Lecture 15 - The strategy development process Flashcards
Who identified the 3 broad types of strategic decision making that occur in an organisation
Eisenhart, 1992
Eisenhart, 1992
3 broad types of decision making that occur in organisations
What are the 3 broad types of decision making that occur, according to Eisenhart (1992)?
Rational/bounded model - most deliberate, have intention
Politics & power - some fluidity in terms of how strategy may be influenced by powerful individuals
Garbage can model - most emergent, no intention whatsoever, by chance, strategy born out of people going about their everyday operations
Advances in behavioural economics have revealed:
Not all agents are rational
What is coalition formation?
Coerce strategies to try and steer the organisation in the direct you want it to go (born out of game politics)
Define ‘strategy process’
the pattern of decisions made in managing organisational activities and processes with the aim of achieving competitive advantage.
What are the two schools of thought in strategy process?
Deliberate (Rational) -Porter
Emergent (Behavioural) -Mintsberg
Deliberate strategy development is purposely formulated and planned by managers as a result of:
Strategic leadership
Strategic planning
External imposition
What are the 4 aspects of strategic leadership?
Command
Vision
Decision making
Symbolic
Strategic leadership as command:
the case of the entrepreneur, controls of all aspects of the business
Strategic leadership as vision:
creating a clear view of strategic direction and gaining commitment from employees
Strategic leadership as decision making:
leaders weigh evidence, interpret data, make decisions and secure buy-in
Strategic leadership as symbolic:
leaders as the face, voice and soul of the organisation
What is strategic planning?
Strategies that emerge through formalised planning systems
Formalised structured processes supported by a range of tools to develop strategy (rational school of thought)
Typically supported by dedicated planning team
Helps organisation learn by going out and conducting an external study
Name some problems with planning systems
Confusing strategy with planning
Detachment from reality
Paralysis by analysis
- So obsessed with doing environmental analysis – don’t get anything done
- Detachment from reality
Lack of ownership/ high complexity
- People only contribute towards part of it
- Don’t have idea of bigger picture
Dampening of innovation
- Rigid control squeezes out any potential for creativity
What is external imposition?
Imposition of strategy by powerful stakeholders
- still deliberate
- intentionality
Give some examples of external imposition
Government privatisation
New regulation / legislation
Local operating division implementing Group strategy
Major events
- Natural disasters
- Scandals
Define ‘emergent strategy development’
Strategies that emerge on the basis of a series of decisions, a pattern in which becomes clear over time (Johnson et al., 2014; p.410)
(Johnson et al., 2014; p.410)
Strategies that emerge on the basis of a series of decisions, a pattern in which becomes clear over time
EMERGENT STRATEGY
Name the 4 types of emergent strategy
Logical incrementalism (most deliberate)
Political processes
Prior decisions
Organisational systems (least deliberate)
What is logical incrementalism?
Strategics that emerge from ‘organisational subsystems’ (such as SBUs, cross-functional teas) activities and are initiated from the bottom up
3 stages of logical incrementalism
Subsystems focus on specific sets of strategic issues: acquisition, divestitures, re-organisation, NPD
Subsystems produce strategy in planned, disciplined way, but then are blended incrementally and opportunistically to create a cohesive pattern – the company’s strategy
Subsystems are managed and linked through ‘logical incrementalism’
Purposeful, effective, proactive approach to integrating analytical and behavioural aspects of strategy formulation
What is Quinn (1980)’s definition of logical incrementalism?
The development of strategy by deliberate incremental experimentation and learning “from partial commitments rather than through global formulations of total strategy”
Typically, logical incrementalism is based around: (3)
Environmental uncertainty: precipitating events
Focus on development of general goals rather than specific goals
Experimentation
Define political processes
Strategies are the outcome of bargaining and power politics that go on between executives, departments, and major stakeholders
- Reflecting different views of the best strategy and executives’ position within the company
- The divisional warring tribes view: tribes with differing planning systems
4 characteristics of political processes
Views organisations as political systems in which actors and departments leverage power as a control mechanism – strongly linked with the RBV.
Resources are a key political bargaining chip
Coalitions, co-optation, and strategic use of information in battle for power/leverage over others
Reflects differences in individuals and departments and their backgrounds/ agendas
Define prior decisions
Strategy is the result of the previous history of strategy formulation within the organisation
Decisions are informed or constrained by previous decisions e.g. the decision to make a significant investment in a new product, significant successes, significant failures
Path dependency
Organisations are not necessarily free to choose strategic direction they want
Historically conditioned because of what they’ve done before – past dictates where you can go in the future
Particularly powerful if based on earlier successful strategies
Particularly dangerous in sectors experiencing discontinuous innovation
E.g. lawyer becoming a surgeon
E.g. massive investment in an acquisition, cannot easily sell, made decision, must follow it through, cannot change goalposts
Organisational culture (strategy process)
Strategy as the result of taken for granted values, assumption, routines and behaviours
Limiting options to be considered
Defining how options are assessed
Define organisational systems strategy process
A non-deliberate ‘bottom-up’ process of strategy setting
Strategy as the result of managers at relatively low levels in companies making sense of and dealing with problems and opportunities by applying established ways of doing things
Strategies develop from the allocation of resources at the micro-level (e.g. INTEL)
Organisational systems approach is based on idea that:
Organisational systems and structures are a basis for employees making sense of issues
Organisational systems and structures provide a basis of solutions to strategic issues
Typical local systems and structures of organisational process may be:
Based on functions e.g. Finance, marketing, operations
Based on organisational units e.g. Business unit
System, structures, priorities, local language, problems and solutions
What are the key tensions/managerial implications of strategy processes?
The need for exploitation (of existing assets and capabilities)
The need for exploration (or new opportunities, markets and products)
The need for organisational ambidexterity is a significant management challenge. What does it mean/involve?
Structural ambidexterity: separate divisions and business units
Maintaining diversity in decision making
The importance of leadership
Tight and loose systems
How does it all happen in reality?
Mixed methods and approaches are likely to characterise the majority of strategy development processes
Intended and emergent process and contexts are likely to interact in any single case
Practitioners have to deal with the entirety of the strategy process
Purely deliberate strategy occurs when
a strategy is influenced wholly as intended
Purely emergent strategy occurs
without any formal intention or planning
