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Achieving a meaningful understanding of strategic thinking involves addressing several interrelated topics. From an academic perspective, we see strategic thinking at the intersection of three fields of study: cognitive psychology, systems thinking, and game theory.

Figure 1.1 The Three Components of Strategic Thinking

Cognitive psychology is the study of perception, creativity, decision making, and thinking. Systems thinking is an approach to understanding how systems behave, interact with their environment, and influence each other. Game theory is the study of decision making when the decision involves two or more parties (the decision maker and the opponent or adversary). While these are all academic disciplines, they address highly practical real-world matters. Applying cognitive psychology helps you manage your biases and blind spots. Systems thinking helps you broaden the slate of factors you consider when evaluating options and prioritizing actions. Game theory helps you further recognize the ramifications of your decisions and actions and take steps to mitigate opposing forces. We will now explore each of these disciplines in terms of how they influence and impact strategic thinking and strategic leadership.

Before we begin, we should note that the purpose of this chapter is not to provide an exhaustive review of the research that has been conducted in each of these three fields. Rather, our intent is to lay the foundation for subsequent chapters and provide enough information to raise your level of awareness of considerations impacting your ability to think and lead strategically.

Cognitive Psychology

The term cognitive psychology was first used in 1967.1 It is the branch of psychology that studies mental processes regarding how people perceive, solve problems, make decisions, and become motivated. Although cognitive psychology includes the study of memory and how individuals sense and interpret external stimuli, the most relevant elements for our purposes include how preconceived notions and beliefs influence and impact your analysis, the conclusions you draw, and the decisions you make. It also reveals the impact of mental models and processes on our focus, self-awareness, and awareness of the environment. Combined, these factors influence how we perceive our current reality, interpret existing and emerging opportunities, and imagine the future we desire.

In essence, cognitive psychology helps us explore and understand the way we interpret and interact with the environment. We consider this important because interpretation involves our grasping and analyzing information, and interaction involves our managing, altering, or manipulating our current or future environment.

Types of Discovery

The questions we ask are a key influence on how we interpret and interact with the environment. For example, what questions do we typically use when seeking to comprehend? When thinking about the future? When attempting to identify viable alternatives? A series of studies conducted by noted psychologist Jerome Bruner in the 1960s revealed that individuals have a natural tendency to ask certain types of questions when attempting to understand situations, events, and circumstances. His research revealed two types of questions, rooted in concepts called “episodic empiricism” and “cumulative constructionism.” Episodic empiricism is manifest in questions unrelated to or unbound by existing rules, laws, and principles – they are the questions typically used when attempting to make sense of the world and decide on a path forward. In this case, the question becomes the new hypothesis. Cumulative constructionism, on the other hand, manifests as questions intended to add clarity to existing understanding, paradigms, and structure.2 Put simply, some questions focus on “drilling down,” while others focus on “broadening.”

For example, consider the two types of questions that can be asked about a commercial-transport airplane crash. Cumulative constructionism–type questions, intended to drill down, might include:

■ When did the crash occur?

■ How far from the departure airport was the crash?

■ How far from the arrival airport was the crash?

■ Did the pilots declare an emergency prior to the crash?

■ Were there any eyewitnesses to the crash?

■ If there were eyewitnesses, what did they see?

■ Was anyone on the ground injured or killed?

■ Did the pilots deviate from the flight plan prior to the crash?

■ Did the airplane strike a mountain or another airplane?

■ Were there any survivors?

Episodic empiricism–type questions, asked to broaden one's thinking, might include:

■ What type of material was the transport airplane carrying?

■ What is the safety record of the company owning the airplane?

■ What was the safety record of the flight crew?

■ Who manufactured the airplane?

■ What is the safety record of airplanes built by this particular manufacturer?

■ How do all of the above compare to other airplanes, flight crews, and airplane manufacturers?

■ How do all of the above compare to equipment, operators, and manufacturers in other industries?

Both lines of questioning are important. The value lies in understanding the difference and appropriate use of each.

From our perspective, the former type of questions are valid but will likely lead you down the current path to a certain conclusion and decision, albeit one with a greater level of detail. In contrast, the latter type of questions will likely lead you to a broader understanding and ultimately to a new and potentially more creative insight through considering more options.

