Strategic Startup Thinking

Strategic Startup Thinking: The literature on strategic thinking is vast. It makes interesting reading, but for now I suggest you use a Wharton Business School definition as your guide:

“Strategic thinking focuses on finding and developing unique opportunities to create value by enabling a provocative and creative dialogue among people who can affect a company’s direction.“

This is an especially important message for the entrepreneur.

Use All Your Faculties, Not Just Your Left Brain

For a ‘provocative and creative dialogue’, remember: this is not an academic exercise for you. Make use of all your faculties. Successful strategic business thinking needs them all:

Sensing: uses stimuli from outside or inside the body—hearing, sight, smell, touch, taste, and equilibrium. Sensing people are likely to focus on facts, details, experience and the present.
Thinking: involves the mental manipulation of information, as when we form concepts, engage in problem solving, reason and make decisions. Thinking people have a preference for determining the objective truth in a situation.
Intuition: uses unconscious understanding. Intuitive people tend to be concerned with what is possible and new, with an orientation to the future.
Feeling: uses emotion and sensitivity. Feeling people are concerned with personal values and making decisions based on what is the best for the people involved¹.

Business Strategy

Business strategy is a subject much written about. Many business school professors and strategy consultants like Bain, BCG and McKinsey have built careers based on their own models of business strategy. Even I teach the stuff on an MBA. I am agnostic, when it come to business strategy. Thus I am no slave to one model or another.

Michael Porter and his five forces of competitive advantage is perhaps the most widely cited authority at the current time. Though his hugely significant recent thinking has been around the concept of building shared value that focuses on the connections between societal and economic progress, rather than what otherwise seems to be self interest.

The best recent writing has been by Richard Rumelt who has been teaching strategy at UCLA for many years. Called Good Strategy Bad Strategy: The Difference and Why It Matters. I love the book because not only is he widely experienced and has worked with many companies on their strategy, he naturally tells many strategy stories from real life and a deceptively simple model to help you understand how to craft business strategies.

Rumelt says the “kernel of a strategy contains three elements:

Use All Your Smarts, Especially Your Right Brain

You have probably heard the term ‘emotional intelligence’ as a result of the book of that name by Daniel Goleman. He is the man who has long argued that outstanding leadership requires a combination of self-mastery and social intelligence.

Then there’s Howard Gardner’s Frames of Mind: The Theory of Multiple Intelligences, a book that helps to explain how and why different people seem to learn in different ways and possess different skills and talents. In using all the smarts in strategic startup thinking, you are much more likely to cover all the bases.

The ‘smarts’ that Gardner defines are:

To be strategic you need to monitor your external environment constantly and be prepared to swivel on a dime, combining strategic planning with intuitive entrepreneurship. While being intensely self-aware, your attention needs to be focused on the external environment. It is vital to have your antennae twitching so that you can respond quickly, while maintaining that clear vision that you have about the startup.

When I started in business in the sixties, strategic planning often involved loads of research and considerable number-crunching and the use of mathematical models. Of course, if you are in a giant technology-based business, you may well still need this. Gut feel was never expressed in those days, even when felt. We are wiser now and the business world spins faster and we see planning as an imprecise art, not an exact science.

Henry Mintzberg, a biz prof I admire, draws the distinction between strategic planning (defined as systematic programming of pre-identified strategies) and strategic thinking (a more integrated perspective on the organization) supports that conclusion.

Reflect and React, Integrate Both Brains

Only the shape of the future can be predicted, not the future itself. That’s why I stress big picture thinking. That requires reflection. But don’t allow yourself to get lost in ‘what ifs’ and ‘if onlys’. Immediate reactions can be spot on. We tend to say, ‘don’t get carried away by first impressions’, but often the best business thinking comes straight from the gut.

Malcolm Gladwell in his book Blink, makes the argument that people frequently make some of their best decisions in mere seconds. It is our adaptive unconscious at work. We can toggle back and forth between thinking and intuiting. And as Gladwell says, “decisions made very quickly can be every bit as good as decisions made cautiously and deliberately.”

Kanizsa triangles The way the brain creates perceptions from raw data, like what you see, is a frequent characteristic of entrepreneurs. they can see what is not obvious to many others. Entrepreneurs are very often iconoclasts

Iconoclasts–the mold breakers, the game changers, the thought leaders, the paradigm shifters–they all make sense of what the rest of us lack the vision to see. In his book, Iconoclast: A Neuroscientist Reveals How to Think Differently, Gregory Berns describes what happened in the brains of business breakthrough artists like Henry Ford, Richard Branson and Steve Jobs. Take a look–it’s a good read anyway, and it will help you understand more about your own, even non-iconoclastic, brain.

As she would tell you, a friend of mine, Dr Susie Wadia-Ells, the founder of the non-profit Know Breast Cancer would tell you, the obvious is not always obvious. The US has the highest breast cancer rate in the world, where the focus is on costly mammograms, surgery, radiation and chemotherapy to detect and treat cancer. But new studies show how breast cancer is preventable with lifestyle changes. But since there is little money to be made in prevention, these developments often go unnoticed.

The ability to perceive things differently is a skill you can hone. Does the illustration (a Kanizsa triangle) on the left say three pacmen or a floating triangle? Probably the triangle, because that is what you want to see, based on your experience.

Successful strategic thinkers have an external focus, keep gathering intelligence and are prepared to modify their strategy in the light of the emerging patterns they observe in the chaos around them. Watch for disruption and watch for convergence.

Irene Saunders, the author of Strategic Thinking and the New Science (a book that applies chaos and complexity theory to business strategy), says it well when she breaks down the strategic thinking process into two components: insight and foresight:

insight about the present;
foresight about the future.

