Strategy as Design Thinking

What exactly is design thinking, what value does it offer for strategy and how can you apply it in your organisation?

Henry Mintzberg’s recent (Feb 2022) article goes by the grand title of An Underlying Theory for Strategy, Organization, and Management: Bridging the Gap Between Analysis and Synthesis. Taking inspiration from Herbert Simon’s work on bounded rationality and Ludwig Von Bertalanffy’s general systems theory, Mintzberg sets out to contrast the rationalist approach and the systems approach to strategy.

The rationalist approach sees organisations being run by ‘administrators’ (Mintzberg calls them ‘administrative actors’). According to Mintzberg, the administrator “intends to be rational but … physical and mental limitations make it impossible to cope with the complexity and dynamism of the environment. Accordingly, the administrative actor ‘satisfices’, namely seeks satisfactory rather than optimal solutions to problems, by making do with the information available and making use of convenient heuristics—rules of thumb, learned from experience, that produce quick and acceptable, if not optimal, solutions, most of the time. In sum, the administrative actor exhibits ‘bounded rationality’.”

The rationalist approach to strategy is ‘to think in order to act’. It is rooted in analysis. We search the environment for conditions calling for a decision, we devise possible courses of action and then weigh up which are best before committing to them in strategy.

The systems approach sees organisations as open systems, exchanging material, energy and information with their environment. It follows, then, that the management of organisations seeks to reconcile internal and external pressures. Open systems have a number of interesting properties:

1. They often operate in cyclic patterns, reflecting the time taken for inputs to be transformed into outputs. These cyclic patterns are often homeostatic: the output from one cycle may cause the processing of the next cycle to be adjusted to maintain steady state. Homeostasis requires feedback mechanisms.
2. Different parts of organisations differentiate from one another through division of labour. They acquire specialist functions. These functions typically become arranged hierarchically – operational functions report to managerial functions which, in turn, report to executive functions
3. The whole becomes more than the sum of its parts. Synergies start to arise. New properties emerge as we move between systems levels.  The organisation exhibits what Von Bertalanffy called equi-finality – the same final state may be reached from different initial conditions and in different ways.

The systems approach to strategy emphasises the unpredictability of outcomes from similar starting conditions. It may require ‘acting in order to think’. We may need to try things out to see what happens.

Mintzberg’s conclusion is that “all organizations need analysis but as an aid, not a club” and “the very nature of managing, organizing, and strategizing requires synthesis beyond analysis”.

All of which sounds a lot like strategy as a design process, which Mintzberg has talked about before (Mintzberg et al 1998) but, oddly, doesn’t mention in this article. As I outlined on Twitter last year, strategy-as-design refers to:

1. A design ambition – inventing the future you want to bring about (as opposed to merely choosing the best available option);
2. A design process – an iterative process of divergent and convergent thinking;
3. A design output – the production of a strategy that is fit for the purpose it was designed to serve.

The process of divergent and then convergent thinking is key here. Figure 1 below highlights the fact that convergent thinking doesn’t just select the best from the many ideas generated during divergent thinking. It actively and creatively hybridises and synthesises those ideas. This is where Mintzberg’s ‘synthesis beyond analysis’ happens.

Figure 1. Hybridisation and Synthesis of Ideas in Divergent and Convergent Thinking

Just to reinforce the connection between design thinking and strategic thinking, and to show how Von Bertalanffy’s systems theory also has a key role to play in strategic management, Figure 2 gives an explanation and ‘manifesto’ for strategy as design thinking.

Figure 2. Strategy as Design Thinking

So, what does this mean for the strategy work you do in your organisation?

1. Make sure everyone leading and managing strategy across your organisation understands what design thinking means.
2. They need to appreciate the creative power that comes from cycles of divergent and convergent thinking.
3. They need to have seen (and ideally experienced) how convergent thinking is much more than an idea-selection process – it needs to combine, hybridise and synthesise a set of initial ideas into a whole new generation of ideas
4. They need to realise that this divergent / convergent cycle repeats several times over the course of the strategy lifecycle. Different people, from across the organisation, need to be engaged and involved in the process. In doing so strategy will transcend system boundaries from being something that relates the entire organisation to its operating environment, to something internal to the organisation, then to a business unit or functional department within the organisation and finally to individuals working in front-line teams.
5. As strategy cascades through the organisation, in this way, new emergent properties will be discovered. New opportunities. New obstacles. New ways of working. Resistance to change old ways of working. To keep this process of discovery manageable, without having to continually re-write the strategy, many organisations find it useful to separate the strategy from the strategic plan. The strategy is relatively simple and concise and is designed to be unchanging in the face of new discoveries and new circumstances. It designed to act as a beacon and a direction-finder to guide everyone’s high-level decision-making. The strategic plan, on the other hand is the transformational change programme by which strategic goals are reached. It is about people, priorities, resources and deadlines. It is, therefore designed to change at every step in the strategy cascade.

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References

Mintzberg H 2022. An Underlying Theory for Strategy, Organization, and Management: Bridging the Gap Between Analysis and Synthesis. Strategic Management Review 3 (1): 125-144.

Mintzberg H, Ahlstrand B and Lampel J, 1998. Strategy Safari: A Guided Tour Through the Wilds of Strategic Management. Prentice Hall. Chapter 2 is The Design School: Strategy Formation as a Process of Conception.