2

Strategic Thinking

Shahnawaz Adil

Assistant Professor, Department of Business Administration

Course Advisor:
Management
In-charge:
Library Affairs
Moderator:
http://groups.yahoo.com/group/IUGC_LRC_A

Learning Outcomes

The paradox of Logic and Creativity

The Rational Thinking perspective logic
The Generative Thinking perspective
Creativity
Defining the issues: Cognition and Reasoning
The nature of Cognition
The nature of Reasoning
Important keywords used
References
2

Quotes

When you have eliminated the impossible,

whatever remains, however importable,
must be the truth.

(Sherlock Holmes, Arthur Conan Doyle 18591930; English novelist)

Imagination is more important than

knowledge.

(Albert Einstein 1879-1955; German-American

physicist)
3

The paradox of
Logic and Creativity

The Rational Thinking perspective logic

The Generative Thinking perspective
Creativity
4

The paradox of
Logic and Creativity

Strategy can be broadly conceived as a course of

action for achieving an organizations purpose.
It is therefore, usually argued that managers need
strategies to solve the complicated, often wicked,
problems with which they are confronted.
Strategic Problem usually have a negative
connotation to some, it is not intended to denote
only troublesome situations.

It is a more general term, that refers to any challenging

situation encountered by an organization that demands
a re-consideration of the current course of action, either
to profit from observed opportunities or to respond to
perceived threats.
5

Problem-Solving

The term problem-solving also has a connotation

to many, namely, finding the optimal (mean:
best/finest) answer to a puzzle.
However, there might not be one best solution.
Therefore, problem-solving should not be
interpreted as the activity of finding the solution
to a problem, but as the activity of finding a
solution.
The following topics deal with the mode of
thinking employed by people when confronted
with strategic problems.
6

Strategic Problems /
Thinking:
Two central issues

Two issues will be central to the

discussion on strategic thinking:
First, how do people define strategic
problems how are problems
identified and conceptualized?
Second, how do people actually solve
strategic problems how are potential
solutions generated, evaluated and
decided on?
7

Strategic Problems /
Thinking:
Two central issues (contd)

On both issues it is of interest to know

what people really do (descriptive) and
to know what people should do to be
successful (prescriptive).

Both an understanding of what is

commonly done, and what leads to the
best results, is of importance.
8

Strategic Thought Process

Question: What is the fundamental

nature of strategic thought processes?
Question: How does the mind of
strategist work and how should readers
themselves think strategically?
Opinions on this matter differ
considerably, both among practitioners
and theorists (who will jointly be referred
to as strategists throughout this session).
9

Strategic Thinking:
Two opposed positions

On the one hand, there are strategists who

argue that strategic thinking is one of the most
advanced forms of analytical reasoning,
requiring the consistent (mean: reliable and steady)
and rigorous (mean: exact/thorough/precise) use of logic
i.e. rational thinking perspective.
On the other hand, there are strategists who
argue that the essence of strategic thinking is
the ability of break through orthodox (mean:
traditional) beliefs, requiring the use of creativity
i.e. generative thinking perspective.
10

Strategic Thinking:
Two opposed positions
(contd)

Based on these two extremes, it seems

that disagreements between
strategists revolves around the
question whether strategic thinking is
primarily logical or creative.

These two factors are opposite and

might be (partially) contradictory.
11

Rational thinking versus

generative thinking
perspective
Rational Thinking Generative Thinking
perspective
Perspective
Emphasis on

Logic over
creativity

Creativity over
logic

Cognitive style

Analytical

Intuitive

Reasoning
follows

Formal, fixed
rules

Informal, variable
rules

Nature of
reasoning

Computational

Imaginative

Direction of
reasoning

Vertical

Lateral
12
To be continued

Rational thinking versus

generative thinking
perspective
Rational Thinking Generative Thinking
perspective
Perspective
Value placed on

Consistency and
rigor

Unorthodoxy and
vision

Reasoning
hindered by

Incomplete
information

Adherence to
current ideas

Assumption
about reality

Objective,
(partially)
knowable

Subjective,
(partially)
creatable

Decisions based Calculation

on

Judgement

Metaphor

Strategy as art

Strategy as

13

Rational Thinking
perspective
explained
Logic
14

Rational Thinking
perspective

Strategists employing rational thinking

perspective argue that strategic thinking is
predominantly a logical activity.
To deal with strategic problems the strategist
must first consciously and thoroughly analyze
the problem situation.
Data must be gathered on all developments
external to the organization, and this data
must be processed to pinpoint the
opportunities and threats in the organizations
15
environment.

