Strategic Thinking · Under this de!nition, strategy is a means of gaining market share or a strategic competitive advantage through a speci!c manoeuvre, designed to outwit or outperform

Strategic Thinking 1

STRATEGIC THINKING SHORT COURSE PROGRAM

RHODESBUSINESSSCHOOL


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STRATEGICTHINKING

TRAINING DISCLAIMER

While every attempt has been made to ensure that the material contained in this manual is correct and complete, all comments, material and opinions contained within this manual are intended for training purposes only. No material contained in this manual is to be used or relied upon as information or advice, or as the basis for formulating business decisions, on any matter or in any circumstances, without first obtaining specific professional advice. Rhodes Business School (Rhodes) and the trainer have taken due care in the preparation and delivery of the course material, however Rhodes does not accept any responsibility for any actions and/or consequences of those actions as a result of relying on the information provided at this course. For inquiries concerning the use of the material please contact Rhodes.

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ContentsWhatisStrategy? 5...................................................................................................................................................................Ac>vity1 5................................................................................................................................................................................THENATUREOFSTRATEGY 6.....................................................................................................................................................Ac>vity2 8................................................................................................................................................................................Ac>vity3 9................................................................................................................................................................................Ac>vity4 10..............................................................................................................................................................................Ac>vity4 11..............................................................................................................................................................................WhatisStrategicThinking? 11..................................................................................................................................................Whythinkstrategically? 11...................................................................................................................................................Whatdoesitinvolve? 11.......................................................................................................................................................

Ac>vity5 12..............................................................................................................................................................................WhyisStrategicthinkingimportant? 12...................................................................................................................................Organisa>onalchange 12......................................................................................................................................................Organisa>onalCapability 12.................................................................................................................................................Getitright 13........................................................................................................................................................................

Ac>vity6 13..............................................................................................................................................................................StrategicPlanningvsStrategicThinking 13...............................................................................................................................StrategicCapability 14...............................................................................................................................................................Ac>vity7 15..............................................................................................................................................................................Corecompetency 15.................................................................................................................................................................Ac>vity8 15..............................................................................................................................................................................Compe>>veAdvantage 16........................................................................................................................................................Ac>vity9 17..............................................................................................................................................................................StrategicDecisionMaking 18....................................................................................................................................................StrategicLenses 18....................................................................................................................................................................StrategyasDesign 18............................................................................................................................................................StrategyasExperience 19.....................................................................................................................................................

Ac>vity10 19............................................................................................................................................................................StrategicModels 20..................................................................................................................................................................TheRa>onalStrategicModel 21...........................................................................................................................................TheDynamicStrategicModel 21..........................................................................................................................................

EmergentStrategies 22.............................................................................................................................................................Prescrip>veSchools 23.............................................................................................................................................................DesignSchool 23...................................................................................................................................................................PlanningSchool 23................................................................................................................................................................Posi>oningSchool 23............................................................................................................................................................

Descrip>veSchools 24..............................................................................................................................................................Entrepreneurialschool 24.....................................................................................................................................................Cogni>veschool 24...............................................................................................................................................................LearningSchool 24................................................................................................................................................................PowerSchool 24....................................................................................................................................................................CulturalSchool 24.................................................................................................................................................................EnvironmentalSchool 24......................................................................................................................................................Configura>onSchool 24........................................................................................................................................................

Ac>vity11 24............................................................................................................................................................................


TheLiedtkaModelofStrategicThinking 25..............................................................................................................................ElementOne 25....................................................................................................................................................................ElementTwo 26.....................................................................................................................................................................ElementThree 26..................................................................................................................................................................

Ac>vity12 27............................................................................................................................................................................ElementFour 27....................................................................................................................................................................

References 29............................................................................................................................................................................


WhatisStrategy?

So, what is strategy? When we discuss strategy, are we talking from the same page? When some people discuss strategic planning, they are simply talking about the business plan for the coming year. For others, it is the full gamut of what we would like to do, where we would like to be and how we are going to get there.

Strategy is a well-used term; however, its meaning is not necessarily shared and the contexts in which it is used are diverse.

The ancient Greek concept of strategy is stated by Sloan (2006) as:

Strategy was about moving between order and uncertainty. It was about detached long term forethought, planning, and ordering in advance of action.

From a theoretical perspective, Johnson, Scholes and Whittington (2005) state:

Strategy is the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competencies with the aim of fulfilling stakeholder expectations.

Strategy is concerned with the long-term direction of the organisation. In periods of rapid and sometimes unpredictable change, considerable debate occurs over what determines long term. Matsushita of General Electric fame developed a 250-year strategic plan for the business which is still adhered to despite his passing away. Many strategy "experts" today talk of time horizons from one to five years depending on the stability of the organisation and its associated industry.

Activity1Strategies affect how a business operates. Therefore, all aspects of the business must be considered when developing a strategy.

In considering strategic decision making for an organisation, what do you consider to be an appropriate time frame for long-term planning? What did you take into account when coming up with your answer?


THENATUREOFSTRATEGY

It was six men of Indostan,

To learning much inclined,

Who went to see the Elephant

(Though all of them were blind),

That each by observation

Might satisfy his mind.

The First approached the Elephant,

And happening to fall

Against his broad and sturdy side,

At once began to bawl:

"God bless me! but the Elephant

Is very like a wall!"

The Second, feeling of the tusk,

Cried, -"Ho! what have we here

So very round and smooth and sharp?

To me 'tis mighty clear,

This wonder of an Elephant

Is very like a spear!"

The Third approached the animal,

And happening to take

The squirming trunk within his hands,

Thus, boldly up and spoke:

"I see," -quoth he- "the Elephant

Is very like a snake!"

The Fourth reached out an eager hand,

And felt about the knee:


"What most this wondrous beast is like

Is mighty plain," -quoth he,-

"'Tis clear enough the Elephant

Is very like a tree!"

The Fifth, who chanced to touch the ear,

Said- "E'en the blindest man

Can tell what this resembles most;

Deny the fact who can,

This marvel of an Elephant

Is very like a fan!"

The Sixth no sooner had begun

About the beast to grope,

Then, seizing on the swinging tail

That fell within his scope,

"I see," -quoth he,- "the Elephant

Is very like a rope!"

And so, these men of Indostan

Disputed loud and long,

Each in his own opinion

Exceeding stiff and strong,

Though each was partly in the right,

And all were in the wrong!

MORAL,

So, oft in theologic wars

The disputants, I ween,

Rail on in utter ignorance

Of what each other mean;

And prate about an Elephant

Not one of them has seen!

Source: The Blind Man and the Elephant, John Godfrey Saxe.


Each of the six blind men in the above poem detail their impression of the elephant yet have the different perspectives of the elephant because they have come into contact with different parts of the elephant. Most important to note is that none of them had the perspective of the whole animal.

And so, this describes strategy. You could put six experts in strategy (the blind men) in a room with the same organisational information (the elephant) in front of them and ask them to develop a strategy for the firm. Depending on their perspectives of strategy, interpretation of the information, and the context of their analysis, six different strategies may be presented, and each will argue vehemently for their case.

Activity2Think of an organisation with which you are familiar and consider their strategies.

Do you think they could be pursuing a different strategy? Would a different strategy produce different outcomes for the organisation?

In trying to develop an understanding of strategy, a distinction will be made between two elements of the strategic management process:

• Strategy formulation • Strategy implementation

Some people believe that the delineation between formulation and implementation does not exist. Therefore, two schools of thought are also presented:

• Rational (formal and logical approach) • Behavioural (people’s reactions and responses to changing environments)

The rational school of thought focuses on strategy formulation where formal planning processes and logical approaches to planning make up what most people are comfortable working with. The benefit of this school of thought is the provision of a framework within which people can operate that is easy to relate to, clearly defined and logical.

