From Problem Solving to Problem Formulation, A Necessary Shift for Leaders and Strategists

Sunday, July 09, 2023

This essay delves into Problem Formulation (PF), as discussed in the Strategic Management Journal. It achieves two goals. The first is to provide a foundation of what PF is and how it can be applied to the challenges faced in today's business landscape. The second goal is to broaden this perspective to encompass a wider range of groups. Many of the problems we tackle today, regardless of our field or profession, fit the definition and criteria of complex and ill-structured problems outlined by the authors. So, who are 'we'? The original authors targeted their discussion at teams in established firms. However, today, strategists, entrepreneurs, problem solvers (and prompt engineers) will benefit from this strategy as we grapple with complex and ill-structured problems of our respective domains.

The premise of PF is fairly straightforward; to develop an effective solution, one must first fully understand the problem at hand.

The premise of PF is fairly straightforward; to develop an effective solution, one must first fully understand the problem at hand. This concept is critical when dealing with complex and ill-structured problems. These problems are not easily defined and require a detailed understanding to create a suitable solution. Therefore, the benefits of understanding PF and its processes enable us to identify, clarify, and breakdown complex / ill-structured issues, setting us up for successful resolution.

What are complex and ill-structured problems?

Complex and ill-structured problems, defined by the author, are:

  1. High-stakes and of critical importance: Complex and ill-structured problems are critical for strategic decision-making. They often significantly impact the outcome of a project, and the effectiveness of a strategy.
  2. Deviation from a desired set of specific or a range of acceptable conditions: This concept can be applied to any situation where the current state is unsatisfactory. This deviation from the desired state represents a complex problem that needs to be addressed. Or, in plain English, things are going, but not according to plan.
  3. Strategic Problems: In a broader context, "Strategic Problems" refer to complex and ill-structured problems with significant long-term impacts. These problems require strategic decisions that can significantly influence the outcome, even if that outcome is far into the future. Teams often tackle Problems like these due to their size and scope.

Now, let's look at some practical examples from a very high level (established firms) to my broadened area to better understand these complex and ill-structured problems, which include strategists, entrepreneurs, and problem solvers.

Practical Example: a pharmaceutical company and a business strategist

Consider a pharmaceutical company determining the right treatment method for a new disease. This decision involves multiple variables and uncertainties, such as the response of patients to different medications, side effects, cost of production, regulatory approvals etc. Similarly, for a business strategist, deciding on the best market entry strategy for a new product can be a complex and ill-structured problem. This decision is high-stakes and critical to the company's success, as it involves multiple variables such as market size, competition, customer preferences, regulatory environment, and the company's resources and capabilities. For the pharmaceutical company and the business strategist, these high-stakes decisions are examples of complex and ill-structured problems requiring careful formulation.

Practical Example: a city grappling with pollution and an entrepreneur

Imagine a city grappling with increasing pollution levels causing health issues among its residents. The local government wants to reduce pollution but needs help with the complexities involved - balancing economic growth with environmental protection, changing citizen habits, implementing regulations etc. For an entrepreneur or a startup, a similarly complex problem might be acquiring new customers while operating on a limited budget. The current state (low customer base) deviates from the desired state (large customer base), and the entrepreneur needs to devise a cost-effective marketing strategy that can attract more customers without draining their resources. For both the local government and the entrepreneur, these deviations from a desired state represent complex problems that need careful problem formulation to address effectively.

Practical Example: expanding into foreign markets and problem-solving overall

Take the example of a business expanding into foreign markets. This requires understanding the new market's dynamics, legal environment, cultural differences, and competitive landscape, among many other variables. It is an ill-structured problem with no correct solution or approach, and it involves high stakes as significant resources are invested. The company's future growth depends on this decision. For a general problem solver, a strategic problem could be planning a city's transportation infrastructure to accommodate future growth. This problem is complex and ill-structured because it involves many variables, such as population growth projections, budget constraints, environmental impact, and citizen needs and preferences. The decisions will have long-term implications for the city's development and quality of life. For the business expanding into foreign markets and the general problem solver planning a city's infrastructure, these strategic problems are complex and ill-structured, requiring careful problem formulation to make effective long-term decisions.