Rational Thinking
perspective (contd)

Furthermore, the organization itself must be

appraised, to uncover its strengths and
weaknesses and to establish which resources are
available.

A problem well stated, is the problem half

solved

Charles Kettering 1876-1958; US electrical engineer and inventor

Once the problem has been defined, a number of

alternative strategies can be identified by
matching external opportunities to internal
strengths.

16

Rational Thinking
perspective (contd)

Then, the strategic options must be

extensively screened, by evaluating them on
a number of criteria, such as consistency,
consonance, advantage, feasibility, potential
return and risks.
The best strategy can be selected by
comparing the scores of all options and
determining the level of risk the strategist is
willing to take.
The chosen strategy can subsequently be 17

Rational Thinking Perspective

Prerequisites

The type of intellectual effort requires welldeveloped analytical skills.

Strategists must be able to rigorously,
consistently and objectively comb through
huge amount of data, interpreting and
combining findings at arrive at a complete
picture of the current problem situation.
Possible solutions requires critical appraisal
and all possible contingencies must be
logically thought through.

18

Rational Thinking
Perspective Prerequisites

Advocates of the rational perspective

argue that such thinking strongly
resembles the problem-solving approach
of chess grand masters.

They also thoroughly assess their

competitive position, shift through a variety
of options and calculate which course of
action brings the best chances of success.
Therefore, the thought process of chess
grand masters can be used as an analogy for
what goes on in the mind of the strategist.

19

Rational Thinking
Perspective:
Bounded
Rationality
In reality strategists often have to backtrack
and redo some of these steps, as

new information becomes available; or

chosen strategies do not work out.

Strategists attempt to be as comprehensive,

consistent and rigorous as possible in their
analyses and calculations, but of course they
cannot know everything and their
conclusions are not always perfect.
Even with the most advanced forecasting
techniques, not all developments can be
20
foreseen.

Rational Thinking
Perspective:
Bounded
Rationality
(contd)
Even with state-of-the-art market research, some
trends can be missed.
Even with cutting-edge test marketing, scenario
analyses, competitive simulations and NPV
calculations, some selected strategies can turn
out to be failures.
Strategists are not all-knowing, and do make
mistakes their rationality is limited by
incomplete information and imperfect cognitive
facilities.
Yet, strategists try to be as rational as possible.

21

Rational Thinking
Perspective:
Bounded Rationality

(contd)

Simon (1957) refers to this as bounded

rationality people act intentionally
rational, but only limitedly so.
This coincides with Ambrose Bierces
famous sarcastic (mean: ironic) definition
of logic as the art of thinking and
reasoning in strict accordance with the
limitations and incapacities of human
misunderstanding.
22

Rational Thinking
Perspective:
Bounded
Rationality
(contd)
The (boundedly) rational strategist must

sometimes improvise (mean: manage) to make up

for a lack of information, but will try to do this
as logically as possible.
Inferences (mean: conclusion as a result of a thought process)
and speculation (mean: free thinking without limitations) will
always be based on the facts as known.
By articulating assumptions and explicitly
stating the facts and arguments on which
conclusions have been based, problem
definition and solutions can be debated within
the firm, to confirm that they have been
arrived at using sound reasoning.
23

The alternative to a
rational approach

It is often pointed out i.e. to be

irrational and illogical, which surely
cannot be a desirable alternative for
the strategist.
Non-rational thinking comes in a
variety of forms:

Emotions
Routines & habits
Intuitions

24

The alternative to a rational

approach
Emotions

Feelings such as love, hate, guilt, regret, pride,

anxiety, frustration, and embarrassment, can
all cloud the strategists understanding of a
problem situation and the possible solutions.
Adherents (mean: supporters/believers/proponents) of the
rational thinking don not dispute the
importance of emotions the purpose of an
organization is often based on personal
values, aspirations and ideals, while the
motivation to implement strategies is also
rooted in human emotions.
25