The Role of Cognitive Ability

Another branch of cognitive psychology focuses on the role of intelligence in decision making and problem solving. While these activities are undoubtedly a component of strategy, we deemphasize the role of intelligence in strategic thinking and strategic leadership. Our stance is consistent with the conclusion that Bruner came to in his analysis of creativity:

Nothing has been said about ability, or abilities. What shall we say of energy, of combinatorial zest, of intelligence, of alertness, of perseverance? I shall say nothing about them. They are obviously important but, from a deeper point of view, they are also trivial. For at any level of energy or intelligence there can be more or less of creating in our sense. Stupid people create for each other as well as benefiting from what comes from afar. So too do slothful and torpid people. I have been speaking of creativity, not of genius. 3

Creativity is manifest in a wide range of circumstances, independent of basic intelligence. Given this, we do not consider intelligence to play a distinguishing role in strategic thinking or strategic leadership. Instead, we consider several other cognitive characteristics to be important, including the following:

■ The ability to recognize and take advantage of personal strengths and mitigate personal weaknesses,

■ Comfort with and ability to understand complexity,

■ The ability to recognize related concepts and principles,

■ Self-confidence and belief in oneself,

■ Comfort with ambiguity and uncertainty,

■ A willingness to take risks,

■ The courage of conviction,

■ The willingness to draw conclusions and make decisions, and

■ Personal assertiveness.

These cognitive characteristics consistently have been proven to correlate with creativity.4

We believe that cognitive activities associated with the creative process5 enable strategic thinking. These activities – while perhaps not always discrete or linear – typically include the following:

■ Preparation: Becoming familiar with existing works, what has been done, how challenges are typically addressed, and how opportunities are typically seized.

■ Incubation: Allocating time to the creative process, such that ideas and thoughts combine and awareness and understanding materialize.

■ Insight: Combining existing concepts, principles, frameworks, and models to form new relationships, combinations, associations, or structures.

■ Verification: Assessing and elaborating on new ideas to determine whether they are likely to be brought to fruition and molded into a complete product.

Types of Thought Processes

Whether your approach to problem solving and decision making involves sequential steps or taking intuitive leaps may depend partly on what research psychologist Gary Klein describes as System 1 and System 2 thinking.6 System 1 thinking involves applying instinct and intuition, which are in essence experience-based and expertise-driven. System 2 thinking involves applying and following preestablished steps and procedures. System 1 is somewhat unstructured, emergent, and omnidirectional, while System 2 is linear, somewhat rigidly sequenced, and unidirectional. While System 2 will help ensure you do not make serious mistakes in your logic or thinking, it alone is not enough. Much like the list of drill-down, cumulative construction–type questions we cited earlier, System 2 thinking alone proves inadequate in terms of raising, considering, and addressing the myriad issues in our complex, ambiguous, and uncertain world. System 1 thinking is much more effective at raising these issues.

In his influential book Thinking, Fast and Slow, Nobel Prize winner Daniel Kahneman7 provides examples of activities attributed to System 1 thinking:

■ Determining that one object in the distance is closer than another.

■ Looking toward the direction of a loud and sudden sound.

■ Completing the phrase “peanut butter and…”

■ Making a “sad face” when shown a heartbreaking photo.

■ Detecting anger in someone's voice.

■ Understanding two- to three-word sentences.

■ Driving a vehicle on an empty road.

Kahneman also provides examples attributed to System 2 thinking:

■ Looking for a person wearing a red hat.

■ Walking faster than normal.

■ Self-monitoring and self-regulating your behavior.

■ Stating your telephone number.

■ Comparing and contrasting the value of consumer goods.

■ Completing and submitting the annual tax form.

■ Evaluating a complex logical argument.

Just like the two types of questions highlighted earlier, System 1 and System 2 thinking both serve different purposes.

We believe that System 1 and System 2 exploration is not an either-or proposition. Rather, we consider both to be conducive to credible analysis and exploration. The issue therefore is not which System to apply but, rather, when to emphasize each and what risks to consider when placing too much emphasis on one or the other. More specifically, when should you apply a process-driven methodology and when should you broaden your thinking to include or emphasize intuition or instinct? What are the trade-offs or risks of placing too much emphasis on one type of thinking and too little on the other?

While the preceding exploration focuses heavily on the internal cognitive process, it is imperative that the internal process occurs with conscious awareness of context. Alva Noë, a professor of philosophy and expert in the theory of perception, emphasizes the importance of paying attention both to what one is doing and how one is doing it at any given moment:

Suppose I am a hiker. I walk along and move my legs in all sorts of subtle ways to follow a path along a trail. But the steps I take and the way I move my legs are modulated by, controlled by, the textures and bumps and patterns of the trail itself. There is a kind of locking in. To study experience, to think about the nature of experience, is to look at this two-way dynamic exchange between the world and the active perceiver.8

Context is as critical to the leaders' thinking as it is to the hiker's walk.

Conversations with Bobby Duby,9 a world-class hunter, showcase these tenets. Bobby is a hunter even hunting opponents like. He takes steps to follow all state laws pertaining to wildlife conservation and hunting, only kills enough animals to provides an adequate amount of meat for his family, takes steps to leave only footprints behind when leaving a hunting area, works with local wildlife officers when he comes across illegal or questionable practices, and does all that he can to help ensure the animals he shoots do not suffer. He also takes steps to level the playing field. For example, he only hunts with a compound bow, hunts only on land in which game has escape routes, and does not bait his prey. Bobby realizes taking these steps comes with a price; in all likelihood, they decrease his success as a hunter. This is noteworthy given that some people pay professional guides up to $15,000 to $20,000 to hunt as he does and where he does.

