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FMI Quarterly/March 2015/March 1, 2015

Interpreting the Future: The Value of Strategic Thinking

People_whiteboard_planning_imageLeaders at all levels focus more of their efforts addressing the urgent issues versus important ones — the tactical ones versus the strategic ones. The ability to think strategically in the construction industry has become a competitive advantage.

What leadership skill set is 10 times more important in driving perceived effectiveness than others? And what skills are almost 50 times more important than hands-on tactical behaviors?1 Thinking strategically, composed of a set of critical leadership skills, is differentiating the top companies in the industry compared to others who never foster and develop this skill set in their leaders. How do these skills impact what happens on an annual basis in your own company? See if you can relate to our next scenario.

Twenty of your top leaders are convening for your annual business-planning meeting. The agenda is set, location booked and hours blocked to polish and finalize next year’s goals. Yet, when the day arrives, it feels oddly like déjá vu. The conversations focus on the same topics discussed last year and the team moves through the motions of identifying goals for the year ahead. Something is missing. Absent are: insights about how your organization is faring in the market, an understanding of your company’s market share and feedback from the marketplace on how you perform. Additionally, there is a dearth of ideas for innovation. The meeting continues but this need for deeper market understanding and lack of positioning for the ambiguous complexities of the industry is never addressed.

Across town, your competitor has leapt into action by injecting new ideas, creating targeted plans and infusing fact-based market research into its annual business-planning meeting. The competitor has adjusted productivity practices, entered adjacent markets based on research, and is exceeding clients’ needs — all while remaining laser-focused on developing its talent and poaching yours. Its focus on why it exists and how it will live that out has inspired all inside the company. As a result, your competitor’s market share is increasing while yours seems to have stagnated or even reduced.

Halfway through the year, you are wondering when the subtle industry movements turned into major trenches for which your company must dig its way out (shifts in construction methods, new technologies, resource shortages, leadership gaps). Your clients’ increasing expectations of completing more and more complex schedules on tighter budgets continues to press your team’s close rates, customer service and margins, while your competitor is faring far better despite the similarities in your businesses. Familiar scenario?

The ability for an organization’s leaders to think strategically about the current and future states of its operations decreases the likelihood that industry disruptions will take you by surprise. Outside of our industry, we see numerous examples of industry disruptions by innovative ideas and businesses. One notable example is Uber. By and large, taxi businesses failed to see Uber on the horizon. Uber, a transportation service that connects passengers with drivers in minutes by way of a user-friendly application, has disrupted traditional taxi usage. Spotting a threat on the horizon is only the first step; strategic thinking skills also determine how we respond to disruption.

The rapid pace of change in the construction industry is resulting in leaders falling behind. Growth in size of projects, implications of the warming of the earth and its impact on agriculture and livestock, technology improvements, globalization, aging and pending retirement of talent, energy changes, oil and gas growth, consolidation in the A/E/C space, sustainability, maintenance and service, and P3 have had drastic impacts on our industry. Yet, too often leaders fail to think strategically about what these trends mean for their businesses and thus, fail to respond to disruptions. Rather than continually dealing with tactical decision-making, senior leaders should stop and clarify the many different internal and external factors influencing their business’s success. Yet, leaders at all levels focus more of their efforts addressing the urgent issues versus important ones — the tactical ones versus the strategic ones. The ability to think strategically in the construction industry has become a competitive advantage.

If you examine our industry today versus 20 years ago, there are a number of aspects that have not changed — many tools of the industry, the art of masonry work and need for manpower on the job site, for example. In the same breath, we can say that a great many aspects have indeed changed — the introduction of new technologies influences productivity, how we track equipment and materials, along with new construction and design methods. We can have instant access to change orders with the touch of a screen in four offices scattered across the country (or globe). How have transformations to the industry in the last 20 years changed your business? As the leader at the helm, were you able to adapt and adjust or did you lag behind? Organizations led by strong strategic thinkers identify and ride the changing tide rather than getting swept under.

