This week, the Effective lab focuses on the making of strategy. Just like the word strategy is not understood well yet used by many people in their daily lexicon, strategy design is an equally mixed experience. It’s difficult to design what you don’t understand well. The many strategy schools of thought, some led by acclaimed subject matter specialists, add to the multivariate understanding and confusion.
Strategy is: intertwined and more horizontal than vertical; the new strategy normal is loose, fast moving, and requires multiple factors to make sense of
Borrowing from Mintzberg, Ahlstrand, and Lampel in 1000ventures.com , the fluid, as opposed to static nature of strategy, is brought to light:
“We are all like the blind men and the strategy process is our elephant”, say Mintzberg, Ahlstrand, and Lampel. “Everyone has seized some part or other of the animal and ignored the rest. Consultants have generally gone for the tusks, while academics have preferred to take photo safaris, reducing the animal to a static two dimensions. As a consequence, managers have been encouraged to embrace one narrow perspective or another.… Unfortunately, the process will only work for them when they deal with the entire beast, as a living organism”
According to 1000ventures.com, the lesson in all this is that there is need for a wider systemic perspective to strategy making
Making effective strategy:
Again, we can’t make something that we don’t understand. So the Effectiveness lab heavily borrows from 1000ventures.com strategy schools analysis to bring to your door-steps a deeper understanding of strategy design archetypes. The archetype knowledge is used as a segway to designing effective strategy
The ten strategy schools:
Yes, you need to become a little more academic this week, if you are to understand the usually commingled world of strategy making.
- The Design School
‘Look before you leap’ mantra
It sees strategy formation as achieving the essential fit between internal strengths and weaknesses and external threats and opportunities (SWOT analysis). Senior management formulates clear and simple strategies in a deliberate process of conscious thought – which is neither formally analytical nor informally intuitive – and communicates them to the staff so that everyone can implement the strategies. The school dominated strategy process into the 1970s, and it has influenced teaching and practice.
Cons: It’s neither analytical nor intuitive. All said, it is too static for the era of modern change
- The Planning School
“A stitch in time saves nine” mantra
This school grew in parallel with the design school. But the planning school predominated by the mid-1970’s and though it faltered in the 1980’s it continues to be an important influence today. The planning school reflects most of the design school’s assumptions except a rather significant one: that the process was not just cerebral but formal, decomposable into distinct steps, delineated by checklists, and supported by techniques (especially with regard to objectives, budgets, programs, and operating plans). This meant that staff planners replaced senior managers, de facto, as the key players in the process. Today, many companies get little value from their annual strategic-planning process. To meet the new challenges, this process should be redesigned to support real-time strategy making and to encourage ‘creative accidents.’
Cons: Neither supports real-time strategy making nor encourages creative accidents
- Positioning School
“Nothing but the facts, madam” mantra
This prescriptive school was the dominant view of strategy formulation in the 1980’s. It was given impetus especially by Harvard professor Michael Porter in 1980, following earlier work on strategic positioning in academe and in consulting, all preceded by a long literature on military strategy, dating back to 500 BC and that of Sun Tzu, author ofThe Art of War. In this view, strategy reduces to generic positions selected through formalized analysis of industry situations. Hence, planners became analysts. This proved especially lucrative to consultants and academics alike, who could sink their teeth into hard data and so promote their “scientific truths” to companies and journals alike. This literature grew in all directions to include strategic groups – value chain, game theories, and other ideas – but always with this analytical bent.
Cons: Strategy is reduced to generic positions selected through formalized analysis of industry situations
- Entrepreneurial School
“Take us to your leader” mantra
Much like the design school, the entrepreneurial school centered the process on the chief executive, but unlike the design school, and in contrast to the planning school, it rooted that process in the mysteries of intuition. That shifted the strategies from precise designs, plans, or positions to vague visions, or perspectives, typically to be seen through metaphor. The idea was applied to particular contexts: start-ups, niche players, privately owned companies and “turnaround” situations, although the case was certainly put forward that every organization needs the discernment of a visionary leader
Cons: Vague vision; strategies are designed mainly based on the leader’s intuition.