While attempting to follow the hunting principles of his forefathers, what does Bobby do to increase the odds of his hunting trips being successful? In many ways, he applies the thought processes and discovery methods we have highlighted here – for example:

■ Bobby believes that there is no substitute for hunting time. The more time you spend in the field, the more likely you are to succeed as a hunter.

■ He relies heavily on his intuition, which he believes is strengthened each hunting season. In seeking to strengthen his intuition, he believes that his failures are as important as his accomplishments.

■ Bobby studies maps of his hunting area, studies the flora and fauna therein, monitors weather patterns, and analyzes changes in elevation of the terrain. He applies both structured analysis and “a gut feeling” that he has developed over time to determine what this information implies.

■ He periodically reassesses the situation during each hunting trip, evaluating presenting events and circumstances to recognize unanticipated and unexpected occurrences that might influence his thinking and behavior during the remainder of the trip.

■ Bobby has conversations with as many individuals as he can who might be familiar with the area, the wildlife, and prevailing or emerging situations, events, and circumstances.

These examples reflect the integrated application of both types of discovery questions as well as both System 1 and System 2 thinking. Bobby integrates these methods to improve his performance as a hunter, just as we each have the opportunity to integrate practical concepts from cognitive psychology into our work and daily lives.

Systems Thinking

We consider systems thinking to be a key element of strategic thinking. Much has been written about systems thinking since noted systems scientist Barry Richmond began studying and writing about the topic in the late 1990s.10 Richmond considers most challenges we face to be multifaceted, interconnected, and constantly changing. He stresses the challenge of recognizing and understanding these interdependencies when dealing with such complexity. Given this challenge, he has been a champion for more effective methods of thinking.

Types of Thinking

Unfortunately, many people do not think in a way that is likely to recognize and understand the complexity that surrounds them. Richmond notes that many people are raised to be linear, sequential, and one-dimensional thinkers. For our purposes, we will focus our discussion on the tendency of some individuals to demonstrate a “checklist” mentality. While Richmond identifies other important implications of linear thinking, we emphasize the checklist mentality because it is particularly relevant to our exploration in this book.

One implication of having a checklist mentality is considering “cause” to be the one or two actions that occur immediately prior to a particular event. Such a cause-effect relationship can reveal an unconscious assumption that only directly linked factors can influence an event in meaningful ways, underestimating the relevance and impact of indirect causes and influences.

Whenever an incident occurs, an individual using this mode of thinking would likely ask:

■ Have we identified the one or two actions immediately preceding the state, event, or incident? If so, check.

■ Have we created a solution to be applied to the one or two contributing factors? If so, check.

Having evaluated and confirmed these two questions, the matter would be considered closed. Unfortunately, this leaves several additional questions unexplored:

■ What other factors directly or indirectly influence the event?

■ Do each of these factors contribute equally, or do some have a greater impact than others?

■ To what extent will a specific solution address the contributing factors?

■ Which solutions should occur first, second, and third to ensure optimal results?

■ Is this event a symptom of some larger problem?

Each of these questions combats the checklist mentality by opening up the possibility of discovering additional relevant data.

We frequently observe the checklist mentality at play when working with our clients, colleagues, and graduate students. We therefore recognize the strength of Richmond's recommendations for countering such a mind-set and helping us recognize and understand how things really work. His recommendations take the form of the following discrete types of thinking that contribute to his broader definition of systems thinking:

■ Dynamic Thinking: Involves recognizing patterns and trends that materialize over time rather than focusing on isolated factors, events, or circumstances.

■ Closed-loop Thinking: Involves recognizing that systems consist of connected and interdependent processes that do not flow one way but, rather, interact in dynamic and constantly changing ways. An important facet of closed-loop thinking is that it helps you recognize the role the individual plays in influencing the system.

■ Generic Thinking: Involves recognizing the broad-based and multifaceted implications of people, processes, systems, mechanisms, and events. Using an example common in business school courses, what might have happened if the railroad companies had considered themselves to be part of the transportation industry rather than merely being railroad companies? Might Southern Railway now be responsible for transporting supplies to the International Space Station?

■ Operational Thinking: Involves thinking in terms of how a system, process, or mechanism actually works rather than how it was intended to work. This helps one avoid falling into the trap of assuming that the system designed in the planning process will perform “in accordance to plan” simply because that was the original intent.

■ Continuum Thinking: Involves recognizing that what seems like opposing forces typically are connected and have certain commonalities or interdependencies. Such recognition allows one to find common ground upon which to build rather than continuing to focus on the boundaries and disconnections.

