From Fit to Stretch in Strategic Thinking - Literature review Example

Running Head: FROM FIT TO STRETCH From Fit to Stretch [The Writer’s Name] [The Name of the Institution] From Fit to Stretch The concepts of 'fit' and stretch' are real theoretical innovations in strategic thinking, and they are not merely strategic fashion. Strategic planning is in hazard of disintegrating into a hollow practice that falls short of more than offering the misapprehension of power in the face of quick transformation. There are numerous causes, but in fraction it is because customary strategic planning searches for a “fit” between ambitions and resources. The management sets pragmatic objectives depending on what it believes it can attain with the assets at hand, and then create strategies and procedures to get them. The upstarts concentrate on “strategy as stretch and leverage”. (Hamel, 1994, 35-45 They set what the western companies think are impracticable targets for a company of competitive volume and funds, then use creativity and innovation to leverage resources into outcomes. “The key to strategic intentions, Hamel proposes, is holding a chasm between ambition and resources.” Furthermore, “Creating stretch between resources and aspirations is the single most important task senior management faces.” (Hamel, 1994, 35-45) Long term achievement comes from constancy of attempt generated by focused, mutual intention all through the organization. In the present scenario of global competition it is assessed that is not limited nowadays just product versus product or so to say company versus company. Rather, it is significantly mindset versus mindset. Determined to appreciate the dynamics of competition has transpired a lot about what changes one company into more triumphant than another. But to discover the origin of competitiveness--to be aware of why some companies generate new shapes of competitive advantage while the rest just watch and follow--strategic mind-sets must not be ignored. In this context, for many managers, "being strategic" signifies chasing occasions that comprise the company's resources. This tendency is not mistaken, Gary Hamel and C.K. Prahalad argue, but it hinders a notion in which "stretch" help fit and being strategic means evolving a chasm between aspiration and resources. (Prahalad, 1990, 79-91) British Airways, Toyota, Sony, CNN and others all displaced competitors enjoying wider ranged reputations and having deeper pockets. In all cases, the conqueror had superior aim than its well-endowed competitors. Winners also discover less resource-concentrated traditions of attaining their striving goals. This is the phase where leverage harmonies the strategic distribution of resources. In this scenario, managers at contesting companies may find a bigger bang for their buck in these five different and basic ways: by directing resources around certain strategic targets; by accruing resources more professionally; by balancing one kind of resource with another; by preserving resources whenever it is possible; and by improving resources from the market-place as rapidly as possible. As modern competitive combats have confirmed, plentiful resources can't promise sustained industry leadership. It is definite that triumphant goal setters in business set up as well as in life “stretch” for what is significant. They form a "chasm" between their vision and their existing certainty. (Prahalad, 1990, 79-91) Hamel says, “Creating stretch between vision and reality is the single most important task" individuals as well as companies can accept. So, despite of restricted resources, time, and energy, truthfully thriving people place "big hairy audacious goals," and afterwards do what it takes to attain them. (Hamel, 1994, 35-45) Practical objectives then turn into strategic stepping stones to accomplishment. "As strategy' has blossomed," says Gary Hamel, "the competitiveness of Western companies has withered." Hamel, in Competing for the Future, also asserts that “fitting goals to resources is a recipe for mediocrity.” (Hamel, 1994, 35-45) Strategy can be viewed as building on or broadening an organization's resources and competences to create new opportunities or to capitalize on existing ones. Strategy development if extended can leverage an organization's resources and competences to yield competitive advantage and/or new opportunities. For example a new strategy adopted by a bank might try to change the 'standard rules of the game' in its market to suit its own competences e.g., offering online services by banks changed the whole scenario of banking. Or a bank might focus its strategies on businesses that have a strong potential. The emphasis would then be not only ensuring that resources are available to take advantage of a new opportunity in the market but also on identifying existing resources and competences that might be a basis for creating new opportunities. (Scholes, 2000, 245-49) So the Citicorp and Travellers merger should not be viewed in terms of improved competitiveness in the current 'arenas' such as the distribution of banking but also of exploiting strengths to create new offerings or to compete in new arenas . The combined outfit of Citicorp can offer commercial banking, investment banking and insurance products and as well cross sell its products. In practice organizations develop strategies on the bases of both 'fit' and 'stretch.' (Scholes, 2000, 245-49) Peter Schwartz (1991) points out that individuals and even organizations have little control over environmental forces that cause change. Most of us get our leverage for dealing with them from recognizing them and their effects. Yet, our own actions also contribute to the driving