Debate on Deliberate and Emergent Strategy - Case Study Example

The Deliberate-Emergent Strategy Debate The debates surrounding deliberate and emergent strategy started over twenty years ago, when Mintzberg and Waters (1985) asked whether "cost leadership strategies might prove more deliberate" and "differentiation strategies more emergent (p. 257)." They were referring to the five forces industry analysis framework proposed by Porter (1980) to help organisations craft a competitive strategy. In his book, Porter listed down three generic strategies - overall cost leadership, differentiation, or focus - and suggested that the organisation concentrate its activities on one. By highlighting two of Porter's three generic strategies, Mintzberg and Waters set the tone for the debate when they argued that "deliberate strategy is seriously limited, and that the process needs to be viewed from a wider perspective so that the variety of ways in which strategies actually take shape can be considered" (p. 260). Five years later, Mintzberg (1990) wrote a critique of the 'design school' generally associated with the Harvard Business School where Porter was a faculty member (Mintzberg was then a professor at Canada's McGill University). Before going into the essence of the discussions, a brief explanation is in order as to what Mintzberg meant when he distinguished these two methods - deliberate and emergent - of formulating strategy, also known as defining 'long-term' organisational objectives. Deliberate strategy is a method of formulating strategy following an over-all design dictated by top management that needs to be followed more or less strictly, whilst emergent strategy is a method of developing strategy following a trial and error approach based on general guidelines agreed on by everyone in the organisation (Mintzberg, 1990). Deliberate strategy is a 'top-down' approach, the product of what he called the 'design' or 'planning' school, whilst emergent strategy is its opposite, a process of 'learning by doing' that belongs to the 'learning' or 'emerging strategy' school. Taking up the challenge was Ansoff, one of the 'fathers' of strategic planning (1965), who felt alluded to. He countered with a defence (1991) of the 'design school' and a discussion and critique of Mintzberg's 'emerging strategy' school. Mintzberg responded (1991) by categorising an earlier Ansoff work (1987) as being part of the 'design school' and built upon the basic premises proposed by Andrews (1987). Although Mintzberg (1991) agreed that both emergent learning and deliberate planning are necessary for good strategy formulation, he defends his initial position that in a fast-changing world characterised by the rise of knowledge workers, learning organisations, and ever-shifting markets, the top-down deliberate strategy approach must be balanced by placing greater attention on emergent strategy techniques. Up next inside the ring was Goold (1992), a Boston Consulting Group (BCG) consultant who elaborated upon and defended his and BCG's role in Honda's development of a successful motorcycle strategy. He acknowledged the differences between the planning (deliberate) and learning (emergent) approaches but counselled that synthesis and collaboration, rather than conflict, are most appropriate for the continued development of the discipline, a view that Porter (1996) and Mintzberg (with Lampel, 1999) supported. A thorough study and analyses of the academic papers surrounding the debate would show that, in reality, there may be no grounds for conflict as the arguments proposed by both schools seem equally sound and reasonable. To better understand why, it would be necessary to develop a clear understanding (Johnson, Scholes, and Whittington, 2005) of strategy, strategy formulation, and strategic management and implementation (or execution). Strategy comes from the Greek word strategos meaning "art of the general" and implies its initial application in warfare (Watson, 1993, p. 26). Strategic planning involves knowing what to do in the future and is also called "long-range planning", but before an organisation can decide "where it wants to go", it has to know where it currently "is" and whether its future plans are realistic given its capabilities. Strategy formulation, therefore, is the organisation's over-all approach to get where it wants to go, a set of plans and targets to reach its destination based on what it thinks it can reasonably but ambitiously do. Strategy is different from strategic management. Whilst strategy is a statement of general purpose and direction (e.g., to be the most profitable bank in the U.K.), strategic management is the execution of strategy (what needs to be done to be the most profitable bank in the U.K.). Strategy is made of words and intentions, but strategic management is acting on those words and intentions, making detailed plans and putting them into practice, and monitoring