On the other hand, strategy implementation is seen to be the domain of the behavioural school of thought. The planning process is developed in the organisational “office” in a systematic and calculating manner; however, the implementation encounters a myriad of factors such as:

• Organisational structures • Peoples’ individual responses • Stakeholders’ reactions to change • Political issues that impinge or restrict the capacity to achieve the plans made

Two old adages come to mind: 1. The best laid plans of mice and men 2. Murphy’s Law – if it can go wrong it will go wrong

The distinction between formulation and implementation is clearly manifested in the real world where an organisation will commit extensive resources to the planning process. However, it does not see fruition for a number of reasons including:

• Impractical in the real world • No support for implementation • Lack of ownership through the organisation • Poor communication • Lack of leadership


Activity3Manyofyouwhohavebeeninvolvedinstrategic(business)planningprocesseswillhavefoundthatstrategyimplementa>onhasevolveddifferentlyfromplannedstrategy.

Withinyourorganisa>on,howeffec>vearethestrategicformula>onandimplementa>onphases?Whatwillyouconsiderinformula>ngyouranswer?

Five Ps of Strategy

Believing that a single definition or context for strategy was way too difficult, Mintzberg (1998) presented a different viewpoint, suggesting that different conceptualisations of strategy where needed for differing circumstances. Leaving it within a single domain perpetuated the process element of strategic management and hindered the thinking or planning element. Subsequently, Mintzberg put the concept of the five Ps of strategy on the table – presenting five different ways of thinking about the essential characteristics of strategic planning.

These are:

1. Strategy as a plan

A guide for conscious course of action, a path from a current state to a desired future end state. When BHP and Billiton merged to form BHP Billiton, it reflected a specific plan be a major global player in their industry.

2. Strategy as a pattern

A consistency of behaviour over time; a pattern in a stream of actions. A company that perpetually markets the more expensive products in its industry pursues what is commonly known as a high-end strategy. David Jones is an example of a department store adopting a high-end strategy. Microsoft’s formation of strategic alliances demonstrates a pattern of behaviour that clearly identifies the strategies that they are committed to.

3. Strategy as position

The targeting of products in markets or locating a company within its environment. That means matching the company’s product to a market or attempting to create a strategic fit between the external environment and internal resources. With computers taking over from typewriters, Remington realigned its internal resources to remain competitive within an external environment that had changed due to demand.

4. Strategy as perspective

Represents strategy as a philosophy of the business. For example, in terms of interacting with the customer or the way I which members of the organisation view their business, and what it takes for them to maintain a competitive advantage. It can also be the way in which goods or services are presented or supplied to the customer. For instance, Ferrari motor vehicles are renowned for engineering excellence by both the members of the organisation and its customers. The Body Shop approaches business from a strong environmental mindset which is reflected in their vision and


product development policies.

5. Strategy as a ploy

Under this definition, strategy is a means of gaining market share or a strategic competitive advantage through a specific manoeuvre, designed to outwit or outperform a competitor. For example, recognising their competitors, Harley Davidson might plan a specific trade fair for dealers to launch a new model motor bike. Their ploy is to commit their dealers to Harley Davidson motor cycles before the competitor’s model is launched so that the dealers have less capacity to stock their competitors’ products (reducing floor space and inventory capacity).

Activity4Which of the five P perspectives do you think the following companies might take and why?

Why have a Strategy?

Mintzberg et al. (1998) provide several reasons why strategic planning is thought to benefit an organisation. These are: • Strategy sets direction • Strategy focuses effort • Strategy defines the organisation • Strategy provides consistency

Mintzberg et al, suggest pros and cons about these points.

Strategy sets direction While this is clearly beneficial, the danger is that it can close an organisation’s eyes and make it difficult to react to changes in the external environment

Strategy focuses effort The downside risk is that managers within an organisation can suffer from ‘groupthink’, thus reducing the capability for innovative thinking in the organisation.

Strategy defines the organisation The danger here is that organisations can have a rich diversity inherent within the organisation that forms their culture, and that can get overlooked or lost by an overly simplistic perspective of “what this organisation is”.

Strategy provides consistency

a) McDonalds

b) Faber Castle

c) Dick Smith Foods

d) Virgin Blue


Consistency for consistency’s sake, without having a clear reason, can reduce the options open to an organisation to respond to threats or opportunities in the market environment.

Activity4Mintzberg provides 4 reasons why strategic planning is of benefit to an organisation. What other benefits do you think there are to have a strategy. Think of the different organisation types when formulating your answer – government, commercial and not for profit.

WhatisStrategicThinking?Ifyouthoughttherewasconfusionoverthemeaningofstrategy,strategicthinkingisawholenewdiscussion.Thereisabsolutelynodoubtthattheconceptofstrategicthinkinghasconfusedtherealmsofstrategicmanagement.Exactlywhatstrategicthinkingisandwhereitsitsinthestrategicmanagementcontextneedstobeclearlydefined.

Themuddywatersofstrategyneedtobeclearedsothatthereisamoreunifiedapproachtothismanagementparadigm.Someseestrategicthinkingasanewandimprovedtypeofstrategicplanning,whilstothersseeitasacon>nuumoftheexis>ngstrategicprocess.Muchfocusinthepasthasbeenaboutthe“StrategicPlan”,thatdocumentthatendstheprocess,whilstliblehasbeensaidabouttheprocessofgecngthere.Strategicthinkingisaboutthatprocess.AsIanWilson(1994)hassuggested,“strategicthinkingisexactlythat–thinkingaboutstrategy”.

Whythinkstrategically?

Strategicthinkingispartoftheprocessthatprecedestheplan,implementstheplanandsubsequentlythatmaintainstheplanasalivingdocument.Thereareseveralreasonsthatitisimportanttothinkstrategically.Theseinclude:

• Businessenvironmentistougher• Businessenvironmentisnottolerantofmediocrity• Operatesinaneconomicrealitycharacterisedbyrapidchange• Changesin:

o Informa>ontechnologyo Networkedorganisa>onso Knowledgeworkerscarryingtheirbusinessaroundintheirheadso Globalisa>on

Whatdoesitinvolve?Mintzberg(1994)emphasisesthatstrategicthinkingisnotan“alterna>venomenclatureforeverythingfallingundertheumbrellaofstrategicmanagement”.Inexplainingthedifferencebetweenstrategicplanningandstrategicthinking,Mintzbergarguesthatstrategicplanningisthera>onalandsystema>cprogrammingof“pre-iden>fied”strategiesfromwhichastrategicbusinessplanisdeveloped.Strategicthinking,ontheotherhand,isa“synthesizingprocess”thatusesintui>on,crea>vity,adap>venessandflexibility,andresultsinanintegratedperspec>veeoftheorganisa>onanditsstrategicintent.Mintzbergseestradi>onal,ra>onal


planningapproachestendingtoundermineratherthanunifyanorganisa>oninitsendeavoursbythetop-downapproach,andthetendencytoimpairsuccessfulorganisa>onaladapta>ontochange.

PrahaladandHamel(1989)echothesesen>ments;describingtradi>onalapproachestoplanningas“formfilling”.Theyrefertostrategicthinkingas“cralingstrategicarchitecture”,whilsts>llemphasisingMintzberg’sgeneralthemesofcrea>vity,explora>on,andunderstandingdiscon>nui>es.Adichotomybetweenthecrea>veversustheanaly>cispervasiveinmanyofthediscussionsaboutstrategicthinkingandstrategicplanning.

Insummarythen,itcanbedebatedthatstrategicthinkinginvolvesthinkingandac>ngwithinacertainsetofassump>onsandpoten>alac>onop>ons,whilstcon>nuallychallengingthemandpoten>allyleadingtonewandmoreappropriateac>ons.

Activity5Howwouldyoudefinestrategicthinking?Doyouthinkithasavalue,andwhyorwhynot?

WhyisStrategicthinkingimportant?

Timeshavechanged,andthedaysofthestablebusinessenvironmentaregone.Usingtheanalogybetweenanorganisa>onandahotairballoon,youcangetthefeelofhowdifficultitcanbetomanoeuvreanorganisa>on.Thehotairballooncanonlybecontrolledinaver>caldimension;however,itisslowtoreacttothechangingtemperatureoftheairinitsballoon.Itis,however,totallyundertheinfluenceoftheenvironmentwhentravellinginahorizontaldirec>on.Anorganisa>on,likewise,isslowtoreactandissubjecttothemul>tudeofimpactsfromtheexternalenvironment.Skilfulpilotsandstrategistsmusttrusttheirins>nctsandintui>on,dependonexperienceandthecon>nualinputofinforma>ontoassistwithstrategicdecisionmaking.

