Introduction to the Chapter

This chapter discusses the importance of strategy and expands to discussions of strategic thinking. The chapter supports readers in understanding attributes of strategic thinkers and allows readers to reflect on how they can become a strategic thinker. Information regarding the strategic planning process highlights both informal and formal methods. Ultimately, the chapter guides readers in moving strategic thinking from a cognitive function to the actual implementation of a plan.

Learning Outcomes

After completing this chapter, you will be able to:

1. Define strategy and strategic thinking.
2. Identify your own strategic thinking attributes.
3. Describe the differences between informal and formal strategic planning methods.

Key Terms

The following important terms are used in this chapter:

• Strategy: a plan of action that guides individuals in reaching a predetermined outcome
• Strategic thinking: a cognitive process used to intentionally develop a plan of action to reach predetermined outcomes
• Operational effectiveness: the degree of quality demonstrated in the performance of tasks
• Entrepreneurial mindset: a combination of skills, traits, and personality characteristics that allows an individual to maximize opportunities
• Idea generation: developing and communication new ideas through the use of an unstructured, open, creative process

Section 1: Understanding Strategy and Strategic Thinking

Companies have always explored ways to remain competitive and outpace rival companies. In order to do so successfully, leaders develop a vision for the company. The vision serves as the mark of what the company views as perfection. In working toward that vision on a day-to-day basis, a mission is established. The mission consists of ongoing steps that the company takes to work toward the vision. The vision and mission address the “what” for an organization. What is the company aiming to do?

Even with a vision and mission in place, a company still needs a detailed plan of action to serve as the overall framework in meeting smaller objectives and goals. This plan of action is the company’s strategy. Strategy is a plan of action that guides in reaching predetermined outcomes. Strategy addresses the “how” for an organization. How will the company accomplish the vision, mission, and goals?

Strategic Thinking

Strategic thinking is a process used by individuals, teams, or organizations. The process will involve consideration of internal and external factors and how those factors may impact achievement of goals. Although the ultimate goal is to demonstrate alignment amongst vision, goals, and the major objectives, strategic thinking is not always a linear process. Thus, individuals must use creative and innovative approaches as part of the strategic thinking process.

Are You Strategic?

Examining and understanding the strengths and weaknesses of leaders and team members are important. Understanding these strengths and weaknesses provide an opportunity to position the team for success. Leveraging the capabilities of various leaders and team members is an important component of the overall strategy of a company. While some leaders or team members are creative, it may not necessarily mean that those same individuals are strategic. Strategic thinkers have a keen ability to see the big picture (vision), break that big picture into smaller pieces (goals), and then develop a plan to achieve the goals.

Strategic thinkers have high-level planning skills and use questioning techniques to ensure consideration of various perspectives in developing a strategic plan. Strategic thinkers embrace an entrepreneurial mindset. An entrepreneurial mindset allows individuals to think outside of the box and consider innovative approaches to addressing situations. It is not required that you are an entrepreneur in order to have an entrepreneurial mindset. Furthermore, individuals may possess certain characteristics of an entrepreneurial mindset and not have all characteristics of an entrepreneurial mindset.

Individuals with an entrepreneurial mindset are forward thinking, willing to take risks, creative, and innovative. All of these characteristics are attributes often associated with strategic thinkers. Moreover, strategic thinkers provide the leadership necessary to establish goals and align the team to effectively leverage team members in working toward the goals. In this next section, we explore these attributes in greater detail.

Section 2: Strategic Thinking: The Planning Process

Strategic thinking is a cognitive function. In order to see results from a cognitive process, there is a requirement to move from thinking to actually doing. Strategic planning is the process in which strategic thinking moves from a cognitive function to action. Individuals and organizations may use informal or formal strategic planning processes.

Informal Planning Process

An informal process may be more fluid in nature and not formally tracked. Consider a group of people sitting at a restaurant or dinner table and they begin thinking. Someone in the group may jot down notes on a napkin. The napkin shows ideas, but there is no formal process outlined. Informal planning may often serve as the brainstorming or idea generation stage that later leads to a formal planning process.

Formal Planning Process

In comparison, formal strategic planning may likely involve brainstorming meetings, charts, and specific objectives for the planning process. Additionally, a formal strategic plan may use a tracking system to ensure the accomplishment of milestones within a given timeframe. Such a tracking system is often coordinated through a project management framework. Project management involves tracking the overall plan, the resources, and key milestones for a project. The project may be an ongoing project with multiple components, or a smaller scale project. Regardless of the scope of the project, the coordination of the full process is formal in nature.

Case Study: A Crossroads for Airbnb

The Crossroads: Airbnb’s Strategic Dilemma in 2020

Brian Chesky, CEO of Airbnb, stared out the window of his San Francisco office on a gloomy March afternoon in 2020. The COVID-19 pandemic was wreaking havoc on the travel industry, and Airbnb was not immune. Bookings had plummeted by over 70% in many major cities. Chesky knew he had to act fast to save the company he had cofounded 12 years earlier.

Since its founding in 2008, Airbnb has been on a meteoric rise. With its peer-to-peer home-sharing platform, it disrupted the hotel industry. By early 2020, it had over 7 million listings worldwide and was valued at $31 billion. The company had been planning to go public later that year.

But now, everything was up in the air. Chesky had already made the difficult decision to lay off 25% of Airbnb’s workforce—about 1,900 employees. He had also slashed the company’s marketing budget and put several initiatives on hold.

However, Chesky knew that simply cutting costs would not be enough. Airbnb needed a bold new strategy to survive the pandemic and emerge stronger on the other side. But what should that strategy be?

