STRATEGIC THINKING AND KNOWLEDGE MANAGEMENT
Authors Iraj Tavakoli and Judith Lawton
Iraj Tavakoli is an Associate with Hanover Executive Limited
(Final draft. Published in the Handbook of Business Strategy 2005 by Emerald Publishing; ISSN 0894-4318)
This article is a conceptual framework and literature review on strategic thinking. It examines some of the
more recent definitions and identifies a number of key elements involved. Further analysis determines a
number of situations that can improve strategic thinking capability in individuals and considers whether
organisations can successfully adopt its conclusions to develop their managers and improve the business.
The paper briefly discusses the relationship between strategic thinking, strategic planning and emergent
strategy and suggests that strategic thinking needs to precede both and is essential in making them more
appropriate and effective. The authors believe that the greater the sum total of strategic thinking and thinkers
in the organisation the more readily and effectively it can respond to and take advantage of the vast array of
changes occurring in today’s business environment. However, despite the significant levels of delayering
and flattening of structures that has taken place in the last decade or so, some organisational barriers
continue to stifle opportunities for strategic thinking by limiting the flow of experiences and insights to
relevant corners of the firm. The authors suggest that knowledge management can have a significant role in
increasing and improving strategic thinking by drawing such experiences and insights from all parts of the
organisation and making them available to points of strategic decision and action.
1. WHAT IS STRATEGIC THINKING?
There is no one clear definition as to what strategic thinking actually is, rather a number of slightly
moderated descriptions and attributes. Garratt (1995) sees strategic thinking as a “ process, by which senior
executives can rise above daily managerial processes and crises to gain a different perspective of the
organisation and its changing environments”; Porter (1987) suggests that it is “the glue that holds together
the many systems and initiatives within a company”; Zabriskie & Heullmantel (1991) define it as the
“prelude to designing the organisation’s future”; Peters, in Reimann & Ramanujam (1992), argues that it is
a method for finding a vision and “obtaining perpetual invigoration” for that vision; Ohmae (1983) believes
that it involves a “combination of ‘analytical method and mental elasticity’, used to gain a competitive
advantage”; Mintzberg, (1994) states that strategic thinking emphasizes synthesis, “using intuition and
creativity” to produce “an integrated perspective of the enterprise” and Bandrowski (1985) relates it to “the
actual thought mechanisms that can be used to generate strategic options”.
More ‘usably’, Stumpf (1989) argues that strategic thinkers are “adept at interpreting, analysing and
applying information” and … “can arrange the same information in more than one way” … “thereby
generating more alternative courses of action” in the process of achieving determined objectives. Bonn
(2001) suggests that for strategic thinking to occur three attributes need to be present:
A holistic, systems, understanding of the organisation & its environment, recognising the linkages and
complexity of the various sub-structures and relationships
Creativity; ‘thinking out of the box’, for new ideas and frequent reworking of old ideas and practices
A vision for the future of the organisation
Liedtka (1998), while recognizing the importance of the attributes explored by Bonn, suggests that strategic
Embodies a focus on intent that does not necessarily strive to dovetail resources and opportunities.
Involves thinking in time, in that looking to the future, it is imperative to consider the past and the present,
as all are interconnected
Is hypothesis driven. “By asking the creative question ‘What if?’ followed by the critical question
‘If..then…? strategic thinking spans the analytic-intuitive dichotomy”. This suggests that strategic thinkers
are ‘experimental’ thinkers and able to envisage several alternative courses of action and critically evaluate
them. They are further able to creativity ‘craft viable ways forward’. This way they are in a position to take
advantage of newly emerging opportunities more promptly and effectively.
2. DEVELOPING AN ORGANISATIONAL (CORE) COMPETENCE IN STRATEGIC THINKING
Bonn (2001) suggests that organisations that successfully develop and integrate strategic thinking at individual
and organisational levels can create a core competency1 which becomes the basis of enduring competitive
advantage. Seen from this perspective, the role of strategic thinking has to become central for the future health
of a business. The importance and relevance of this capability is highlighted by Liedtka (1998) who argues
that in the face of an unpredictable, highly volatile and competitive market place, a capacity for divergent
strategic thinking at multiple organisation levels is seen as “central to creating and sustaining competitive
advantage.” It follows therefore that organisations would benefit highly from encouraging and helping to
develop strategic thinking in as large a number of their employees as practicable.
