far too numerous to list here. Future articles will dive into specific aspects of strategic thinking and its impact on organizational leadership.
With that said, here are a few:
Improved problem-solving and decision-making skills: Strategic thinking provides a framework for understanding the current environment and analyzing data to identify potential problems and opportunities. This insight enables emerging leaders to make better decisions, identify unique solutions, and anticipate and avoid problems before they arise.
Enhanced organizational performance: By making decisions based on long-term objectives and mission, emerging leaders can ensure their organization remains focused and efficient. This in turn yields better results, higher morale and loyalty among employees, and greater customer satisfaction
Increased confidence in leadership ability: Strategic thinking helps emerging leaders develop the confidence and skills necessary to handle complex problems and opportunities. This prepares them to effectively lead teams and organizations in times of rapid change and helps build their own personal presence in the organization
Increased adaptability to changing conditions: Strategic thinking allows emerging leaders to stay one step ahead of changes by understanding the implications of the external environment. This allows them to quickly pivot and adjust to changing conditions and keep the organization on course.
How can leaders develop strategic thinking skills?
Tips for improving your strategic thinking skills include:
- Learn to identify patterns and trends: Start by looking at the broader context and understanding the interrelated aspects of a problem. Examine the causes and effects of various scenarios and observe how these dynamics can play out over time.
- Develop an analytical mindset: Develop critical thinking skills and learn to look at data in an objective and unbiased way to draw meaningful insights. Develop the ability to interpret data to identify opportunities and potential problems.
- Think beyond the obvious: Challenge preconceived notions and consider possibilities from different angles. Pushboundaries and come up with creative solutions to tough problems.
- Ask questions: Open-ended questions help you dig deeper and uncover underlying issues. Develop the ability to ask meaningful questions that can help you understand the bigger picture.
- Practice and stay current: Stay abreast of current events and industry trends through reading, networking, engaging in dialogues, and attending conferences. First be informed by data and analysis, but you also need to continue to develop as a leader so you can eventually get to the point where you also have a gut instinct that leads you in the right direction.
There are also exercises you can do to increase your strategic thinking abilities, including:
- SWOT analysis: Evaluate the Strengths, Weaknesses, Opportunities, and Threats (SWOT) of an idea or venture. For a guide to SWOT analysis, check this out.
- Case studies: Analyze case studies to look for problems, develop solutions and identify opportunities. You can obtain these from business schools or simply Googling case studies in your specific market segment.
- Scenario planning: Consider different possible outcomes of decisions or events and plan accordingly.
- For example, what if the market changes significantly and sales of your flagship product drop by 80% tomorrow? What would you do? What if your company decides to fire your entire B2B sales division and focus solely on B2C sales? How would you respond?
- Business simulations: Test strategies through simulations of risk-free situations. For example, simulate a decision to launch a new product in a new market or try out a new pricing strategy.
One of the most helpful muscles to develop in strategic thinking is your ability to envision the future.
Here’s one exercise you can use to help you break out of stale thinking patterns about the future.
Imagine a totally different future: Imagine that a huge part of your business is totally upended.
For example, imagine that you’re a company that runs some of the 150,000+ gas stations currently in the United States. Electric car sales have gone through the roof and you’re faced with a business that is going to collapse or necessitate complete change in the next 1-2 years.
Begin by asking yourself: “What can I do to save or pivot my business in response to this new reality?”
In this exercise, you don’t have to worry about the feasibility of any of your ideas–just let your imagination run wild and paint a picture of what you would do to ensure the longevity of your business.
Next, ask yourself, “What would the world look like in 10 years, and how can I position my business to take advantage of it?”
If your business based on selling gas to consumers is going to collapse, how can you shift to a fossil fuel-free (or significantly reduced) future?
Should you sell off assets in a fire sale and go some completely different direction? Is there some other business model that you can shift to? If so, what? How will you fund that pivot?
Creative thinking exercises like these can help you envision futures that you otherwise might never even think of. Tweak the details of this exercise to fit your particular business.
Ultimately, strategic thinking is a skill that can be developed and improved over time. With continuous practice, emerging leaders can hone their strategic thinking capabilities to navigate a rapidly changing environment.
Conclusion
In conclusion, strategic thinking is a crucial skill for emerging leaders in today’s constantly changing business environment. It involves considering the long-term vision and goals of the organization, analyzing current conditions and data, and identifying potential problems and opportunities.
Strategic thinking also requires critical and creative thinking, as well as the ability to question assumptions and come up with innovative solutions. It is different than much of the thinking common among leaders, although it is a skill that can (and should!) be developed.
By developing strategic thinking skills, emerging leaders can better navigate the challenges and opportunities of the business world and drive long-term success for their organization.
Therefore, it is important for emerging leaders to make a conscious effort to develop and hone their strategic thinking skills, as this will not only benefit their own careers but also the success of their organization.