Strategic Thinking vs. Strategic Planning

You can see that strategic planning sessions would benefit greatly from more strategic thought. These two closely related topics warrant distinction from one another. At its essence, strategy translates into an organization’s ability to transform its resources into a source of advantage and differentiation. Many construction companies pursue strategic planning as a source of competitive advantage, and yet a strategic plan is only as good as the thinking behind it (Exhibit 1). Often, strategic plans involve little true strategic thinking and result in a plan that lacks an innovative, data-driven or long-term focus approach. Strategic planning without thinking strategically is simply a plan. In the same vein, strategic planning provides a method for organizing innovative, data-driven and long-term thought. Strategic thinking without a strategic plan lacks clear objectives and short-term execution plans. To advance the organization’s goals, both need to be present.

2015q1_strategic_thinking_ex1

Intentional use of strategic thinking during planning results in a differentiated strategy — one that addresses changes in industry needs, your current market share and objectives to increase your market share in the future. Strategic thinking is a process, a way of thinking about your business in the context of the industry and global setting. Strategic planning, on the other hand, is primarily product-driven. The end product is a set of goals and objectives for the next two to five years of the organization, whether that is entering a market, targeting growth in revenue number or acquiring talent.

In planning, great strategic thinkers take a long-term outlook (10–20 years). Leaders who have this long-range skill improve strategic planning sessions by pushing their teams to develop goals aligned with enduring success instead of quick wins. Strategic thinking emphasizes universal, macro trends — those that often have impacts beyond the construction industry, such as urbanization in emerging and developed markets, large-scale disruption of technology or the colossal shift from baby boomer dominance to millennial representation. Strategic planning incorporates the analysis of the macro trends to include their immediate effects on your business — for example, decisions for current projects, those in the pipeline or obvious hot spots in the industry. Hence, competitive advantage for an organization comes from integration of longer-term and short-term implications of trends, looking for immediate wins as well as the sustainable path forward.

In the industry, we have seen midsized firms use great strategic thinking and planning to make deliberate choices about seizing projects. With a long-range preference and a great sense of macro trends and industry market knowledge, they choose to let their competition take lower-margin work early on, waiting for the market to become saturated. Firms like these use strategic thinking and planning to identify the right projects to dive in, ultimately capturing margins that make them the envy of their peers.

So who is involved in strategic thinking and planning? While strategic planning is typically reserved for executives and senior leaders who can leverage advanced industry knowledge and business acumen, strategic thinking is a skill set that can (and should) be developed at every level of the organization. With the current demographic shifts in the workplace, it is critical to invest in junior talent’s thinking strategically skills. Because of significant generational gaps in available talent, it is likely that younger leaders will participate in strategic planning sessions earlier in their careers than will their predecessors. While strategic thinking is a necessity at all levels of the organization, it may be even more critical to invest in developing your high-potential junior talent’s ability to think strategically.

Strategic thinking and strategic planning are both essential to an organization’s health and future relevance. Strategic thinking is the motor that drives long-term success, with individuals looking out beyond the immediate needs of an organization to determine the path forward. A constant emphasis on thinking deeply, challenging assumptions and driving change benefits the immediate and distant future. Strategic planning acts as the checkpoints along the path, providing structure and specific objectives and measures to guide the strategic thinking process.

The Vital Role of Strategic Thinking in Your Organization

In a 2013 study conducted by Management Research Group (MRG), out of more than 10,000 senior executives, strategic leadership behaviors appeared as the most critical behaviors to their organization’s future success 97% of the time.2 FMI describes strategic leadership as providing vision and direction for the enduring growth and success of an organization. It is the ability to successfully deal with change and ambiguity through creating common purpose, buy-in and alignment with workgroups supported by sound strategy formulation and implementation.