OrganisationalchangeDespiteanorganisa>on’smanysuccesses,therewillbe>meswhenitseffortsfallshortofexpecta>ons.Issueshaveemergedfromareasleastexpectedandthoseissuesthatweregoingtobe“dealtwith”neverwere–notproperlyanyway.Whathasnotbeenmanagedwellinsuchcircumstancesischange.Twothingsleadtothis.Firstly,thedynamicofthechangewasnotunderstoodinarealis>candcoherentway.Secondly,thesystems(health,economics)wereviewedfromanarrowperspec>veanddonotforma“wholeofpicture”approach(Sanders,1998).AsSandersstates:

Wedidnotseethewholepicture.Whatwasmissingwasanunderstandingaboutthedynamicofchangeinthe“bigpicture”contextinwhichourdecisionswerebeingmade.

OrganisationalCapability

Developing an organisation’s capability for strategic thinking is one of the most important facets to an organisations’ performance. It is this capability that allows human capital to be realised as a strategic asset and allows the development of sustainable organisational strategic capability (Sloan, 2006).

There is a need to be able to see and understand the changes taking place in the external environment. There also needs to be a link between the context in which the organisation operates and the ‘content’ of the organisation itself.


Thinking about strategy can no longer be a once a year task – it now needs to be an ongoing process that is in the organisational culture if it is to survive. It is no longer a process on its own but inherent with risk management and continuous improvement cycles.

Strategic thinking needs to take a top-down, “big picture” view of the organisation. It is predicated on involvement of most organisational members. To think strategically, everyone must be involved, connected, committed and alert to change. It is “the calculated chaos” of an organisation’s work that drives staff thinking and enables them to reflect on their actions. Strategic thinking is not about detailed tactics it is based upon a deep understanding of your business.

Getitright

Strategic thinking is important because we are concerned with doing the right things rather than doing things right. With strategic thinking you are deciding what to do, whereas with tactical thinking you are deciding how to do it. A statement differentiating strategic and tactical mindsets is:

There is nothing worse than a sharp picture of a fuzzy concept. Clearly strategy must precede tactics. Strategic thinking must precede tactical thinking.

Activity6How does strategic thinking make a difference to the way things are done in your organisation? What improvements could be made?

StrategicPlanningvsStrategicThinking

It has been over a decade since the term ‘strategic planning’ lost its popularity and was replaced by the term ‘strategic thinking’. Many strategists use the terms differently. Mintzberg sees the developed strategy of a company as ‘the synthesis of strategic thoughts’, whereas other more traditional strategists such as Porter, believe that it is ‘the analysis of these strategic thoughts’ that will generate a thorough strategy. Porter and Mintzberg advocate the strategic planning process; however, some opponents argue that strategic planning is a complete waste of time since strategy development also includes a human element, and as such expands further than just analysing hard data (Simpson, 1998). However, Liedka (1998) presents a perspective showing the differences between strategic planning and strategic thinking.

Strategic Thinking Strategic Planning

Vision of the future Only the shape of the future can be predicted

A future that is predictable and specific in detail.

Strategic formulation and implementation

Formulation and implementation are interactive rather than sequential and discrete.

The roles of formulation and implementation can be neatly divided


Another perspective of the difference between strategic planning and strategic thinking is: • Strategic thinking is highly structured and has a tangible output by a business plan. • Strategic thinking is less structured, outputs less formal and a shared understanding exists.

StrategicCapability

Strategic capability is the organisations ability to use the necessary resources to achieve a desired objective. It is about being able to provide the required products or services to customers now, or at some point in the future. Resources are rarely productive on their own. Often, other resources are required to fulfil the potential work effort. For example, an airline pilot is totally unproductive without a plane, cabin crew, baggage handlers, mechanics, air traffic controllers, fuel and cargo.

An organisation’s capability is its ability to exploit its resources better than its competitors in response to customer needs. This leads to the concept of strategic fit because the organisation sets out to ensure its resources use matches the external environment in which it operates. However, the organisation will need to be adaptable and flexible if it is to use this capability to take advantage of environmental opportunities and to negate environmental threats. In order to gain a competitive advantage over it competitors, an organisation will stretch its resources (strategic stretch).

Whereas the resources may be intangible, organisational capabilities are not. The power behind capability is the ability to be able to use the resources both efficiently and effectively. An organisation may have the ‘best resources’ available, but if it is not able to use them to create a sustain a competitive advantage, or create a core competency, then the resource is wasted.

Managerial role in strategy making

Lower-level managers have a voice in strategy making, as well as greater latitude to respond to developing conditions.

Senior executives obtain the needed information from lower-level managers, and then use it to create a plan which is, in turn, disseminated to managers for implementation.

Control Relies on self-reference- a sense of strategic intent and purpose embedded in the minds of managers throughout the organisation that guides their choices daily in a process that is often difficult to measure and monitor from above

Asserts control through measurement systems, if organisations can measure and monitor important variables both accurately and quickly.

Managerial role in implementation

All managers understand the larger system, the connection between their roles and the functioning of that system, as well as the interdependence between the various roles that comprise the system

Lower-level managers need only know his or her own role well and can be expected to defend only his or her own turf.

Strategy Making Sees strategy and change as inescapably linked and assumes that finding new strategic options and implementing them successfully is harder and more important than evaluating them.

The challenge of setting strategic direction is primarily analytic

Process and outcome Sees the planning process itself as a critical value-adding element.

Focus is on the creation of the plan as the ultimate objective.


Resources don’t have to be or rare to improve organisational capability, they can be common. Woolworths has exploited its logistics resources far better than Coles and, subsequently, finds itself with a competitive advantage.

Several organisation functions are fundamental to support organisational capability. These include decision-making processes, and internal processes and procedures. Equally, individuals within the organisation need to interact and cooperate in support of a capability enhancing culture.

Activity7

Consider an organisation with which you are familiar and identify any capabilities it may possess to exploit its resources.

Corecompetency

Core competencies are resources, activities or processes that are fundamental to achieve and maintain an organisation’s competitive advantage. To achieve this advantage, core competencies must fulfil the following criteria:

• The competence must fundamentally underpin the value in the product or service. • The competence leads to level of performance that are significantly better than its competitors • The competence must be difficult for competitors to imitate

Core competencies emerge from resources and reflect a way of bundling resources to the benefit of the organisation. Newly discovered competencies can manifest themselves in emergent strategies.

Three traits regarding core competencies are important. These are: 1. Core competencies are a set of skills and knowledge manifesting itself in the resources of the

organisation. 2. Identifying and building core competencies are a senior manager’s responsibility, as they have a

broad perspective of the organisation and can readily discern such competences 3. There needs to be a depth to the core competencies of the organisation in order for it to be capable

of responding to external environmental changes and maintaining any sustainable competitive advantage.

Some examples of core competencies are:

• Honda’s core competencies are its depth of expertise in petrol engine technology and small engine design (lawn mowers, motor cycles and motor cars).

• Sony’s core competencies are its expertise in electronic technology and its ability to translate that expertise into innovative products.

Activity8Give some thought to the Microsoft Company and identify what you would consider to be the core competencies of that organisation.


CompetitiveAdvantage

Competitive advantage means that you are providing customer with what they want, but in a way that is hard for your competitors to imitate.

The primary objective of strategy is to achieve a sustainable competitive advantage. To achieve this, an organisation needs to do two things:

1. Create a competitive advantage based upon its current core competence and capability 2. Build additional competence to secure long-term viability and to be able to maintain its

competitive position in the market.

External environment factors can significantly influence the capacity of an organisation to achieve competitive advantage. In 1997, the competitive positions of firms with the automotive industry was affected by the fall in price of crude oil and changing exchange rates. Falling oil prices helped large vehicle manufacturers, whilst falling exchange rates helped Japanese and German vehicle manufacturers. Provided they were able to respond in a timely manner, a competitive advantage was obtained.


Activity9

Read the following quote from Sun Tzu and discuss its relevance to today’s business, government and not-for-profit operations.

He who has a thorough knowledge of his own conditions as well as the conditions of the enemy is sure to win battles. He who has a thorough knowledge of his own conditions but not the conditions of the enemy has an even chance of winning and losing a battle. He who has neither a thorough knowledge of his own conditions nor of the enemy’s is sure to lose in every battle.