Can this be possible? McCall (in Stumpf 1989) identified experiences that he suggests enhance an individual’s
capability to think strategically:
Starting a business from scratch
Fixing or turning around a failing operation
Being involved in special projects or temporary assignments that were crucial to the organisation
Moving from a line to a staff position or vice-versa
Being demoted, missing a promotion or getting an undesirable job
A personal crisis, such as divorce, illness or family death
He believes that it is experiences in such uncertain circumstances that can develop an individual’s ability as a
strategic thinker while Pellegrino & Carbo (2001) suggest that ‘the common thread through all of these
experiences is that they destroy the sense of structure and predictability in a person’s life. Things go from
clear and defined to unstructured and ambiguous.’
Stumpf (1989) developed training programmes & simulations based on McCall’s ‘experiences’ that can
improve the strategic thinking ability of the participants, (BOX 1).
The programme was used in a four-year case study of 47 senior managers at Finanbank (disguised name).
Business simulations, work assignments and special project activities were developed for each of the
managers based on the analysis of their individual needs. Stumpf monitored the progress of these managers as
part of a research programme and suggests that it resulted in all of the managers significantly improving their
strategic thinking capabilities. The benefit to the organisation was demonstrated by substantial increases in
As described by Hamel and Prahalad (1994)
the value of their assets in the five-year period of the exercise, rising from $5.8 billion to $61 billion, with
profits increasing proportionately.
BOX 1: Stumpf’s training programme to develop strategic thinking capability
As the Finanbank study appears to indicate, training can have an important role in developing strategic
thinking capability among employees. However, Bonn (2001), believes that there may as yet be insufficient
research into whether and how training enhances the strategic thinking capability of managers.
A further tool in the armoury of shaping and channelling by companies is selection. Appropriate selection
criteria and processes can be devised to assess personal cognitive styles and separate out candidates with
greater potential for strategic thinking. Graetz (2002) suggests that strategic thinking is a skill more
commonly found in people who are creative and able to work outside their comfort levels, coping well in
situations with low structure in the available information. Today, myriads of tests and techniques are
available that claim to distinguish creative individuals. Graetz states that it is possible to combine such
selection criteria with subsequent training programmes that develop the selected applicants in thinking and
managing in unstructured situations. An important part of this training would be simulation, which as a
technique is capable of creating low structure situations.
Selection and training are two methods of developing a capability in strategic thinking and decision making,
but Grant (2002) suggests that observation, shadowing and apprenticeship are other methods of developing
such capabilities and particularly useful in transferring ‘tacit’ knowledge (Grant 2002).
These methods, however, may not produce optimum results if the organisation’s culture and structure are not
conductive to encouragement of strategic thinking by employees outside the small group of senior managers.
Porter (1987) urges firms to develop structures and cultures for effective strategic planning which
encompasses strategic thinking; “strategic thinking rarely occurs spontaneously as day-to-day concerns tend to
prevail; the future is forgotten”. He further argues that managers should be encouraged to “overcome the fear
of being different. The way they are judged should not encourage them to prefer failing with the same
strategy as everyone else but to dare to succeed with a new strategy”.
One structure for developing strategic thinking, suggested by Bonn (2001), is a ‘strategic forum’. It is a
proactive approach that could be employed by senior management teams wishing to maximise the benefits of
its strategic thinkers. A forum, she argues, should meet regularly to focus on areas likely to be important to
their organisation over the next five to ten years, and should consist of successful managers with a proven
track record in their own disciplines. Structured in this way, meetings would not be pre-dominated by crises
and short term fixes, but would become truly strategic and benefit the long-term health of the organisation.
See Box 2 for an example of a Strategic Forum.
