Corporate Strategy and Decision Making Lecture 12: Reconfiguration approaches

The Positioning School is particularly silent on the issue of implementing strategies. The Extended Design School model by contrast made the tacit assumption that senior managers, who have primary responsibility for the formulation of strategy, automatically enjoy the authority to command its implementation. The model, therefore, takes for granted a unitarist view of organizations, one which recognizes managerial authority as the only source of legitimate power to command the activities of the enterprise. The rational approaches to strategy focused on the mechanics of developing a strategic plan and on getting the steps or stages of the strategic process right. All the approach es examined under the rational approach assumed a top down view of strategy making, presenting the planning process very much as edicts or directives issued by those in authority to be implemented, unquestionably throughout all levels of the organization. Resistance or defiance were not considered problems. An alternative view, however, is that in practice managerial authority is not the only source of power in organizations, and indeed that both official and unofficial sources of power and influence are distributed throughout organizations. In these circumstances, it cannot be assumed that strategies formulated by senior managers will be implemented automatically and unchanged by organizational stakeholders and those responsible for their implementation. The relationship between formulation and implementation of strategies is not as unproblematic as the Extended Design School model might lead one to suppose. The reconfiguration approaches question the wisdom and viability of the unitarist approach to planning, suggesting a number of improvements to ensure the success of strategies. One of these was the increased focus during the 1980s on the implementation of strategies. An important development was the realisation that while senior managers could formulate strategies, to work in practice a strategy would require many peoples commitment to it and ownership of it. An important part of understanding how the implementation of a particular strategy might be supported or resisted occurred with the adoption of a more pluralist view of strategy making. Increasingly it became apparent that strategy had to include more devolved and participatory methods to ensure that all levels of the organization could contribute to the strategy process and identify with the plan if this much needed ownership and commitment were to materialise. Implementation became as important as the formulation of strategy, hence the term strategic management replaced strategic planning. Attention became focused on the constraints and opportunities impacting upon or affecting the implementation of strategy, that is, on the sorts of things that were likely to frustrate or impede the organizations capacity to carry out its strategies. This entailed recognizing that organizations comprise multiple and diverse stakeholders who are likely to view any new strategic direction or plan as potentially affecting their power, influence and control over valued or scarce resources. Pluralists agree that stakeholders, or coalitions of them, more than likely view any new strategy in terms of its costs and benefits to them personally. Strategic change was recognized as involving the threat or real loss of power, influence and control over traditional resources and often placed new restrictions on peoples ability to act independently. Resistance became identified as an inevitable consequence of implementing new plans. The organizations stakeholders were considered most likely to evaluate the costs and benefits of any proposed strategy with respect to their underlying assumptions, preferences, interests and values. In other words, the strategy had to be made to fit the contours of these interests, as well as the resource and structural considerations of the organization vis vis its competitive position. This contingency approach to strategy emphasized the importance of achieving fit between the companys structure, culture, strategy and environment. The better the fit, the smoother the implementation of any strategy, or so the argument went.

Incrementalism
For some theorists the accommodation of interests required to achieve this strategic fit has less to do with rational behaviour and more to do with political negotiation and bargaining as discussed. This was evident in the work of Charles Lindblom (1959) on incrementalism in decision-making. Lindbloms ideas, derived from the public policy context, have nevertheless resonated with several writers in the field of private sector strategy formulation. For example, the conclusion that the processes of decision making in the organizational context are likely to be characterized by political rather than comprehensively rational processes is shared by a number of theorists (e.g. Brunnson 1982: 30; Narayanan and Fahey 1982; Jemison 1981: 604; Piercy 1989: 27). But Lin dbloms ideas have been