One option was to expand Airbnb’s core short-term rental business, focusing on domestic travel and longer stays as people sought to escape crowded cities. This would involve investing heavily in marketing to hosts and guests in drive-to destinations.

Another possibility was to pivot more aggressively into new areas like virtual experiences and monthly stays, capitalizing on the shift to remote work. This would require significant product development and a move away from Airbnb’s traditional model.

A third option was to hunker down and conserve cash, waiting out the pandemic before making any major strategic moves. This would mean additional layoffs and indefinitely postponing growth plans.

As Chesky pondered these options, he knew that Airbnb’s future hung in the balance. The company had overcome challenges before, but nothing like this. Whatever path he chose would define Airbnb for years to come.

Chesky took a deep breath and turned back to his laptop. It was time to make a decision that would shape the future of travel. What should he do?

Strategic Thinking to Action

To continue challenging your thoughts on having an idea, strategic thinking and launching into action, here are a few examples:

IBM: Shifting From Products to Services

IBM executed a remarkable strategic transformation in the 1990s under CEO Louis V. Gerstner Jr.

Key aspects of their successful strategy execution included:

• Making a paradigm shift from being a technology product provider to a comprehensive services partner.
• Collaborating with competitors when beneficial for customers, like supplying components to Dell while still offering their own PCs.
• Centralizing marketing and advertising efforts under one agency with standardized procedures.
• Diversifying offerings and investing in strategic growth areas.

This strategic pivot paid off significantly:

• Income increased from $3 billion to $7.7 billion between 1993 and 2001.
• Revenue grew from $64 billion to $86 billion in the same period.
• Stock market value reached $180 billion.
• In just 6 years, revenue rose 45% and net income more than doubled.

IBM’s successful transition is considered one of the greatest corporate turnarounds in history.

Tesla: Premium Strategy and Integrated Purpose

Tesla has demonstrated effective strategy execution through:

1. Integrating mission, business goals, and workplace culture around the central purpose of accelerating sustainable transport.
2. Setting and pursuing bold, ambitious goals like taking on established auto industry giants and developing new technologies.
3. Emphasizing modularity in design to enable rapid innovation and parallel production lines.
4. Focusing on radical simplification in engineering, design, and operations.
5. Targeting the premium market segment initially to fund the development of more affordable models.

This strategic approach has positioned Tesla as an industry leader and innovator in electric vehicles.

PayPal: Building Strategic Partnerships

PayPal successfully executed a strategy focused on developing solid relationships with retailers. Key elements included:

• Forming direct partnerships with major retailers like Foot Locker, Office Depot, and J. C. Penney.
• Positioning themselves between banks and retailers, filling a gap that traditional financial institutions were hesitant to occupy.
• Leveraging these retail relationships to gain access to consumers.

This strategy allowed PayPal to establish a strong position in the digital payments market.

Procter & Gamble: Customer-Centric Innovation

P&G has demonstrated successful strategy execution through:

• Committing to “constructive disruption and an agile and accountable organization structure.”
• Focusing intensely on customer needs and experiences.
• Investing heavily in consumer research ($400 million annually) and R&D ($2 billion annually).
• Implementing advanced technologies to analyze customer behavior and optimize marketing strategies.
• Fostering an agile culture with effective leadership and individual empowerment.

These strategic initiatives have helped P&G maintain its position as the world’s largest consumer goods company, with net sales of $82 billion in fiscal year 2023.

In all these cases, the companies successfully moved from strategic thinking to concrete actions that transformed their businesses and drove significant growth.

A Nutshell Summary

This chapter provided you with an understanding of strategy and the use of strategy in strategic thinking and in the strategic planning process. The chapter highlighted key attributes of strategic thinkers and the importance of these attributes in successfully leading a team in setting goals and leveraging the strengths of team members to work toward those goals. The chapter aided in understanding informal and formal methods to use in moving strategic thinking from a cognitive function to taking action to implement a plan. The chapter assignment provides readers with an opportunity to practice strategic thinking skills by developing a turnaround strategy for a company.

Probing Questions

1. How might strategy support a company in developing a competitive advantage?
2. Which two attributes of strategic thinkers resonated with you the most and why?
3. How might a team leader ensure that multiple perspectives are considered during the strategic planning process?

Introduction to the Reading

This reading is significant because thinking strategically allows for a deeper understanding of the facets that lead to making strategic decisions. In order to think strategically, we must question our assumptions and biases as well as reflect and engage in thoughtful dialogue.

References

4 Examples of Successful Strategy Execution. (2014). Kanban Software for Agile Project Management. https://businessmap.io/blog/successful-strategy-execution-examples

Airbnb. (2020). A Message from Co-Founder and CEO Brian Chesky. Airbnb Newsroom. https://news.airbnb.com/a-message-from-co-founder-and-ceo-brian-chesky/

Denning, S. (2023). How Tesla Is Revolutionizing Management to save the Planet. Forbes; www.forbes.com. https://www.forbes.com/sites/stevedenning/2023/07/05/how-tesla-is-revolutionizing-management-to-save-the-planet/

Gaudioso, G. (2022). Examples of Successful Strategy Execution – Uppwise. https://www.uppwise.com/2022/04/11/examples-successful-strategy-execution/.

Hussain, N. Z., & Franklin, J. (2020, December 11). Airbnb valuation surges past $100 billion in biggest U.S. IPO of 2020. Reuters. https://www.reuters.com/article/world/airbnb-valuation-surges-past-100-billion-in-biggest-us-ipo-of-2020-idUSKBN28K29H/.