The alternative to a rational

approach

Routines & habits

Routines are programmed courses of actions

that originally were deliberately conceived,
but are subsequently internalized and used
automatically (March and Simon, 1993).
Habits are programmed courses of actions
that have developed unconsciously.
Humans approach many everyday problems
by reverting to routine and habit, which is a
good thing, because conscious deliberation
would cost too much time and effort.
26

The alternative to a rational

approach

Intuitions

In a general term, intuition is the opposite of

formal analysis (Von Winterfeldt and
Edwards, 1986).
Intuition is informal and synthetic.

Informal means that the reasoning is largely

unconscious and based on assumptions,
variables, casual relationships not explicitly
identifiable by those doing the thinking.
Synthetic means that the thinker does not aim at
unraveling (mean: untie/unknot/loosen) phenomena
into their constituents parts, but rather maintains
a holistic view of reality.
27

The alternative to a rational

approach

Intuitions

(contd)

Intuition is not necessarily irrational.

If intuition is viewed as a set of unconscious
and uncodified decision rules largely derived
from experience (Simon, 1987), intuitive
judgments can be quite logical.
Decision rules based on extensive
experience are often correct, even if they
have been arrived at unconsciously.

For example, Simon argues that even chess grand

masters make many decisions intuitively, based
on tacit (that is unarticulated) rules of thumb,
formulated through years of experience.
28

The alternative to a rational

approach

Intuitions

(contd)

Unconscious does not mean illogical and

therefore most proponents of the rational
perspective do not dismiss intuition out of
hand.
However, intuitive judgments are viewed with
great suspicion, as they are difficult to verify
and infamously unreliable (Hogarth, 1980;
Schwenk, 1984).
Where possible, intuitive reasoning should be
made explicit the cognitive map in the
strategists head should be captured on paper
(Eden, 1989), so that the reasoning of the
strategist can be checked for logical
29
inconsistencies.

Rational Thinking
Perspective:
Conclusion
In short, advocates of the rational thinking
perspective argue that strategic thinking should
not be based on emotions, routines, habit or
pure intuition, but on explicit logical reasoning,
just like a science.
Scientific methods of research, analysis,
theorizing, and falsification are all directly
applicable to developing strategy.
Consequently, the best preparation for strategic
thinking is to be trained in the scientific
tradition.
30

The Generative
Thinking
perspective
explained
Creativity
31

The Generative Thinking

perspective

Strategists taking a generative thinking

perspective agree that logic is important, but
stress that logical reasoning is often more a
hindrance than a help.
The heavy emphasis placed on rationality can
actually stifle (mean: suffocate/choke) creativity.
While creativity is essential for generating
novel (mean: new/fresh) insights, new ways of
defining problems and innovative solutions
(Baden-Fuller and Stopford, 1992)
32

The Generative Thinking

perspective

Therefore, proponents of the generative

perspective argue that strategists should not
get too caught up in rational approaches to
strategic thinking, but should nurture
creativity as their primary cognitive asset.
The generative thinking perspective is based
on the assumption that strategic problems
are wicked (Rittel, 1972).
It is believed that strategic problems cannot
be easily and objectively defined, but that
they are open to interpretation from a
limitless variety of angles.
33

The Generative Thinking

perspective

The same is true for the possible solutions

there is no fixed set of problem solutions
from which the strategists must select the
best one.
Defining and solving strategic problems, it is
believed, is fundamentally a creative activity.
As such, strategic thinking has very little in
common with the thought processes of the
aforementioned chess grand master, as was
presumed by the rationalists.
34

The Generative Thinking

perspective

Playing chess is a tame

disciplined/cultivated) problem.

The problem definition is clear and all

options are known.

In the average game of chess,

consisting of 40 moves, 10
possibilities have to be considered
(Simon, 1972).

