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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

ExploringCorporate Strategy7thEdition

Part V

How Strategy

Develops

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Chapter 11

Understanding StrategyDevelopment

ExploringCorporate Strategy7thEdition

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Understanding Strategy DevelopmentOutline (1)

Intended versus emergent strategydevelopment

Intended processes of strategy development Strategic planning systems

Strategy workshops and project groups

Strategy consultants Externally imposed strategy

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Understanding Strategy DevelopmentOutline (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 strategydevelopment

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Strategy Development Processes

Exhibit 11.1

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Strategy Development Routes (1)

Exhibit 11.2

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Strategy Development Routes (2)

Intended strategy Expression of desired strategic direction deliberatelyformulated 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

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Strategic Direction from Prior Decisions

Exhibit 11.3

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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

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Strategic Planning Systems (1)

Systematised, step by step, chronologicalprocedures involving different parts of theorganisation

Structured means of analysis and thinking aboutcomplex strategic problems

Questioning and challenging received wisdom

Longer-term view of strategy

Means of coordination

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Strategic Planning Systems (2)

Facilitates conversion of strategy intoorganisational action: Communication of intended strategy from the

centre

Agreed objectives or strategic milestones tomeasure progress

Coordination of resources to implement strategy

Psychological role Involvement of people creates ownership

Sense of security

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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

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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

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Problems with Strategic Planning Systems (2)

Problems in design: Line managers may cede responsibility toconsultants no power to make things happen becomes an intellectual exercise

Cumbersome process may result in notunderstanding the whole

Can be over-detailedinformation overload Formalised and rigid systems can stifle ideas

Failure to gain ownership Lack of broad involvement

Removed from organisational reality

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Strategy Workshops and Project Groups

To reconsider or generate the intendedstrategy 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

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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

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Externally Imposed Strategy

By powerful external stakeholders Government regulation/deregulation

International requirements for JVs/alliances

Imposition of strategy from parent to operatingunit

Deliberately forces strategic change

Interventionist special measures in UK publicsector

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Logical Incrementalism

Managers have a generalised rather than specific view offuture direction

Cannot know environment, but sensitive to signals viaconstant scanning

Develop strong, flexible core business and experiment withside bet ventures Experiments emerge from subsystems Top managers utilise mix of formal/informal social and

political processes to pull together emerging pattern ofstrategies

The development of strategy by experimentation andlearning from partial commitments rather than throughglobal formulations of total strategies

(Quinn 1980)

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Resource Allocation Routines

Strategies emerge through formalisedroutines 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

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The Dynamics of Paradigm Change

Source: Adapted from p. Grinyeh and J.-C. Spender, Turnaround: Managerial recipes for strategic success, AssociatedBusiness Press, 1979, p. 203.

Exhibit 11.5

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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 andstrategies selected

Results in emergent or incremental patterns of strategydevelopment

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 powerfulinternal or external interest groups (or stakeholders)

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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, analyticaland planned

Middle managers see it as the result of cultural andpolitical processes

Managers in government organisations see it asimposed

No one process describes strategy development Multiple processes at work

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Some configurations of strategy development processes

Exhibit 11.6

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Planning Incrementalism (Logical Incrementalism)

Characteristics Standardised planning procedures

Systematic data collection and analysesConstant 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

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Incremental Cultural Political ConfigurationCharacteristics Bargaining, negotiation and compromise amongst

conflicting interests of groups

Groups with control over critical resources more likelyto influence strategy

Standardised ways of doing things

Routines and procedures embedded in organisational

historyGradual 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

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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 inenvironment

Need to encourage challenge and change ofcore assumptions

Learning organisation

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The Learning Organisation (1)

Collective knowledge of individuals exceedsorganisational knowledge

Formal structures stifle organisationalknowledge and creativity

The learning organisation is capable of continualregeneration from the variety of knowledge, experience andskills of individuals within a culture which encouragesmutual questioning and challenge around a shared purposeor vision

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The Learning Organisation (2)

Need to unlock individual knowledge andencourage knowledge sharing

Importance of social networks

Learning organisation is inherently capableof change

Context for organisational learning

Pluralistic organisation

Experimentation as the norm

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Managers perceptions of strategydevelopment processes

Exhibit 11.7

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Managing Strategy Development Processes

Organisation needs different processes fordifferent 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 levelsacknowledge and value different roles?

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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

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Key Points (2)

Challenge of strategic drift Need to challenge taken for granted

assumptions

Multiple processes of strategy developmentrequired To create a learning organisation

To cope with dynamic and complexenvironments

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