Strategy as Practice - Research Paper Example

Strategy is about making choices and strategic managers have the responsibility to collect, analyze and use the information to make strategic choices(Parnell, 2005). They are usually faced with several alternatives and they use their own subjective perspective of strategy as it pertains to the organization and its environment. Strategy, strategic planning and strategists are terms the give rise to conflicting and diverse opinions, theories and debates. While some believe that strategic planning is not strategic thinking, others believe that a business manager needs to be a strategist as well. There are also debates and discussions on who should or should not be involved in the formation of strategy. While some argue that tools and techniques should be used to determine the strategy, others contend that the solution to a problem should be based on the experiences of the people. There has also been an increasing focus on devising strategies rather than focus on the people that implement the strategies. It is thus become important to find the right approach to strategy and strategic planning within organization taking into account the different competing theories. An investigative method of research through literature review will be adopted to study the different approaches suggested by the theorists and researchers. Through the application of strategic theory the key areas such as strategy, strategic planning, strategic thinking and strategist will be investigated and a common and most viable approach suggested. Fahey (2003) contends that anticipating and interpreting change in and around the market place has become important. It is equally important how the organization leverages that change into winning strategies. Hence a strategy becomes essential to infuse fresh perspectives of the future but senior managers express their inability to extract useful data about the future from the current indicators. There is no synergy between the senior managers and the managers as a result of which the strategy alternatives are not tested before application. The term ‘strategic’ as explained by Mintzberg has been criticized by Godet (2000) who believes that no risks can be involved in strategic planning because an organization can plan without committing to the plan. This is in response to the ‘rise and fall of strategic planning’ as described by Mintzberg (1994). Godet believes that the issue is not the planning but the manner in which the planning is carried out. Again, management does not constitute a strategy although strategy shapes management, according to Godet. The term ‘strategic’ is much more than an adjective and according to Ansoff it refers to the firm’s action on the environment and then the reflection on that action (Godet, 2000). Some believe that a strategic decision is specific to an organization and a strategic decision should create an irreversible situation for the entire organization. Mintzberg believes that strategic thinking and strategic planning, while being distinct, are both useful in the strategic management process while Porter argues that strategic thinking is not so much creative as analytical (Heracleous, 1998). Some even think that strategic planning is useless and should be totally replaced by strategic thinking. There is no consensus on what strategic thinking is and the relationship between strategic planning and strategic thinking. Heracleous believes that strategic thinking should precede strategic planning. Mintzberg (1994) contends that strategic planning and strategic thinking are two entirely different functions – strategic planning is analysis while strategic thinking is synthesis. It is not more sufficient to have sustainable competitive advantage; today the strategy must focus on continuous improvement and adaptation. It must be continuously evolving in ways that surprise the competition (Graetz, 2002). The ability to think strategically is another dimension to the process of strategy making. Even though strategy planning and thinking are distinct, they are interrelated and complementary. The ability to think strategically depends upon the interaction between the situation and the characteristics of the individual involved. Mintzberg contends that strategic planning spoils strategic thinking when even the managers become confused because the most successful strategies are visions and not plans. Strategic planning or programming starts with the strategy making process when the manager collects data through insight, experiences or from the market and then synthesizes that learning into a vision which provides the direction the business must pursue. The role of the planners according to Mintzberg is only to contribute around the strategy making process and not try to find the right strategy. In other words they are catalysts to aid and encourage managers to think strategically. Whittington (1996) believes that tools and techniques help the managers to make decisions and not people. These aids that help in strategic planning include the portfolio matrices, industry structure analysis, and the concept of core competency. The process of strategy making is known as strategizing, according to Whittington, which is basically the data collection process as pointed out by Mintzberg. This requires skill and technical knowledge but the work is repetitive (Whittington) while Mintzberg believes that data collection is basically a learning process. Planners are analysts while strategic thinking is about synthesis (Mintzberg, 1994). Strategic thinking involves intuition and creativity and is done through informal learning. It must be carried out by people at various levels who are deeply involved with those issues at hand. Experiences are never synthesized into a novel strategy. Strategy making should involve new perspectives and new combinations. Managers should be committed to their job and should be able to engage others along with him through enthusiasm and motivation. Porter argues that strategic thinking is analytical and uses different frameworks like the five forces analysis, the diamond model of national competitive advantage, and the value chain to determine the strategy. According to Porter the use of the term ‘strategic thinking’ is not as a synthetic and divergent thought process but as a convergent and analytical one (Heracleous, 1998). Some authors refer to this as strategic planning. Heracleous believes that the real purpose of strategic planning is to improve strategic thinking and strategic planning has evolved over time to strategic thinking. Strategic planning can be useful if the line managers are involved, the business units are defined correctly the steps are clear and well integrated with the overall control system of the organization. The Strategy as a Practice (SAP) has been pointed out by Whittington (1996) who believes that this is a new direction in strategic thinking. In this new approach the manager is the strategist and there is a shift from the core competence of the organization to the practical competence of the organization. This suggests that the role of the manager is