For many managers, the
word strategy conjures
up thoughts of gigantic
PowerPoint decks,
binders collecting dust
and general confusion. A
survey by Roger Martin
of the Rotman School of
Management found that
67 percent of managers
believe their organization
is bad at developing
strategy.
Harvard Business School
professor David Collis
is even more direct:
“It’s a dirty little secret:
Most executives cannot
articulate the objective,
scope and advantage of
their business in a simple
statement. If they can’t,
neither can anyone else.” Martin’s research supports
this point: 43 percent of managers cannot state their
own strategy.
What seems to be the cause of this lack of perfor-
mance when it comes to strategy? My research with
500 managers at 25 companies identied the top 10
strategy challenges and the frequency of each chal-
lenge by company:
1
| Time (96 percent). The
most commonly cited
strategy challenge is time.
With more responsibilities
and fewer people to han-
dle them, many managers
are overwhelmed with
activities. While checking
lots of tasks o a to-do list
each week may foster a
sense of accomplishment,
activity doesn’t always
equal achievement. If the
individual tasks aren’t
strongly supporting the
strategy, then we may fall
into the trap of activity
for activity’s sake. When
there are lots of things to
do, managers feel guilty
stopping to take time to
think strategically about
the business. After all,
most performance reviews don’t include a big box
for “Thinks strategically for six hours a week,” with the
rating of “Exceeds Expectations,” marked in it. When
there is a lot to get done, time to think is often the
rst thing to go.
2
| Commitment (72 percent). Gaining commit-
ment from others to support and execute the
strategy vexes many managers. Often referred to as
The Strategic Thinking
Manifesto
By Rich Horwath
2
buy-in, commitment can be challenging for sever-
al reasons. If the people expected to execute the
strategy aren’t aware of it, or don’t understand it,
then commitment will be non-existent. According to
a study out of Harvard Business School, a shocking
95 percent of employees in large organizations are
either unaware of or don’t understand their com-
pany strategies. This
nding may be rejected out
of hand by some senior leaders, but it’s crucial to
nd out just how high that percentage is for your
group. Another reason buy-in is lacking is because
many people don’t understand the reasons behind
the strategy and how it will help them achieve their
goals. A study of 23,000 workers found that only 20
percent said they understood how their tasks relate
to the organization’s goals and
strategies. If leaders fail to share
why the strategies are in place,
and don’t translate them to peo-
ple’s respective work, the level of
commitment will be minimal.
3
| Lack of priorities (60
percent). A great cause of
frustration among managers
is the overall lack of priorities
at the leadership level. When
everything is deemed important,
it creates an overowing-plate
syndrome. If clear priorities are
not established up front, then it
becomes dicult for people to
determine what they should be
working on and why. This lack of priorities prevents
people from taking things o of their plate, resulting
in the frustration of feeling spread too thin by too
many initiatives. A lack of priorities is a red ag that
the dicult work of making trade-os—choosing
some things and not others—was not accomplished
in setting the strategy. Good strategy requires
trade-os, which in turn help establish priorities by
ltering out activities that don’t contribute to the
achievement of goals.
4
| Status quo (56 percent). Numerous studies in
the social sciences have shown that people prefer
the status quo to change. When people change
strategy, inevitably they are changing the alloca-
tion of resources, including how people invest their
time, talent, and budgets. Since strategy involves
trade-os, certain people will be gaining resources
and others losing resources. Obviously, those slated
to lose resources are going to prefer to keep things
they way they are. Another factor in the preference
of the status quo is the “if it ain’t broke, don’t x it,”
mentality. For groups that have experienced success
in the past, the idea of making changes to the strate-
gy flies in the face of common sense, so their ques-
tion is, “Why change what made us successful?”
What they may not realize is that changes in market
trends, customer value drivers, and the competitive
landscape may be making the current strategy obso-
lete. In leading a revival at Starbucks during his sec-
ond stint as CEO, Howard Schultz said, “We cannot
be content with the status quo. Any business today
that embraces the status quo as an
operating principle is going to be
on a death march.”