FMI’s recent research also suggests that strategic leaders are more likely to be engaged in their job. Employee engagement, or being fully immersed in your working role and aligned with your organization’s goals, is a hot topic today across organizations. Knowing that the total cost to the U.S. workforce of disengaged employees is $450 billion to $550 billion,3 companies are interested in identifying ways to foster a highly engaged workforce. Disengaged employees cost a company in productivity, are more likely to steal from the organization, and negatively impact the workforce and lower morale. Our research suggests that when employees spend time focusing their thought and energy on strategic thinking, they are more engaged in their work. Higher scores on FMI’s tool for assessing strategic thinking, the Think Strategically Indicator (TSI), may clue leaders into employees more vested in their work and those who need additional challenge or motivation. Organizations in the industry that truly challenge high-potential leaders’ thinking strategically skills offer rotational assignments to get leaders thinking about the greater business system, ask leaders to participate in innovation think tanks, and join strategic initiative committees charged with investigating trends and proposing what the industry will look like in 10–20 years.

Strategic leaders, as the name suggests, aren’t just great thinkers; they also lead. Think for a minute about some of the leaders you admire inside and outside of the industry. Were they reactive? Always putting out fires? Stuck in the past? Reinventing the wheel? When you think about truly great leaders, likely the answers to these questions is a resounding “no.” Instead, the leaders we admire are often the visionaries, ahead of the curve, well aware of market complexities, thinking about the big picture and doing a great job at inspiring their teams and organizations to think in the same capacity.

Recent FMI research findings suggest that the most effective strategic thinkers are also seen as leaders and mentors. In the industry, we rely on mentoring as an effective tool for building the next generation of leaders. Mentoring, where a more senior individual provides career development and support to a more junior employee or “protégé,” is critical for skill-building and career growth. However, in order to be a truly great mentor to your employees, your people have to respect you. Based on our findings, great strategic leaders are respected by their direct reports and seen as mentors. The implication here is that junior leaders are driven to learn from people who are thinking strategically. A mentorship between a strategic leader and a high-potential employee could greatly benefit the latter’s own strategic thinking skills.

So what does that look like for our industry? How can we build our leaders’ thinking strategically skills in the near term? Based on our work with organizations and research, the following tools may provide a first step in building a strategically thinking talent pool:

  • Have senior estimators, project executives and directors (or other blended teams) hold sessions every few weeks to introduce business concepts to junior leaders.
  • Task a team of junior leaders to tackle an ongoing challenge at your company to come up with and execute the solution with the guidance of senior leadership.
  • Encourage younger leaders to meet with mentors or more senior leaders to discuss industry changes and macro trends likely to affect the long-term success of the organization.

While there are many more developmental assignments that can increase your leaders’ abilities to think strategically, offering these ongoing opportunities to develop and mentor high-potential leaders should stretch their skill set and strengthen your bench of future strategic leaders.

Building strategic leaders for the future of your organization and inspiring learning at junior levels of leadership fuel continual success, but how do you know where your leaders stand today? Before we can assess our leaders’ strategic thinking skills, it is critical to zoom in and understand the elements of great strategic thinking.

What Does Thinking Strategically Entail?

So what does it mean to be a great strategic thinker? Based on extensive research, we identified eight factors that are critical to thinking strategically: (1) Mental Flexibility, (2) Intellectual Curiosity, (3) Creativity, (4) Intuition, (5) Information Gathering, (6) Analysis, (7) Systems Thinking and (8) Decision Making. Combined, these factors allow leaders to maximize their ability to think effectively about challenges and opportunities that their organizations face.

2015q1_strategic_thinking_ex2

You may have some ideas about your leaders’ strengths and weaknesses on these factors. Perhaps your team has always applied logic to decisions and has excelled at analysis but has struggled to demonstrate creativity when it comes to developing unique solutions to problems. For example, FMI has worked with a number of firms that have strong analytical skills but have developed creativity skills to find work more strategically. Specifically, organizations that study economic development, immigration and demographics as a way of determining needed infrastructure in specific areas around the world has proven an innovative solution to develop greater geographic reach. As leaders, we tend to build strong skills in a few of the strategic thinking areas but need additional development in others. Where we focus our time when making a big decision generally depends on our worldview and past experiences.4

2015q1_strategic_thinking_ex3-809x1024Worldview exists at the center of the Think Strategically model and influences our personal values and attitudes, which impact how we demonstrate the skills in the outer ring (i.e., the eight factors). If you strongly believe that all best decisions are based on logic and analysis, chances are that you will place more value there and focus your time to build your analytical skills (and that of your team’s). Without a baseline of where your team excels and where you need development relative to thinking strategically,
how would you improve?

