UNDERSTANDING STRATEGY DEVELOPMENT

HOW DO STRATEGIES COME ABOUT IN ORGANIZATIONS ?

DIFFERENCE BETWEEN :

INTENDED STRATEGY Deliberately planned or conceived in organizations Orthodox view, that most strategies are Intended

EMERGENT STRATEGY Evidence shows that, often, the strategies, do not develop on the basis of some grand plan

SOME KEY POINTS The different explanations of strategy development – not “mutually exclusive” or “independent” of each other. Seen within organizations at same time, or different times, with varying degrees “Multiple Process of Strategy Development” – Context dependent

CHALLENGES AND IMPLICATIONS 1. Strategic Drift 2. The learning organization 3. Uncertain and complex conditions 4. Managing strategy development processes PROCESSES OF INTENDED STRATEGY DEVELOPMENT Strategic planning Strategic workshops and project groups Strategy consultants externally imposed strategies PROCESSES OF EMERGENT STRATEGY DEVELOPMENT Logical incrementalisation Resource allocation routines Cultural processes Political processes

CONCEPT OF STRATEGY intended strategy-- plan for action emergent strategy-- process realized strategy--- outcome

Intended Strategy UnrealizedStrategy Deliberate Different Kinds of Strategy

Intended Strategy UnrealizedStrategy Emergent Strategy Strategy Deliberate Different Kinds of Strategy

Intended Strategy UnrealizedStrategy Emergent Strategy Strategy Deliberate RealizedStrategy Different Kinds of Strategy

INTENDED STRATEGY DEVELOPMENT STRATEGIC PLANNING SYSTEMS

STRATEGIC PLANNING: Strategic planning may take the form of systematized, step –by-step, chronological procedures to develop or coordinate an organizations strategy.

Strategic Planning Cycle

STEPS: 1. Planning guidelines, Forecasts. scenarios and assumptions. 2. Draft business plans. 3. Discussion with corporate. 4. Revised Business Plans. 5. Annual capital and operating Budgets & corporate plan. 6. Approval by board. 7. Annual performance targets. 8. Performance Appraisal.

USES: Provides a structured means of analysis and thinking about complex strategic problems. Encourage a long term view of strategy. Provides a means of coordination. Communicating intended strategy from centre. Creating ownership of the strategy.

PROBLEMS: Misunderstanding the purpose of the planning systems. Confusion between budgetary processes and strategic planning processes. Obsessed with search of ‘Right Strategy’. Contribution of the individuals. Highly formalized and rigid systems of planning.

“Logical Incrementalism” “Logical Incrementalism”  Quinn does not agree that change is either emergent or planned. Quinn believes that although managers may have an idea of the destination, they do not really plan change in ‘big chunks’. 18

“Logical Incrementalism”  Quinn says that managers:  Are flexible about how to get to the destination.  Arrive at strategic change through negotiation with stakeholders.  Allow strategic change to evolve incrementally, although this is not piece-meal or haphazard because it is based on agreed purposes and involves constant critical re-assessment.  The planned change process involves opportunist learning as it goes along.  Logical instrumentalism is both emergent and planned. 19

 Managers have a generalized rather than specific view of where they want the organization to be in the future and try to move towards the position incrementally.  Managers try to be sensitive to the environment by grasping the signals through constant scanning and by testing the changes in the strategy in small scale steps.

 Managers do this constant scanning by attempting to ensure the success and development of a strong, secure, but flexible core business, building on the experience gained in that business to inform decisions about its development and experimenting with side bet ventures.

 Such experiments cannot be the sole responsibility of the top management. They emerge from what Quinn describes as subsystems in the organization.  This means the groups of people involved in for example, product development, product positioning, diversification and so on.  Top manager then use a mix of social and political process to draw together an emerging pattern of strategies from these systems.

Resource Allocation  The Bower-Burgelman explanation of strategy development is that strategy develops as the outcome of resource allocation routines in organizations.  For example it could be that a manager with in an organization wishes to pursue a project and puts forward a proposal to do so. This may take the form of an argued case supported by a set of financial projections and measurements.

 In doing so the manager will be competing with other proposals for resource allocation.  The procedures for deciding between competing proposals will include financial yard sticks and benchmarks, the argued case by the competing managers and the extent to which those making decisions see it as fitting with in an existing strategy and meeting the needs in turn, of their own financial objective and targets.

Cultural processes

Organization culture can be understood in terms of the taken for granted in an organization. Taken for granted ways of doing things and structures that are encapsulated in the outer rings of the cultural web.

How the people in an organisation view that organisation and its environment. Cultural explanation of strategic development- outcome of taken for granted assumptions and behaviour in organisation. Strategic drift.

Organizational politics Strategy followed in organisation- bargaining and power politics-executives. Political view Political activity –inevitable-negative influence-thorough analysis & rational thinking.

Multiple processes of Strategy Development

Strategy development differ over time and in different Contexts

There is no, one right way to develop a strategy.

Its likely that the perceptions of how strategies develop will be seen differently by different people.

No one process describes Strategy development in any organization

CHALLENGES & IMPLICATIONS FOR STRATEGY DEVELOPMENT

CHALLENGE OF STRATEGIC DRIFT Organization getting out of line with its environment Organizations become merely reactive to their environment Organization must have the capacity and willingness to challenge and change their core assumptions and ways of doing things

THE LEARNING ORGANISATION Regenerates itself from within Encourages sharing of information and knowledge Organizational learning takes place Pluralistic Organizations Experimentation should be the norm

Strategy Workshops and Project Groups

Intensive working session that takes place for 2-3 days Away from the office By groups of executives addressing the strategy of the organization Use analytic tools and techniques, experience of the participants to develop strategic recommendations Participants – top management like board of directors, departmental or functional heads, different levels of management across organization

Project groups, comprising of managers, are set up to tackle specific issues Purpose – devolve responsibility while accessing their expertise Configuration of workshops and project groups differ according to their purpose Challenges:- ◦ Quality of the data ◦ Extent of support of top management ◦ Capabilities of the participants Strategy Workshops and Project Groups Contd..

To reconsider or generate the intended strategy To challenge the assumption underlying the existing strategy To plan strategy implementation To examine the blockages to strategic change and how to overcome them To undertake strategic analysis To monitor the progress of strategy To generate new ideas and solution Strategy Workshops and Project Groups Contd..

Strategy Consultants External consultants – large consultancy firms to small boutique firms specializing in strategy development E.g. McKinsey, Bain etc.. Reasons for going for external consultants ◦ Need for an external and more objective way of looking into issues ◦ To overcome internal disagreements Consultants play different roles in strategy development

Roles of Strategy Consultants Analyzing, prioritizing and generating options Act as knowledge carrier Promoting strategic decisions Implementing strategic change

Externally imposed strategy Powerful external stake holders like governments can impose strategy Can take form of government regulation or deregulation Multinationals may be required to setup joint ventures to enter into a market Multidivisional organization – Imposition of strategy by parent organization on subsidaries

Thank you Presented by Tanvi Srivastva Swati Walia Vidyadhar Reddy Gopi Srinivas Vijay Simha Sriram VG Sruti Jayaramdas Vidushi Sharma