StrategicDecisionMaking

Whether you are in the strategic planning process or are implementing a strategic plan, choices, issues and ‘out-of-left-field’ situations will arise, and decisions will need to be made. Decision making is a fundamental part of any manager or leader’s role. Some important facets of strategic decisions include the following:

• Strategic decisions should help the organisation focus on achieving a competitive advantage, preferably a sustainable one.

• Strategic decisions need to consider the scope of the organisation’s activities. The scope determines such things as the industry sector, product range and geographic coverage

• Strategic decisions ensure a strategic fit exists. That is, an organisations resources ‘fit’ with the external environment in which the firm competes. Sufficient resources (physical, reputational, organisational, financial, intellectual, technological) are required to compete effectively within the external environment (political, economic, social, technological environmental, legal).

• Strategic decision making should incorporate the concept of ‘strategic stretch’. That is, to build on or stretch an organisation’s resources and competencies to create opportunities and to capitalise on them.

• Strategic decisions can involve major changes to the organisation’s resources in order to fend off threats or take advantage of opportunities.

• Strategic decisions must flow through to operational decision making. They must translate into the implementation phase to ensure there is consistency between the strategic goal and the day-to-day activities.

• Strategic decisions reflect the values and expectations of the various stakeholders of the organisation – those who have power in, and around the organisation.

The implications of these characteristics have various consequences:

• Strategic decisions can be complex • Strategic decisions may involve change in organisations • Strategic decisions may have to be made in conditions of uncertainty • Strategic decisions demand an integrated approach to managing the organisation

StrategicLenses

How often have you heard the statement “they are looking at the world through rose coloured glasses”, thus indicating they are seeing the world from a very favourable perspective? Johnson, Scholes and Whittington (2005) offer a similar perspective through which strategy in organisations can be viewed – that is, the lenses through which they view and think about organisational strategy.

StrategyasDesign

This is the perspective that strategy development, can be a logical process by virtue of systematic thinking and reasoning.

Strategic thinking considers which economic forces and constraints are being imposed upon the organisation and through analytical and evaluative techniques it establishes clear strategic intent and direction.

Its weakness lies in its implementation and its tendency to adopt a top-down approach. What looks good in theory can fail due to the external environment influencing positioning and people influencing the rationality behind the process, e.g. change is not embraced, and the strategy fails.

Some key management implications of this view are: • Objective analysis, planning systems and evaluation techniques exist in most organisations and

represent, as Johnson, Scholes and Whittington (2005) put it, “the orthodox language of strategy” • It caters for a structured and logical approach to managing complexity • That managers are formal method of control over events and people (for example, through

reporting mechanisms) • That rationality is deeply rooted in the human psyche by our education system and ways of


thinking.

StrategyasExperience

There is a tendency for the organisational strategy to build on and be a continuation of what has gone before. Future strategies are influenced by the experiences of managers and other key people in the organisation and are, subsequently, based on the adaption of past strategies. Also, embedded in the culture of the organisation are assumptions about the way things should be done.

As individuals, we have all got experiential backgrounds and inherent biases that influence our perspective of the world and allow us to create mental models that help us to make sense of what is happening around us. The collective mindsets of individual within an organisation form the basis of its culture, which in turn influences responses to proposed changes.

There are two sides to this coin. Does an organisation move down the path of a new strategy, disregarding what it knows and has learned for the sake of a new direction only to be ‘thinking outside the box’? Or, do we develop an organisational strategy disregarding all that we have learned to date? Most strategies develop in an incremental way building on existing strategies and changing gradually.

Successful strategy implementation is often a result of having evolved gradually. To quote an adage “how do you eat an elephant…one bite at a time”.

Strategy as Ideas

The ideas lens sees strategy as the creation of order and innovation from the variety and diversity that exists within an organisation. Strategic development is seen as emergent rather than planned. Strategy emerges as people within and around the organisation cope with an uncertain and changing environment.

The ideas lens caters for a bottom-up approach with new ideas and innovation coming from anywhere in, or outside, the organisation. An organisation that is responsive and receptive to new ideas, and respects and enhances variety, will be in a far better position to innovate and adapt to external changes.

A changing and unpredictable environment will foster a diverse range of ideas, whereas high degrees of control and strict hierarchy are likely to encourage conformity.

Consensus contributes to innovation and change because it facilitates collective action and a clear understanding of different perspectives. Innovation is likely to occur in organisations that have few boundaries or silos. Both formal and informal communication channels, networks and linkages fostering interaction and cooperation are required to produce innovative and creative ideas.

Innovation and creativity need sufficient order to emerge. On the one hand, too much order leads to rigidity and negates innovation, but no control leads to a lack of cohesion. Research clearly indicates that an ordered but open environment is most conductive to innovation.

There are several organisational implications of this view within the context of strategic management: • Senior management do not come with crystal balls and therefore should not be expected to know,

understand or plan the future – the future will evolve • Management needs to be open to internal and external environmental changes and encourage

variety and diversity within the organisation • Formal planning processes and systems must take their rightful place and support innovation • Accept that change is likely to be incremental than disruptive

Activity10

Give thought to the three ‘lenses’ – strategy as design, strategy as experience and strategy as ideas – and determine which one, you feel most comfortable with.

If you were the CEO of an organisation, which ‘lens’ do you believe is the most effective in terms of the business world we now operate in?


By understanding the lenses perspectives, we can appreciate how different people will come to different conclusions based on the lens through which they view the environment or a particular task. The important point is not that any one lens is necessarily right, but that by understanding the perspective taken, we can more accurately interpret outcomes. In addition, we again see the dichotomy of paradigm regarding strategy planning and strategy implementation being raised. Strategy planning and development naturally tend to come from the design lens perspective because that is how we inherently perceive the planning process. The implementation process has a strong tendency to the experience lens as it involves the behavioural aspects of people.

Innovation in strategy is attributed to the ideas lens. Experience tends to reproduce what has gone before even though this may not have occurred in the current setting. Design, by definition, excludes innovation and creativity in that the basis is rationality and logic.

People make sense of complex situations in more than one way. Subsequently, our capacity to see and think about different perspectives of a particular problem or issue enhances our capacity to handle the situation.

StrategicModels


TheRationalStrategicModel

According to many strategy textbooks, strategic thinking can be divided into two segments: strategy formulation followed by strategy implementation.

Strategy formulation (see Figure 2) involves: • Strategic analysis including:

o Developing a vision (long-term) and mission (medium-term) statement, and a set of corporate objectives

o Completing an environmental analysis (internal and external) o Completing a SWOT analysis (Strengths, Weakness, Opportunities and Threats)

• Making strategic decisions as to the strategic path and intent of the organisation – these are made at the varying levels of the organisation from corporate to the business unit.

• Developing tactical business plans to reflect the strategic business plan

The strategy planning process determines where you are now, where you want to go, and how to get there.

The implementation phase involves: • Allocating resources (personnel, financial etc.) • Establishing a control system including:

o Allocating tasks o Reporting processes o Managing the change process

• Setting up an organisational structure that fits the strategy

The downside of this model is that it does not consider the dynamics of the real world. If the world was a predictable and consistent environment, the model may be well suited. They dynamic strategic model is an alternative model that supports strategic thinking not only through the initial planning process, but through the whole of life process.

TheDynamicStrategicModel

Theorists have recognised the issues with a purely rational, if not, static model. They see strategy as a more


dynamic and iterative process. Quinn (1978) developed an approach called “logical incrementalism” where strategic outcomes were attained through a series of step by step actions. Quinn states:

Constantly integrating the simultaneous incremental process of strategy formulation and implementation is the central art of effective strategic management.

Numerous other strategists took this to another level stating that these steps were completed by numerous people at all levels within an organisation, a theory that supports the rationale behind strategic thinking.

With the significant levels of change occurring at all levels of business, the traditional rational model (though still useful) is no longer the complete process. Markides (1999) describes the strategy process as a perpetual, integrated process requiring continuous review and reassessment.

Mintzberg (1987) saw the affects of change on strategic processes and made the distinction between deliberate strategy and emergent strategy. Emergent strategy is not a result of the strategic planning process, but a result of the interaction of the organisation with its environment. This interaction can manifest itself by way of opportunities or threats.