5
| Not understanding what
strategy is (48 percent). Even at
the highest levels of organizations,
confusion abounds as to what
exactly is a strategy. Perhaps due to
its abstract nature, strategy tends
to mean dierent things to dier-
ent people. It’s often confused with
mission, vision, goals, objectives,
and even tactics. Failure to provide
managers with a universal deni-
tion of strategy, and clear examples
to refer to leaves the term open to
interpretation, creating ineective
plans and inecient communication. To determine
the level of understanding in your group, provide
each manager with a 3” × 5” notecard at your next
meeting and ask each person to record their deni-
tion of strategy along with an example. Collect the
cards, read them aloud to the group, and tally the
number that dened strategy in the same way. UCLA
professor Richard Rumelt describes the problem this
way: “Too many organizational leaders say they have
a strategy when they do not. . . . A long list of things
to do, often mislabeled as strategies or objectives, is
not a strategy. It is just a list of things to do.”
6
| Lack of training/tools for thinking
strategically (48 percent). Many managers aren’t
considered strategic simply because they’ve never
been educated on what it means to think and act
To more effectively
develop and
execute strategy,
it stands to reason
that we need to
better understand
it. In order to better
understand it, we
need to be skilled
at thinking about it.
3
strategically. For many years in the pharmaceutical
industry, district sales managers were not asked
to be strategic, because the blockbuster business
model combined with the reach and frequency
sales approach proved to be a winning formula.
However, changes in the industry—including
healthcare reform, geographic dierences in
managed care, reimbursement policies, and the
emergence of Accountable Care Organizations
(ACOs)—now require district sales managers to
strategically allocate their resources and make
trade-os between dierent opportunities to grow
their business. Research has found that 90 percent
of directors and vice presidents have received no
training to become competent business strategists.
It shouldn’t be a shock then that a Harris Interactive
study with 154 companies found only 30 percent of
managers to be strategic thinkers. The disconnect on
prociency in strategic thinking
can sometimes occur between
a CEO’s perspective and the
perspective of senior executives.
A global survey showed that
while only 28 percent of
CEOs felt their teams needed
improvement in strategic
thinking, more than half of the
non-CEO executives indicated
that strategic thinking skills were
in need of improvement. Procter
& Gamble CEO A. G. Laey says,
“There simply is no one perfect strategy that will
last for all time. There are multiple ways to win in
almost any industry. That’s why building up strategic
thinking capability within your organization is so
vital.”
7
| Lack of alignment (48 percent). Getting people
on the proverbial same page is dicult when it
comes to strategy. The challenge lies in the fact that
dierent groups within the organization have their
own goals and strategies. Sometimes they align
with others, but often times they don’t. When there
is misalignment, power struggles erupt and instead
of working with one another, managers from dier-
ent areas work against each other to ensure their
priorities take precedence. Lack of alignment can
also occur between executive teams and the organi-
zation’s board of directors. Some organizations use
their board to provide input into the development
of strategy and some use the board to review the al-
ready completed strategy in a Q&A-format presenta-
tion. Selecting the optimal intellectual exchange and
setting appropriate expectations for contribution
can be critical to a CEO’s success. A survey of 1,000
corporate directors found the number-one reason
for success and the number-one reason for failure
in CEO appointments dealt with strategic alignment
between the CEO and the board.
8
| Fireghting (44 percent). Make no mistake,
a reghting mentality starts at the top of the
organization. If managers see their senior leaders
constantly reacting to every issue that comes across
their desk, they too will adopt this behavior. Fire-
ghting then becomes embedded in the culture
and those that are seen as the most reactive, oddly
enough, garner the greatest recognition. Managers
who thoughtfully consider each
issue before responding don’t
seem to be doing as much as the
reghters, when in reality, they’re
exponentially more productive.
