SYSTEMS THINKING STRATEGY

iUniverse, Inc.

Contents

1: Introduction.....................................................12: What Is Strategy?................................................53: The Competitive Environment: Looking Outward.....................134: Leveraging Internal Capabilities.................................235: It's About the Customer..........................................316: Systems Thinking.................................................377: Applying Capabilities in the STS.................................458: Applying Customer Information in the STS.........................559: The Competitive Environment in the STS...........................6510: Making Sense in the STS.........................................7511: Lessons Learned.................................................91List of Figures.....................................................95List of Tables......................................................97Research Notes......................................................99References..........................................................117About the Author....................................................123

Chapter One

Why are some organizations more successful than others? Is it better products? Is it a superior service model? Is it some mixture of the two? Is it merely a matter of lining up the products and services to meet the needs of the marketplace at a particular time? Or did they just get lucky?

These are the questions business leaders wrestle with on a daily basis. And they're not just doing it for the fun of the debate. They are trying figure out how to make their organizations more successful. Many business leaders (especially those with top-tier MBAs) believe that finding the answer to these questions is a matter of strategy. Find the right strategy, and the company is bound to be successful.

But what is strategy? That is a tricky question. A Google search will yield around 855 million results. Narrowing the search term down to "strategic planning" is only a little better, with 145 million results. You can't go more than an hour watching CNBC or Fox Business without hearing someone use a derivation of the word. Claiming to be a strategic thinker has almost surpassed good people skills as the talent that too many people put on their résumés when they don't know what else to list.

Obviously there are a lot of people talking about strategy, but how many people really understand what it means? More importantly, how many know how to do it right? Most importantly, how can a business leader understand how to do it right and apply that to his or her organization?

Strategy is about finding ways to drive sustainable competitive advantage (Hamel, 1996; Porter, 1996; Worley, Hitchen, & Ross, 1996). There is plenty of agreement on that point. Where there is disagreement, however, is in the how, where, when, and why of the various approaches to strategy.

Notice that the previous paragraph used the word approaches and not the singular approach. That is not a typo. There are lots of different approaches to strategy, and plenty of debate about which approach is the best. While there will be some discussion of the major approaches later in this book, it is important to remember that despite proponents' claims, none of the established approaches is best for all organizations at all times. As a result, anytime one model is found to be inadequate for a particular scenario, someone comes along and presents a new approach. The majority of these models are fairly specific and applicable only to a finite number of situations. This has led to lots of different models for strategy, more than a little confusion, and numerous calls to come up with a better way (Collis & Montgomery, 1995; Cummings & Angwin, 2004; Mintzberg, 1994).

While it would be extreme hubris to claim that this book will address all of the existing models' shortcomings, it does provide an approach that has a wider application than many of the existing paradigms. This book codifies elements that reflect what many successful organizations are already doing. It takes a new view that answers at least some of the challenges presented by existing paradigms. It does this by applying a systems thinking lens (e.g., see Peter Senge's The Fifth Discipline) to current approaches and illustrating a model that allows for a fuller view of the organization and its ecosystem. Hopefully those who read this book will find something useful they can apply to their own organizations.

This book and the strategy model it presents are based upon a university-supported research study that was part of my doctoral dissertation. It was a long, arduous, and frankly painful process that required nearly a year and a half of literature review, data collection, and analysis, not to mention multiple rewrites. The final product, however, was an in-depth look at one very simple question:

• Do organizations that take a systems thinking approach to strategy perform better than the overall market?

The short answer is yes, they do. The long answer is a bit more complicated. The original dissertation and the summary report that was provided to the study participants are both hefty descriptions of what was done and why it was done, written in such a way as to appease the demands of an academic audience. But then again, that was the goal. The goal of this book is very different.

The goal of this book is to share the insights gained from that study in a way that is more palatable to business professionals without the superfluous prose of a dissertation. Accomplishing this goal will begin with an overview of what strategy is in chapter 2, followed by a look at the dominant strategy paradigms in chapters 3 through 5. Next is a review of systems thinking and how it applies to strategy in chapter 6. Chapter 6 also provides a very high-level review of the research study's methodology. Given the focus of this text, that section of chapter 6 does not go into very much detail, but for those who feel the need to "see the math," research notes are also provided at the end of the book.

Chapters 7 through 10 illustrate the major findings of the study and how they can be applied. Chapter 7 reviews how an understanding of organizational capabilities is applied; chapter 8 looks at how customer data is used; and chapter 9 looks at how information about the competitive environment is integrated into these efforts. Chapter 10 reviews how organizations make sense of all the data points. The last chapter attempts to summarize the overall findings and bring things to a reasonable close.

Chapter Two

The term strategy comes from the Greek word strategos and, loosely translated, means "art of the general" (Collis, 2005). The great Chinese general Sun Tzu said that the responsibility of generalship is to create situations that assure victory (Griffith, 1963). Following this line of reasoning, the case could be made that strategy is about creating situations that allow organizations to be victorious or, in other words, successful. Sounds simple enough, but achieving that goal can be quite complicated.

To be successful, an organization must be able to create some kind of sustainable competitive advantage. The leaders of that organization have to make hard...