Strategy development processes – summary Essay
Strategy development processes – summary
Intended strategy is deliberately formulated or planned by managers. This may be the result of strategic leadership, strategic planning or sometimes the external imposition of strategy deliberately formulated elsewhere. 12. 2. 1 Strategic leadership: the role of vision and command An organisation’s strategy may be influenced by strategic leaders: whose personality, position or reputation gives them dominance over the strategy development process. Strategic leadership as command The strategy of an organisation might be dictated by an individual.
This is, perhaps, most evident in owner-managed small firms, where that individual is in direct control of all aspects of the business. Strategic leadership as vision It could be that a strategic leader determines or is associated with an overall vision, mission, or strategic intent that motivates others, helps create the shared beliefs within which people can work together effectively. Strategic leadership as decision-making One of the key roles of leaders is to have the ability to weigh different views, interpret data, have the confidence to take timely decisions and the authority to get others to buy into those decisions.
Strategic leadership as symbolic 12. 2. 2 Strategic planning systems In a study of strategic planning systems of major oil companies, Rob Grant noted the following stages in the cycle for a large corporation: Initial guidelines The cycle’s starting point is usually a set of guidelines or assumptions about external environment. Business – level planning Business units or divisions draw up strategic plans to present the corporate centre. Corporate centre executives then discuss those plans with the business managers and then revise their plan for further discussion.
Corporate – level planning The corporate plan results from the aggregation of the business plans Financial and strategic targets are then likely to be extracted to provide a basis for performance monitoring of business and key strategic priorities on the basis of the plan. A strategic planning system may play several roles within an organisation. Typically four are emphasised: Formulating Learning Co-ordinating Communicating There are five main dangers in the way in which formal systems of strategic planning have been employed: Confusing strategy with the strategic plan
– Strategy is not the same as “the plan”: strategy is the long-term direction that the organisation is following, not just a written document. Detachment from reality – The result can be that strategic planning becomes an intellectual exercise removed from the reality of operations. Paralysis by analyse – Strategic planning can also become over-detailed in its approach. It is not unusual to find companies with huge amounts of information, but with little clarity about the strategic importance of that information. The result can be information overload with no clear outcome.
Lack of ownership Dempening of innovation BILDE 1: Table 12. 1 side 403 I boka There has been a decline in the use of formal corporate planning departments and a shift to business unit managers taking responsibility for strategy development and planning. Strategic planning is becoming more project-based and flexible. 12. 2. 3 Externally imposed strategy The third way in which intended strategies manifest themselves is in situations where managers face what they see as the imposition of strategy of powerful external stakeholders. 12. 3 Emergent strategy development
Although strategy development is often associated with top-management intentionality, an alternative explanation is that of emergent strategy: that strategies emerge on the basis of a series of decisions, a pattern in which becomes clear over time. – explains an organisation’s strategy as a developing “pattern in a stream of decisions” There are different explanations of emergent strategy: logical incrementalism (most deliberate), strategy as the outcome of political processes, as adaptation from prior decisions and as the outcome of organisational systems and routines (least deliberate).
12. 3. 1 Logical incrementalism It explains how management may deliberately cultivate bottom-up, experimental basis for strategies to emerge. Logical incrementalism is the development of strategy by experimentation and learning from partial commitments rather than through global formulations of total strategies. There are four main characteristics of strategy development: Environmental uncertainty – Managers try to be sensitive to environmental signals by encouraging constant environmental scanning throughout the organisation General goals
– More general rather than specific goals may be preferred and try to move towards them incrementally. Experimentation – Build on the experience gained in that business to inform decisions both about its development and experimentation with “side-bet” ventures. Coordinating emergent strategies Given logical incrementalism’s emphasis on learning, it is a view of strategy development which corresponds to the learning organisation – an organisation that is capable of continual regeneration from the variety of knowledge, experience and skills within a culture that encourages questioning and challenge.
Arne, dette er en test pa om du har lest eller ikke. As with logical incrementalism the learning organisation sees organisations as social networks, where the emphasis is not so much on hierarchies as on different interest groups that need to cooperate and learn from each other. 12. 3. 2 Strategy as the outcome of political processes The second explanation of how strategies may emerge is that they are outcome of the bargaining and power politics that go on between executives or between coalitions within the organisation and major stakeholders.
The political view of strategy development is that strategy develop as the outcome of bargaining and negotiation among powerful interest groups (or stakeholders). Information used in strategic debate is not always political neutral. A manager or coalition may exercise power over another because they control important sources of information. In such circumstances it is bargaining and negotiation that give rise to strategy rather than careful analysis and deliberate intent.
In approaching strategic problems, people are likely to be differently influenced by at least: Personal experience from their roles within the organisation. Competition for resources and influence The relative influence of stakeholders on different parts of the organisation. Different access to information given their roles and functional affiliations. 12. 3. 3 Strategy informed by prior decisions The third explanation of how strategies may emerge is as the product of prior decisions which inform or constrains strategy development.
