How Effective Leaders Apply Strategic Thinking

How Effective Leaders Apply Strategic Thinking

How Effective Leaders Apply Strategic Thinking

Editor’s note: Aaron K. Olson and B. Keith Simerson have co-taught MSLOC 431: Leading with Strategic Thinking since its inception in 2009. The collaboration eventually led the duo to further explore the nature of strategic leadership and to the development of their new book, Leading with Strategic Thinking, released in April 2015. This article highlights results of their independent research, their own expertise as leaders, and ideas explored in the course.

Aaron is Chief Talent Officer at Aon plc, a global firm specializing in risk management and human resources. B. Keith Simerson, Ed.D. provides consultation, executive coaching and leadership development in the areas of strategy formulation and execution. He is the co-author of four additional books including Strategic Planning: A Practical Guide.

By Aaron K. Olson and B. Keith Simerson, EdD

Organizations and individuals face new challenges in a world where technology and globalization drive increasing complexity. Strategic thinking is critical in this context, as automation increasingly takes over routine tasks and the remaining work often involves the navigation of competing priorities and trade offs. Likewise, leadership is essential to advancing change and influencing stakeholders towards the right outcomes.

We’ve spent the past six years exploring these issues with our graduate students in Northwestern’s MSLOC program, examining the intersection of leadership and strategic management. We recount this work in our new book, Leading with Strategic Thinking, to better explain what it means to be a strategic leader.

At the heart of this work, we see the application of three academic disciplines—game theory, systems thinking and cognitive psychology—to the core activities of strategic management: recognizing patterns, making choices and managing risk

Patters decisions risk

Recognizing patterns involves the interpretation of relevant data sources to gain new insight. While technology increasingly enables the collection and analysis of large sets of data, the act of interpreting this data remains the activity of individuals. The best leaders we’ve examined use intentional methods to find novel insights. These leaders make connections between often-disparate data points, using both formal analytical processes and their own direct experience. Regardless of their methods, strategic leaders recognize patterns to find the opportunities that have not previously been identified or pursued.

Making decisions involves navigating the tradeoffs and stakeholders in a given situation to identify the best choice among available options. This includes determining how value can be defined and to whom that value is relevant. The best leaders take an intentional approach to decisions, using a combination of formal methods and personal judgment informed by past experience.  This includes being conscious about the right way to make a decision. Formal methods and instinct both have merits and the right approach can vary depending on context.

Managing risk is inherent in the creation of value, as any new venture involves the pursuit of previously unexplored or unproven activities. Strategic leaders take conscious action that maximizes the balance between risk and reward.  They do this through the formal identification of risks that can undermine the intended outcome, the categorization of those risks according to the nature of each threat, and the management of actions that can mitigate or neutralize those threats.

An increasing number of frameworks and tools have been developed that strengthen the impact of these three activities, fueled by research in three academic disciplines:

  • Cognitive psychology – helps uncover biases and blind spots which might limit strategic thinking. Concepts like system one and system two thinking (Kahneman et al), help leaders manage decisions more intentionally.
  • Systems thinking – helps leaders recognize connections, revealing how a change in one area might impact other interconnected areas. Tools like double loop learning (Argyris) have a long track record in helping organizations and individuals capture insights and make better choices.
  • Game theory – sensitizes leaders to the reality that decisions and actions rarely occur in isolation. Actions typically impact others and their reaction is seldom neutral.  First developed as a field in mathematics, game theory and concepts like win-win decision making (Buchanan) have crossed over to become a significant tool in the decision sciences and strategic management.

We draw on each of these fields in our graduate course and in our book, applied through a use of case studies that reveal effective ways to navigate the challenges that leaders faces today. These case studies span geographies, industries and even public and private sector work, illustrating what we see as the universal and increasing relevance of both leadership and strategic thinking.

References:

Kahneman, D., Lovallo, D. & Sibony, O. (n.d.). The Big Idea: Before You Make That Big Decision…. Retrieved June 3, 2015, from https://hbr.org/2011/06/the-big-idea-before-you-make-that-big-decision

Argyris, C. (n.d.). Double Loop Learning in Organizaations. Retrieved June 3, 2015, from https://hbr.org/1977/09/double-loop-learning-in-organizations

Buchanan, L. (n.d.). Play to Win. Retrieved June 3, 2015, from https://hbr.org/2005/12/play-to-win

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