Historically An Organisations Strategy Business Essay

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This paper will examine the historic methods used to create strategic plans. In doing so we will take a linear approach, starting with the roots of strategic management popularised by the American business schools of the 1960's (Segal-Horn 2004), through to the emerging views currently espoused by the likes of Ralph Stacy, Ratsogi and practitioners such as Ricardo Semler. In doing so, this paper will consider if the traditional methods, with their reliance on vertical integration, based on structure and step by step method still has relevance or if the emergent approach, with its emphasis on "trial, experimentation, and discussion" (Carr et al 2004 p80), -a more horizontal or even bottom up integration- is a more appropriate strategy to develop "in today's highly dynamic business milieu characterised by saturated markets and over capacity in almost every industry" Rastogi (2002).

Strategic Management has historically been considered a process of very deliberate planning, as Carr et al 2004(p80) contends "the rational planning school defines an objective in advance, describes where-we-are-now and uses a prescriptive approach in which the three core areas - strategic analysis, strategic development and strategy implementation are linked together sequentially" Mintzberg and Lampel, (p22, 1999) along with the Planning School summarised by Carr identifies a further two process in the Prescriptive school of thought. The Design School in which "senior management formulates clear, simple and unique strategies in a deliberate process of conscious thought."(p22). They see this as the dominant view in the early formation of strategy thinking and with the simplicity and rational of the description Mintzberg can still see its influence in the 1990's albeit in combination with other views. The Positioning School, is influenced by the work of Michael Porter, the Boston Consulting Group and others and is heavily reliant on the collection of data, which is then input into models, for example Bowmans strategy clock, Porters Value Chain and 5 forces, SWOT and PESTEL analyses. Johnson et al (2006). These "tools of practical strategic planning" (Whittington (2004) p64) have been influential in marginalising the need for planners and creating a Market place for analysts, Mintzberg does add perhaps a little wearily that this School has "proved especially lucrative to consultants and academics alike."

Segal-Horn who examines the early 60s literature, identifies this approach to strategy under the umbrella title of the Classical School, "Companies and organisations were seen as efficient and rational resource-allocating mechanisms," (p135), this assumption means that managers must look outside the company, and study the wider environment to achieve long term "competitive advantage" over competitors, of similar size, efficiency and resources. These views have their roots in the relative stability of the 1960's which allowed for a planned purpose concerned with long term development As Andrews'(1971) argues a company must have "a clearly defined set of purposes or goals which keeps it moving in a deliberately chosen direction and prevents it drifting in undesired directions." (P23)

This research and practice is heavily reliant on examination and analysis of data, either from primary sources or secondary sources from the likes of Harvard who have built huge data bases and sort to establish strategy as a 'positive science'. This data and analysis can then be used to create "strategic recipes" Volberda 2004 (p35) - prescriptive plans, handed down by Managers and to be slavishly followed step by step to the assumed successful conclusion. This perpetuates the view that: "strategy is considered as a deliberate planning process (formal) initiated by top management (top-down), based on an elaborate industry analysis (rational) and aimed at designing a cohesive grand strategy for the corporation (consistency)" Volberda 2004 (p36).

There is however concern that this structured, formal approach to strategy is too restrictive, especially within modern economies, which since the oil crises of the 1970's have seen "economic and geopolitical instability" (Segal Horn 2004 p136), globalisation of trade and the speed of change hasten by technological progress. It is generally accepted that "the business environment has changed over the past decades." "In the past …firms could still achieve high profitability because markets were regulated, production resources were scarce, distribution channels were controlled, or poorly performing firms were acquired and rationalised". The markets have as Lindgreen and Wynstra(2005) noted changed in physical distance and time, economies have been liberalised, industries deregulated, markets globalised, and new information technology introduced. Segal-Horn accepts that during the 70's the emphasis "on long range planning using mainly quantitative techniques" was becoming less appropriate. If firms are using the same data and techniques, they will come to the same conclusions and Ghemawat(2002, p50) sees this as leading to "stalemates as more than one competitor pursues the same generic success factor." Gray (1986) has different concerns in that strategic planning is being considered "a separate discipline function," imposed by leaders of organisations, on managers, with little regard to the real problems that those managers face. The upshot of this is that due to this lack of integration and ownership a "number of impressive plans fall apart in implementation" (p89). Glor's (2007, p33) research indicates that the planned approach applied to the modern economy is creating an environment where 65-70% of companies fail to make their intended organisational change. Likewise Mintzberg and Lampel warn that the clarity of ideas, easy to transmit can "foster sterility in thinking and application" (p29). Gray as a result is concerned that strategic planning is on the wane. His approach, however still argues for a top down approach with concentration on the training of line managers and the involvement of all business units in the strategy process. He does make the observations that; individual business units must be decentralised so that in each "strategic environment" they "can act and be treated with appropriate differentiation" (p92). Furthermore he recognises that "good strategic planning becomes a mindset, a style, and a set of techniques for running a business-not something more to do but a better way of doing what always had to be done." It is being accepted that it is not enough to just consider the external factors, and seek optimum market position and market share but in order to maximise potential a company must "identify their organisation's corporate competencies" as well as resources in order "to evaluate their strategic opportunities" (Andrews1971).