(mean:

35

The Generative Thinking

perspective

This makes it a difficult game for

humans to play, because of their
limited computational capacities.
Chess grand masters are better at
making these calculations than other
people and are particularly good at
computational short-cuts recognizing
which things to figure out and which
not.
36

The Generative Thinking

perspective

However, even the best chess grand masters have

been beaten at the game by highly logical
computers with a superior number crunching
capability.
Garry Kimovich Kasparov
World Chess Champion
19851993 (undisputed)
19932000 (Classical)

e.g. Garry Kasparov is widely known for being the first

world chess champion to lose a match to a computer,
when he lost to Deep Blue (chess-playing computer
37
developed by IBM) on 11 May 1997.

The Generative Thinking

perspective

For the poor chess grand master, the

rules of the game are fixed and there is
little room for redefining the problem or
introducing innovative approaches.
Engaging in business strategy is an
entirely different matter.
Strategic problems are wicked.
Problem definitions are highly subjective
and there are no fixed solution sets.
38

The Generative Thinking

perspective

It is, therefore, impossible to identify

the problem and calculate an optimal
solution.
Opportunities and threats do not exist,
waiting for the analyst to discover them.
A strategist believes that a solution can
be viewed as an opportunity and sees
that certain factors can be threatening if
not approached properly.
39

The Generative Thinking

perspective

Neither strengths and weaknesses be

objectively determined a strategist
can employ a company characteristic
as a strength, but can also turn a
unique company quality into a
weakness by a lack of vision.
Hence, SWOT analysis actually has little
to do with logical analysis, but in reality
is nothing less than a creative
interpretation of a problem situation. 40

The Generative Thinking

perspective
Limitations of Logic

The major limitations, according to the

proponents of generative thinking
perspective, is that it entraps strategists in
the current orthodoxy (mean: accepted belief
(view)/prevailing attitude/convention).
Logical reasoning can be an intellectual
straight-jacket.
Being logical means engaging in consistent
reasoning based on a number of accepted
theories, ideas and assumptions about reality.
41

The Generative Thinking

perspective
Limitations of Logic (contd)

When a group of people share such premises

that shape how they view specific situations
or problems, it is said that they have a
common paradigm (e.g. Kuhn, 1970).

Prahalad and Bettis (1986) speak of the

dominant logic within a group, while others
speak of a shared cognitive map (e.g. Weick
and Bougnon, 1986) or belief system (e.g.
Noorderhaven, 1995)
42

The Generative Thinking

perspective
Limitations of Logic (contd)

Rational thinking then, is nothing other

than interpreting problems and selecting
solutions in accordance with the
prevailing paradigm.

Breaking out the status quo (mean: the

existing state of affairs) requires that
strategists question and contradict
established wisdom.

43

The Generative Thinking

perspective

To find innovative ways of defining and

solving problems, it is imperative that
strategists think creatively they must
make leaps of imagination, that are not
logical from the perspective of the
current paradigm.
Strategists must be willing to leave the
intellectual safety of generally-accepted
concepts to explore new ideas, guided
by little else than their intuition.

44

The Generative Thinking

perspective

De Bono (1970) refers to such generative,

frame-breaking reasoning as literal thinking,
as opposed to vertical thinking, which
remains neatly within the existing paradigm.
To proponents of the generative thinking
perspective, it is essential for strategists to
have a slightly contrarian (Hust et al., 1989),
revolutionary predisposition (Hamel, 1996).

Contrarian: a person who takes an opposing view,

esp. one who rejects the majority opinion, as in
economic matters.
45
Predisposition: tendency/ inclination/ temperament

The Generative Thinking

perspective

Strategists must enjoy the challenge of

thinking out of the box, even when this
is disruptive of the status quo and not
much appreciated by those with their
two feet (stuck) on the ground.
As Picasso once remarked, every act of
creation is first of all an act of
destruction strategists must enjoy the
task of demolishing old paradigms and
confronting the defenders of these
46
beliefs.

The Generative Thinking

perspective
Conclusion

In short, advocates of the generative

thinking perspective argue that the
essence of strategic thinking is the ability
to creatively challenge the tyranny (mean:
dictatorship/autocracy) of the given (Kao,
1996) and to generate new and unique
ways of understanding and doing things.
As such, strategic thinking closely
resembles the frame-breaking behaviour
common in the art.
47

The Generative Thinking

perspective
Conclusion

In fields such as painting, music, motion

pictures, dancing and architecture, artists
are propelled by the drive to challenge
convention and to seek out innovative
approaches.
Many of their methods, such as
brainstorming, experimentation, openness
to intuition, and the use of metaphors,
contradictions, and paradoxes, are directly
applicable to developing strategy.
48

The Generative Thinking

perspective
Conclusion

Consequently, the best preparation for

strategic thinking is to be trained in the
artistic tradition of creativity and
mental flexibility.