critical – how they spot the oppurtunities and attain a grasp of the situation. This requires practical competence which stretches much beyond the theoretical knowledge. Organizations believe that years of experience make a person more competent to be the strategic practitioner than a fresh recruit who may know the theories through formal learning. Thus strategists not only need to know about the analytical techniques of planning but they also need to have practical experience. Godet (2000) believes that the theory of core competency proposed by Porter does not hold well in today’s scenario. Short-term profits should not be the aim in strategy planning. Godet also criticizes the strategic business unit (SBU) approach used in Japan and the USA. Strategic planning should be done taking into account the firm’s competencies according to scenarios that produce the general and competitive environments. A scenario describes the future situation and charts the progress from the present to the future situation. Who is responsible for strategy formulation has also been a controversial and debatable issue. The power holders within an organization are responsible for the strategic actions including the establishment of norms and cultures, performance standards, and the control systems (Eden, 1990). It depends on what sense the powerful make of their world because based on their learning and experiences they set the norms. Eden clearly argues that strategy is the function of those in power and not that of the staff. Those in power must be involved in developing the strategy and it requires continuous adaptation rather than an analysis. Analytical techniques can only account for the change in numbers and cannot replace the experience of the managers. The senior managers too have their own vision through experience and hence it is important to relate to their individual vision as well. This is in stark contrast to the views of Whittington who argues that tools and techniques help the managers to make decisions and not the people. Godet (2000) believes that people and organization are at the heart of the difference between efficient and inefficient firms. People need to be motivated through new challenges and by getting the people to be involved, strategic analysis will generate a synthesis of collective commitment. The real difficulty according to Godet is not in making the right choices but to make sure that all the participants ask themselves the right question whereas according to Mintzberg, the others should only aid the manager and not try to find the right strategy. Thus, the theorists differ in their views on who should be involved in the strategy planning. In most entrepreneurial ventures, owner-managed or top-down companies, the responsibility for strategy making rests with the owners or the top managers. They select the implementing strategies and in some cases they even delegate certain responsibilities to the forecast specialists, but the specialists only serve the top management (Millett, 1988). They have no authority on independent responsibility. The personalities and styles of the top managers determine the strategy that will be adopted. Given that people at all levels should be involved in the planning, there are again differences over how they should be involved. Eden argues that tools and techniques such as cognitive mapping are necessary for strategy development. This technique produces high level of ownership as they are intended to relate to the way in which a person ‘makes sense of’ and explains the world around him. When an individual discusses a problem, he uses his experiences and draws upon the general theories in the organization and the market place. They are in a position to discuss the strengths and weaknesses naturally without having to follow or take recourse to the SWOT analysis as described by Porter. Nevertheless, tools do become necessary to determine the exact position and take a decision. For instance, a chemical company was planning a major acquisition and on the face of it the deal seemed very lucrative as it would bring cost benefits and increased sale (Armour, 2002). It was an extremely compelling case for purchase but a more rigorous analysis revealed that the company’s projections had been overly optimistic and the pro forma financials were overly aggressive. Initially they had thought they would become more efficient than the current industry leader but later realized that they could lose much more in the deal. Now in this case the decision of the board or the super powers can prove to be fatal for the organization. They need to get the facts and figures from different levels of people to arrive at a decision. Here the experience of the people in power can at best urge the people to deduce figures and numbers but tools are necessary and so is the cooperation of the people at all levels. As Eden points out the powerful can make sense of their world but without the tools and techniques their sense and experience may make them take a wrong decision. Besides, the experiences and the opinions of the middle management is important as these are the people that deal with scenarios and situations and learn how to overcome them or are in a position to anticipate the problems (Liedtka, 1998). Most multi-divisional organizations have adopted a ‘strategic planning’ or ‘strategic control’, in which the centre shares some degree of responsibility for strategy development with the business units. The dialogue between the centre and the business units should be of high quality if the strategic planning process has to add value (Bungay & Goold, 1991). To have a quality dialogue both must understand each other, speak the same language, and trust each other. This implies that management skills, knowledge and attitude are equally important for the success. This also implies that strategy planning cannot be with the powerful people in the organization. The people at all levels have to be equally involved in the strategy formation. Mintzberg says strategic thinking is about synthesis. When GE introduced the SBU structure in the 1960s, they also made a major effort to improve the quality of strategic thinking in the business. They trained and then created several posts as senior managers. They felt they had financial controls in place till they found that with the passage of time the strategic thinking declined. There was no synthesis of the processes and people were more involved in discussing theoretical models and conducting meetings and the quality of dialogue reduced. Hence strategic planning is different from strategic thinking and needs greater insights. In today’s environment firms need a more dynamic approach to strategy development. They need to exploit the current market positions while exploring new ones. Nokia succeeded because its strategy was based on the concepts of strategic intent, capability-leverage and market creation (Leavy, 2003). This was a competence-led strategy but they could emerge winners despite the losses they had been facing. In this case focusing on the organizational strategies rather than the activities of the individuals in the