EmergentStrategies

Although organisations evaluate their environment as part of a strategic process, no one can predict the future. Issues and situations will arise that will challenge any assumptions made and contradict our forecasts. Equally, opportunities or threats may present themselves spontaneously, outside of a formal strategic ‘planning’ process. Mintzberg presents the following model incorporating emergent strategies.

The formal process produces the intended strategy which may then take two paths: 1. Be put into action and become a deliberate strategy providing the organisation with a purpose and

direction 2. Become an unrealised strategy as the strategic plan has more value as a door stop or dust collector

Having taken the path of the deliberate strategy, the organisation’s aim is to achieve a ‘realised strategy’. However, two ‘interference paths’, both emergent, may impact on the organisations ability to realise its intended strategy – one providing a choice of action, where the other does not. Imposed strategies are those that are forced upon an organisation or industry, for example, through the actions of acts of parliament and industry regulators where compliance may be mandatory, and strategies may have to adapt.

On the other hand, an emergent strategy develops when an organisation chooses to take a series of actions in response to environmental changes that turn into a consistent pattern of behaviour over time but were not intended in the original planning.


When a deliberate strategy is realised, the outcome matches the intended strategy, but when an emergent strategy is realised it implies that organisational learning has taken place.

In a rapidly changing and unpredictable business environment one could hypothesise that the unintended strategic process may shape the future of many organisations. We should therefore take emergent strategy seriously. Why? Because environmental changes can affect even the largest of companies, and the length of the strategic planning cycle would normally preclude rapid response when needed. This does not mean that the rational process should not be taken seriously. Some organisations such as government departments, airlines and resource companies do need a formal framework to support their operational stability and requirements.

Schools of Strategy

In this section we will introduce ten different schools of strategy. Strategic thinking can be influenced by context, circumstance and environmental events. By presenting the different schools you will see some of the many perspectives of strategy that exists. Mintzberg, Ahlstrand and Lampel (1998) outline ten different schools of thought. These schools of strategic thought are:

1. The design school 2. The planning school 3. The positioning school 4. The entrepreneurial school 5. The cognitive school 6. The learning (or emergent) school 7. The power school 8. The cultural school 9. The environmental school 10. The configuration (or transformation) school

The underlying basis that the Mintzberg et al, try and portray is that the ‘strategy beast’ is not independently any one of these, but a blend of different schools, each representing a partial picture of what strategy is. Academics may be free to analyse individual elements of the ‘beast’; however, practitioners have to be able to work and operate within the context of the whole beast.

The ten schools are divided into two categories – the prescriptive and the descriptive schools attempt to understand the historical reasons why a given company is where it is at a particular point in time.

PrescriptiveSchools

DesignSchool

The design school sees strategic management as a process of attaining a fit between the internal resources and capabilities of the organisation and the possibilities in the external business environment – a concept known as ‘strategic fit’.

PlanningSchool

The planning school follows the tenets of formal strategic planning, following a rigorous set of steps from analysis to the development of the formal plan. It uses analytical tools in the exploration of various strategic alternatives.

PositioningSchool

The positioning school is influenced by the ideas and works of Porter (1996). It advocates that the strategy must place the business within the context of the industry taking into account five factors to improve its competitive position. These are:


1. Barriers to entry for new entrant to the market 2. Actions of suppliers 3. Actions of buyers 4. Actions of competitors 5. Threats of substitutes to existing products

DescriptiveSchools

Entrepreneurialschool

The entrepreneurial school sees strategy formation as a visionary process that emphasises that a primary role must be played by a charismatic leader within an organisation.

Cognitiveschool

The cognitive school regards strategy formation as a mental process. It looks at the minds of strategists and analyses how people perceive patterns and how they process information.

LearningSchool

The learning school sees strategy formation as an emergent process where people learn about emerging issues and their organisation’s ability to deal with it. Management of the organisation pays close attention to outcomes and incorporates ‘lessons learned’ into ongoing strategic direction.

PowerSchool

The power school sees strategy development as a process of negotiation between the organisation’s internal and external power brokers.

CulturalSchool

The cultural school views strategy formation as a process that reflects the culture of the organisation. This involves all levels of the organisation, the corporate culture and the underlying sub-cultures.

EnvironmentalSchool

The environmental school focuses on the organisation’s response to changes in the external environment. Here, strategy formation is dependent on how the organisation responds to these changes.

ConWigurationSchool

In this final approach, the purpose of strategy formation is seen as a process of transforming the organisation from one type of decision-making structure into another.

None of the above schools are able to completely take an organisation through the strategic management process – from the gathering of information to its synthesis and eventual choice of different courses of action. Coming back to the analogy of the blind men, none of their descriptions of the elephant were adequate yet they all held elements of the truth. As it is with the ten schools; none are complete in themselves. However, all have useful concepts and advantages and disadvantages.

Activity11

Mintzberg et al, (1989) states:


Every strategy process has to combine various aspects of the different schools. Can anyone possibly imagine strategy making in any serious organisation without mental and social aspects, without the demands of the environment, the energy of leadership, and the forces of organisation, without trade offs between the incrementals and the revolutionary? And can any strategy process be realistically pursued as purely deliberate or purely emergent? To deny learning is as silly as to deny control.

Within your organisation which schools do you see affecting the corporate strategy?

What impact do they have and why?

If there is a missing school what is it and why would it be beneficial to have?

TheLiedtkaModelofStrategicThinking

So far, we have looked at many different perspectives that strategic thinking can be influenced by. These have included:

• The different lenses • Mintzberg’s five Ps • Ten schools of strategy

However, we have yet to see a model on strategic thinking. Liedtka (1998) developed a model which defines strategic thinking as a way of thinking, with five very specific and clearly identifiable characteristics. Figure 4 illustrates the five elements of strategic thinking.

ElementOne

The first element is a “Systems Perspective”. Liedtka (1998) states:


A systems or holistic view. Strategic thinking is built on the foundation of a systems perspective. It includes a mental model of the complete end-to-end system of value creation, and an understanding of the interdependencies it contains. It involves looking at each part not as a sum of its specific tasks, but as a contribution to a larger system that produces outcomes of value…

One of the fundamental strengths of a very good strategic thinker is that they have a highly developed mental model of the complete process of value creation within the context of their organisation and beyond. They must understand the interdependencies within the value-creation chain. The model must be robust, flexible and be able to cater for the vagaries of both the internal and external environments. Furthermore, the greater the business context the better the model must be. Preferably, the model will cater for “greater than industry context” termed a ‘business ecosystem’ by Moore (1993). He further states:

I suggest that a company be viewed not as a member of a single industry but as part of a business ecosystem that crosses a variety of industries.

The strategic thinker must also understand the interdependencies inside the irganisation in order for it to operate effectively. Each business unit must, therefore, work together. From a systems perspective there needs to be a fit between all levels of the business ecosystem and the strategic thinker must understand this. According to Liedtka (1998) the fit within the business ecosystem is fundamental to success. The actions of a well-intentioned but parochial manager seeking to optimise their part of the business ecosystem without considering the whole organisation will be damaging.

ElementTwo

The second element is a “Focus on Intent”. Strategic thinking is intent-driven meaning it provides a focal point for the organisation to move towards. Subsequently, it allows members of the organisation to know what the organisation does and where it is going. This allows the people in an organisation to strive for those organisational goals (Liedtka 1998).

Hamel and Prahalad (1994) state: Strategic intent is our term (that) implies a particular point of view about the long-term market or competitive position that a firm hopes to build over the coming decade or so. Hence, it conveys a sense of direction. A strategic intent is differentiated; it implies a competitively unique point of view about the future. It holds out to employees the promise of exploring new competitive territory. Hence, it conveys a sense of discovery. Strategic intent has an emotional edge to it; it is a goal that employees perceive as inherently worthwhile. Hence, it implies a sense of destiny. Direction, discovery, and destiny, these are the attributes of strategic intent.