- Cognitive School
“I’ll see it when I believe it” mantra
On the academic front, there was interest in the origin of strategies. If strategies developed in people’s mind as frames, models, or maps, what could be understood about those mental processes? Particularly in the 1980’s, and continuing today, research has grown steadily on cognitive biases in strategy making and on cognition as information processing. Meanwhile, another, newer branch of this school adopted a more subjective interpretative or constructivist view of the strategy process: that cognition is used to construct strategies as creative interpretations, rather than simply to map reality in some more or less objective way.
Cons: Too subjective approach to strategy formulation – it is just in the head of the strategist.
- The Learning School
“If at first, you don’t succeed, try, try again” mantra
Of all the described schools, the learning school became a veritable wave and challenged the omnipresent prescriptive schools. Dating back to early work on “incrementalism”, as well as conceptions like “venturing“, “emerging strategy”, (or the growing out of individual decisions rather than being immaculately conceived) and “retrospective sense-making”, (that we act in order to think as much as we think in order to act), a model of strategy making as a learning developed that different from the earlier schools. In this view, strategies are emergent, strategists can be found throughout the organization, and so-called formulation and implementation intertwine.
Cons: Strategy development process is rather chaotic, unpredictable and process- rather than result-oriented
- The Power School
“Look out for number one” mantra
This comparatively small, but quite different school has focused on strategy making rooted in power, in two senses. Micro power sees the development of strategies within the organization as essentially political, a process involving bargaining, persuasion, and confrontation among inside actors. Macro power takes the organization as an entity that uses its power over others and among its partners in alliances, joint ventures, and other network relationships to negotiate “collective” strategies in its interests.
Cons: Focuses mainly on the clash of self-interests of stakeholders during the process of strategy development
- The Cultural School
“An apple never falls far from the tree” mantra
As opposite to the power school that focuses on self-interest and fragmentation, the cultural school focuses on common interest and integration. Strategy formation is viewed as a social process rooted in culture. The theory concentrates on the influence of culture in discouraging significant strategic change. Culture became a big issue in the United States and Europe after the impact of Japanese management (see Kaizen and Competitive Advantage: US versus Japan) was fully realized in the 1980’s and it became clear that strategic advantage can be the product of unique and difficult-to-imitate cultural factors.
Cons: Not well suited for radical change projects.
- The Environmental School
“It all depended ” mantra
Perhaps not strictly strategic management, if one takes that term as concerned with how organizations use their degrees of freedom to create strategy, the environmental school nevertheless deserves attention for the light it throws on the demands of the environment. Among its most noticeable theories is the “contingency theory”, that considers what responses are expected of organizations that face particular environmental conditions, and “population ecology”, writings that claim severe limits to strategic choice.
Cons: Severe limits to strategic choice.
- The Configuration School
“Everything there is a season” mantra
This school enjoys the most extensive and integrative literature and practice at present. One side of this school, more academic and descriptive, sees organization as configuration – coherent clusters of characteristics and behaviors – and so serves as one way to integrate the claims of the other schools: each configuration, in effect, in its own place, planning for example, in machine-type organizations under conditions of relative stability, entrepreneurship under more dynamic configurations of start-up and turnaround. But if organizations can be described by such states, then change must be described as rather dramatic transformation – the leap from one state to another. And so, a literature and practice of transformation – more prescriptive and practitioner-oriented (and consultant promoted) – developed as the other side of the coin. These two very different literatures and practices nevertheless complement one another and so belong to the same school.
Cons: Polarized between two approaches favoring either radical or incremental change
The way forward:
As shared severally by the Effectiveness lab, no one strategy model can on its own be used to design a sustainable strategy
For example, Micheal Porter’s positioning theory has an almost sole focus on the company’s external happenings and how they influence the value chain, but it doesn’t pay sufficient attention to the internals in the organization. Effective strategy design is attained when Porter’s positioning theory is combined with another method that pays enough attention to the internals in the organization
Indeed the emerging view of strategy making is a combination of internal and external drivers – the Resource Based View (RBV). For example, instead of using the external focused, input/output model to design strategy, the RBV recommends that the organization’s unique resources and capabilities provide the basis for a sustainable strategy – it’s all about exploiting the organization’s core competencies relative to the available opportunities in the external environment
The above discourse takes us back to the Effectiveness Lab’s intertwined bionic-entity model
See you next week when we discuss hands-on strategy making – a, from-theory-to-practice session!
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