One way of explaining emergent strategy is that managers deliberately seek to maintain a continuity of strategy. Emergent strategy as managed continuity The strategy of an organization may develop on the basis of a series of strategic moves each which makes sense in terms of previous moves. Path-depended strategy development Path-dependency is where early events and decisions establish “policy paths” that have lasting effects on subsequent events and decisions. It therefore explains strategic decisions as historically conditioned.
Organisation culture and strategy development The emphasis is on strategy development as the outcome of the taken-for-granted assumptions, routines and behaviours in organisations. This taken-for-granted works to define, or guide how people view their organisation and its environment. It also tends to constrain what is seen as appropriate behavior and activity. 12. 3. 4 Strategy as the product of organisational systems The fourth explanation on how strategies may emerge is on the basis of an organisation’s systems.
Rather than seeing strategy development as about foresight and anticipation taking form in directive plans from the top of the organisation, strategy development can be seen as the outcome of managers at much lower levels making sense of and dealing with problems and opportunities by applying established ways of doing things. The resource allocation (RAP) and the attention-based view (ABV) of development emphasise that established ways of allocating resources in organisations will tend to play a significant part in what sort of solutions to problems are advocated and those to which resources are allocated.
Organisational systems as a basis of making sense of issues – Managers are likely to make sense of issues they face on the basis of the systems and routines with which they are familiar and which directly affect them. Organisational system provide bases of solutions to strategic issues. Systems and routines also provide solutions that managers can draw on when faced with problems. 12. 4 Implications and challenges for managing strategy development 12. 4. 1 Multiple strategy development processes
It is likely that there will be multiple processes at work in any organisation and the effective management of strategy development need to take this into account. There is no one right way in which strategies are developed. The challenge is for managers to recognise the potential benefits of different processes of strategy development so as to build organisations capable of adapting and innovating within a changing environment yet achieving the benefits of more formal processes of planning and analysis to help this where necessary. Organisational ambidexterity
Multiple strategy processes may need to exist because the strategic needs of organisations require it. For example, an organisation may seek to exploit the capabilities that it has built up over time in order to build and sustain competitive advantage. The risk is that there may not be enough exploration of bases of new capabilities and bases of innovation. In some organisations there may be a need for both exploitation and exploration – what has become known as “organisational ambidexterity”. Structural ambidexterity Diversity rather than conformity The role of leadership
Tight and loose systems Perceptions of strategy development: It is also likely that processes of strategy development will be seen differently by different people. 12. 4. 2 Strategy development and organisational context Processes of strategy development are likely to differ according to context. Therefore different ways of thinking about strategy development and different processes for managing strategy may make sense in different circumstances. Organisational characteristic sand the nature of the environment Organisations differ in their characteristics and exist in different environments.
In terms of the characteristics, is it small or large? In a small organisation individual and detailed direction of strategy may be possible by a chief executive, but this may be more difficult in larger companies. If the organisation is large, is it also complex? What is the nature of the environment? In stable environments historic tendencies are capable of being understood and are likely to influence the future nature of the environment In relatively dynamic and uncertain environments history is less a predictor, so managers need to seek to take a view of the future rather more than the past.
Complex environments are difficult to comprehend; and here complexity is likely to go hand in hand with dynamic change. Se figure 12. 5 I boka (side 417) The command mode of strategy is likely to be found most in small organisations in relatively stable environments. Draw on extensive experience of how to compete in an industry, use that experience to direct strategy and manage the implementation. Directive planning is most likely in large stable organisations that are not complex. Managers are likely to understand their business units well and if environmental change does occur, it may be predictable.
Co-ordination planning: Where organisations face more turbulent or complex situations there is an important role for planning but is likely to differ from top-down directive planning. Emergent strategy processes are also more likely in complex organisations where the environment is also more complex. Leadership and learning: The situation of dynamic or complex environments therefor poses an additional challenge. Not only is co-ordination necessary, but it is likely that some stimulus from the top will be needed to galvanise change or to empower and legitimize new ideas from the bottom. Life cycle effects
The third contextual influence on strategy development processes is how organisations develop over time For example: Life cycle stages. In early stage of an organisation’s development, very likely strange development will be heavily influenced by the founder; as such it is likely to be a “command” style of management. As organisations develop there is likely to be a reliance on managers’ experience and drawing lessons from what other organisations do. As organisations and industries mature, however, they may use more analytic approaches to strategy development Strategic infection points.
Burgelman and Grove argue that all organisations face what they call “strategic infection points” where there are shifts in fundamental industry dynamics which management need to recognise and act upon 12. 4. 3 Managing intended and emergent strategy It is not unusual for organisations to have an intended strategy. Perhaps the result of a strategic planning process, but to be following a different strategy in reality. Intended strategy is the strategy deliberately formulated or planned by senior executives. It may well be expressed in a formal document.
Intention and pans are not action; what an organisation actually does can be influenced by other processes Emergent strategy is that which emerges on the basis of a series of decisions, a pattern which becomes clear over time. Realised strategy is what the organisation is actually doing in practice. This may have come about as a result of the intended strategy, but it man have come about as the outcome of emergent strategy processes. Both intended and emergent processes are likely to influence what actually happens. Unrealised strategy is the aspects of the intended strategy that do not come about in practice.