“Let’s think about that,” is a simple
but powerful phrase that can elimi-
nate reactivity within your business
and culture. The next time you
receive an e-mail marked urgent
or someone comes charging into
your oce with how to react to a
competitor’s activity or a new avor-of-the-month
project, reply with “Let’s think about that.” Then stop
and consider how this helps you achieve your goals
and supports your strategic focus. To do so, deter-
mine the probability of success, impact on the busi-
ness, and resources required. If after this analysis, the
new task doesn’t appear to support your goals and
strategies, kindly inform the relevant parties that,
relative to the other initiatives you’re working on,
this doesn’t warrant resource allocation.
9
| Lack of quality/timely data and information
(36 percent). Strategic thinking is dened as the
ability to generate new insights on a continual basis
to achieve competitive advantage. An insight is the
combination of two or more pieces of information
or data in a unique way that leads to the creation
of new value. So, at the core of strategic thinking is
the information or data, which we piece together in
“Let’s think about
that,” is a simple
but powerful
phrase that can
eliminate reactivity
within your business
and culture.
4
unique ways to come up with new approaches, new
methods, or new solutions for providing superior
value to customers. Managers who aren’t receiving
timely, high-quality information and data regarding
the key aspects of their business are going to be
hindered in their ability to think strategically—and
the ability to understand this information is critical.
A study showed that 62 percent of workers cannot
make sense of the data that they receive. Without
clear priorities and methods for understanding,
categorizing, and sharing insights, managers at all
levels will continue to struggle with generating new
ways to achieve their goals and objectives. Research
by the consultancy McKinsey &
Company veried the challenge
managers face when it comes
to protably growing their busi-
ness on strategic insights:
A fresh strategic insight—some-
thing your company sees that
no one else does—is one of
the foundations of competitive
advantage. It helps companies
focus their resources on moves
that separate them from the
pack. Only 35 percent of 2,135
global executives believed their
strategies rested on unique and
powerful insights.
10
| Unclear company
direction (32 percent). It’s
dicult for managers to set
strategy if there isn’t clear
strategic direction at the business unit and corporate
levels. In some organizations, there are strategies at
the business unit and corporate levels, but they’re
kept secret. Evidently, this secrecy is to prevent
competitors from nding out their strategy. While it’s
understandable to keep proprietary processes and
future intellectual properties secret, it makes little
sense to keep strategy hidden away. If strategy is
how to achieve the goals and objectives, it’s impossi-
ble to gain full engagement and proper commit-
ment from employees in rolling out the strategy if
they don’t know what it is.
The other main reasons for unclear company di-
rection are lack of process to develop strategy, a
“we’re too busy to plan” approach, and ignorance as
to what comprises sound strategy. Managers from
more than 500 companies have taken an assessment
I developed called, “Is Your Organization Strategic?”
and the average score is 45 percent, a failing grade,
indicating there are many rudderless companies out
there that are strategically adrift.
The Importance of Strategy
How many of these challenges does your team face?
More important, what are you doing to overcome
them? The inability to eectively navigate strategy
challenges can have devas-
tating long-term eects on
an organization. Research by
The Conference Board has
shown that 70 percent of
public companies experienc-
ing a revenue stall lose more
than half of their market
capitalization. Additional re-
search attributes the primary
cause of these revenue stalls
to poor decisions about
strategy. While it’s convenient
to blame an organization’s
failings on external factors
such as the economy, deci-
sions about strategy account
for failure a whopping 70 per-
cent of the time.
While most managers be-
lieve strategy is an inherent
factor in their organization’s success, several studies
also document the support for this claim. One study
concludes that, “strategy has a positive and signi-
cant eect on a rm’s performance. Specically, it is
found to inuence both the growth and protability
of a rm.” Another study summarized its ndings
as, “strategy contributes to protability dierences
between successful and unsuccessful companies.”
Finally, a ten-year study out of Harvard Business
School showed that rms with clearly dened and
well-articulated strategies on average outperformed
competitors by 304 percent in prots, 332 percent in
sales and a whopping 883 percent in total return to
shareholders. Yes, strategy does matter.