Each of these examples provides concrete ways to apply systems thinking to avoid the checklist mentality and to understand more accurately the dynamics typically at play in a given situation.

Systems Thinking in Groups

Just as systems thinking can help individuals think more strategically, it can also help teams and organizations. In the 1980s, Peter Senge conducted research to discover how organizations build learning capacity and why some organizations are better at learning than others. The practices that differentiate the effective learning organization are referred to as the Five Learning Disciplines, all of which we consider to contribute to strategic thinking:

● Shared Vision: Involves formulating a compelling vision to create commitment among a group to “pull” individuals toward the envisioned future state.

● Mental Models: Involves surfacing the values, assumptions, and expectations that determine the way people think and behave. We will describe tools later in this chapter that can help challenge existing assumptions and ensure that contributors working together to turn the vision into reality do so in a consistent and mutually supportive manner.

● Personal Mastery: Involves taking steps to strengthen self-awareness about how we think, draw conclusions, make decisions, and manage conflict, as well as how we apply these to establish, manage, and strengthen relationships.

● Team Learning: Involves teams working together to review situations and gain mutual understanding of what they had hoped to accomplish, how things progressed, and how they handled unexpected and unplanned events. Doing so can reveal underlying and contributing factors, and identify necessary steps to increase effectiveness and efficiency in the longer term. Again, we will describe tools later in this chapter that can help teams work together to identify lessons learned and establish new best practices.

● Systems Thinking: Helps teams and team members recognize interconnected factors and forces that influence or impact events, analyze events to understand related and contributing challenges and opportunities, and identify ways to leverage the opportunities and mitigate the challenges.11

The Five Learning Disciplines contribute to strategic thinking and help organizations build learning capacity by emphasizing the importance of planned and purposeful thinking; the benefit of teamwork and teams composed of self-confident, self-motivated, and capable team members; and the importance of individuals and teams thinking through issues, considerations, and related implications prior to drawing conclusions and making decisions.

Applying Systems Thinking

A case involving a multifacility medical center that provides “full life cycle” health care services showcases how the effective use of systems thinking might lead to better outcomes. In this scenario, the Emergency Services Department is a well-known and highly recognized trauma center, seeing scores of patients every day who are experiencing some type of physical distress.

The department operates in an environment of continuous improvement, measuring success through a variety of internal and regulatory-driven metrics. The director of the Emergency Services Department conducts quarterly patient satisfaction surveys to gain insight into the overall impact of its policies and procedures, and to measure the effectiveness and efficiency of its operation. A special recognition program includes cards that patients and their families can easily complete and submit to recognize exemplary performance.

The director of the Emergency Services Department, troubled by a decreasing Patient Satisfaction Index, or PSI, decides to take action. The director's strategic intent is to take steps to address concerns raised by patients with the ultimate goal of increasing the department's PSI. Upon analyzing the data revealed through the quarterly patient survey, she realizes that approximately 80 percent of the concerns raised relate to wait time. Patients are spending two to four hours in the waiting room per visit. The director's examination of the data reveals that concerns are being raised by “single appointment” patients and recurring patients who receive extended care.

Further examination reveals that the concerns being raised mostly center on the fact that patients entering the department at certain hours miss meals. Those entering after 3:00 or 4:00 AM miss breakfast, those entering after 9:00 or 10:00 AM miss lunch, and those entering after 2:00 or 3:00 PM miss dinner. The director weighs the options and decides to begin offering breakfast, lunch, and dinner to patients in the waiting room during the appropriate hours.

Time passes, and new patient satisfaction surveys and comments suggest the director's solution is working. Single-appointment and returning patients are pleased with the meals they now receive. The department's PSI is climbing, primarily as a result of increased satisfaction relating to the catered meals. Happy to see this key performance indicator returning to historical levels, the director takes satisfaction in a job well done.

If the director had applied systems thinking concepts and principles, how might have her considerations, conclusions, decision(s), and subsequent actions been different? In terms of her general considerations, the director might have broadened her level of analysis to include local, regional, and national emergency services departments. She might have shifted her focus from attempting to increase patient satisfaction by providing catered meals to attempting to increase patient satisfaction by decreasing wait times. In terms of the questions she asked, the director might have explored how effectively and efficiently the Emergency Services Department operates within the context of other similar emergency services organizations. Perhaps she might have investigated how the department's structure, systems, processes, policies, or staff capabilities affect the department's efficiency and effectiveness. In terms of the conclusions she drew and decisions she made, the director and her colleagues might have attempted to tackle the issue of patients using the Emergency Services Department as their primary health care provider through patient education. Alternately, they might have taken steps to strengthen the integration of systems and processes to enhance efficiency and effectiveness. Perhaps they might have taken steps to bolster controls and incentives to ensure employees at all levels are committed, engaged, and motivated to work together to achieve the Emergency Services Department's goals and objectives.