forces that keep changing the business environment. These two modes of approaching scenario-driven planning--companywide capability and top management support--are pervasive. They act like a pair of switches that can turn a firm's managers and executives into partners in taking the long view. If both switches are on, then a firm will benefit from scenario-driven planning. The benefit is not more accurate forecasts but "better decisions about the future" (Schwartz, 1991, p. 9 ). A point glossed over in the literature of scenarios is that the upper level environmental scenarios resulting from macroeconomic analysis and the strategic scenarios differ. Environmental scenarios become inputs to the computation of strategic change scenarios. In turn, strategic or competitive scenarios can serve as inputs for devising specific or special-purpose operational scenarios. This theoretical consideration allows us to penetrate the jungle of scenario theories. For example, Chapter 13 of Porter's Competitive Advantage (1985) refers to all three levels of scenario analysis, linking several different approaches with each level. Yet, "Scenario thinking is an art, not a science," writes Peter Schwartz (1991, p. 29 ). He is talking about macro-environmental scenarios, the inputs to scenario-driven planning that allows a whole array of possible futures to be addressed before a firm's managers rehearse their responses to each one of them. Active engagement and support of senior managers are essential for scenario driven planning to succeed. Both in Goodyear Aerospace and in the Royal Dutch Shell Group of Companies, the scenario planning teams had gained support among top corporate policymakers (Millet & Randles, 1986, 64-72; Wack, 1985, 85, 139-50). Despite his guardian angel group, Pierre Wack, the chief planner at Shell UK, left some managers unconvinced that scenarios were necessary and a valuable input to planning. According to Arie de Geus, some of Shell's managers and planners were debating the scenarios' connection with actual decisions: "For most outside observers, this internal debate would have been an enigma" (Arie de Geus 1992, p. 2). Wack himself made the following assessment of scenarios: “Scenarios deal with two worlds, the world of facts and the world of perceptions. They explore for facts but they aim at perceptions inside the heads of decision makers. Their purpose is to gather and to transform information of strategic significance into fresh perceptions. This transformation process is not trivial--more often than not it does not happen. When it works, it is a creative experience that generates a heartfelt "Aha!" from your managers and leads to strategic insight beyond the mind's previous reach” (Wack, 1985, p. 140). Administrative and technical innovations are interdependent in effect, if not by design (Scott, 1987, 139-42). Kimberly (1981, 66-70) points to the synergistic effects of administrative and technical innovations. The adoption of one type of innovation enables the adoption of another. Researchers and practitioners should try to understand exactly how administrative along with technical innovations affect organizational performance (Georgantzas & Shapiro, 1993, 161-83). Scenario-driven planning is a new management technology. Often, it is the technology behind the superior performance of world-class firms. Their managers use scenarios to articulate their mental models and thereby make better decisions. Their performance is a consequence of continuously improving their strategy designs, which scenario-driven planning enhances through a tireless renewal of organizational mind-sets. Computed scenarios can help a management team produce an insight that is much richer than that expected from a single-point forecast. Typically, the context of strategy making is an ill-structured, uncertain one in which decision makers continuously try to broaden their perceptions, to improve their understanding, to articulate, and to improve their mental models of the relationships among variables relevant to the decisions they have to make. Strategic decisions are not and should not be made by simply eliciting information from managers and engineers (Remus & Kottemann, 1987, 233-43). Scenario-driven planning can help a firm integrate its competitive intelligence efforts with strategy design, not as a narrow specialty, but as an admission of limitations and environmental complexity. The analysis of strategic situations requires a comprehensive inquiry into the environmental causalities and equivocalities that result from competitive actions. Scenarios probe the combined consequences of environmental trends, changes in the firm's own strategy, as well as the moves of its current and future competitors. Computed scenarios help managers understand what they do not know, enabling strategy design and implementation through the co alignment of the "right" tactics to improve long-term performance. Through its judicious use of corporate resources, scenario-driven planning makes the tactics required for implementation clear. Also, it can reveal the required co alignment of tactics over time, so a firm can become both flexible and efficient, and save time! The conventional perspective of copycat strategy shows linear thinking at best and clumsy benchmarking--also known as shadow marketing--at worst (Hatten & Hatten, 1987, 91-95). Its proponents assume that they can improve long-term performance incrementally, with disconnected tactical moves alone, when improvements in strategy design should be their primary concern. Piecemeal tactics can undermine strategy, but they are secondary. It may be possible to improve performance through efficient tactics, but it is better