determinants of saturation in a strategic issue management system: a longitudinal analysis 26th...

DETERMINANTS OF SATURATION IN A STRATEGIC ISSUE MANAGEMENT SYSTEM: A LONGITUDINAL ANALYSIS

26th Annual International Conference of Strategic Management SocietyNovember 1, 2006

Vienna, Austria

Peter Kunnas, Nokia CorporationMarkus Kajanto, Nokia Corporation

Matti Keijola, Helsinki University of TechnologyTomi Laamanen, Helsinki University of TechnologyMarkku Maula, Helsinki University of Technology

Introduction and motivation

Methodology and approach

Results of empirical analysis

Discussion and conclusions

DETERMINANTS OF SATURATION IN A STRATEGIC ISSUE MANAGEMENT SYSTEM: A LONGITUDINAL ANALYSISDETERMINANTS OF SATURATION IN A STRATEGIC ISSUE

MANAGEMENT SYSTEM: A LONGITUDINAL ANALYSIS

FAILING TO ANTICIPATE AND RESPOND TO EMERGING STRATEGIC ISSUES CAN BE DETRIMENTAL TO A COMPANY…

[Compaq] won its spurs (---) as an IBM-killer, but then its sales

fell after it failed to react quickly to a (---) changing market

AT&T (---) understood that the convergence of telecommunications and computing would transform (---) much of business life. (---) But the

company failed to see (---) that the internet was the specific vehicle through

which the vision would be realised

Pope et al., 1993 Financial Times, 1999

…WHEREAS A CORRECT INTERPRETATION AND RESPONSE CAN PROVIDE MARKED RESULTS

What we thought would be a complete threat, a destroyer of value, resulted in being a value creator. You should never come

to conclusions about competition, partnerships, [or] alliances before really looking into them. When this issue came up we

thought we knew what it was all about. As people monitored its progress and researched additional issues surrounding it, we began to see other aspects that led to our implementation

strategy and in the long-term served us well.

VP, Regulatory Issues, BellSouth Corporationin CSB, 1999

THE PRESENT UNDERSTANDING OF THE TOPIC IS LIMITED

• Research on issue management has addressed multiple viewpoints

• Organisational decision-making and information processing (e.g. Cohen et al., 1972; Cyert et al., 1963/1992; March et al., 1958/1993; Eisenhardt, 1989, 1990; Eisenhardt et al., 1992; Miller et al., 1999; Nutt, 1993; Rajagopalan et al., 1993; Schweiger et al., 1986)

• Strategic issue management and interpretation (e.g., Ansoff, 1980; Bansal, 2003; Barr et al., 2004; Dutton, 1986, 1993; Dutton et al., 1993; Dutton et al., 2002; Dutton et al., 2001; Dutton et al., 1987a; Dutton et al., 1983; Dutton et al., 1987b; Dutton et al., 1987c; Dutton et al., 1989; Dutton et al., 1988; Schneider et al., 1991; Thomas et al., 1990)

• Organisational attention allocation (Ocasio, 1997)

• However, there has been little research to understand how limited cognitive resources of top management in particular are allocated to the portfolio of issues competing for management’s time.

• This paper contributes to this emerging research area by

• Examining determinants affecting the issue processing capacity of a firm

• Extending the existing research from individual issues to a portfolio context

• Providing a conceptual framework to facilitate the management of issues

• Much of the activity focuses around a few key individuals

• Both members and visiting (internal) experts have played a significant role

THE WHOLE PROCESS RELIES EXTENSIVELY ON THE WIDE-RANGING PARTICIPATION OF THE ORGANISATION

METHODOLOGY AND APPROACH

• We examined all the corporate level strategic issues of a world-leading technology company over a three-year period

• Our analysis covered• How the issue was interpreted and how this interpretation changed over time

• Which persons participated in the process

• How the issue progressed in the decision-making and attention allocation system of the company

• In addition, the analyses have produced a coding of each issue with• A number of descriptive statistics

• An analysis of the networked decision-making structures

• A quantitative analysis of the results of individual decisions made

• To complement our analyses, we interviewed representatives of other firms’ as benchmarks and studied the secondary material that is publicly available on the strategic planning practices of Hewlett-Packard and IBM

0

1

2

3

4

5

6

7

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29

Number of concurrently active issues

Number of issues

Moving average

Period

ISSUE MANAGEMENT PROCESS APPEARS TO RUN WITH A STEADY NUMBER OF ISSUES OVER TIME

• Dealing with an issue may be affected by other issues being processed.