49

The paradox of
Logic and Creativity
CONCLUSION

The Rational Thinking perspective logic

The Generative Thinking perspective
Creativity
50

Conclusion

The question within the field of Strategic

Management is, therefore:

Whether strategic thinking is primarily a

rational activity or
has more to do with ingenuity and imagination.
Should strategists train themselves to follow
procedural rationality rigorously analyzing
problems using scientific methods and
calculating the optimal course of action?
Or should strategists boldly think out of the box
inventing entirely new course of action?
51

Conclusion

Not all strategists give the same

answers to these questions.
This places readers in the position that
they themselves must think about the
nature of strategic thinking.
Together, logic and creativity present a
paradox that strategists, and prospective
strategists, must come to terms with.
52

Defining the issues:

Cognition and
Reasoning

The nature of Cognition

The nature of Reasoning
53

Defining the issues:

Cognition and
AsReasoning
we have seen, the disagreement
between the two extreme points of
view revolve around two major issues:

The nature of Cognition the human

ability to know.

The nature of Reasoning the thought

process leading to knowing.

54

The Nature of
Cognition

55

The nature of Cognition

The mind of the strategist is a complex

and fascinating apparatus, that never
fails to astonish and dazzle on the one
hand, and disappoint and frustrate on
the other.

We are often surprised by the power of

the human mind, but equally often
stunned by its limitations.

56

The nature of Cognition

Please note that for the discussion at

hand it is not necessary to unravel
(mean: untie/unknot/loosen) all of the
mysteries surrounding the functioning
of the human brain, but a short
overview of the capabilities and
limitations of the human mind will
greatly help strategists to take on
strategic business decisions.
57

The nature of Cognition

The human ability to know is referred to as

Cognition.
Knowledge that people have is stored in their
minds in the form of cognitive maps, also
known as cognitive schemata.
These cognitive maps are representations in
the mind of an individual of how the world
works.
A cognitive map of a certain situation reflects
a persons beliefs about the importance of the
issues and about the causes and effects
58
relationships between them.

The nature of Cognition

Cognitive maps are formed over time through

education, experience and interaction with
others.
It is clear that people are not omniscient they
do not have infinite knowledge. The cognitive
abilities of humans are limited.
These cognitive limitations are largely due to
three factors:

Limited information processing capacity;

Limited information sensing ability; and
Limited information storage capacity.

59

Limitations
1.Limited information processing
capacity

As was clear in the chess example cited

earlier, humans do not have unlimited
data processing abilities.
Thinking through problems with many
variables and huge amounts of data is
a task that people find extremely
difficult to perform.
Approaching every activity in this way
would totally overload a persons brain.
60

Limitations
1.Limited information processing
capacity

For this reason, humans hardly ever think

through a problem with full use of all available
data, but make extensive use of mental
shortcuts, referred to as cognitive heuristics
(Janis, 1989).
Cognitive heuristics are mental rule of thumb
that simplify a problem, so that it can be more
quickly understood and solved.
Cognitive Heuristics focus a persons attention
on a number of key variables that are believed to
be most important, and present a number of
simple decision rules to rapidly resolve an issue.

61

Limitations
1.Limited information processing
capacity

The set of possible solutions to be

considered is also limited in advance.

The specific cognitive heuristics used

by individuals are rooted in their
cognitive maps.

62

Three Cognitive
Limitations
2. Limited information sensing ability

Human cognition is also severely handicapped

by the limitations of peoples senses.

While the senses touch, smell, taste, hearing

and seeing are bombarded with stimuli, much
of reality remains unobservable to humans.

This is partially due to the physical inability to

be everywhere , all the time, noticing
everything.
63

Three Cognitive
Limitations
2. Limited information sensing ability

However, peoples limited ability to

register the structure of reality is also
due to inherent superficiality of the
senses and the complexity of reality.