Applying the TSI:

Building Individual Skills

The TSI is an online tool that provides a quick and relatively easy way to determine how you and your team measure up when it comes to thinking strategically. Results from the tool create actionable steps for individuals to follow and develop their thinking strategically skills. An individual low in intellectual curiosity may lack alternative perspectives to attack a problem differently. By being versed in outside industry knowledge, your employee might apply a standard from a different industry to increase productivity at your site. For example, in 2013, Toyota partnered with the Food Bank of New York City and helped streamline efficiencies in its food distribution processes.5

The knowledge and understanding of processes and systems outside the immediate industry provided context within an unrelated industry. To increase intellectual curiosity and push thinking, the individual could choose two nonindustry-related news sites (that peak his/her interest) to regularly read or subscribe to for information. Expanding and pushing the individual’s thinking could result in additional ideas and success for your business. These action steps will affect pursuit of knowledge and expanding personal networks, two elements directly related to intellectual curiosity.

Building Great Teams

Great teams are diverse in composition, where each team member brings unique perspectives, knowledge areas and skill sets. When it comes to strategic thinking, the same rules apply. Teams that have diverse strategic thinking skill sets are more effective compared to those where only a few skills are present. For example, perhaps you have experienced a team that relies solely on intuition or gut feeling when it comes to making a tough decision. Though intuition has its place in decision-making, without sufficient analysis and information gathering, the result can produce poor outcomes. If a team is weak in creativity, it may not generate adequate alternatives to solve a problem. Instead of thinking about different approaches, the team continuously looks to see what it has done in the past. This lack in creativity can provide gaps in advancement or addressing disruptors in the industry.

Conclusion

Thinking strategically often seems ambiguous and abstract. Understanding your leaders’ strengths and areas for development can help you better develop your employees, both next generation and senior executives alike. With focused development and a baseline to work from, individuals can improve their ability to think strategically. In our industry, with the tendency to gravitate toward numbers and hard facts, learning to develop certain think strategically skills such as being more mentally flexible or creative can be challenging. Strategic thinking continues to pose a serious competitive advantage to those organizations that do it well, and it can benefit business activities such as strategic planning. Don’t be back in the boardroom, creating duplicate business plans year after year. Develop and nurture strategic thinking at all levels of your organization to catapult ahead of the competition. Q

Paige Kelly is a consultant with FMI Corporation. She can be reached at 303.398.7254 or via email at pkelly@fminet.com. Emily Livorsi is a consultant with FMI Corporation. She can be reached at 303.398.7216 or via email at elivoris@fminet.com. Ron Magnus is a managing director with FMI Corporation. He can be reached at 303.398.7217 or via email at rmagnus@fminet.com.

1 Kabacoff, Robert. Harvard Business Review. Develop Strategic Thinkers Throughout Your Organization. February 7, 2014. http://blogs.hbr.org/2014/02/develop-strategic-thinkers-throughout-your-organization/
2 Kabacoff, Robert. Harvard Business Review. Develop Strategic Thinkers Throughout Your Organization. February 7, 2014. http://blogs.hbr.org/2014/02/develop-strategic-thinkers-throughout-your-organization/
3 Gallup World. State of the Global Workforce. October 8, 2013. http://www.gallup.com/strategicconsulting/164735/state-global-workplace.aspx
4 “The Key to Effective Leadership: Understanding Your Worldview” FMI Quarterly, 2014 Issue 2
5 El-Naggar, Mona. The New York Times. In Lieu of Money, Toyota Donates Efficiency to New York Charity. July 26, 2013. http://www.nytimes.com/2013/07/27/nyregion/in-lieu-of-money-toyota-donates-efficiency-to-new-york-charity.html?pagewanted=all&_r=0

 

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