Exploring Corporate Strategy 7th Edition Part V How Strategy Develops 8

Exploring Corporate Strategy 7th Edition Chapter 11 Understanding Strategy Development

Understanding Strategy Development – Outline (1) Intended versus emergent strategy development Intended processes of strategy development Strategic planning systems Strategy workshops and project groups Strategy consultants Externally imposed strategy

Understanding Strategy Development – Outline (2) Emergent processes of strategy development Logical incrementalism Resource allocation routines Cultural processes Organisational politics Multiple forms and different contexts for strategy development Issues managers face in strategy development

Strategy Development Processes Exhibit 11.1

Strategy Development Routes (1) Exhibit 11.2

Strategy Development Routes (2) Intended strategy Expression of desired strategic direction deliberately formulated or planned by managers Unrealised strategy Frequently strategies do not come about in practice Plans are unworkable Environment changes Influential stakeholders do not agree with plan Realised strategy The strategy actually being followed by an organisation in practice Emergent strategy Comes about through everyday routines, activities and processes

Strategic Direction from Prior Decisions Exhibit 11.3

Strategy Development Intended strategy development Strategic planning systems Strategy workshops and project groups The role of strategy consultants Externally imposed strategy Emergent strategy development Logical incrementalism Resource allocation routines Cultural processes Organisational politics

Strategic Planning Systems (1) Systematised, step by step, chronological procedures involving different parts of the organisation Structured means of analysis and thinking about complex strategic problems Questioning and challenging received wisdom Longer-term view of strategy Means of coordination

Strategic Planning Systems (2) Facilitates conversion of strategy into organisational action: Communication of intended strategy from the centre Agreed objectives or strategic milestones to measure progress Coordination of resources to implement strategy Psychological role Involvement of people creates ownership Sense of security

A Strategic Planning Cycle Source: From R. Grant, Strategic Planning in a Turbulent Environment, Strategic Management Journal, vol. 24, p. 499, 2003. Exhibit 11.4

Problems with Strategic Planning Systems (1) Misunderstanding the purpose: Danger that strategy thought of as the plan Confusion between budgetary and strategic planning processes Obsession with search for a right strategy Documentation gives false appearance of proactive approach

Problems with Strategic Planning Systems (2) Problems in design: Line managers may cede responsibility to consultants no power to make things happen becomes an intellectual exercise Cumbersome process may result in not understanding the whole Can be over-detailed – information overload Formalised and rigid systems can stifle ideas Failure to gain ownership Lack of broad involvement Removed from organisational reality

Strategy Workshops and Project Groups To reconsider or generate the intended strategy of the organisation To challenge the assumptions of the current strategy To plan strategy implementation To examine blockages to strategic change To undertake strategic analysis To monitor the progress of strategy To generate new ideas and solutions

Strategy Consultants Reasons for using consultants Consultants’ roles To get an external objective view of issues To cut through internal disagreements To symbolise the importance of the work Consultants’ roles Analysing, prioritising and generating options Knowledge carrier Promoting strategic decisions Implementing strategic change

Externally Imposed Strategy By powerful external stakeholders Government regulation/deregulation International requirements for JVs/alliances Imposition of strategy from parent to operating unit Deliberately forces strategic change Interventionist special measures in UK public sector

Logical Incrementalism The development of strategy by experimentation and learning from partial commitments rather than through global formulations of total strategies (Quinn 1980) Managers have a generalised rather than specific view of future direction Cannot ‘know’ environment, but sensitive to signals via constant scanning Develop strong, flexible core business and experiment with ‘side bet’ ventures Experiments emerge from ‘subsystems’ Top managers utilise mix of formal/informal social and political processes to pull together emerging pattern of strategies

Resource Allocation Routines Strategies emerge through formalised routines and systems of the organisation The Bower-Burgelman explanation Day to day decision making about resource allocation across businesses Managers’ proposals competing for funds Decisions may be made at a lower level than conventionally thought to be ‘strategic’ Cumulative effects of such decisions guide the strategy