to design an efficient strategy that will expel counterproductive tactics. Examples of counterproductive tactics are those coercive moves that increase rivalry among competitors, without a real payoff, either direct or indirect, for the industry incumbent who initiates such moves. It is atypical of an industry or market leader to initiate such moves. In strategy, superior implementation demands superior design. Not all stakeholders’ needs can or should be met, and, of course, at times horrible mistakes cannot be avoided. Moreover, corporate social responsibility may be neither a necessary nor a sufficient condition for successful performance. Baron points out the lack of empirical support for the relationship between performance dimensions, such as competitiveness and profitability, and actions taken in the cause of* ethics and corporate social responsibility: "Even if there were an empirical relationship, the direction of causality would have to be established. That is, does socially responsible behaviour lead to superior performance or does superior performance allow a firm to take socially responsible actions?" ( Baron, 1993, p. 502). Conclusion The goal in modelling a firm's strategic situation is to link system structure and behaviour. Modelling and computed scenarios can help today's modern organizations understand what they don't know, if they model what they don't know as opposed to what they do know. The modelling process provides a different way of seeing business problems, a different mind-set for thinking about strategic situations and for learning faster from their experiential ramifications. The relevance of modelling for learning to today's general manager and strategy student has much to do with their daily struggle to define, to refine, and to reperceive their contact with reality. Modelling serves many purposes on many organizational levels. A good understanding of a firm's strategic situation depends on an understanding of the mechanics in modelling tools, from rough-cut mapping (ID) to full-fledged modelling and computer simulation (system dynamics). Comprehensive situation mapping can help a firm make the transition from rough-cut mapping to modelling a strategic situation. This transition is necessary for US firms to stop inflicting wounds on themselves by separating knowledge from action. Quantifying the relationships among the variables pertinent to a strategic situation yields a much deeper understanding of a situation's nature and structure than qualitative conceptualization alone. This is not to downplay the managers' mental database and its information content, for the mental database provides the raw material for modelling. In turn, the art in modelling expands, refines, and thereby improves the mental database. This is the organizational learning that scenario-driven planning generates. Human fallibility is not much of an excuse for failing to acknowledge the inadequacy and complacency resulting from continually being busy fighting the wars of the past. Naturally, rough play requires talent. It is an art, but not necessarily one that is conducive to increasing productivity. Too often, competitive analysis is limited in scope, focusing solely on the competitors of today and their current performance. Other key elements in the marketplace remain overlooked, often those that literally are right under your nose. The ability to sustain competitive advantage requires you to broaden your view of the business landscape. To effectively monitor the competition, your business needs to understand how your own customers—and your own channels—perceive the purpose of your products and services. You need to “become” your consumers and channel partners, in addition to walking in the shoes of your competitors and could-be competitors. Market research techniques can help you achieve a better understanding of customers, their unmet needs, and the abilities of new or existing competitors to possibly fill those needs ahead of business. Reference Baron D. P. ( 1993). Business and its Environment. Englewood Cliffs, NJ: Prentice-Hall. 502 de A. P. Geus (1992). "Modelling to predict or to learn?" European Journal of Operational Research, 59 ( 1): 1-5. Georgantzas N. C. & Shapiro H. J. (1993): "Viable theoretical forms of synchronous production innovation" Journal of Operations Management, 11: 161-183. Hamel, Gary, and C.K. Prahalad. 1994: Competing for the Future. Harvard Business School Press, 35-45 Hatten K. J. & Hatten M. L. (1987): Strategic Management: Analysis and Action. Englewood Cliffs, NJ: Prentice-Hall. 91-95 Kimberly J. R. (1981). Managerial innovation. In W. Starbuck & P. Nystrom (Eds.), Handbook of Organizational Design (pp. 84-104). New York: Oxford University Press. 66-70 Millet S. M. & Randles F. (1986): "Scenarios for strategic business planning: A case history for aerospace and defence companies". Interfaces, 16 ( 6): 64-72. Porter M. E. (1985). Competitive Advantage. New York: Free Press. Chapter 13 Prahalad, C.K., and Gary Hamel. "The Core Competence of the Corporation." Harvard Business Review, May/June 1990, pp. 79-91. Remus W. E. & Kottemann J. E. ( 1987). "Semi-structured recurring decisions: An experimental study of decision making models and some suggestions for DSS". MIS Quarterly, 11 (2): 233-243. Scholes, K, Johnson G. &.2000, Exploring corporate strategy, 6th edition, Harlow: Prentice Hall: 245-49 Schwartz P. ( 1991). The Art of the Long View. New York: Doubleday Currency. 9-29 Scott W. R. ( 1987). Organizations: Rational, Natural and Open Systems (2nd ed.). Englewood Cliffs, NJ: Prentice-Hall. 139-42 Wack P. ( 1985). "Scenarios: Shooting the rapids". Harvard Business Review, 63 ( 6): 139-150. Read More