the organisation's progress on how its strategy is being implemented or executed, making changes where needed. Yes. Strategy, strategy formulation, strategic management and implementation all require asking the same set of "boring" questions over and over again, but it is in finding answers to those questions, agreeing on the answers, communicating those answers to everyone in the organisation, and putting those answers into practice relentlessly and with determination that spells the difference and provides the excitement. The deliberate versus emergent strategy debates provide two ways of going about this process: what questions to ask, who asks them, and who agrees on the answers. Supporters of deliberate strategy answer with the mantra: "management, management, and management". Emergent strategists, on the other hand, emphasise that everyone must have a hand in strategy formulation. Management must ask workers and customers, learn from their answers, and make the needed changes before taking definite action. Which of these two schools is right The first step to finding an answer is to look at the strengths and weaknesses of each side. Then, we compare their arguments with what happens in reality. The deliberate school of strategy emphasises the importance of planning, thinking, and acting with intent before implementation. After all, strategy is supposed to provide a clear direction that could be understood and supported by everyone. It does not mean, however, that deliberate strategy is completely blind to unexpected developments and events in the real world. In fact, Andrews (1987) recognised that revisions to the original strategy may be needed due to and guided by operational feedback. Amongst the key points and advantages of deliberate strategy formulation are the following: Directed: Organisations need direction, and without objectives and plans, they go adrift, and employees would not know what to do. Without firm direction and guidance from the top, organisations lose focus and employees are de-motivated. Commitment: Having clear plans allow organisations to mobilise themselves, build capacity, and commit to major investments. Considering all possible options open to it, and facing the problems that come with each option, demands a high level of commitment, effort, and determination. Coordinated: A deliberate and well-crafted organisation-wide strategy allows the organisation to act as a united whole and make the coordinated and decisive moves needed in a complex world. Implicit in this characteristic is having an organisational structure that would allow adjustments to challenges and events that impact on the accomplishment of goals and objectives. Optimised: Good plans enable optimal allocation of scarce resources to businesses that are the most promising. Knowledge of the various business opportunities using different strategic formulation frameworks and models - such as SWOT/PEST Analysis, Ansoff's and the BCG Matrix, Strategic Maps, and Porter's Five Forces Analysis - would help managers and workers in making decisions that are best for the organisation's future. Programmed: Deliberate strategic planning enables organisations to operate with precision, with minimal mistakes and waste of time, maximised efficiency and reliability, and with a greater chance of success. On the other hand, the emergent school of strategy emphasises the benefits of letting strategy develop as events, issues, and challenges to the organisation and its drive towards its goals gradually become apparent. The best plans, they contend, come with experience, and strategy is viewed as an ongoing process of constant learning, experimentation, and risk-taking, of trial and error. It is an adaptive, incremental, and complex learning process in which the ends and means are intertwined and often specified simultaneously. Emergent strategists are like free-spirited strategy managers content with a minimum of formality. They rarely announce in formal planning documents (as deliberate strategists do) their goals and if they do, these remain broad, general, and mostly non-quantifiable (such as Nokia's "connecting people" strategy). They learn to expand or evolve the organisation's path from developments and interactions with the environment, but it does not mean they are not proactive and just react completely in an improvised manner to events as they unfold. Rather, emergent strategy formulation develops the following mindsets: Opportunism: Organisations have the psychological freedom to grab unpredictable business prospects as they emerge. They map scenarios, considering options and possible impacts, as exemplified by Royal Dutch Shell, an early proponent of scenario planning. Flexibility: This flows naturally from opportunism. Organisations should not commit to taking early actions or investments, but when they do, they can do so quickly. Learning: Allowing strategy to emerge from real