“In the early 1990s’s, Paul Allaire, the CEO (of Xerox) at that time, appointed a group of six young middle
managers to examine Xerox’s current structures and practices and to develop a proposal for a new
organisational design that would help Xerox to be successful in the future. The group, which was known as the
‘Futuretecture team’, underwent a 15-month design process that involved more than 75 managers from
throughout the organisation. They came up with four possible design approaches and presented them to
senior management. After intensive discussions, the senior managers decided to implement proposal four and
Allaire set up a committee consisting of members from the Futuretecture team and senior managers to work
out the details of the proposal. According to Allaire, ‘this group became far more important than any of us
could have imagined’. These people hammered out these principles without knowing where they would end up
in the new organisation they were creating. Through that process, they internalized those principles to a
remarkable degree. We in the corporate office often found ourselves behind them.”
BOX 2: Example of Bonn’s Strategic Forum
An further example of this type of forum in action can be found at the global management consultancy
KPMG, as reported by Gottliebsen (1999), see Box 3.
In 1998, Colin Sharman, the global chairman of KPMG formed a group of younger consultants from around
the world, asked them to take a year off from ‘normal duties’ to consider the forces most likely to influence the
future of the company. “Sharman believed that business plans of three to five years in most enterprises were
little more than long term budgets, and a new approach was required, using people who were much closer to
customers than the senior executives”. When the group presented their findings, they found that many of the
senior management team were shocked by the four final scenarios, which were far removed from anything
that they could have imagined. Satisfied, the chairman concluded that the future success of KPMG “will not
be to pick the ’correct’ scenario, but to prepare KPMG [to] adapt to any one of the four”. A further
conclusion was the “use of talent to develop and take advantage of new skills and technologies ……..it will be
companies with the best ‘knowledge workers’ that will win”. It can be argued that in this post 9/11 society,
there has never before been such a need for strategic thinkers who are able to think ‘outside the box’, because
the altered perceptions of the future are anything but certain.
Box 3, KPMG’s development of strategic talent’ and strategic thinking
Another structure for developing strategic thinking capability is setting up ‘communities of practice’ (Wenger
and Snyder 2000). These essentially self forming and informal networks are now being deliberately organised
in larger organisations as a means of sharing skills, knowledge and experiences among employees from
different sectors and geographical areas. A similar structure is the multi-disciplinary project team. However,
to have relevance in terms of developing strategic thinking capability, its membership needs to also include
staff from the strategy making ‘establishment’, creating multi disciplinary but also multi-level teams.
3. THINKING VERSUS PLANNING
If the above diverse definitions and descriptions can be summarized, one could say that strategic thinking is
the cognitive process, with all the characteristics mentioned, that precede strategic planning or action,
whereby an individual contemplates the future development of the organisation whilst considering its
attributes, its past and present and the external realities within which it operates. Strategic thinking is an
individual experience and takes place informally and without any decision or action necessarily following.
Planning, on the other hand, requires a degree of formality and structure and generally entails some decisions
and actions. Porter (1987) believes, however, that good strategic planning can stimulate and initiate strategic
thinking because otherwise the daily rigours of operations can take up a manager’s entire attention. So if no
time is set-aside for it, strategic thinking can quickly get overlooked.
He also suggests that ‘bad planning’ can conversely discourage strategic thinking:- for instance when strategy
concepts and models are used mechanistically; where inappropriate data is employed; where too much
analysis takes place and where support staff, rather than line managers have the major role. Mintzberg
(1994) rightly argues that “strategic planning is not strategic thinking”, and while planning concerns analysis,
thinking “involves synthesis – encouraging intuitive, innovative & creative thinking at all levels of the
organisation”. Mintzberg concludes that good strategic planning can only take place after strategic thinking
has happened. He goes on to say that strategic thinking and action take place in the throes of operational
activity and calls this combination ‘emergent’ strategy.
Wisely (!) Heracleous (1998) suggests that strategic thinking and strategic planning are interrelated and
equally important for effective strategic management. Thompson & Strickland (1999) concur and state that a
well-designed strategic management system facilitates strategic thinking within the organisation.
Strategic planning normally takes place at the top of organisations (Ansoff 1965, Christensen et al 1982,
Porter 1987, Mintzberg 1994) but emergent strategy can occur at all levels (Quinn 1984, Mintzberg 1994,
Campbell 1999). Emergent action at lower levels, if successful, is usually adapted into strategic plans by
senior management. Strategic thinking, however, can be done by any member of the organisation up and down
the hierarchy at any time.