taken up most forcibly by James Brian Quinn (1980) who argued that logical incrementalism is a more apt description for strategic decision-making. Logical incrementalism is a process for making decisions in the context of an uncertain environment. Arguably, most strategic decisions are indeed incremental as are their implementations. Take, for example, the marketing strategies an enterprise might employ. On relatively rare occasions such as the launching of a new product marketing strategy formulation may take the form of a marketing plan specified in detail prior to implementation. But this does not describe the vast majority of marketing decisions. Most decisions in marketing strategy are taken in the context where a strategy is already in place and a product is already active in the market. The decisions taken under these circumstances will be incremental small piecemeal changes to the strategy already in place: a discount on prices, some further advertising, the negotiation of an extension to a distribution contract. These changes are taken in response to new opportunities. In the process the enterprise learns a great deal: how consumers respond to the enterprises initiatives; the reaction of competitors; the reliability of the distribution system; the flexibility of the enterprises own production team. Thus strategies do not derive from a rational planning process fully specified and ready for implementation. Rather strategies emerge incrementally over time and incrementalism is not muddling through but is a purposeful, effective, proactive management technique for improving and integrating both the analytical and behavioural aspects of strategy formulation (Quinn 1978: 8). In reality the rational-consensus model of strategy implementation is distorted by conflicting goals, bargaining and negotiation of interests, leading to the creation of dominant/dependent coalitions within an organizations various domains of operation. In Quinns terms, the whole strategy implement ation process becomes fragmented and evolutionary, that is, it follows a path of logical incrementalism (Quinn 1978). Decisions are taken incrementally and opportunistically as a result of communicating assumptions, integrating corporate and divisional plans and resolving political differences. Each aspect of a strategys implementation that involves the acquisition, reorganization and redistribution of scarce resources is contested by individual stakeholders when their expectations are threatened. The resolution of negotiations between stakeholders with differential bases of power produces a temporarily structured order within the company, so that, according to Anselm Strauss, strategic outcomes are the result of a process of negotiated order (Strauss 1 978), not the product of a rational-analytic planning process. Organizational environments can be structured by the actions of key players operating in those arenas which provide them with the greatest strategic advantage. Strategic planners and managers will hold multiple roles within their organization, thereby enabling them to select the most propitious arenas in order to promote and pursue their agendas for strategic implementation. In this way strategy is continuously moulded and fashioned by the actions of key players. Strategy formulation is a political process involving various groups and individuals pursuing their interests using power and influence and various tactics to devise actions which can at times go against other major corporate players (Byrt 1973: 2).

The problem of strategic drift

Not all commentators on strategy believe that it is possible to change an organization incrementally or otherwise, except in very specific circumstances, because human beings do not naturally work in that way. Mindsets, or cultures, only change slowly and often under extreme pressure, to the extent that some researchers question whether it is realistic to talk about changing the culture to facilitate a strategic change. Gerry Johnson (1992) argues, as does Peter Anthony (1994), that in the context of the organization or company it is the change of behaviour which matters most, and really the idea that managers can engineer change in belief systems is rather fanciful. Johnson suggests that the organization is embedded in a cultural web of stories and myths, rituals and routines, symbols, power structures, control systems, organizational structures, and all of these shape the paradigm. A paradigm is basically a formula for what the organization is and what it does and what the people in the organization think are the recipes for its success or otherwise. The figure below (figure 15.8 from the text) describes the key elements of such a cultural web. The paradigm is at the heart of the web, and is sustained by its other elements. This paradigm can make the organization insensitive to change and produce the situation of strategic drift illustrated below (in figure 15.9 from the text). Johnson gives several examples of this from manufacturing and service industries. The effect of strategic drift is that the organization (or its management) gets further and further out of step with its environment, while believing that it is doing everything possible to keep up. Incremental change is attenuated by the biased perception the organization has of its environment, and the modifications it makes are too little because of its cultural

filter. When crisis approaches, the organization abandons its incremental progression and tries out a number of responses, but again none of them are radical enough by now and the organization is so confused that it often goes backwards and undoes some of the progress it has made. Eventually, radical change is necessary to enable the organization to survive, as in many of the corporate turnaround stories of the 1980s. Johnson offers some advice on how to avoid strategic drift, which includes creating an open and communicative culture where challenge of the status quo is encouraged, frequent use of external consultants and outsider input to challenge established mindsets, and the constant deployment of symbols of change rather than tradition.

Mintzberg was optimistic about the potential for a radical turnaround of organizations in such turmoil. Organizations, he said, always have both deliberately planned and emergent strategies coexisting. He believed that many large-scale mass production organizations can be typified by incrementalism, but noted that some organizations are designed and operate to institutionalize change and encourage both emergent and deliberate strategies. For Mintzberg, managing incremental change is the predominant and normal strategic role for most managers, and those who are concerned with crafting strategy.