experience in the marketplace gives organisations the opportunities to learn from mistakes, their own and those of others, so they can try out different solutions to find those that work. Entrepreneurial: They claim that the best way to find out what works is to allow people to try, take risks, be daring, and not to fear change but to embrace it. Support: Involving everyone in the organisation to cope with strategic change helps minimise resistance and develops a learning culture where experiences are shared. These advantages and strengths give an idea of the disadvantages and weaknesses that each side faults the other. Deliberate strategy, its critics claim, is too formal, theoretical, rigorous, wasteful (not only of management time), time-consuming, impractical, mechanistic, risky, inflexible, slow, presumptuous (top management as all-knowing), de-motivating, unrealistic, and prone to analysis paralysis and a separation between planning and execution. Emergent strategy, on the other hand, is seen as too free-wheeling, chaotic, drifting, wasteful in resources (as some mistakes may be too much for the organisation to bear), unprofessional, too incremental, slow, de-motivating (directions and goals are not too clear), and is therefore characterised as too wild for some people's tastes. These criticisms may at first seem valid, placing each school at opposite ends of the strategy spectrum, but in reality, each may be but a different side of the same coin, co-existing and being utilised by organisations at different phases of the strategy process. As Mintzberg (1991) conceded, "both are like two feet walking", one following the other along the path to an emerging strategy that would be impossible without a certain degree of planning and analysis. In practice, the strategy formulation process is a balanced combination of deliberate, systematic planning and a freewheeling learning process with a certain degree of order. Whilst an organisation may explicitly express a strategic intent to focus and move in a certain direction, it may leave unwritten such basic rules as its openness to uncertainties in the market and the willingness to change according to lessons from experience. And though managers may practice extreme open-mindedness and flexibility when soliciting 360-degree feedback from everyone, they can be equally relentless and systematic in their execution of strategy. Many examples abound of how managers have successfully mixed deliberate and emergent strategy techniques to steer their organisations through difficult times. A widely known example is Honda's success in penetrating the U.S. motorcycle market. Pascale (1984 and 1996) contrasted two versions of Honda's successful strategy, which the Boston Consulting Group (BCG) described as a top-down, deliberately designed process. However, the Japanese managers involved denied that it was not deliberate; and that their strategy was more of emergent as a result of setbacks and emerging opportunities. What's the story Whilst Honda's intended strategy to sell large motorbikes proved a failure, they noticed that the market showed greater interest in the small bikes Honda managers rode on their way to work. Honda shifted strategy and decided to exploit an unmet need for small machines, which they developed and sold profitably. Throughout the whole process, senior management saw their primary task as guiding and orchestrating feedback from below rather than steering the organisation from above along a predetermined strategic course. Pascale (1996, p. 89) described Honda's successful strategy formulation system as one that "evolves from an incremental adjustment to unfolding events and a product of having to deal with miscalculation, mistakes, and serendipitous events outside its field of vision". Honda's experience begs the question of whether it could have done what it did, i.e., be flexible in making strategic adjustments, if not for the pre-work of analysis and market studies done with the help of the BCG. The hours spent looking at customer, competitor, and market data, plus the additional hours of discussions and planning may have contributed significantly to the learning of managers involved in the strategy process. In the end, it may be that the deliberate strategy process became the foundation for an emergent strategy to be formulated and implemented quickly and in a deliberate, systematic way. Porter's (1996) example of the Swedish furniture manufacturer, Ikea helps shed some light on this explanation. Ikea was presented as a paradigm of a deliberate competitive strategy combining the unique Swedish design tradition with cost leadership, global supply chain management, and efficient store design layouts that make it difficult, almost impossible, for competitors to copy. However, while Ikea's CEO admits (Dahlvig, 2003) that strategy requires discipline and clear communication, he counsels that the top management's main role