Both planned and emergent strategies (and by implication, strategic thinking) have shortcomings. A major
problem with planning at the top is that management usually have to rely on ‘old’ information, information
that represents one or more periods in the past, for their analysis and are not in touch with current
developments. Another problem is that the information does not normally incorporate the knowledge and
experience of the front line staff: those at the coal face. This has been known and criticised by management
writers for a long time but is still widely in practice, as confirmed, for example for the UK, by a recent survey
(2003) carried out jointly by TSO Consulting and Strategic Planning Society. On the other hand, the problem
with emergent strategy is that, in the absence of any guidelines from senior management in the form of a
detailed plan or more general strategy themes, it can lead the organisation into directions which are not
necessarily in line with its mission and overall advantage.
The better way, of course, is for both planning and emergent action to take place together. However, this is
easier said than done. The straightjacket of strategic planning and the potential rudderlessness of emergent
actions can be reconciled by either involving ‘line managers’ (Porter 1987), ‘operators’ (Campbell and
Alexander 1997) and ‘implementors’ (Towells 2003) in the planning process or by pushing down further the
strategy decision rights. The better organisational solution is to have both levels involved. This can be
facilitated by senior management producing general ‘strategic themes’ (Porter 1987) or ‘strategic intents’
(Hamel and Prahalad, 1994) only, rather than detailed plans. This will provide more opportunities for lower
level staff to be creative and put their strategic thinking into operation.
This practice will increase the sum total of the organisation’s capability in strategic thinking and decision
making. However, the quality of such thinking and decisions can also be improved by fast and economic
transfer of experiences and insights up and down the hierarchy, using the newly developed processes of
knowledge management. In order to produce a sound set of general strategy themes, top management would
need to be in touch with the current experiences of front line staff and they, in turn, in order to take sound
emergent action, would need to have at their disposal the broader visions and perspectives of senior
management. This is what Jensen and Meckling (1996) call the ‘co-location of decision rights and specific
knowledge’. Normally these exchanges of experience and insight do take place but with damaging time lags
and distortions. This is where knowledge management can make a major contribution to strategic thinking and
4. KNOWLEDGE MANAGEMENT
Knowledge management is a recent development and in the strategy literature an extension of the resources
and capabilities concept. If it can deliver what is claimed, it should be able to enhance strategic management,
that is analysis, formulation and implementation and by definition the quality and sum total of strategic
thinking in the organisation. To the extent that in today’s world of increasing and accelerating change
establishing and sustaining competitive advantage depends on flexibility and a wide spread spirit of
innovation within the firm, knowledge management should be able to further help develop these requirements
by providing better and more information more quickly and at less cost for the ‘doers’ and decision makers.
Grant (2002) suggests that “the knowledge-based view of the firm …. considers the firm as a set of knowledge
assets [and examines] the role of the firm in creating and deploying these assets to create value” while Probst
et al (2000) define knowledge management as “the whole body of cognitions and skills which individuals use
to solve problems”. Quintas (2002) suggests that “in many sectors competitive advantage increasingly occurs
through innovation………which in turn depends on knowledge creation as well as application”. Nonaka and
Takeuchi (1995) similarly suggest a direct link between knowledge and competitive advantage via the
enhancement of the potential for innovation, and finally Quinn (1992) believes that as much as “three –
quarters of added value is attributable to the possession of specific knowledge”.
To be able to have a better quality of strategic thinking and decision making, whether through planning or
emergent action, it is essential to have a better quality and variety of information at the disposal of strategic
decision makers. Furthermore, the more the number of people in the organisation who are capable of doing
good strategic thinking and making sound strategic decisions the greater the chances of the firm in being
appropriately responsive and innovative. To achieve this diffusion requires that those who have the decision
rights also have the appropriate knowledge and information at their disposal – a collocation of knowledge and
decision rights, as suggested by Jensen and Meckling (1996). However, organisational inertia has generally
prevented the speedy and economic transfer of knowledge between levels and functions in most firms.