• Introducing new issues may lead to saturation

• Sensitivity to new issues can be reduced

• Capacity to process issues can be impaired

DurationMonths

Average resourcingFull-time equivalents

Value-at-stake

0

2

4

6

8

10

12

14

16

0 10 20 30 40

ISSUES EXHIBITED FUNDAMENTAL DIFFERENCES IN THEIR RESOURCE REQUIREMENTS

• “Messy” issues with high value-at-stake needing a long duration and high resourcing form the base load and may cause saturation

• “Crash efforts” with short duration and high resourcing emerge sporadically

• “Quick-and-easy” issue can be addressed depending on overall workload

0

10

20

30

40

50

60

70

80

90

100

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29

Share of resourcing for top three issuesPercent

Share of Top 3

Moving average

WHILE MULTIPLE ISSUES WERE ACTIVE CONCURRENTLY, ATTENTION FOCUSES ON FEW MOST SIGNIFICANT ISSUES

Period

• Top3 issues commanded c. 60% of resourcing on average

• In most periods, Top 3 issues represented the majority share of resourcing

More messy issues (requiring more resources) are likely to lead to more discussions in the issue processing meetings

MOST HEAVILY RESOURCED ISSUES ALSO GENERATED MOST DISCUSSION IN MEETINGS

Word count

Total resourcingFull-time equivalents

R2 = 0,7953

ISSUE CHARACTERISTICS INFLUENCE THE CHOICE OF THE APPROPRIATE PROCESS …

Uncertainty of the response

Low

HighU

nce

rta

inty

of

the

issu

e

Low High

InternalSense-making

StrategicAgenda

CalculatedResponse

ExternalSense-making

…THEREBY MAXIMISING THE EFFECTIVENSS AND MITIGATING THE RISK OF SATURATION OF THE ISSUE MANAGEMENT PROCESS

Basic assumption

Main emphasis

Issue analysis

Issue identification

Implementation plan

Speed of action

Potential challenges

ExternalSensemaking“Deep Dives”

Fast, in-depthanalysis is the key

Analysis

Detailed analysispractices and tools

Emergent,one-time

Part of the analysisrecommendations

Relatively fast afterthe analysis results

Analysis cannotalways imply optimalimplementation plan

InternalSensemaking”War Room”

Efficiency of teamwork is the key

Implementation

Utilizing team’sanalysis intelligence

Emergent,one-time

Emerges as a resultof the group work

Determined at theinitiation of work

Team self-sufficiency,team member choice,

limited time frame

Strategic Agenda”Portfolio of

Strategic Issues”

Observing issuesover time is the key

Analysis andimplementation

Varying profilesof resource use

Emergent andcumulative

Sensemaking resultemerging over time

Non-determinable,options preservation

Saturation of the process and rejectionof new issues, speed

CalculatedStrategicResponse

Timely identificationof issues is the key

Response

Immediateimplications

Emergent,one-time

Clear-cutimplementation

Immediatedecision

Underestimationof uncertainties,

too fast decisions

DISCUSSION AND CONCLUSIONS

• This paper represents one of the first longitudinal, in-depth analyses of strategic issue management processes based on unique data.

• The paper puts forward a novel concept: the saturation of a strategic issue processing system.

• The primary determinants affecting the issue processing capacity of the company include the networked operating mode of the issue processing staff and the resource consumption intensity of the strategic issues.

• Based on these determinants, we propose a conceptual framework of portfolio of approaches for addressing strategic issues.

• The nature of work involved in solving the issue is an important determinant of the resource consumption. Future research should examine the linking of issues and initiatives in an analysis of the saturation of a firm’s management capacity and how the transition from strategic issues to strategic initiatives takes place.

determinants of saturation in a strategic issue management system: a longitudinal analysis 26th...

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