Strategic Thinking

03. July 2011 All, Career 0

There is no way to learn strategic thinking than by doing it. You can’t really learn it in a book or website for that matter, so unless you plan on working and thinking through these examples with me – you may not find any of this valuable. And for those who have taken my class, practice makes perfect – so let’s keep going.

There are three parts to strategy: strategic thinking, strategic planning and strategic implementation. Let me pause. I am not a fancy MBA executive. If you’re here to learn complex methodologies, you should try wiki or your library. I’m just someone who learns concepts and then figures out how to make them work for me. If that’s what you’re here for, let’s move on.

When all is said and done, I think strategy just comes down to three things:
1) how you approach a problem 2) how you create your plan and 3) how you get it done. Today I’ll write about the first.

Strategic Thinking: Strategic thinking requires you to look at an issue from all possible angles. I have found the best way to do this by asking questions and refraining from trying to answer them. Think about how an alien visiting our planet with just a basic knowledge of humanity might ask questions. Our perspectives are crafted through our upbringing, education, cultures, media, social and familial orders, etc. Although our perspectives make us unique, they can be quite limiting when approaching a business problem. The idea is to remove these “lenses” so that you can look at as many realities as possible.

The key here is asking unbiased, untainted, and non-assumptive questions. Then rather than trying to answer the questions right away, the only ones you should answer are: do I have the resources to answer this question? If not, what resources are required to answer this question? The best part of this exercise is realizing how limited you would have been without having done this. You’ll find some of these examples to be quite silly but that’s the point –  no lines, no limits, no boundaries! Is that not where you want to take your business?

Problem A:
There is a fly in my soup

Questions A:
Where did this fly come from?
Do I enjoy flies in my soup?
What attracted the fly to my soup?
How did it get in there?
Why does the fly stay in my soup?
How many others have had flies in their soup this week? month?
What kind of fly is this?
Did the fly get in there accidentally?
Does the fly want to be in my soup?
Are there many flies in this area?
Where else have flies landed today?
What objects around my soup are attracting flies?
Is this a fly?
Is this soup?
What is soup?
Am I a fly?

Ok I know what you’re thinking. Again, let’s keep going. Now let’s try a more serious one:

Problem B:
My customer volume is significantly lower in the summer

Note: the most immediate reaction to this problem is to answer it with solutions like: summer sales, promotions, reduce inventory, extend hours, etc. The PERFECT pitfall for someone who jumps straight to implementation without thought.

Questions B:
What is the decrease in volume?
Is there a decrease in purchase per customer?
When exactly does the decrease happen?
Is this decrease problematic? Why?
Is there a coincident decrease in expense?
Does volume ever increase again? If so, when?
Are there annual trends on times the volumes decrease?
What is volume? How do I measure it?
Is there a coincident decrease in total revenue?
What other customer purchases are decreasing during this time? What are increasing?
Are my neighboring businesses experiencing the same volume shift?
Where are my customers this summer? How are they getting there?
Which items are being purchased at a lower rate and which at a higher one?
Are customer budgets as a whole being reduced or allocated toward other expenses? If so, what ones?

Ok, we can go on and on, that’s the whole point – to think and think and question until you’ve thought of every possible perspective.

See, if you had just gone straight to spending $1000 on “SUMMER SALE” signs without asking these questions, you might never have realized that your current customer purchase rate (the % of people who enter your store that actually buy something) is 10%. By making flashier signs, you do increase the purchase rate by 20% on that original 10%  to 12%. However, you already spent $1000 on the signs, and you’ve reduced costs on full price-items by 10% to honor your sale promotion – so you’re at a net loss.

But instead, after this strategic thinking session, you ask the questions that lead you to find the answers that tell you that your problem lies in the number of drive-by customers as a whole. Now that the elementary school down the street is on summer vacation, the majority of your teacher and parent customer base are not driving down your road anymore. Instead, they are driving to little league and summer camps which are clustered down Rt 8 – which is exactly where you’re going to invest to put some signs up – resulting in a 200% increase in entrance rate, 0% increase in purchase rate, net revenues are up.