Strategic thinkers need a context in which to operate – intent provides this. We need to know where we are going otherwise any strategy will do. This quote from Lewis Carol’s Alice in wonderland puts in nicely:

At the fork in the road, Alice asked the Cheshire Cat which road to take. The Cheshire cat asked, “Where do you want to go?” To which Alice replied, “I don’t know”. “Then, “said the cat, “it doesn’t much matter which way you go”.

ElementThree

The third element is “Thinking in Time”. Thinking in time means strategic thinkers link the past, present and future. Traditional strategic focus is on rational thinking and is usually influenced by one perspective. Liedtka advocates the importance of a complete temporal view, fundamentally requiring the strategist to consider different perspectives.

This is supported by Hamel and Prahalad (1994) who advocate that strategy is not solely driven by the future, but by the gap between the current reality and the intent for the future. These gaps will usually require the organisation to stretch its capabilities. This stretch may find the organisation short on resources and without adequate infrastructure. From a traditional perspective, a fit is sought between the organisation, external environment and opportunities or threats presented. Strategic intent supports a misfit created by stretch, fostering a more creative environment using limited resources or infrastructure.

A number of perspectives need to be held. Taking the viewpoint of the lenses, experience is the past,


design is the present and ideas are the future. However, one by itself is not sufficient – you need to be able to look through all three lenses to be a true strategic thinker. This provides us with a way of linking the past, present and future. Neustadt (1986) states that:

Thinking in time (has) three components. One is recognition that the future has no place to come from but the past; hence the past has predictive value. Another is recognition that what matters for the future in the present is departures from the past, alterations, changes, which prospectively or actually divert familiar flows from accustomed channels…A third component is continuous comparison, an almost constant oscillation from the present to future to past and back, heedful or prospective change, concerned to expedite, limit, guide, counter, or accept it as the fruits of such comparison suggest.

Strategic thinking connects the past, present and future. The past provides the stability and continuity for the future to be made through innovation and ideas. Handy (1994) believes that a sense of continuity with our past and a sense of direction for our future is required in order to maintain a feeling of control in the midst of change. Having our strategic intent in mind, he puts forth an interesting question:

Having seen the future that we want to create, what must we keep from that past, lose from the past, and create in our present, to get there.

Activity12

Does your organisation ‘Think in Time’? How? If not, what would your organisation need to do to take a more comprehensive temporal perspective?

ElementFourThe fourth element is “hypothesis driven” and is about coming up with hypotheses and then testing them. It allows the organisation to take a number of tactics including:

• New idea hypothesis • Strategy improving hypothesis • Scenario driven hypothesis

This allows the strategist to consider a wide range of options (Liedtka 1998).

The hypothesis driven element brings in the ‘What… If’ and ‘ If… Then’ scenario elements of the strategic thinking. According to Liedtka (1998) this approach is somewhat foreign to most managers:

Yet in an environment of ever-increasing information availability and decreasing time to think, the ability to develop good hypotheses and test them efficiently is critical…the ability to work well with hypotheses is the core competence of the best strategy consulting firms.

Strategic thinking needs to be both creative and critical, although accomplishing both types of thinking simultaneously is seen to be difficult. The concept of divergent thinking (creativity/what…if ) followed by convergent thinking (critical/if…then) allows us to operate in both modes.

Element Five

The fifth element is intelligently opportunistic. Liedtka (1998) states:

The dilemma involved in using a well-articulated strategy to channel organisational efforts effectively and efficiently must always be balanced against the risks of losing sight of alternative strategies better suited to a changing environment…There must be room for intelligent opportunism that not only furthers intended strategy but that also leaves open the possibility of new strategies emerging.


This concept is supported by Mintzberg (1999) with his model of emergent strategies. The strategic thinker must not be hamstrung by the ‘well-articulated strategy’ and be able to move freely in a changing environment. Being opportunistic requires a comfortable suit of clothes, not a straight jacket!

Traditionally, strategy formulation has been a top-down approach and is not conducive to intelligent opportunism. To be truly effective the organisation will need to realise that intelligent opportunism is an organisation-wide attribute and not simply limited to the domain of the executive suite. This allows the scope for ideas and innovation to increase substantially with the addition of a multitude of new mindsets. Hamel (1997) puts it differently:

If you want to create a point of view about the future, if you want to create a meaningful strategy, you have to create in your company a hierarchy of imagination. And that means giving a disproportionate share of voice to the people who have until now been disenfranchised from the strategy making process. It means giving a disproportionate share of voice to the young people…(and)…to the geographic periphery of your organisation – because, typically, the farther away you are from headquarters, the more creative people are: they don’t have the dead hand of bureaucracy and orthodoxy on them. And it means giving a disproportionate share of voice to newcomers.

Summary of the five elements

The five elements, taken together describe a more complete strategic thinker that can see both the forest and the trees. They can see every level of strategy (global, corporate, business and operational) and can see from the past to the point of strategic intent.

The strategic thinker will also be able to validate how appropriate the organisation’s strategic intent is and intervene if it needs a change of direction. But it will remain open to emergent strategies (both in response to opportunities and threats). In summary, the benefits of the five elements to the strategic thinker are (Liedtka, 1998):

• The system perspective allows them to improve their operations, processes and infrastructure to enhance organisational performance both in effectiveness and efficiency

• The intent focus will allow a clear understanding of the organisation’s direction • The ability to ‘think in time’ allows them to consider lessons learned, where they are now and where

they want to be when making decisions. It will also allow for a streamlined implementation in trying to achieve a ‘realised strategy’.

• The ability to be ‘hypothesis driven’ supports a more creative problem-solving environment • ‘Intellectual Opportunism’ supports environmental scanning, makes the strategic thinker less likely

to be caught out by the unexpected, and instead makes them able to see and grasp opportunities.


References

Hamel, G., & Prahalad, C. K. (1994). Competing for the future, Boston: Harvard School Press

Hamel, G. (1996). Strategy as revolution, Harvard Business Review, July-August 69 – 82.

Hamel, G in Gibson, Rowan, ed. (1997). Rethinking the future: business, principles, competition, control, leadership, markets and the world. London: Nicholas Brealey Publishing.

Johnson, Scholes and Whittington (2005), Exploring Corporate Strategy. Prentice Hall.

Lawrence, Eton, (1999) Strategic Thinking: A Discussion Paper: http://www.csun.edu/bus302/Course/Materials/Cases/strategic.thinking.pdf

Liedtka, J.M (1998) “Linking Strategic Thinking with Strategic Planning”, Strategy and Leadership, 26(4), 30 – 35.

Liedtka, J (1998) Strategic thinking: can it be taught? Long Range Planning, 31., (1), 120 – 129

Lineham, R, (2004), Strategic Thinking: A Discussion, www.irrelevantechoes.com

Mintzberg, H (1994), The fall and rise of strategic planning, Harvard Business Review, Jan-Feb, pp. 107 – 114

Mintzberg, H, Ahlstrand, B and Lampel, J (1998) Strategy Safari: A Guided Tour Through the Wilds of Strategic Management, The Free Press, New York, 1998.

Mintzberg, H. (1999), “Bees, flies, and CEOs; do we have too many bees making strategy and not enough flies?” Across The Board, January

Moore, J. (1993), Predators and prey: a new ecology of competition, Harvard Business Review, May/June, 76.

Neustadt, R. & May, E. (1986) Thinking in time: the uses of history for decisionmakers. New York: Free Press, p. 251

Porter M (1996), What is strategy. Harvard Business Review. Nov-Dec, pp. 61-78

Sloan, J (2006) Learning to think strategically. Elsevier, Sydney.

http://www.csun.edu/bus302/Course/Materials/Cases/strategic.thinking.pdf

http://www.csun.edu/bus302/Course/Materials/Cases/strategic.thinking.pdf

http://www.irrelevantechoes.com


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THE STRATEGIC MANAGEMENT PROCESS

In trying to develop an understanding of strategy, a distinction will be made between two elements of the strategic management process:

strategy formulationstrategy implementation

Some people believe that the delineation between formulation and implementation does not exist. Therefore, two schools of thought are also presented:

rational (formal and logical approach)behavioural (people's reactions and responses to changing environments).

The rational school of thought focuses on strategy formulation where formal planning processes and logical approaches to planning make up what most people are comfortable working with. The benefit of this school of thought is the provision of a framework within which people can operate that is easy to relate to, clearly defined and logical.