In recent years, the tearing down of many organisational chimneys and the popular practice of decentralisation
has increased the ‘quantity’ of strategic decisions taken at operational levels. This has been a welcome
development and fully in sync with the requirements of the increasingly fluctuating business environment
world wide. However, this has been done mostly without the benefit of timely and economic transfer of the
specific knowledge possessed by top management; the knowledge that is essential in making sound strategic
decisions. This includes knowledge about the requirements of the owners of the firm, the broader contextual
and competitive developments influencing the industry and the firm, the ‘dominant logic (Prahalad and Bettis
1986) being employed by the corporate centre and so on. Conversely, the new structures and practices have
not necessarily been able to make the currency of the knowledge residing at lower levels available to senior
decision makers. These include recent developments in customer requirements, markets, technologies etc.
Thus at the ‘top’ too, the essential ‘collocation’ of specific and current knowledge with decision rights may
not necessarily have taken place.
The authors believe, therefore, that these ‘deficiencies’ of specific knowledge leave open to question whether
the appropriateness and ‘quality’ of strategic decisions and actions at the top or at lower levels has improved
along with the net increase in the ‘quantity’ of strategic decisions which has resulted from the extensive
practice of delayering and flattening of structures. It is therefore suggested that the extensive downsizing of
structures that have taken place in many organisations in recent years is only the first step towards improving
the sum total and the quality of strategic decisions and actions. The next essential step is the efficient and
effective capture and transfer of experiences and insights of managers and employees up and down the
hierarchy. The significance of knowledge management in this regard is that it promises to do so and thereby
contributing in a substantial way to increasing both the quantity and the quality of strategic thinking and
Knowledge, however, as implied above, comprises of two parts, information and insight; the latter also
referred to as specific knowledge, feel or tacit knowledge. Tacit knowledge is much more important for the
quality of strategic thinking and decision making than information but much more difficult and costly to
identify, capture, organise, store and disseminate. Unfortunately knowledge management is only at the early
stages of development (Grant 2002) and the main methods of capturing and transferring tacit knowledge
currently are some of the training and simulation methods mentioned above, and employee selection. The
challenge for knowledge management, therefore, is how to facilitate such capture and transfer of tacit
knowledge up, down and across the hierarchy, and how to do so speedily and cost effectively.
The article refers to three questions: what is strategic thinking, can it be developed in individuals and
organisations, and is knowledge management an apposite way to disseminate the requisite experiences and
insights for it in business.
Strategic thinking is the cognitive process that can and should precede strategic decisions and actions,
whether arrived at through planning or emergent action. Strategic thinking occurs when a person
contemplates the future of an organisation taking into consideration its environmental and competence
variables. A widespread and integrated capability in strategic thinking within the organisation can create a
core comepetency that can enhance and sustain its competitive advantage.
Research has started to look at potential ways to develop strategic thinking capability in individuals, primarily
through training and selection, but other ways such as shadowing, apprenticeship, and membership of
‘communities of practice’ and ‘strategic fora’ may be more appropriate. This, however, requires economic and
speedy capture and dissemination of knowledge from and to all levels within the organisation in order to
achieve better collocation of knowledge and decisions. Structural arrangements such as the widespread
‘delayering’ and ‘flattening’ in the last few years may have increased the ‘quantity’ of strategic thinking but
not its ‘quality’. Here, knowledge management may be able to play a significant role in developing a core
competency in strategic thinking in organisations by identifying, capturing, storing and transferring current
and relevant experiences and insights throughout the organisation. .
Suggestions for further research:
Stumpf’s case study indicates that it is possible to design executive ‘training’ programmes that enhance
managers’ capability in strategic thinking. However, this study needs to be further tested in a number of
different types of organisations and industries to determine the mechanics and processes involved. A second
question for research is to determine how knowledge management can efficiently and effectively capture and
diffuse relevant experiences and insights in the organisation in order to improve the quality of strategic
There are several application issues. One is that strategic thinking is essential for sound strategic decisions. A
related issue is that strategic decisions, whether arrived at via planning or emergent action, may not
necessarily be preceded by sound strategic thinking. A third issue is that ‘delayering’ and ‘flattening’ may
devolve and increase the ‘quantity’ of strategic decisions but may not necessarily assure better quality in such
decisions. It is therefore suggested that knowledge management may be able to assist in improving the
‘quality’ of strategic decisions. A final question is how (and how soon) can knowledge management capture
and transfer specific knowledge relevant to strategic decisions up and down the hierarchy.