Crafting strategy
Mintzberg drew a distinction between planning strategy and crafting strategy. He said: Imagine someone planning strategy. What most likely springs to mind is an image of orderly thinking: a senior manager or a group of them, sitting in an office formulating courses of action that everyone else will implement on schedule. The keynote is reason rational control, the systematic analysis of competitors and markets, of company strengths and weaknesses, the combination of these analyses producing clear, explicit, full-blown strategies (Mintzberg 1987: 58). Mintzberg has criticized the view that the making of strategy somehow reflects senior managements intentions alone. This view, espoused by many managers, creates an image of tidiness and purpose and conceals complexity and confusion the many meetings, debates, dead ends and diverse ideas that drive the organization forward (Mintzberg 1987: 678). He preferred instead to describe planning as crafting strategy and deliberately used the crafting metaphor to distance his concept of planning from the mechanistic or mechanical models of formal planning to infuse it with the ideas of creativity, uncertainty, feeling involved and the fusion of design and implementation (1987: 66). Crafting strategy is more like a fluid learning process in which formulation and implementation merge to produce effective and creative strategies (Mintzberg 1987: 66). Not only did Mintzberg advocate that senior managers abandon top-down planning in favour of a more negotiated or interactive style, but he also argued that the concept of strategy had to incorporate emergent and more dynamic ways in which planning actually happens. Crafting strategy involves managing the differences between emergent and deliberate (or intentional) strategy making. Mintzberg proposed that senior managers could develop an umbrella strategy within their organizations, which would involve them only in setting broad guidelines or goals (e.g. to produce only high-margin products at the cutting edge of technology), leaving the specifics (e.g. the choice of products) to others in the organization. An umbrella strategy would allow scope for substrategy development within departments, units or divisions, that is, a portfolio of plans coordinated at the centre (Mintzberg 1987: 701). Mintzberg believed that the implementers of plans (the grass roots people) had to become the formulators of plans as well or have a more significant role in devising strategies. He argued that senior managers should focus on strategy formation, rather than formulation, and involve the grass roots of the organization, particularly middle managers (Mintzberg 1987: 701). Crafting Strategy was considered especially important in adhocracies or in post-entrepreneurial organizations, which have been characterized by quite complex cross-functional relationships between departments, teams, divisions and suppliers and more turbulent environments (see Kanter 1989: 89 90). The focus on learning and strategy has become an important element in more contemporary views of strategy, particularly strategic thinking. Mintzbergs singular message in the use of the crafting metaphor was to argue that grass roots strategies emerge or take root whenever people have the capacity or opportunity to learn. This opportunity to learn depends on a strategic framework or context that is deliberate, but not so inflexible that it leaves no room for experimentation, innovation or creativity (Mintzberg 1987: 6971).

Strategic thinking
According to Lenz, most strategic planning processes do not facilitate the sel f-reflective learning that is necessary for organizations to adapt to changing competitive conditions because of the paralysis of analysis (1987: 349; see also Pearson, 1999). Following this path avoids strategic thinking because it is crowded out by the mechanics of strategic planning (Rowe, Mason and Dickel 1986: 36). Rational

thinking alone tends to preclude the use of dialogue, argument and debate, so that entrepreneurial creativity in strategic planning is stifled, and the process becomes mechanistic. Lenz suggests several steps to ensure a self-reflective strategic planning process and these essentially are: Make the job of the strategic planner concerned with facilitating organizational learning. Keep the process as simple as possible. Avoid routinized behaviour and processes. Emphasize logical arguments; use numbers as back-up material. Simplify planning reviews; focus on action, not theatricals. Stimulate thinking and action. Do not allow analytic techniques to oversimplify the situation: use them instead to illuminate problems. Strategic planning is good; strategic thinking is better. Base evaluation on insights provided, not techniques used. Manage the evolution of the planning process so it becomes self-learning (Lenz 1987: 39).

A similar sentiment is expressed by Kenichi Ohmae (1983), who also criticized strategy formulation for being too rational or formal and obsessed with facts and figures. Ohmae believed very firmly in the virtues of analysis, but not the sort of analysis that merely produces rational or predictable responses to problems. In a sense, much of what Porter describes as competitive advantage rests on the markets predictability and logic operating in certain industries, while Ohmae argues that strategic thinking requires going beyond the obvious, beyond appearances, beyond proven logics, to search out the truly novel sources of competitive advantage. For Ohmae, strategic thinking means seeking a clear understanding of the elements of a problem or situation and of the important underlying relationships, then restructuring or reconfiguring these relationships in the most advantageous way (1983: 12 15). Ohmae suggests that rational analysis has to be combined with imaginative reintegration if strategic thinking is to produce a competitive edge. For Ohmae, the most important part of strategic thinking is the ability to identify critical issues and solutions to abandon preconceived ideas and preconceptions. Ohmae suggests a number of steps managers can follow to develop their strategic thinking capabilities, as well as devising an issues diagram to identify issues and solutions-oriented questions. The issues diagram is similar to a decision tree, a rational method of decision making used to list a number of alternative possibilities to an issue, with yes and no alternatives identified to guide possible actions. Ohmae drew on his engineering background to develop the issue diagram by using value engineering and value analysis to determine or identify critical issues managers need to ask about their competing products (1983: 23). The former refers to quality and reliability issues relating to a product, the latter to the cost and price of products. Analysis for Ohmae, and the focus on quality, was deeply rooted in his Japanese origins. Ohmae suggests that strategic thinking, and the development of an issues diagram, require four main processes: 1. 2. 3. 4. identifying all the key factors in a business that put it at a disadvantage relative to its competitors; grouping the factors based on some common denominator or principle; evaluating each underlying relationship within the categories identified to try to find the critical issues; and asking solution-oriented questions for each critical issue, with the ultimate aim being to prioritize actions.

As mentioned above, Ohmae draws concepts from engineering to identify critical issues. Ohmaes approach is less formula driven or based on a specific model. It is far more dependent on managers developing or mastering strategic thinking, which in the end means having the superior battle plan (Ohmae 1983: 378, 2401).

References
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