is "guiding employees in making strategic choices that arise because of trade-offs in their individual activities and in day-to-day decisions" (p. 12). Lastly, Mair (1999) concluded after reviewing the abundant academic literature on Honda's strategic success that was the object of the debate that these were but partial representations of something as complex as the strategy formulation process. As Mintzberg and Lampel (1999) implied, categorising the strategy process into schools should help practitioners do it better. Instead of adopting a tendentious and duellist approach - learning versus design, prescriptive versus descriptive, etc. - it would be better for managers and academics to learn the trickier and more challenging aspect of mastering the different strategy models and knowing how to combine them in practice. In real life, such as when a company needs to pursue new growth opportunities, it would be difficult, perhaps objectively impossible, to determine when to adopt deliberate and emergent strategies. For example, the complex decision to grow by entering a new market or coming up with a new product may be the result of an emergent strategy, e.g., how to satisfy shareholders grumbling about the low share price. However, the company may have to shift to a deliberate strategy as they narrow down their goals, define the steps to reach those goals, and then methodically act on each of those steps. Every organisation has to be flexible in shifting strategy frameworks as they adapt to new information emerging from the marketplace. They must not lose their willingness to learn as they gather feedback on what works and what doesn't. In business environments marked by a high degree of uncertainty where strategic assumptions can change by the minute - imagine the hypothetical situation of a British company making a decision to invest millions in Iraq after the coalition troops declared victory in March 2003 - operating managers encounter problems planners could never have anticipated. Actions lead to unanticipated results, and following a rigorous deliberate strategy can lead companies to ignore market signals, fail in adapting their decision-making, and lose money (and their lives) in the process. The deliberate versus emergent strategy debate, therefore, is more about form than substance, an intellectual attempt to understand the strategy beast. Each school contains practical nuggets of wisdom any manager desiring to succeed in a changing world must know by heart. This then is the challenge: understanding such a complex process as strategy can never be reduced to a few basic rules. If management were so easy to do, failure would be impossible. A final lesson in all these is that crafting strategy is a science and an art: as science, it requires deliberate analysis, systematic focus, and coordinated execution; as art, it demands an open mind, an imagination that welcomes change, and a heroic spirit to learn from mistakes. Whether deliberate or emergent, strategy formulation as science and art demands equally the personal passion for excellence to succeed. Bibliography Ansoff, H. I. (1987) The emerging paradigm of strategic behaviour. Strategic Management Journal, 8, p. 501 - 515. Ansoff, H. I. (1991) Critique of Henry Mintzberg's 'The design school: Reconsidering the basic premises of strategic management. Strategic Management Journal, 12, p. 449-461. Andrews, K. (1987) The concept of corporate strategy (3rd ed.). Homewood: Irwin. Ansoff, H I. (1965) Corporate strategy: an analytic approach to business policy for growth and expansion. London: Pelican. Dahlvig, A. (2003) "An empire built on a flat-pack." Interview given to C. Brown-Humes, Financial Times, 24 November, p. 12. Goold, M. (1992) Design, learning and planning: A further observation on the design school debate. Strategic Management Journal, 13, p. 169-170. Johnson, G., Scholes, K., and Whittington, R. (2005) Exploring corporate strategy (7th Ed.). London: Prentice-Hall. Mair, A. (1999) Learning from Honda. Journal of Management Studies, 36 (1), p. 25-44. Mintzberg, H. (1987) Crafting strategy. Management Science, 24 (9), p. 934-948. Mintzberg, H. (1990) The design school: Reconsidering the basic premises of strategic management. Strategic Management Journal, 11, p. 171-195. Mintzberg, H. (1991) Learning 1, Planning 0: Reply to Igor Ansoff. Strategic Management Journal, 12, p. 463-466. Mintzberg, H. (1994) The rise and fall of strategic planning. London: Prentice-Hall. Mintzberg, H. and Lampel, J. (1999) Reflecting on the strategy process. Sloan Management Review, 40 (3), p. 21-30. Mintzberg, H. and Waters, J.A. (1985) Of strategies deliberate and emergent. Strategic Management Journal, 6, p. 257-272. Mintzberg, H., Pascale, R.T., Goold, M., and Rumelt, R.P. (1996) The "Honda effect" revisited. California Management Review, 38 (4), p. 78-117. Pascale, R.T. 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