These examples illustrate how important problem formulation is and, hopefully, persuade you to consider 'problem-solving' as a distinct step after PF.

Recognizing and Implementing Problem Formulation

We all face problems; that's a given. We naturally want to quickly solve them. But when it comes to complex and ill-structured problems, we're dealing with a different beast altogether, which necessitates a cautioned and reasoned approach. These problems are multifaceted, like a web where pulling one thread affects many different parts. We're not just trying to solve a single, isolated problem but a problem interconnected with many others. Our real challenge is ensuring we're solving the right problem, not just the one immediately in front of us. To do this, we need criteria, a method to our madness.

Our real challenge is ensuring we're solving the right problem, not just the one immediately in front of us. To do this, we need criteria, a method to our madness.

Enter "comprehensiveness", the author's term to describe this evaluation process. Why "comprehensiveness"? Strategic problems, with all their complexity and ill-structured nature, demand a comprehensive understanding for effective resolution. We need to develop a bird's-eye view of the problem, a holistic perspective achieved by gathering more information. 

The author emphasizes comprehensiveness for an excellent reason. It's a safeguard, a way to mitigate a significant challenge that the problem-solving function faces. People who dive headfirst into problem-solving might end up tackling the wrong problem. Why? Because they need to spend more time formulating what the correct problem is. They might be crafting a solution that's too narrow or inappropriate. So, a comprehensive problem formulation process is crucial. It ensures that our problem-solving efforts are directed toward the right problem that truly needs solving.

You must ensures your problem-solving efforts are directed toward the right problem that truly needs solving, the one that'll have the biggest impact with the least amount of consequences.

Information Gathering

Information gathering is the first part of comprehensiveness. It provides us with alternatives. And we will need to gather a lot of information for each part of the problem. I can't tell you how much. I will tell you this: the ideal amount of information is such that you are able to step into that multifaceted and messy web of problems at any point and describe it from that perspective. From here, we truly have a birds-eye view of the problem, and solutions begin to emerge.


Relevance in the context of problem formulation involves assessing the gathered information and organizing it into a hierarchy. At the top of this hierarchy are formulations, or solutions, that address many parts of the problem. Next are formulations that solve only a small part. We want to avoid formulations that attempt to address the problem from outside the web. 

This is a strategic approach. We are not trying to fix the small problems first, or the ones we are better at solving, nor are we divvying them up to specialized teams. Instead, we critically evaluate each formulation's relevance to make the biggest impact based on our desired outcomes and goals while minimizing the chance that our actions will worsen the problem. This ensures that our problem-solving efforts are well-directed and truly effective.


In conclusion, understanding and applying the concept of Problem Formulation (PF) is crucial in tackling complex and ill-structured problems. This essay has explored the idea of PF, broadening its application beyond established firms to include strategists, entrepreneurs, and problem solvers. We've seen how PF is not just about solving a problem but about ensuring we're solving the right problem. This involves comprehensively understanding the problem, gathering relevant information, and evaluating potential solutions based on their relevance to our desired outcome. By doing so, we can direct our problem-solving efforts effectively, ensuring that we're not just addressing the symptoms of a problem but tackling the problem at its core. This strategic approach to problem-solving is critical in today's complex business landscape, where the problems we face are multifaceted and interconnected. Whether you're a strategist in a multinational corporation, an entrepreneur in a startup, or a problem solver in any field, understanding and applying PF can significantly enhance your problem-solving capabilities and lead to more effective and impactful solutions.

Citation: BAER, MARKUS, KURT T. DIRKS, and JACKSON A. NICKERSON. “MICROFOUNDATIONS OF STRATEGIC PROBLEM FORMULATION.” Strategic Management Journal 34, no. 2 (2013): 197–214.