When poor decisions about strategy are made and
5
an organization goes through a revenue stall, it’s
been shown that, on average, low performance
continues for more than 10 years. Unfortunately, this
prolonged period of poor performance can lead to
bankruptcy. Research on 750 bankruptcies during a
25-year period showed that the number-one factor
behind these bankruptcies was bad strategy. Con-
trary to popular opinion, the researchers attributed
the failures to aws in the strategies themselves, not
to poor execution of the strategies. Therefore, it’s
important to be skilled at crafting strategy.
The Rise of Strategic Thinking
To more eectively develop and execute strategy,
it stands to reason that we need to better under-
stand it. In order to better understand it, we need
to be skilled at thinking about it. And for a decade,
strategic thinking has been cited as the number one
most valued skill in managers by numerous sources
including the Wall Street Journal, Chief Executive
Magazine, HR Magazine and the American Manage-
ment Association. Procter & Gamble Chief Executive
AG Laey supported these research ndings when
he wrote, “The explicit goal was to create strategists
at all levels of the organization … The idea is to build
up strategy muscles over time, in dierent contexts,
so that as managers rise in the organization, they are
well prepared for the next strategic task.”
As a manager assumes higher levels of responsibility,
he or she makes decisions in-
volving larger sums of resources.
These resource allocation deci-
sions have an exponentially great-
er eect on the organization’s
business outcomes, ranging from
enduring success to the nality of
bankruptcy. Therefore, the need
to be a sound strategic thinker
increases as a leader rises to the C-suite. Harvard
Business School associate professor Boris Groys-
berg’s research conrms this premise: “One theme
that ran through our ndings was the requirements
for all the C-level jobs have shifted toward business
acumen. To thrive as a C-level executive, an individu-
al needs to be a good communicator, a collaborator
and a strategic thinker. For the senior-most execu-
tives, functional and technical expertise has become
less important than understanding business funda-
mentals and strategy.”
Results from the Corporate Board of Directors survey
conrmed that the number-one trait of active CEOs
that make them attractive board candidates is stra-
tegic expertise. Not only does a leader need to be
able to generate fresh strategic insights on a regular
basis, he or she needs to be able to harness insights
from their employees’ best thinking as well by fa-
cilitating strategy conversations. The ability to then
package their strategic thinking and communicate
strategy in a simple, persuasive and concise manner
is just as critical. Pepsi CEO Indra Nooyi concludes,
“To me, the single most important skill needed for
any CEO today is strategic acuity.”
The GOST Framework
At the heart of most strategy challenges is a lack of
clarity as to what strategy is and how it diers from
some of the other key business- planning terms. If
you think that this lack of strategy knowledge only
plagues new managers at the lower levels of the
organization, take a look at the following quotations
I’ve collected during my work from CEOs describing
so-called strategies that aren’t strategies at all:
• Become the global leader in our industry.
• Use innovation to build customer-centric
solutions.
• Grow our audience.
• Strengthen core business,
execute new initiatives, and
reduce costs.
• Increase sales 25 percent in
emerging markets by pursuing
growth opportunities.
The examples demonstrate how
frequently the terms goals, objectives, strategies,
and tactics are used interchangeably. I developed a
simple framework called GOST (Figure 1.0) to help
managers at all levels use and teach others to use
these business-planning terms appropriately. A goal
is a target. It describes what you are trying to achieve
in general terms. The following is an example of a
goal for a regional sales director:
At the heart of
most strategy
challenges is a lack
of clarity…
6
Goal: Win the national sales contest for our region.
An objective also describes what you are trying to
achieve. The dierence is, an objective is what you
are trying to achieve in specic terms. The com-
mon acronym used to help esh out an objective is
SMART: specic, measurable, achievable, relevant,
and time-bound. Objectives should meet these
criteria, and they should ow directly from the goals
you’ve already set. As evidenced in the following
example, the objective matches up with the corre-
sponding goal established earlier:
Goal: Win the national sales contest for our region.
