Developing strategy is a process of deciding on the trajectory an organisation needs to take to avoid its default future – which is the place it will end up if it takes no action other than that currently planned. It involves deciding the strategic intent – which is what an organisation aims to become or achieve – and the trajectory it needs to pursue in order to achieve the strategic intent.
The process involves making many decisions, some strategic, many not. Strategic decisions are those that, once executed, are difficult, if not impossible, to reverse or undo. All other decisions are essentially planning decisions that can be changed – albeit at a cost.
The outcome of any decision is rarely certain, never more so when developing strategy. There is always an element of risk that the resultant outcome will be different to that expected or hoped for. While this risk can be reduced by making informed choices based upon available data, it cannot be eliminated. However, the risk can be further reduced by focusing on the reasoning by which decisions are made, more specifically the degree to which critical thinking is applied.
According to David T Moore in his book Critical Thinking and Intelligence Analysis, “Critical thinking is a deliberate meta-cognitive (thinking about thinking) and cognitive (thinking) act where a person reflects on the quality of the reasoning process simultaneously while reasoning to a conclusion. The thinker has two equally important goals: coming to a solution and improving the way she or he reasons.”
This definition is insightful as it not only addresses the thinking – coming to good conclusions – it also covers the meta-cognitive aspect – the thinking about what we’re doing in order to make better decisions over time. Afterall, if developing strategy is a capability that organisations need to get better at, then it’s important that leaders know how to do that.
A good place to start is to understand the different types of reasoning and how each can be applied when developing strategy. The three most common types of reasoning are inductive, deductive and intuitive.
Where a conclusion (decision) is drawn from the collection and analysis of a great deal of data. Inductive reasoning is a process of going from particulars to the general.
The limitation of this approach is that it requires the collection and analysis of a great deal of data, from which patterns and conclusions can be drawn. The advent of data analytics and artificial intelligence (AI) has made this much easier and, as a consequence, more powerful.
Examples of where this form of reasoning can provide strategic insight include changes in customer buying behaviour, demographic trends, trends in public health and social care, and climate change. The resulting analysis leads to conclusions from which strategic decisions can be made. The arguments justifying the decision is the result of the analysis.
Where a conclusion (decision) is drawn from a premise or premises. A premise is a proposition that is drawn from theory or practice that is validated through sample data. Premises are then proven to be either true or false. Premises are used to build arguments that lead to conclusions. It’s a process of going from the general to the specific. More specifically, if all the premises are true and the deductive reasoning is sound then the conclusions reached are true.
Deductive reasoning is frequently used when developing strategy, particularly when an organisation’s chosen strategy is to follow an industry trend. The argument being ‘if it works for other organisations it should work for us’.
Applying this form of reasoning more creatively can lead to strategies that result in significant changes in trajectory. For example, the premise could be that a proven technology applied in a specific industry could be equally applied in another. The premise could then be proven – or otherwise – through investigation or experimentation. In recent months we have seen a powerful example of this type of reasoning in response to the Covid-19 pandemic, starting with the premise that anti-inflammatory drugs would calm the body’s violent reaction when it’s trying to fight off the virus – often resulting in serious harm and even death. Investigations showed that Dexamethasone, a type of steroid, was effective in reducing death rates by up to one third in hospitalised patients with severe respiratory complications. The premise was proven to be true, and the decision was to make the treatment widely available.
Where a conclusion (decision) is drawn from insight, guess work, previous experience or inspiration. Many would argue that this is the most common form of reasoning when it comes to developing strategy. A process that’s often based upon an individual’s view of what the strategy should be.
Applying critical thinking and articulating the reasoning behind the supporting argument will lead to better decisions. Furthermore, making the decision-making process more explicit leads to greater shared understanding and engagement. Stating strategic choices, in the hope that they are self-evident to colleagues, is rarely enough. The logic structure – or architecture – behind the decisions also needs to be explained. Only then will colleagues be able to embrace the strategy and make it their own. This was well illustrated in a 2013 study of more than 2,200 executives by Strategy& where 44% of respondents didn’t understand the strategy they were asked to implement. It’s therefore not surprising that the majority of strategies fail to deliver their intended outcomes. Developing well-thought-through strategies is a capability we all need to get better at, applying critical thinking is a good step forward.
I welcome your thoughts.