organization was important because the question was of survival. This required strategic thinking and creativity was essential. A business manager has to play three roles simultaneously – the role of a strategist, the architect of the assets and resource configuration and as the coordinator of transactions across national borders (Bartlett & Ghoshal, 1992). In late 1980s, Electrolux had more than 20 brands in over 40 countries and because of various acquisitions the company had a patchwork quilt of companies. The then business manager recognized the need for an overall strategy to coordinate and integrate his dispersed business operations. This required taking the views and opinions and experiences of his people at both the national and the international level. While the local managers convinced him the national brands would be vital to maintaining consumer loyalty, the division staff members pointed out the similarities in product characteristics. Both the opinions were vital for a strategic decision. The manager tracked the product and market trends across borders which helped him to capture valuable global-scale efficiencies. At the same time he also reaped the benefits of flexible response to national market fragmentation. He took the leadership role as a strategist but he never believed that he alone had the understanding of the global strategy. He had to rely on the national and global mangers for their input, experience and opinions. Understanding the scenario is an important part of standard strategy toolkit because scenarios enhance the knowledge about the future and then this knowledge can be integrated into decision making (Fahey, 2003). To make this strategy workable, Fahey suggests that it is essential to take the views of those people who have suffered the pitfall of excessive scenario refinement rather than relying on the creativity and innovative ideas of the senior managers. According to Millet (1988) scenarios can be an excellent approach to forecasting and strategy making problem but no analytical tool can answer all the questions. Scenarios are useful for long range time spans, when many unquantifiable factors are involved, or in uncertain situations with many variables or in situations when there are few or reliable data available for quantitative models. Strategies should be evaluated against an external frame of reference as well as an internal frame. Even though many companies are trying to train the employees to ‘think strategically, Liedtka (1998), believes that this is not possible. The use of scenario planning-type techniques may be helpful but the best alternative is when the individual recognizes and acts upon the opportunity that presents before him. This has been described as intelligent opportunism which emanates from an individual’s natural curiosity and creativity. This can be enhanced from the simulation techniques but the initiative has to come from within. In addition process skills are allowed to be able to translate the individual strategic thinking skills into a dialogue with a larger community. Scenario planning is a disciplined method for imagining possible futures that companies apply to a great range of issues. General Motors and IBM did not take into account the external and the industry scenario and hence could not take advantage of the unexpected oppurtunities that came along while Royal Dutch used scenarios for evaluating strategic options (Schoemaker, 1995). Scenario planning can take care of under prediction and over prediction and then chart a middle path between the two. Scenario planning stands out because of its ability to capture a whole range of possibilities in great detail. There are two main positions on strategic planning and strategic thinking. Mintzberg believes that strategic planning and strategic thinking is distinctly different thought processes where one requires synthesis while the other is analytical. According to Porter strategic thinking can be achieved by using analytical tools. All the other authors have either criticized these views or build upon these suggestions. Most authors agree that strategic thinking and strategic planning are distinct and separate but some argue that strategic planning should be abolished. Some suggest strategic thinking process based on cognitive mapping while others use frameworks like the five forces analysis. Mintzberg focuses on the process of adopting the strategy while Porter believes in the strategic positioning of the organization. The numerous debates and discussions give rise to the thoughts that strategy making would differ across organizations and again is dependent upon the individual and how he responds to the situation. It is not possible to train or teach people to think strategically although the inherent skills can be enhanced. Strategy making requires the involvement of people at different levels and cannot be restricted to the people in power. This is because they have a very limited view of the practical operations and the problems inherent in the situations. The experiences and the opinions of the middle management are vital and this needs to be integrated by the senior managers with their own ideas and views. Understanding of the scenario is very important and the quality of the dialogue would depend upon the individual’s ability to converse with each other. Strategic thinking can take place not by coercion but depends upon the individual’s ability to recognize the need and opportunity to think strategically. Besides, the intention should be there to come up with strategic solutions and the timing should be right. The industry examples however demonstrates that very few managers have focused on the activities of people; most have focused on the organizational strategies without taking into account the problems that may arise in a given situation in the future. Strategists have to take into account the different perspectives as the business manager at Electrolux. It is the information and the data from the people in the field that help devise the strategy and not the tools and techniques or numbers and accounts. References Armour, E 2002, How borads can improve the odds of M&A success , Strategy & Leadership, vol. 20, no. 2, pp. 13-20. Bartlett, CA & Ghoshal, S 1992, What is a Global Manager?, Harvard Business Review, retrieved online April 22, 2009, from http://www.modelo.edu.mx/maestros/archivos/marketing/What%20Is%20a%20Global%20Manager.pdf Bungay, S & Goold, M 1991, Creating a Strategic Control System, Long Range Planning, vol. 24, no. 3, pp. 32 - 39 Eden, C 1990, Strategic Thinking with Computers, Long Range Planning, vol. 23, no. 6, pp. 35-43 Fahey, L 2003, How corporations learn from scenarios, Strategy & Leadership, vol. 31, no. 2, pp. 5-15 Godet, M 2000, The Art of Scenarios and Strategic Planning: Tools and Pitfalls, Technological Forecasting and Social Change, vol. 65, pp. 3–22 Graetz, F 2002, Strategic thinking versus strategic planning: towards understanding the complementarities, Management Decision, vol. 40, no. 5, pp. 456-462. Heracleous, L 1998, Strategic Thinking or Strategic Planning? 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