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Views of Strategy Development

• Strategy is about the long term direction of an organization.

• It is typically thought of in terms of major decisions about the future.

• However it is a mistake to conceive of organizational strategy as necessarily developing through one-off major changes.

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→This understanding brings us to focus on different views of strategy development

→As a strategic thinker how do we perceive this development?

• The strategic development of organizations is better described and understood in terms of:-– Continuity– momentum

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• Once an organization has adopted a particular strategy, it tends to develop from and within that strategy

− Rather than fundamentally changing direction

− In other words in strategic development drastic change is not desirable

• Historical studies of organizations have shown that there are usually long periods of relative continuity

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– At this point strategy remains unchanged or changed incrementally

• There are also periods of flux in which strategies change but in not very clear direction.

• Transformational change in which there is fundamental change in strategic direction does take place but is infrequent.

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Patterns of Strategy Development

Continuity Incremental Flux Transformational

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This pattern of behaviour in strategy development in organizations has become known as punctuated equilibrium•It is the tendency of strategies to develop incrementally with periodic transformationalChange–A specific strategic move perhaps a product

launch– Significant investment decision– Strategic alliance– Acquisition

Etc…

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Establishes a strategic direction which, itself guides decisions on the next strategic move

–This in itself , helps consolidate the strategic direction, and overtime the overall strategic approach of the organization becomes more established and clear

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Strategic evolution and consolidation

Product Launch

Overseas Expansion

Acquisition

Divestment

Evolving

Strategic

Direction

Strategies evolve and

Inform Strategic

decisions, Which in turn consolidate strategic

direction

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• Gradual change in strategy makes a lot of sense

– No organization could function effectively if it were to undergo major revisions of strategy frequently

– It is unlikely that the environment would change so rapidly that this would be necessary.

– Incremental change might therefore be seen as an adaptive process to a continually changing environment. What is referred to as strategic fit.

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• Environmental change may not always be gradual enough for incremental change to keep pace.

– If such incremental strategic change lags behind environmental change , the organization may get out of line with its environment and, in time, need more fundamental, or transformational, change.

• The transformational change tends to occur at times when performance has declined sufficiently.

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→Strategists should be responsive to the environment than being reactive– They should be innovative– See the best opportunities– Manage the threats– Monitor the rapid changes and align their

organizations to take advantage of the available opportunities

– Strategies should be proactive– Create new markets and transform the

strategic direction

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Intended and realized views• Intended Strategy– It is an expression of desired strategic

direction deliberately formulated or planned by managers

– The implementation is also planned In terms of resource allocation, structure, policy, procedures etc……

– Strategy in this sense is deliberate, systematic planned process of development and implementation

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• Realised strategy is the strategy actually being followed in practice

→Sometimes what is intended is not achieved and ends up in totally a different strategic objective being realized.

• Strategy could also be imposed on an organization

• It could be imposed by an external agency such as government, world bank, IMF, donors (development partners) as has occurred in the deregulation of industries in many countries; or by a parent company on a subsidiary.

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– It could be that environmental conditions severely limit the choices that managers can make or the strategies they can follow.

→For example , the cutting of costs may be forced by recession or conditions in a commodity market– And may mean that there is little opportunity

to follow strategies substantially different from those of other businesses in that market.

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• If strategy is regarded as the long-term direction of the organization which develops over time, then it can also be seen as the outcome of cultural and Political processes.

– The management of organizations depends a great deal on the knowledge and experience of those involved.

– This experience and ways of doing things are built up over the years.

– In organizations, managers typically reconcile different views, based on experience, through negotiation or the exercise of power; and this occurs within established ways of doing things, or routines; that make up the culture of the organization

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• Strategy development routes

Strategy as outcome (of cultural

and political processes)

ImposedStrategy

UnrealizedStrategy

RealisedStrategy

IntendedStrategy

5

2

1

43

Planned Implementation

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Rational Analytical or Planning view• This is a sequence of analytical and

evaluative procedures to formulate and intended strategy and the means of implementing.

→Includes– Setting objectives and goals– Analysis of the environment and the resources of

the organization– So as to match environmental opportunities and

threats– With resource-based strengths and weaknesses

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Includes cont…• The generation of strategic options and

their evaluation.• And the planning of implementation

through resource allocation processes, the structuring of the organization

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Benefits of this view• It can provide a structured means of analysis and

thinking about complex strategic problems requiring managers to question and challenge what they take for granted

• It can be used as a way of involving people in strategy development, therefore helping to create ownership of the strategy.

• Strategic planning may also help to communicate intended strategy

• It can also be used as a means of control by regular reviewing performance and progress against agreed objective or previously agreed strategic direction

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• It can be a useful means of co-ordination, for example by bringing together the various SBU strategies within an overall corporate strategy, or ensuring that resources within a business are coordinated to put strategy into effect

• It can encourage a longer –term view of strategy than might otherwise occur.

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Power behavioral viewor

Command viewThis is a strategy which develops through the

direction of an individual or group, but not necessarily through formal planning.

–At the extreme, strategy could be seen as the product of an autocratic leader who brooks no argument and sees other managers as there to implement his or her decisions

–A common example is where a dominant leader has become personally associated with strategy development of the organization

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– It could also be that the leader turned round the business in times of difficulty and as such personifies the success of the organization.

– Charismatic leaders are also often seen as central to the strategy of their organization

– Their personality or reputation may be seen as a positive force which may be used to influence strategic direction

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The logical incremental view•It is the deliberate development of strategy by learning through doing

•Managers have a view of where they want the organization to be in years to come and try to move towards this position in an evolutionary way.

•They do this by attempting to ensure the success and development of a strong, secure, but flexible core business.

•Building on the experience gained in that business to inform decisions about the development of the business.

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• Since change will be gradual , the possibility of creating and developing a commitment to change throughout the organization is increased.

• It is a process through which the organization keeps itself in line with changes in the environment.

Am

ount

of

chan

ge

Time

Environmental Change

Incremental Strategic Change