There is now a body of opinion which is urging a "more flexible accommodation with practice" (P64) Whittington (2004). He considers the prescriptive methods of the Classical school as too restrictive and is sympathetic to a move away from a reliance on the collection of quantitative data, which is then input into the models, a handle turned and a inflexible "Grand Strategy" produced, and is more sympathetic to an approach where qualitative methods gain some credence. As a consequence managers are realizing that when formulating a corporate strategy, it is not enough to simply identify the competitive forces, opportunities, and threats of the industry as suggested by Porter (1980). In order to maximise potential a company must "identify their organisation's corporate competencies" as well as resources in order "to evaluate their strategic opportunities" (Andrews1971). Mintzberg and Lampel are keen to point out that "wholly different approaches to strategy" have arisen, broadly naming these processes as the Descriptive schools, they are less reliant on "precise plans, or positions" and rely on "vague visions or broad perspectives." In all Mintzberg and Lampel identify seven processes (Entrepreneurial, Cognitive, Learning, Power, Cultural, Environmental and Configuration) which, as they rely on strategy as emergent, go some way to address Pascale's (1999) concerns, that in the current environment the traditional strategic approach is leaving "many exhausted by the pace of change" as strategy upon strategy results in "harried attempts to introduce new initiatives that fall short of expectations."

Segal-Horn sees this shift in thinking emerging in the 1990's, as "interest shifted from the external competitive environment to the internal analysis of the firm as the basis for building strategies and finding sources of competitive advantage"-the "Resource based view." This view considers why companies of similar size and physical resources might perform differently and considers the human resource as a way of creating "distinctive competitiveness" A company's growth is seen as dependant on managers developing "bundles of resources" to achieve "strategic objectives." The Resource based view develops the idea that the prescriptive approach to strategy has led to a concentration on the physical resources of a company which results in a lack of ambition based around the limitations of those assets. In the resource based view "companies focus on leveraging resources, that is using what they have in new and innovative ways to reach seemingly unattainable goals." (Stacy 2007 p67). This is not an unstructured organic view however, as these strategists still set clear goals, but these targets are intended to create a "a challenging, shared vision of a future leadership position for the company"(p67); what Stacy calls strategic intent.

This has led some business thinkers to the view that the management of a firm's unused latent knowledge is the way of addressing the needs of the market and creating sustainable advantage, Rastogi states companies that practice knowledge management "are able to create value even in the face of a volatile, highly competitive, and uncertain environment of business; while others stagnate or decline"

Rastogi's views are part of this emerging body of work which examines the way some companies are being organised to take advantage of the intellectual capital that exists within an organisation, finding methods to unlock the potential of individuals to benefit the company. Quinn (1980) argues that "'non-rational' incrementalism is logical because of the inherently iterative nature of strategic decisions and the resultant need to make and remake them" This leads to Volberda to a view that a "post modern strategy perspective" (p37) is needed where the participants can make sense of their environment and adapt to it. He argues that this is what allows "small resource limited firms" to outperform those with "plentiful resources and many strategic options". This new thinking has led to the view that "dominant, linear approaches to organizational change may be less functional than complexity analysis." Glor (2007, p33).

Complexity theory sees the traditional business models as too narrow and would argue that "an effective business like an effective society is based upon the foundations of an intangible web of resources built around networks of all kinds-information trust and cooperation" (Starkey and Tempest 2004). Pascale(1999) also confirms the need for companies to innovate to move their business plans forward, he quotes HP computers: "The biggest single threat to our business today is staying with a previously successful business model one year too long." This type of research has led commentators like John Vogelsang(2007) to the view that CAS with its emphasis on self organisation and resilience allows companies to move away from following a rigid rationalised view of the future and prepares the organisation "to be mindful of the constant changes and possibilities happening in the present" (Stacy,(2007) p152). Stacy further advocates that managers need to challenge the "implicit, taken for granted assumptions made in the ways of thinking" expressed in strategic management text books, as "in a totally unpredictable environment, under strict time pressures, it would not be logical or sensible to try and make decisions in a pain staking manner" (p152) Rastogi(2002) agrees with this philosophy noting that "all competitive advantages have become temporary" and as a result companies have to look to organise themselves differently to the traditional inflexible, linear strategic models.