On the other hand strategy implementation is seen to be the domain of the behavioural school of thought. The planning process is developed in the organisational "office" in a systematic and calculating manner; however, the implementation encounters a myriad of factors such as:

organisational structurespeoples' individual responsesstakeholders' reactions to changepolitical issues that impinge or restrict the capacity to achieve the plans made.

Two old adages come to mind:

1. The best laid plans of mice and men 2. Murphy's Law—if it can go wrong it will go wrong

The distinction between formulation and implementation is clearly manifested in the real world where an organisation will commit extensive resources to the planning process. However, it does not see fruition for a number of reasons including:

impractical in the real worldno support for implementationlack of ownership through the organisationpoor communicationlack of leadership.


A C T I V I T Y

Many of you who have been involved in strategic (business) planning processes will have found that strategy implementation has evolved differently from planned strategy.

Within your organisation, how effective are the strategic formulation and implementation phases? What will you consider in formulating your answer?


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FIVE PS OF STRATEGY

Believing that a single definition or context for strategy was way too difficult, Mintzberg (1998) presented a different viewpoint, suggesting that different conceptualisations of strategy were needed for differing circumstances. Leaving it within a single domain perpetuated the process element of strategic management and hindered the thinking or planning element. Subsequently, Mintzberg put the concept of the five Ps of strategy on the table—presenting five different ways of thinking about the essential characteristics of strategic planning. These are:

1. Strategy as a plan

A guide for a conscious course of action, a path from a current state to a desired future end state. When BHP and Billiton merged to form BHP Billiton, it reflected a specific plan to be a major global player in their industry.

2. Strategy as a pattern

A consistency of behavior over time; a pattern in a stream of actions. A company that perpetually markets the more expensive products in its industry pursues what is commonly known as a high-end strategy. David Jones is an example of a department store adopting a high-end strategy. Microsoft's formation of strategic alliances demonstrates a pattern of behaviour that clearly identifies the strategies that they are committed to.

3. Strategy as position

The targeting of particular products in particular markets, or locating a company within its environment. That means matching the company's product to a market or attempting to create a strategic fit between the external environment and internal resources. With computers taking over from typewriters, Remington realigned its internal resources to remain competitive within an external environment that had changed due to demand.




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4. Strategy as perspective

Represents strategy as a particular philosophy of the business. For example, in terms of interacting with the customer or the way in which members of the organisation view their business, and what it takes for them to maintain a competitive advantage. It can also be the way in which goods or services are presented or supplied to the customer. For instance, Ferrari motor vehicles are renowned for engineering excellence by both the members of the organisation and its customers. The Body Shop approaches business from a strong environmental mindset which is reflected in their vision and product development policies.

5. Strategy as a ploy

Under this definition, strategy is a means of gaining market share or a strategic competitive advantage through a specific manoeuver, designed to outwit or outperform a competitor. For example, recognising their competitors, Harley Davidson might plan a specific trade fair for dealers to launch a new model motor bike. Their ploy is to commit their dealers to Harley Davidson motor cycles before the competitor's model is launched so that the dealers have less capacity to stock their competitors' products (reducing floor space and inventory capacity).

A C T I V I T Y

Which of the five P perspectives do you think the following companies might take and why?

a) McDonalds

b) Faber Castle

c) Dick Smith Foods

d) Virgin Blue


WHY HAVE A STRATEGY?

Mintzberg et al. (1998) provide a number of reasons why strategic planning is thought to benefit an organisation. These are:

strategy sets directionstrategy focuses effortstrategy defines the organisationstrategy provides consistency.

Mintzberg et al. suggest pros and cons about these points.

Strategy sets direction

While this is clearly beneficial, the danger is that it can close an organisation's eyes and make it difficult to react to changes in the external environment.

Strategy focuses effort

The downside risk is that managers within an organisation can suffer from "groupthink", thus reducing the capability for innovative thinking in the organisation.

Strategy defines the organisation

The danger here is that organisations can have a rich diversity inherent within the organisation that forms their culture, and that can get overlooked or lost by an overly simplistic perspective of "what this organisation is".

Strategy provides consistency

Consistency for consistency's sake, without having a clear reason, can reduce the options open to an organisation to respond to threats or opportunities in the market environment.

A C T I V I T Y

Mintzberg provides 4 reasons why strategic planning is of benefit to an orgainsation. What other benefits do yoiu think there are to having a strategy. Think of the different organisation types when formulating yoiur answer – government, commercial and not for profit.


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W H AT I S S T R AT E G I C T H I N K I N G ?

If you thought there was confusion over the meaning of strategy, strategic thinking is a whole new discussion. There is absolutely no doubt that the concept of strategic thinking has confused the realms of strategic management. Exactly what strategic thinking is and where it sits in the strategic management context needs to be clearly defined.

The muddy waters of strategy need to be cleared so that there is a more unified approach to this management paradigm. Some see strategic thinking as a new and improved type of strategic planning, whilst others see it as a continuum of the existing strategic process. Much focus in the past has been about the "Strategic Plan"; that document that ends the process, whilst little has been said about the process of getting there. Strategic thinking is about that process. As Ian Wilson (1994) has suggested, "strategic thinking is exactly that—thinking about strategy".

WHY THINK STRATEGICALLY?

Strategic thinking is part of the process that precedes the plan, implements the plan and subsequently that maintains the plan as a living document. There are several reasons that it is important to think strategically. These include:

business environment is tougherbusiness environment is not tolerant of mediocrityoperates in an economic reality characterised by rapid changechanges in:

information technologynetworked organisationsknowledge workers carrying their business around in their headsglobalisation.

WHAT DOES IT INVOLVE?

Mintzberg (1994) emphasises that strategic thinking is not an "alternative nomenclature for everything falling under the umbrella of strategic management". In explaining the difference between strategic planning and strategic thinking, Mintzberg argues that strategic planning is the rational and systematic programming of "pre-identified" strategies from which a strategic business plan is developed. Strategic thinking, on the other hand, is a "synthesizing process" that uses intuition, creativity, adaptiveness and flexibility, and results in an integrated perspective of the organisation and its strategic intent. Mintzberg sees traditional, rational planning approaches tending to undermine rather than unify an organisation in its endeavours by virtue of the top-down approach, and the tendency to impair successful organisational adaptation to change.

Prahalad and Hamel (1989) echo these sentiments; describing traditional approaches to planning as "form filling". They refer to strategic thinking as "crafting strategic architecture", whilst still emphasising Mintzberg's general themes of creativity, exploration, and understanding discontinuities. A dichotomy between the creative versus the analytic is pervasive in many of the discussions on the subject of strategic thinking and strategic planning.

In summary then, it can be debated that strategic thinking involves thinking and acting within a certain set of assumptions and potential action options, whilst continually challenging them and potentially leading to new and more appropriate actions.


� A C T I V I T Y 9

How would you define strategic thinking? Do you think it has a value, and why or

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why not?


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WHY IS STRATEGIC THINKING IMPORTANT?

Times have changed and the days of the stable business environment are gone. Using the analogy between an organisation and a hot air balloon, you can get the feel of how difficult is can be to manoeuvre an organisation. The hot air balloon can only be controlled in a vertical dimension; however, it is slow to react to the changing temperature of the air in its balloon. It is, however, totally under the influence of the environment when travelling in a horizontal direction. An organisation, likewise, is slow to react and is subject to the multitude of impacts from the external environment. Skilful pilots and strategists must trust their instincts and intuition, depend on past experience and the continual input of information to assist with strategic decision making.

Organisational change

Despite an organisation's many successes, there will be times when its efforts fall short of expectations. Issues have emerged from areas least expected and those issues that were going to be "dealt with" never were—not properly anyway. What has not been managed well in such circumstances is change. Two things lead to this. Firstly the dynamics of the change were not understood in a realistic and coherent way. Secondly the systems (health, economic) were viewed from a narrow perspective and do not form a "whole of picture" approach (Sanders, 1998). As Sanders states:

We did not see the whole picture. What was missing was an understanding about the dynamic of change in the "big picture" context in which our decisions were being made.

Organisational capability

Developing an organisation's capability for strategic thinking is one of the most important facets to an organisations' performance. It is this capability that allows human capital to be realised as a strategic asset and allows the development of sustainable organisational strategic capability (Sloan, 2006).