Cultural Processes Incremental strategy development can be explained as the outcome of the influence of organisation culture The paradigm and ‘the way we do things around here’ mean that managers try to minimise ambiguity/uncertainty by defining situation as something familiar Self-reinforcing pattern Over time may result in strategic drift

The Dynamics of Paradigm Change Source: Adapted from p. Grinyeh and J.-C. Spender, Turnaround: Managerial recipes for strategic success, Associated Business Press, 1979, p. 203. Exhibit 11.5

Organisational Politics Political view of strategy development is that strategies develop as the outcome of processes of bargaining and negotiation among powerful internal or external interest groups (or stakeholders) Negative influence Obstructs analysis and rational thinking Emphasis or de-emphasis of data can be source of power Powerful individuals may influence identification of key issues and strategies selected Results in emergent or incremental patterns of strategy development Positive influence Political conflict and tensions may produce new ideas Champions will support new ideas

Multiple Processes of Strategy Development No one right way to develop strategy Processes of strategy development may differ over time and in different contexts Perceptions of how strategy develops will differ Senior executives see it as intended, rational, analytical and planned Middle managers see it as the result of cultural and political processes Managers in government organisations see it as imposed No one process describes strategy development Multiple processes at work

Some configurations of strategy development processes Exhibit 11.6

Planning Incrementalism (Logical Incrementalism) Characteristics Standardised planning procedures Systematic data collection and analyses Constant environmental scanning Ongoing adjustment of strategy Tentative commitment to strategy Step-by-step, small-scale change Rather than Intrusive external environment Dominant individuals Political processes Power groups Typical contexts Manufacturing and service sector organisations Stable or growing markets Mature markets Benign environments

Incremental Cultural Political Configuration Characteristics Bargaining, negotiation and compromise amongst conflicting interests of groups Groups with control over critical resources more likely to influence strategy Standardised ‘ways of doing things’ Routines and procedures embedded in organisational history Gradual adjustments to strategy Rather than Deliberate, intentional process Well-defined procedures Analytical evaluation and planning Deliberate managerial intent Typical contexts Professional service firms (e.g. consultancy/law) Unstable, turbulent environment New and growing markets

Imposed Political Configuration Characteristics Strategy is imposed by external forces (e.g. legislation, parent organisation) Freedom of choice severely restricted Political activity likely within organisation and between external agencies Rather than Strategy determined within the organisation Planning systems impact on strategy development Influence on strategic direction mainly by managers within the organisation Typical contexts Public sector organisations, larger manufacturing and financial service subsidiaries Threatening, declining, unstable and hostile environments

Challenges for Strategy Development Strategic drift Incremental strategic change influenced by organisational culture individual and collective experience political processes prior decisions Risk of getting out of line with faster changes in environment Need to encourage challenge and change of core assumptions Learning organisation

The Learning Organisation (1) The learning organisation is capable of continual regeneration from the variety of knowledge, experience and skills of individuals within a culture which encourages mutual questioning and challenge around a shared purpose or vision Collective knowledge of individuals exceeds organisational knowledge Formal structures stifle organisational knowledge and creativity

The Learning Organisation (2) Need to unlock individual knowledge and encourage knowledge sharing Importance of social networks Learning organisation is inherently capable of change Context for organisational learning Pluralistic organisation Experimentation as the norm

Managers’ perceptions of strategy development processes Exhibit 11.7

Strategy Development in Environmental Contexts Exhibit 11.8

Managing Strategy Development Processes Organisation needs different processes for different purposes What is the right emphasis at a given time? What is the role of top management? What are the strategy development roles at different organisational levels? Do the different managerial levels acknowledge and value different roles?

Key Points (1) Intended versus emergent strategy Intended strategy derives from: Planning systems carried out by top management Strategy workshops/project groups Strategy consultants Imposition by external stakeholders Strategies may also emerge as a result of: Logical incrementalism Resource allocation routines Organisational culture Political activity

Key Points (2) Challenge of strategic drift Need to challenge taken for granted assumptions Multiple processes of strategy development required To create a learning organisation To cope with dynamic and complex environments