This view is resisted by many executives at the top of organisations as strategies are conventionally designed to set out a clear defined path, with as much certainty as possible. They certainly "prefer not to have organisational change that has a life of its own". (Glor 2007, p33) If this is happening then the need to plan futures and arrive at correct decisions creates pressure on that individual to be not an analyst or planner but to be an innovator and generator of new ideas. This is an uncomfortable view point for the traditional strategist, with their controlled way of functioning and who consider "that it is the potential and responsibility of managers and executives to initiate, introduce, implement and manage change in organisations," as Glor(2007, p35) argues this approach will take away the ability of the organisation to adapt. Commentators such as Rastogi see adaptability as essential if companies are to succeed, as he asserts; "the only thing that gives an organisation its competitive edge -the only thing that is sustainable-is what it knows, how it uses what it knows, and how fast can it know something new. A view endorsed by Ricardo Semler who took his father's very traditional engineering company and allowed it to turn into a multi skilled diverse organisation. He gave his employees freedom to think, taking the role of a shepherd and guide and in doing so allowed his company to flourish and diversify in new and unexpected directions. This of course brings risk but Semler would certainly agree that this is a better than having a cautious plan as "strategies designed to reduce or eliminate uncertainty are likely to be ineffective at best and very possibly a risk to organizational survival" (Carr et al 2004 p81).

Prof Mitleton-Kelly(2003) characterises this complexity approach to management as one of fostering and creating enabling conditions, going on to suggest that "excessive control and intervention can be counter productive." WL Gore (2007) believes they are successful because they create a non-hierarchical environment, involving all levels of the organisation in the process of innovation. They believe this allows "creative minds to flourish." March(1991) "identified both short term exploitation and longer term exploration as essential." Theorists contend that CAS does not "differentiate between the long term and the short term - it simply organises appropriately."

It would be straight forward to see the change of approach to strategy as a swing from the structured view of the classical practitioner, to the those who see strategy as a "messy disorderly process" (Volberda 2004, p36"), however the likes of Whittington(2004) urge that we take a mixed view as "Modernisms distain for the applied is no longer defensible." (p63). He considers that the new thinking has become too academic based and there is a need to re-engage with the practical, and has similar concerns as Mintzberg and Lampel that without control these new approaches "can end up in tangled confusion, generating many contingencies and multiple perspectives that stymie application." Interestingly Semco's chaotic freedom is underpinned by three solid tenets. Each new venture must have a high level of difficulty, must operate at the premium end of the market and there must be a unique niche. Volberda also recognises this and considers that the next development is for synthesis of strategy, as "more differentiation is probably counter productive to the field's progress", by choosing from a range of disciplines within the strategy field, the organisation can choose the method that best suits their needs at a specific time. He has developed his thinking into three schools, the boundary school, which looks to set the parameters, and then manage the "fuzzy" dividing line between the firm and its environment, this seems best suited to companies operating in fairly stable environments. The Dynamic capability school on the other hand considers fast moving environments which are constantly changing and urges for an approach similar to that of Rastogi's learning organisation where the internal resources of a firm are to be used and developed in order to create "a reservoir of developed capabilities and acquired resources" which will allow the company to "exploit a distinctive competence in different end markets." Finally the configuration school, seeks to understand the process of organisational change, drawing on the classical school as well as biology, in the same way that that complex adaptive theory does he argues for continuity, "in direction or evolution in line with goals, structures programs and expectations".(p40).

In conclusion, "Overall in development terms there has been a gradual evolution in strategic management" away from a rational planning view towards an emergent, incremental, process view of strategy" Segal-Horn (p140). The recurring theme has however been an attempt by both theorists and practitioners to wrestle with the problems that the changing business environment creates and as such each new strategy is an attempt to address the new problems that creates and to reach the zenith of sustainable competitiveness that whatever a company's strategic plan, perhaps the most important element is that the whole organisation must be committed to it;

"What matters is whether their mindsets, their plans, their practices, and their overall controls are coordinated and fit together harmoniously. In the most effective companies I have observed, strategic planning is no longer an added managerial duty. It is a way of thinking about a business and how to run it" (Gray 1986 p97)