To have a vision of how things may turn out, you need to have some idea about how they are at present. Since everything is chance and we live in a world of impermanence, the strategic thinker has to be open to possibility.

Use What I Learned in Military Intelligence

Good strategic thinking takes into account that our thinking is going to be partly based on inaccurate information and/or conclusions, and treats any conclusions as tentative or hypotheses.

When I was in basic training in the intelligence service, we were drilled in comparing and contrasting. We had to evaluate the reliability of information sources—the context, as well as correlating that information with other information collected. We had to examine assumptions, and be critical about our beliefs.

Below is a simplified version of the kind of grid that we used. When you set out the information graphically in this way, it is easier to see the ‘wood for the trees’.

Intelligence Evaluation Grid

	Subject	trust	Source	trust
Information
topic 1
topic 2
topic 3

You do not need to do the exercise literally, but it is vital to be concerned with probability, since you cannot ever be certain about the likelihood of your strategy working out precisely.

By evaluating the degree of trust that you have in the information’s subject and its source, you can significantly reduce your uncertainty, or improve your confidence in the likely outcome.

Consider the Whole System as Much as its Parts

Do not be myopic or one-track minded. Looking at one part of the system, or staring at it with only one eye, will lead you astray.

Systems Thinking

You are more connected than you think. You are also connected at more levels than you think. Peter Senge, the author of The Fifth Discipline, describes business as being “bound by invisible fabrics of interrelated actions, which often take years to play out their effects on each other. Since we are part of that lacework ourselves, it’s doubly hard to see the whole pattern of change. Instead we focus on snapshots of isolated parts of the system, and wonder why our deepest problems never get solved.” You will find it rewarding to read Senge’s book, The Necessary Revolution: Working Together to Create a Sustainable World in which he and co-authors offer a model of sustainable shareholder value.

4elementssf1-sm

Senge suggests that organizations need to develop an ensemble of five disciplines to enhance their capacity to realize their highest aspirations:

Systems Thinking: experiments with young children show that they learn systems thinking intuitively and quickly.
Personal Mastery²: clarifying and deepening our personal vision, focusing our energies, developing patience and seeing reality objectively.
Mental Models: deeply ingrained assumptions, generalizations, even pictures or images that influence how we understand the world and how we take action.
Building Shared Vision: leadership that has the capacity to hold a shared picture of the future we wish to create.
Team Learning: the discipline starts with “dialogue”; teams in business today, are where the rubber meets the road.

Stop to consider the interactions between: you-›‹-group/team-›‹-system and start seeing

interrelationships rather than things,
patterns rather than events, and
structures that underlie complex situations.

I learned the hard way in the early days of my first business. You should watch for them from now on. One of the best demonstrations I know of an entrepreneurial company that demonstrates an understanding of these interrelationships is Urban Partnership Bank that reversed the cycle of economic and social decline on Chicago’s South Shore. It was created to demonstrate that a regulated bank could be instrumental in revitalizing the communities being avoided by other financial institutions.

Life Cycle

A shift of mind is needed to integrate and apply the ensemble of disciplines, together with the realization that all businesses go through life cycles. The life cycle is not a fixed linear progression, any more than is your own life. The natural phases of the business life cycle are:

startup,
growth,
decline, leading to:
renewal or death.

Many times, there are feedback loops, and mini life cycles within the whole. At the excitement of starting a business, it is vital to consider the implications of the probable futures for it, even if they spin out beyond your own life span. Just like you, your new business may die. If the time is right, then the ending of the business does not of itself signify the lack of sustainability.

Change

Given that everything is always changing and there are things we can do to change within, but it is much more difficult to change without, we do better to start inside. Our ability to impact sustainability will be greater if we first work on ourselves. This means starting with ourselves as individuals, even before we think of ourselves as organizations.

Of course environmental or social justice activists have an impact on what happens in civil society, but real systemic change only comes from individuals deciding to make changes in their own behavior. So there is nothing wrong in entrepreneurs wanting make a contribution to changing the world, but their contribution will start within.

Creating Shared Value

One of the most important articles to appear in the Harvard Business Review in a very long time is one by Michael Porter and Mark Kramer, called Creating Shared Value: How to reinvent capitalism–unleash a wave of innovation and growth. Creating Shared Value is integral to a company’s profitability and competitive position. It leverages the unique resources and expertise of the company to create economic value by creating social value.

Why is the article important? Because among strategy theorists, Michael Porter is the guru of competitive advantage. Now he says, “…shared value offers corporations the opportunity to utilize their skills, resources, and management capability to lead social progress in ways that even the best-intentioned governmental and social sector organizations can rarely match. In the process, business can earn the respect of society again.”

1. If you want to know more about this, then find out about the Jungian personality types instrument, the Myers Briggs Type Indicator® (MBTI). You may have encountered it on a management development or leadership program during your corporate career. The purpose of the MBTI personality inventory is to make the theory of psychological types described by C. G. Jung understandable and useful in people’s lives. The essence of the theory is that much seemingly random variation in the behavior is actually quite orderly and consistent, being due to basic differences in the ways individuals prefer to use their perception and judgment. The goal of knowing about personality type is to understand and appreciate differences between people. As all 16 types are equal, there is no best type.

2. ‘Personal proficiency’ is a similar term used by Ulrich, Smallwood and Sweetman in Leadership Code: Five Rules to Lead By. The Leadership Code to mean clear thinking and rising above the details; knowing yourself; tolerating stress; learning agility; tending to your own character and integrity; taking care of yourself; personal energy and passion.

PLEASE NOTE: There is tons of useful stuff on Startup Owl, a site that’s been going for a dozen years. So keep browsing, but know that the founder, Will, now devotes most of his time and energy to his new website that you should definitely visit: https://venturefounders.com