Objective: Achieve $25 million in sales by the end of
the third quarter of this year.
Figure 1.0
Goal Objective Strategy Tactic
What What How How
General Specic General Specic
Once we’ve identied the goals and objectives, then
we can determine the strategy, which is the path
to achieving them. Strate-
gy and tactics are how you
will achieve your goals and
objectives, how you will al-
locate your resources to suc-
ceed. Strategy is the general
resource allocation plan. The
tactics are specically how
you will do that. Using the
previous example, we can
see how the strategy serves
as the path to achieving our
goals and objectives.
Goal: Win the national sales
contest for our region.
Objective: Achieve $25 million in sales by the end of
the third quarter of this year.
Strategy: Focus selling eorts on expanding share
of wallet with current customers.
Tactics: Have district sales managers work with
sales reps to schedule appointments with the top
ve customers for each territory. Prepare a sell sheet
showing dollarized value of using our products in
combination. Videotape three customers using two
or more of our products in combination. Purchase
iPads and put new sell sheets and videos into a pre-
sentation for use during customer meetings. Create
a dollarized, value-close, talking-points checklist to
assist district managers and reps in expanding share
of wallet.
If your managers are having trouble dierentiating
between strategy and tactics, they can use the “rule
of touch.” If you can reach out and physically touch
it (e.g., sell sheet, training DVD, etc.), it’s a tactic. The
concept of strategy originated in the military arena
thousands of years ago. Even that far back, Chinese
general and philosopher Sun Tzu said, “All the men
can see the tactics I use to conquer, but what none
can see is the strategy out of which great victory is
evolved.”
It’s often said that strategy is long-term and tactics
are short-term. In reality, long-term and short-term
descriptors for strategy and tactics may or may not
apply. A strategy that successfully helps you achieve
your goal within three months
might be short-term compared
to tactics used for years to come
in fending o a tough compet-
itor. Using time as the criterion
for distinguishing between strat-
egy and tactics is common, but
misinformed.
Since we can’t see or physically
reach out and touch strategy, it’s
often skipped in favor of going
straight to tactics. A good num-
ber of the business plans I’ve
reviewed over the past 15 years
list goals, objectives, and tac-
tics, skipping strategy all together. If strategy is not
determined before tactics, there is no way of intel-
ligently changing course when objectives and their
corresponding milestones are not being achieved.
We can begin to
understand the
nancial value
to individuals of
strategic thinking by
evaluating the impact
of transforming their
unproductive time to
productive time.
7
Having a high-performance car (tactic) doesn’t help
you reach the other side of the river if there isn’t a
bridge (strategy) to cross it. With no strategy in place,
it’s easy to fall into a game of tactical roulette, where
you continually chamber a new tactic and pull the
trigger, hoping something hits its target. But, sooner
or later, you’ll be looking at a dead plan.
The Fusion of Strategy
& Innovation
The common core of both strat-
egy and innovation is insight. An
insight results from the combi-
nation of two or more pieces of
information or data in a unique
way that leads to new value for
customers. A McKinsey & Company study of more
than 5,000 executives showed that the most import-
ant innovation trait for managers in high-performing
organizations is the ability
to come up with insights.
Unfortunately, McKinsey’s
research also showed that
only 35 percent of global
executives believed their
strategies are built on
unique insights. And only
25 percent of managers
believe their companies
are good at both strategy
and innovation.
Innovation is the contin-
ual hunt for new value;
strategy is ensuring we
congure resources in
the best way possible to
develop and deliver that
value. Strategic innova-
tion can be dened as the
insight-based allocation of
resources in a competitive-
ly dierent way to create
new value for select customers. Too often, strategy
and innovation are approached separately, even
though they share a common foundation in the form
of insight. By becoming a more eective strategic
thinker, a leader is better prepared to drive strategy
and innovation together.
