Week 5 strategic development

Outcomes covered in this sessionFollowing this session students should be able to understand: • What is meant by intended & emergent strategy development • Logical incremenatlism • How

3BM020 Organisational Strategy and

Decision Making

Session 5Glyn Littlewood

Strategic development Understanding strategy developments

Outcomes covered in this session

Following this session students should be

able to understand:

• What is meant by intended & emergent

strategy development

• Logical incremenatlism

• How different processes of strategy

development may be found in multiple

forms & in different contexts

• Strategic drift

Strategy development processes

Intended strategy: key concept

Deliberately formulated or planned by managers

May be the result of:

•strategic leadership

•strategic planning

•external imposition of strategy

Strategic planning

 Structured means of analysis and

thinking about complex strategic

The role strategic planning

Strategic planning may play several roles

within an organisation:

• Formulating strategy : a means by which managers can understand strategic issues.

• Learning – a means of questioning and

challenging the taken-for-granted.

• Co-ordinating business-level strategies within an overall corporate strategy.

• Communicating intended strategy and

providing agreed objectives or strategic

milestones.

Strategic planning systems

• Facilitates conversion of strategy into organisational action:

–Communication of intended

strategy from the centre

–Agreed objectives or strategic

milestones to measure progress

–Coordination of resources to

implement strategy

Benefits of strategic planning

There are additional psychological

benefits:

 can provide opportunities for

involvement

 provides security to managers

‘logical’.

Problems with strategic planning

Misunderstanding the purpose:

 Danger that strategy thought of as the plan

 Confusion between budgetary and strategic planning processes

 Obsession with search for a right

strategy

 Documentation gives false

appearance of proactive approach

Problems with strategic planning systems

• Problems in design:

– Line managers may concede responsibility to

consultants

• no power to make things happen

• becomes an intellectual exercise

– Cumbersome process may result in not

understanding the whole

– Can be over-detailed – information overload –

paralysis by analysis

– Formalised and rigid systems can stifle ideas –

dampening of innovation

• Failure to gain ownership

– Lack of broad involvement

– Removed from organisational reality

Strategy workshops and project groups

• To reconsider or generate the intended

strategy of the organisation

• To challenge the assumptions of the

current strategy

• To plan strategy implementation

• To examine blockages to strategic change

• To undertake strategic analysis

• To monitor the progress of strategy

• To generate new ideas and solutions

Externally imposed strategy

Powerful external stakeholders

 Government regulation/deregulation

 Privatisation (e.g The Royal Mail)

 Imposition of strategy from parent to operating

unit/SBU

 Direct interventionist: e.g special measures in for schools deemed to be under performing

 MNC activity in some countries may require

governmental approval (e.g Joint Ventures or

alliance requirements)

 Venture capitalists – may impose strategy on the businesses they acquire

The potential benefits & dangers of strategic

planning: summary

Emergent strategy: key concept

An emergent strategy comes about through

a series of decisions - a pattern which

becomes clear over time:

……not a ‘grand plan’, but a developing

pattern in a stream of decisions.

A continuum: emergent strategy

processes

Logical incrementalism

• The first explanation of how strategies can emerge

• The link between intended/prescriptive

strategy and emergent strategy -

management may cultivate a bottom-up,

experimental basis for strategies to emerge

• Considered to be the development of

strategy by experimentation and learning

• Managers have a generalised rather than specific view of future direction

Co-ordinating emergent strategies – drawing

together an emerging pattern of strategy from

subsystems.

Logical incrementalism

• Despite being emergent, logical

incrementalism can be conscious,

purposeful, and proactive

• Improve available information and engage psychological engagement with strategy

The learning organisation

• Capable of continual regeneration from the variety of knowledge,

experience and skills of individuals within a culture which encourages mutual questioning and challenge around a shared purpose or vision

• Formal structures stifle organisational knowledge and creativity –

learning organisation enhances creativity to inform strategy

• Collective knowledge of individuals exceeds organisational

knowledge

The Learning Organisation

• Need to unlock individual knowledge and encourage knowledge sharing

– Importance of social networks

• Learning organisation is inherently

Strategy through political processes

• Political view of strategy development: strategies develop and result 

from bargaining and negotiation among powerful stakeholders (internal  and external)

• Negative influence

– Obstructs analysis and rational thinking – Emphasis or de-emphasis of data can be a source of power – Powerful individuals may influence identification of key issues and strategies selected

– Results in emergent or incremental patterns of strategy development

• Positive influence

– Political conflict and tensions may produce new ideas – Champions will support new ideas

Strategy informed by prior decisions

•Emergent strategy as managed

continuity

•Path-dependent strategy

development (be aware of core

rigidities and strategic drift)

•Organisational culture and strategy

development

Strategies emerge through formalised routines

and systems of the organisation

The Bower (1972) –Burgelman (1983) explanation:

– strategy develops as the outcome of resource

allocation routines in organisations

Day to day decision making about resource

allocation across businesses

Managers’ proposals competing for funds

Decisions may be made at a lower level than

conventionally thought to be ‘strategic’

Cumulative effects of such decisions guide the

strategy

The product of organisational systems

Multiple Processes of Strategy Development

• No one right way to develop strategy

• Processes of strategy development may differ

over time and in different contexts

• Perceptions of how strategy develops will differ

– Senior executives see it as intended, rational,

analytical and planned – Middle managers see it as the result of cultural and

political processes – Managers in government organisations see it as

imposed

• No one process describes strategy development

– Multiple processes at work

Managing intended and emergent

strategy

There are four important implications:

Awareness – is the intended strategy actually being

realised?

The role of strategic planning – needs to be clear

(and it may be more about co-ordinating emergent strategies).

Managing emergent strategy – even established

routines and cultural norms can be managed.

The challenge of strategic drift – recognising that

strategy can come adrift and making the required changes in culture and the paradigm.

Intended vs Emergent Strategy

• Intended strategy development

– Strategic planning systems

– Strategy workshops and project groups

– The role of strategy consultants

– Externally imposed strategy

• Emergent strategy development

– Logical incrementalism

– Resource allocation routines

– Cultural processes

– Organisational politics

Strategy development and

 The nature of the environment differs – it may

be stable or dynamic; simple or complex.

 Life cycle effects – development processes will evolve and change over the life cycle.

Challenges for strategy development

Strategic drift

HMV: January 2013 – week 2

In the news: HMV is profitable again

Challenges for strategy development

• Although infrequent, there may be

transformational change in which there is

a fundamental change in strategic

direction

• This pattern has become known as

punctuated equilibrium: the tendency to

develop incrementally with periodic

transformational change

Key points (1)

• Intended versus emergent strategy

• Intended strategy derives from:

– Planning systems carried out by top management – Strategy workshops/project groups

– Strategy consultants

– Imposition by external stakeholders

• Strategies may also emerge as a result of:

– Logical incrementalism

– Resource allocation routines

– Organisational culture

– Political activity

Key points (2)

• Challenge of strategic drift

– Need to challenge taken for granted

assumptions

• Multiple processes of strategy development required

– To create a learning organisation

– To cope with dynamic and complex

environments

Summary: intended strategy

• It is important to distinguish between intended strategy – the desired strategic direction deliberately planned by managers – and

emergent strategy which may develop in a less deliberate way from the behaviours and activities inherent within an organisation.

• Most often the process of strategy development is described in

terms of intended strategy as a result of planning systems carried out objectively and dispassionately There are benefits and

disbenefits of formal strategic planning systems However, there is evidence to show that such formal systems are not an adequate

explanation of strategy development as it occurs in practice.

• Intended strategy may also come about on the basis of central

command , the vision of strategic leaders or the imposition of

strategies by external stakeholders.

Summary: emergent strategy

• Strategies may emerge from within organisations This may be explained in terms of:

 How organisations may proactively try to cope through

processes of logical incrementalism and organisational

organisational culture that favour certain strategies.

 Strategies developing because organisational systems

favour some strategy projects over others.

Sources & further reading

• Grant, R Strategic Planning in a Turbulent

Environment, Strategic management journal, vol

24, p 499, 2003

• Johnson, G., Scholes, K., & Whittington, R

Prentice Hall

• Lynch, R Corporate Strategy 4 th Edition (2006)

Prentice Hall

• MIntzberg, H., Lampel, J., Quinn, J, B, & Ghoshal,

S The Strategy Process 4 th International Edition (2003)

Strategy Development in Environmental

Contexts

Managing Strategy Development

Processes

• Organisation needs different processes for

different purposes

• What is the right emphasis at a given time?

• What is the role of top management?

• What are the strategy development roles at

different organisational levels?

• Do the different managerial levels acknowledge and value different roles?

Strategy Development Routes

Strategy Development Routes

• Route 1 - planned in terms of resource

allocation, control systems, organisational

structure and so on – typically associated with the development of intended strategy

• Route 2 - much of what is intended follows route

2 and is unrealised; it does not come about in

practice, or only partially so, plans are

unworkable, the environment changes after the plan has been drawn up, people in the

organisation or influential stakeholders do not go along with the plan

Strategy Development Routes

• Route 3 - emergent strategy/intended strategy whilst existing in the form of a plan of some sort,

is not the realised strategy actually being

followed by an organisation in practice If

strategy is defined as the long-term direction of the organisation, which develops over time, then

it can be emergent rather than planned up front

• Route 4 - if strategic plans exist they might not perform the role of formulating strategies so

much as the useful role of monitoring the

progress or efficiency of a strategy which

emerges