exploring corporate strategy, seventh edition, © pearson education ltd 2005 exploring corporate...

Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005

Exploring Corporate Strategy7th Edition

Part V

How Strategy

Develops


Chapter 11

Understanding Strategy Development

Exploring Corporate Strategy7th Edition


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

– 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

• 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

The development of strategy by experimentation and learning from partial commitments rather than through global formulations of total strategies

(Quinn 1980)

The development of strategy by experimentation and learning from partial commitments rather than through global formulations of total strategies

(Quinn 1980)


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

• 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

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)

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)


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 ConfigurationCharacteristics 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)

• Collective knowledge of individuals exceeds organisational knowledge

• Formal structures stifle organisational knowledge and creativity

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

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


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 strategydevelopment 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

exploring corporate strategy, seventh edition, © pearson education ltd 2005 exploring corporate...

Documents

corporate strategy

progress of strategy

strategy development

strategy implementation

conversion of strategy

current strategy

imposed strategy slide

strategy development