The human senses cannot directly

identify the way the world works and
the underlined casual relationships.
64

Three Cognitive
Limitations
2. Limited information sensing ability

Only the physical consequences of complex

interactions between elements in reality can be
picked up by a persons sensory system.
Therefore, the mental representations of the
world that individuals build up in their mind are
based on circumstantial evidence.
Cognitive maps are formed by inferring casual
relationships, making guesses about
unobservable factors and resolving
inconsistencies between the bits of the
information received.

65

Limitations
2. Limited information sensing
ability

Hence, the model of reality constructed

in the minds of individuals are highly
subjective.

In turn, peoples cognitive maps steer

their senses while cognitive maps are
built on past sensory data, they
continuously direct which information
will be sought and perceived.
66

Limitations
2. Limited information sensing
ability

A persons cognitive map will focus attention

on particular phenomena, while blocking out
other data as noise, and will quickly explain
how a particular situation should be
perceived.

In this way, a cognitive map provides

interpretive filter, aiding the senses in
selecting and understanding external stimuli
(Johnson and Scholes, 1993)
67

Limitations
3. Limited information storage
capacity

Another human cognitive shortcoming is poor

memory.
People have only a limited capacity for storing
information.
Remembering all individuals, events, data,
places and circumstances is beyond the ability
of the human brain.

e.g. Evidently, while on our way to office, we see a

number of people, vehicles, movements,
signboards, etc. but in fact, we actually dont
remember when we arrive at the workplace and
then try to recall.
68

Limitations
3. Limited information storage
capacity

Therefore, people must store

information very selectively and
organize this information in a way that it
can be easily retrieved when necessary.

Here again, cognitive heuristics are at

play rules of thumb make the
memorization process manageable in
the face of severe capacity limitations.
69

Limitations
3. Limited information storage
capacity

Such heuristics help to simplify

complex clusters of data into
manageable chunks and help to
categorise label and store this
information so that it can be
recalled at a later moment.

70

The nature of Cognition

(contd)

With these limitations, humans can never be

as perfectly rational as computers.
Even when people try to be as rational as
possible that is, they avoid emotional,
routine and intuitive behaviour they will still
be hindered by these three cognitive
limitations.
Two types of problems, in particular, confront
the boundedly rational thinker:

Cognitive Biases
Cognitive Rigidities

71

1. Cognitive Biases

As we discussed earlier, cognitive heuristics are

mental shortcuts, needed to cope with limited
information processing and storage capacity.
Everyone uses them for a large part of thinking.
They help people to intuitively jump to
conclusions without thorough analysis, which
increases speed, but also increases the risk of
drawing faulty conclusions.
The main danger of cognitive heuristics is that
they are inherently biased, as they focus
attention on only a few variables and interpret
them in a particular way, even when this is not
appropriate (Tversky and Kahneman, 1986;
72
Bazerman, 1990)

1. Cognitive Biases

(contd)

For this reason, many academicians urge

practitioners to bolster (mean: strengthen)
their intuitive judgments with more explicit
rational analysis.

Especially, in the case of strategic

decisions, time and energy should be
made available to avoid falling prey (mean:
victim) to common cognitive biases (e.g.
Isenberg, 1984; Schoemaker and Russo,
73
1993)

1. Cognitive Biases

(contd)

Others are quick to point out that without

extensive use of cognitive heuristics, and all
the dangers involved, strategists would grind
to a halt, overloaded by the sheer complexity
of the analyses that would need to be carried
out a situation of rationality gone rampant,
usually referred to as paralysis by analysis
(Lenz and Lyles, 1985; Langley, 1995).

This has led to an on-going debate on how to

balance rational analysis and intuitive
74
jedgment.

2. Cognitive Rigidities

A second problem is that people are

generally not inclined to change their
minds cognitive maps exhibit a high
level of rigidity.