The Value of Strategic Thinking
Can a manager learn to be strategic? Studies of
identical twins separated at birth shows that approx-
imately one-third of a person’s abil-
ity to think creatively comes from
genetics while two-thirds comes
through learning. My work with
thousands of executives around the
world shows a 30 percent increase
in knowledge of strategic thinking
principles following developmental
programs. The knowledge increase
is coupled with behavioral enhance-
ments that come with being more
strategic including insight generation, prioritiza-
tion, trade-os, planning, problem solving, decision
making and resource allocation to name a few. As
professor Michael Watkins
of Switzerland’s IMD busi-
ness school says, “There’s no
doubt that strategic thinking,
like any other skill, can be
improved with training.”
In addition to the knowl-
edge, behavioral and skill
benets of developing one’s
strategic thinking capabil-
ities, there are signicant
nancial benets as well. The
research presented earli-
er regarding the nancial
implications of great strategy
(increases in total return to
shareholders, sales and prof-
its) and poor strategy (com-
moditization and bankrupt-
cy) demonstrate the value
at the company level. That’s
where most analysis stops.
However, if we look deeper,
we can discover the nancial returns generated by
the individuals who think and act strategically.
Strategy is about the intelligent allocation of re-
sources and time is often considered the most
The common
core of both
strategy and
innovation is
insight.
8
valuable of these resources. To think strategically is
to allocate one’s time eectively so it is productive.
Unproductive time is spent putting out res, react-
ing to urgent but unimportant matters and working
on misdirected strategies. We can begin to under-
stand the nancial value to individuals of strategic
thinking by evaluating the impact of transforming
their unproductive time to productive time.
Let’s look an intact team of 10 managers. We’ll use a
base of 2,000 working hours per year per manager
(40 hours per week x 50 weeks). Research has shown
that 25-40 percent of the average manager’s time
is unfocused and not highly productive. To be ultra
conservative, let’s use half of the number at the low
end of this range and assume only 12.5 percent of
the average manager’s time is unproductive. We’d
then conclude that one hour of each day (12.5% x 8
hours/day) is unproductive. If we multiply the one
hour per day x 5 days per week, we get 5 hours per
week that’s unproductive.
Multiplying the 5 hours per week x 50 weeks per
year, we get 250 hours of unproductive time per
year per manager. Using the average U.S. salary
for the following job titles according to salary.com
and Glassdoor, we can then calculate the benet of
strategic thinking skill development that transforms
unproductive time and activity into productive time
and strategic activity:
Despite using an extremely conservative estimate of
the average amount of unproductive time per man-
ager, the nancial losses are signicant. If you can
transform your current annual losses to gains, and
add them to new revenue dollars generated from
improved strategic thinking, the nancial gain can
be spectacular.
Great strategy doesn’t magically emerge from Ex-
cel spreadsheets or elaborate PowerPoint decks. It
comes from managers who can think strategically. It
inspires condence, sets direction and creates com-
petitive advantage. Most important, great strategy is
developed by great strategists.
Rich Horwath is the CEO of the Strategic Thinking Institute where he has
helped more than 50,000 managers around the world develop their strategic
thinking capabilities. Rich is the author of the new book, Elevate: The Three
Disciplines of Advanced Strategic Thinking (Wiley, 2014). He is a New York
Times and Wall Street Journal bestselling author on strategy and has
appeared on ABC, NBC and FOX TV. Sign-up to receive your free copy of the
Strategic Thinker newsletter by visiting www.strategyskills.com
Level Annual Salary
Salary Per
Hour
Hours Wasted Per
Year
$ Lost Per Manager $ Lost for Team of 10
Marketing Mgr. $ 85K $42.50 250 $10,625 $106,250
District Sales Mgr. $100K $50.00 250 $12,500 $125,000
Director $130K $65.00 250 $16,250 $162,500
VP $147K $73.50 250 $18,375 $183,750
