Strategic v Tactical thinking
Dec 19
The most challenging aspect of being in a start up position is that the management team will be under constant pressure to think both strategically and tactically. In my experience, few people are good at both.
A good way to think about the difference is in terms of the time horizon the thinking has an impact on. Strategic thinking is very much about what the future direction of the business is and how it is best suited to make the most of an ever changing environment.
As a member of a board, the expertise that you should bring to play is to be informing the company of how you expect the environment that the business is operating in to change over the next few months and years and how it can gear up to either exploit the changes or to defend itself.
This is where the boards of many major banks were found wanting. Although hindsight is a great tool to have, I find it amazing to think that no one at the board of these banks asked the question “what if we can no longer get hold of funds from wholesale markets?” or “What if people default on the loan payments?” or even more obviously “what if the assets we are lending against (such as houses) drop in value?”. Surely, the answer could not have been “Don’t worry – we are too big to go down and the government will rescue us!”
I do feel let down by some of the non-executive directors of the companies that I have invested in. They have been great at taking the money but not too good at asking difficult questions. Sometimes, I do think that people confuse putting someone under pressure with asking difficult questions.
This is perhaps best defined by tactical thinking. In this thinking, it is more about operational delivery and ensuring that the strategy you have laid out to meet the challenges ahead are executed well. But it should be up to management at an operational level to deliver this. Of course a board should ask when KPI are not being met. But their role needs to be wider than this.
Tactical thinking is a skill that is hard to define and to spot. You only see evidence of it once it has been delivered. On the other hand, you can see strategic thinking being displayed in case studies and through academia.
Sales people tend to be good at thinking tactically, but appalling at thinking through the strategic consequences of their actions. By definition, a sales person will be fixated on the achievement of short term goals to deliver x in revenue or y in volume.
Giving a large discount to a customer may help deliver the operational need you have today but may scupper your plans to position yourself as a premium brand.
That is the challenge of managing a business and the conflicts between managing in the short term and managing for the long term.
Great companies tend to employ a blend of good strategic thinkers and good tactical doers. The worst thing is when tactical people move into strategic positions or you have someone who is strategic performing a role which requires tactical ability!
Which one are you better at?
is a book that asks the question - “what does it take for something to reach a tipping point?” A tipping point could be described as when something breaks into the mainstream or suddenly goes big. He also talks about why certain things despite heavy spend do not make it big.
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