Once peoples cognitive maps are

formed, and they have a grip on reality,
they become resistant to signals that
challenge their conceptions.
75

2. Cognitive Rigidities
(contd)

The mind strives tremendously to bring order,

simplicity, consistency, and stability to the world
it encounters.
It is therefore, reluctant to welcome ambiguity
presented by contradicting data.
People tend to significantly overestimate the
value of information that confirms their cognitive
maps, underestimate disconfirming information,
and they actively seek out evidence that
supports their current beliefs (Schwenk, 1984).
76

2. Cognitive Rigidities
(contd)

Once an interpretive filter is in place, seeing is

not believing, but believing is seeing.
Cognitive rigidity is particularly strong when an
individuals cognitive maps are supported by
similar beliefs shared within a social group or
organization.
How rigid cognitive maps actually are and how
open people can be to evidence and new ideas
is, however, an ongoing debate within the fields
of (strategic) management and (social)
psychology.
77

Cognitive Rigidities:
main questions

Do cognitive rigidities present a major

problem to strategists?

Do strategists need to change their

minds in sufficient ways or is it
sufficient for strategists to build on
their current understanding, with
occasional minor adaptations?
78

Cognitive Rigidities:
main questions

Must strategists consistently try to break

through cognitive rigidities, by creatively
generating other ways of understanding the
world, or should they progress rationally, by
logically extending their existing cognitive
maps?

Is it necessary for strategists to be intellectual

revolutionaries, overthrowing the established
orders, or should they respect accepted
knowledge and build on these foundations? 79

The nature of Cognition

Conclusion

Which interpretation of cognition is right?

As unanimity (mean: agreement/accord) is
lacking, readers will have to form an
opinion of their own.
Which position in this debate each reader
takes will ultimately depend on their view
on the nature of reality (which
philosophers refer to as the issue of
Ontology) and the nature of knowledge
(the issue of Epistemology).

80

The Nature of
Reasoning
81

The nature of reasoning

Reasoning and cognition are intimately

related reasoning is the thought
process leading to knowing.
As a process, reasoning involves a
number of mental activities taking
place over time.
In the context of strategy, reasoning is
the thought process used to define and
solve strategic problems.
82

Strategic Reasoning

Most strategists, whether of rational or

generative inclination, agree that reasoning
about strategic problems can be decomposed
into four broad categories of mental activities
(see figure on the next slide).
These four elements of Strategic Reasoning are:

Identifying;
Diagnosing;
Conceiving; and
Realizing
83

Process:
an example

Elements of Strategic Thought

Process
1. Identifying
(What is a problem?)

2. Diagnosing
(What is the nature of the problem?)

Defining
Solving

4. Realizing
3. Conceiving
(What actions should be taken?) (How should the problem be addressed?)

1. Identifying

Before strategists can move to benefit

from opportunities or to counter
threats, they must be aware of these
challenges and acknowledge their
importance.

This part of the thought process is

variably referred to as identifying,
recognising or sense-making.

86

2. Diagnosing

To come to grips with a problem,

strategists must try to understand the
structure of the problem and its
underlying causes.

This part of the thought process is

variably referred to as diagnosing,
analyzing or reflecting.
87

3. Conceiving

To deal with a strategic problem, strategists

must come up with a potential solution.

If more than one solution is available, the

strategist must select the most promising
one.

This part of the thought process is variably

referred to as conceiving, formulating, or
envisioning.

88

4. Realizing

A strategic problem is only really solved once

concrete actions are undertaken that achieve
results.

Strategists must therefore carry out problemsolving activities and evaluate whether the
consequences are positive.

This part of the thought process is variably

referred to as realizing, implementing, or
acting.

89

The Nature of Reasoning

Real contradiction

What strategists do not agree on, is how each

activity is carried out and in what order.
Rational Thinking Perspective:

From the rational thinking perspective, it is

logical to start by identifying problems, and
then to move from diagnosing to conceiving
solutions and realizing them (clockwise
movement).

90

Elements of Strategic Thought

Process
1. Recognizing
(What is a problem?)

2. Analyzing
(What is the nature of the problem?)

Defining
Solving

4. Implementing
3. Formulating
(What actions should be taken?) (How should the problem be addressed?)

The Nature of Reasoning

Real contradiction (contd)

In general, adherents to the rational thinking

perspective believe that identifying strategic
problems requires extensive external and
internal scanning, thorough shifting of incoming
information, and the selecting of priority issues.