*Ansoff H.I. (1965), “Corporate Strategy”, McGraw-Hill, New York
*Bandrowski, J.F., 1985, “Creative Planning Throughout the Organization”, AMA Publications Division, New York, NY.
*Bonn I (2001), “Developing Strategic Thinking as a Core Competency”, Management Decision, Vol.39,No.1
*Campbell A. and Alexander M., (1997), “What’s Wrong with Strategy?”, Harvard Business Review, November-December
*Christensen C.R., Andrews K.R., Bower J.L., Hamermesh R.G., (1982), “Business Policy, Text and Cases”, 5th. Ed., Richard D.
*Garratt, B, 1995, "Helicopters and Rotting Fish: Developing Strategic Thinking and New Roles for Direction-givers", Garrat, B,
Developing Strategic Thought - Rediscovering the Art of Direction-Giving, McGraw-Hill,, London, 242-55.
*Gottliebsen, R, 1999, "KPMG's Range of Possible Worlds", Business Review Weekly, 50-2.
*Graetz F. (2002), “Strategic Thinking Versus Strategic Planning: Towards Understanding the *Complementarities”, Management
Decision, Vol. 40, No. 5
*Grant R.M (2002), “Contemporary Strategy Analysis”, Blackwell, 4th. Ed.
*Hamel G. and Prahalad, C.K., (1994), “Competing for the Future”, Harvard Business School Press
*Heracleous, L., 1998, "Strategic Thinking or Strategic Planning?", Long Range Planning, 31, 3, 481-7.
*Jensen M.C. and Meckling W.H. (1996), “Specific and General Knowledge, and Organisational Structure”, in Meyers P.S.,
“Knowledge Management and Organisational Design”, Butterworth-Heinemann, Boston
*Liedtka, J.M., 1998, "Linking Strategic Thinking with Strategic Planning", Strategy & Leadership, 30-5.
*McCall M.W., (1988), in Stumpf (1988), Work Experiences that Stretch Managers’ Capacities for Strategic Thinking, Journal of
Management Development, 8
*Mintzberg 1994, “The Rise and Fall of Strategic Planning”, Prentice Hall, New York
*Nonaka I and Takeuchi H., (1995), “The Knowledge-Creating Company”, Oxford University Press
*Ohmae K. (1983), “The Mind of the Strategist”, Harmondsworth, Penguin Books
*Pellegrino K. and Carbo J.(2001), “Behind the Mind of the Strategist”, Total Quality Management,Vol.13, No.6
*Porter, M, 1987, "The State of Strategic Thinking", The Economist, 19-22.
*Prahalad C.K. and Bettis R.A. (1986), “The Dominant Logic: A New Linkage Between Diversity and Performance”, Strategic
Management Journal 7
*Probst G., Raub S. and Romhardt K. (2000), “Managing Knowledge: Building Blocks for Success”, John Wiley and Sons,
*Quinn J.B. (1992), in Probst et al (2000), “Managing Knowledge, the Building Blocks for Success”, John Wiley and Sons,
*Quintas P. (2002), “Managing Knowledge in a New Century”, in Little, Quintas and Ray (2002), Managing Knowledge: an
Essential Reader, Sage Publications
*Reimann, B.C., Ramanujam, V., 1992, "Acting versus thinking: a debate between Tom Peters and Michael Porter", Planning
Review, 20, 36-44.
*Stumpf S. (1989), Work Experiences that Stretch Managers’ Capacities for Strategic Thinking, Journal of Management
*Thompson, A.A, Strickland A.J, 1999, Strategic Management. Concepts and Cases, 11th ed, Irwin McGraw-Hill, Boston, MA.
*Towells S., (2003), From Planning to Strategic Intent, Strategy Magazine, issue 1
TSO Consulting and Strategic Planning Society, 2003, Strategic Planning: The State of the Art, Strategy Magazine, issue 1
*Wenger E.C.and Snyder W.M, (2,000), “Communities of Practice”: The Organisational Frontier”, Harvard Business Review
*Zabriskie, N.B., Huellmantel, A.B, 1991, "Developing strategic thinking in senior management", Long Range Planning, 24, 25-33.