In the next mental phase, that major strategic

problems that have been recognised are
diagnosed by gathering more detailed data, and
further analyzing and refining this information.
92

The Nature of Reasoning

Real contradiction (contd)

Once the problem has been properly defined, a

strategy can be formulated by evaluating the available
options and deciding which solution is the best.

In the final phase of realization, the strategist must

ensure the execution of the proposed solution by
consciously planning and controlling implementing
activities.

Therefore, in the vocabulary of rational thinking

perspective, the four elements of the strategic thought
process are usually referred to as recognising,
analyzing, formulating and implementing.

93

The Nature of Reasoning

Real contradiction (contd)

Generative Thinking Perspective:

Proponents of generative thinking perspective
do not believe that strategists reason in this
linear (or actually circular) fashion.
They do not accept that the four categories of
mental activities are phases.
In their view, reasoning is usually far more
messy, with identifying, diagnosing, conceiving,
and realizing intermingled with one another and
often going on at the same time.
94

Elements of Strategic Thought

Process
1. Sense - making
(What is a problem?)

2. Reflecting
(What is the nature of the problem?)

Defining
Solving

4. Acting
3. Envisioning
(What actions should be taken?) (How should the problem be addressed?)

Keywords

Strategic problem
Strategic problems
Swot analysis
Chess grand masters
Bounded rationality
Inferences
Speculation
Emotions
Routines & habits
Intuitions
Cognitive map or Cognitive
Schemata
Belief system
Deep Blue
Orthodox
Dominant logic

Literal thinking

Revolutionary
predisposition
Paradox
Procedural rationality
Cognition
Reasoning
Omniscient
Cognitive limitations
Cognitive heuristics
Interpretive filter
Cognitive Biases
Cognitive Rigidities
Paralysis by analysis
Ontology
Epistemology

96

References

(contd)

Baden-Fuller, C.W.F., and Stopford, J.M. (1992) Rejuvenating the

mature business, Routledge, London, pp.13-34

Bazerman, M.H. (1990) Judgment in managerial decision

making, Second edition, John Wiley, New York.

De Bono, E. (1970) Lateral thinking, Harper and Rowe, New

York.

Eden, C. (1989) Using cognitive mapping for strategic options

development and analysis (SODA), in: Rosenhead, J., (ed.)
Rational analysis in a problematic world, Wiley, London.
97

References

(contd)

Hamel, G. (1996) Strategy as Revolution, Harvard Business

Review, pp. 69-82.

Hogarth, R.M. (1980)Judgment and choice: the psychology of

decision, Wiley, Chichester.

Hust, D.K., Rust, J.C, and White, R.E. (1989) Top management
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Isenberg, D.J. (1984) How senior managers think, Harvard

Business Review, pp. 81-90.

Janis, I.L. (1989) Crucial decisions: leadership in policymaking

and crisis management, Free Press, New York.

98

References

(contd)

Johnson, G., and Scholes, K. (1993) Exploring corporate

strategy: text and cases, Third edition, Prentice Hall, Hamel
Hampstead.

Kao, J. (1996) Jamming: the art and discipline of business

creativity, Harper-Business, New York.

Kuhn, T.S. (1970) The structure of Scientific Revolution,

University of Chicago Press, Chicago.

March, J.G., and Simon, H.A. (1993) Organizations, Second

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Noorderhaven, N.G. (1995) Strategic decision making, Addison99

Wesley, Wokingham.

References

(contd)

Prahalad, C.K., and Bettis, R.A. (1986) The dominant logic: a

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Rittel, H. (1972) On the planning crisis: system analysis of the

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Schoemaker, P.J.H., and Russo, J.E. (1993) A pyramid of decision

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Schwenk, C.R. (1984) Cognitive simplification process in

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100
5, pp. 111-28.

References

(contd)

Simon, H.A. (1957) Models of man, John Wiley, New York.

Simon, H.A. (1972) Theories of Bounded Rationality, in: McGuire, C.,

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Simon, H.A. (1987) Making management decisions: the role of intuition

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Tversky, A., and Kahneman, D. (1986) Rational choice and the framing
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Von Winterfeldt, D. and Edwards, W. (1986) Decision analysis and

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Weick, K.E., and Bougnon, M.G. (1986) Organizations as cognitive

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101
Jossey-Bass, San Fransisco, pp. 102-35.