There is a need to be able to see and understand the changes taking place in the external environment. There also needs to be a link between the context in which the organisation operates and the "content" of the organisation itself.

Thinking about strategy can no longer be a once a year task—it now needs to be an ongoing process that is in the organisational culture if it is to survive. It is no longer a process on its own but inherent with risk management and continuous improvement cycles.

Strategic thinking needs to take a top-down, "big picture" view of the organisation. It is predicated on involvement of most organisational members. To think strategically, everyone must be involved, connected, committed, and alert to change. It is "the calculated chaos" of an organisation's work that drives staff thinking and enables them to reflect on their actions. Strategic thinking is not about detailed tactics—it is based upon a deep understanding of your business.

Get it right

Strategic thinking is important because we are concerned with doing the right things rather than doing things right. With strategic thinking you are deciding what to do, whereas with tactical thinking you are deciding how to do it. A statement differentiating strategic and tactical mindsets is:

There is nothing worse than a sharp picture of a fuzzy concept . Clearly strategy must precede tactics. Strategic thinking must precede tactical thinking.


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How does strategic thinking make a difference to the way things are done in your

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organisation? What improvements could be made?


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S T R AT E G I C P L A N N I N G V S S T R AT E G I C T H I N K I N G

It has been over a decade since the term "strategic planning" lost its popularity and was replaced by the term "strategic thinking". Many strategists use the terms differently. Mintzberg sees the developed strategy of a company as "the synthesis of strategic thoughts", whereas other more traditional strategists such as Porter, believe that it is "the analysis of these strategic thoughts" that will generate a thorough strategy. Porter and Minzberg advocate the strategic planning process; however, some opponents argue that strategic planning is a complete waste of time since strategy development also includes a human element, and as such expands further than just analysing hard data (Simpson 1998). However, Liedka (1998) presents a perspective showing the differences between strategic planning and strategic thinking.

Strategic Thinking Strategic Planning

Vision of the Only the shape of the future can be A future that is predictable and

Future predicted. specific in detail.

Strategic Formulation and implementation are The roles of formulation and

Formulation and interactive rather than sequential and implementation can be neatly

Implementation discrete. divided.

Managerial Role Lower-level managers have a voice in Senior executives obtain the

in Strategy strategy making, as well as greater latitude needed information from

Making to respond to developing conditions.lower-level managers, and then

use it to create a plan which is,

in turn, disseminated to

managers for implementation.

Control Relies on self-reference—a sense of Asserts control through

strategic intent and purpose embedded in measurement systems,

the minds of managers throughout the assuming that organizations

organization that guides their choices on a can measure and monitor

daily basis in a process that is often difficult important variables both

to measure and monitor from above. accurately and quickly.

Managerial Role All managers understand the larger system, Lower-level managers need

in the connection between their roles and the only know his or her own role

Implementation functioning of that system, as well as the well and can be expected to

interdependence between the various rolesdefend only his or her own turf.

that comprise the system.

Strategy Making Sees strategy and change as inescapably The challenge of setting

linked and assumes that finding new strategic direction is primarily

strategic options and implementing them analytic.

successfully is harder and more important


Another perspective of the difference between strategic planning and strategic thinking is:

Strategic thinking is highly structured and has a tangible output by virtue of a business plan. Strategic thinking is less structured, outputs less formal and a shared understanding exists.

than evaluating them.

Process andSees the planning process itself as a critical Focus is on the creation of the

Outcome value-adding element. plan as the ultimate objective.


S T R AT E G I C C A PA B I L I T Y

Strategic capability is the organisations ability to use the necessary resources to achieve a desired objective. It is about being able to provide the required products or services to customers now, or at some point in the future. Resources are rarely productive on their own. More often than not, other resource are required to fulfil the potential work effort. For example, an airline pilot is totally unproductive without a plane, cabin crew, baggage handlers, mechanics, air traffic controllers, fuel, and cargo.

An organisation's capability is its ability to exploit its resources better than its competitors in response to customer need. This leads to the concept of strategic fit because the organisation sets out to ensure its resources use matches the external environment in which it operates. However, the organisation will need to be adaptable and flexible if it is to use this capability to take advantage of environmental opportunities and to negate environmental threats. In order to gain a competitive advantage over it competitors, an organisation will stretch its resources (strategic stretch).

Whereas the resources may be intangible, organisational capabilities are not. The power behind capability is the ability to be able to use the resources both efficiently and effectively. An organisation may have the "best resources" available, but if it is not able to use them to create or sustain a competitive advantage, or create a core competency, then the resource is wasted.

Resources don't have to be or rare to improve organisational capability, they can be common. Woolworths has exploited its logistics resources far better than Coles and, subsequently, finds itself with a competitive advantage.

A number of organisation functions are fundamental in order to support organisational capability. These include decision-making processes, and internal processes and procedures. Equally, individuals within the organisation need to interact and cooperate in support of a capability enhancing culture.

A C T I V I T Y

Consider an organisation with which you are familiar and identify any capabilities it may possess to exploit its resources.


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C O R E C O M P E T E N C Y

Core competencies are resources, activities or processes that are fundamental to achieve and maintain an organisation's competitive advantage. In order to achieve this advantage, core competencies must fulfil the following criteria:

The competence must fundamentally underpin the value in the product or service.The competence leads to levels of performance that are significantly better than its competitors.The competence must be difficult for competitors to imitate.

Core competencies emerge from resources and reflect a way of bundling resources to the benefit of the organisation. Newly discovered competencies can manifest themselves in emergent strategies.

Three traits regarding core competencies are important. These are:

1. Core competencies are a set of skills and knowledge manifesting itself in the resources of the organisation. 2. Identifying and building core competencies are a senior manager's responsibility, as they have a broad

perspective of the organisation and can readily discern such competences. 3. There needs to be a depth to the core competencies of the organisation in order for it to be capable of

responding to external environmental changes and maintaining any sustainable competitive advantage.

Some examples of core competencies are:

Honda's core competencies are its depth of expertise in petrol engine technology and small engine design (lawn mowers, motor cycles and motor cars).Sony's core competencies are its expertise in electronic technology and its ability to translate that expertise into innovative products.

A C T I V I T Y

Give some thought to the Microsoft Company and identify what you would consider to be the core competencies of that organisation.


C O M P E T I T I V E A DVA N TAG E

Competitive advantage means that you are providing customers with what they want, but in a way that is hard for your competitors to imitate.

The primary objective of strategy is to achieve a sustainable competitive advantage. To achieve this, an organisation needs to do two things:

1. Create a competitive advantage based upon its current core competence and capability. 2. Build additional competence to secure long-term viability and to be able to maintain its competitive position

in the market.

External environmental factors can significantly influence the capacity of an organisation to achieve competitive advantage. In 1997, the competitive positions of firms within the automotive industry were affected by the fall in price of crude oil and changing exchange rates. Falling oil prices helped large vehicle manufacturers, whilst falling exchange rates helped Japanese and German vehicle manufacturers. Provided they were able to respond in a timely manner, a competitive advantage was obtained.

A C T I V I T Y

Read the following quote from Sun Tzu and discuss its relevance to today's business, government, and not-for-profit operations.

He who has a thorough knowledge of his own conditions as well as the conditions of the enemy is sure to win battles. He who has a thorough knowledge of his own conditions but not the conditions of the enemy has an even chance of winning and losing a battle. He who has neither a thorough knowledge of his own conditions nor of the enemy's is sure to lose in every battle.


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S T R AT E G I C D E C I S I O N M A K I N G

Whether you are in the strategic planning process or are implementing a strategic plan, choices, issues and "out-of-left-field" situations will arise and decisions will need to be made. Decision making is a fundamental part of any manager or leader's role. Some important facets of strategic decisions include the following:

Strategic decisions should help the organisation focus on achieving a competitive advantage, preferably a sustainable one.Strategic decisions need to consider the scope of the organisation's activities. The scope determines such things as the industry sector, product range, and geographic coverage.Strategic decisions ensure a strategic fit exists. That is, an organisations resources 'fit' with the external environment in which the firm competes. Sufficient resources (physical, reputational, organisational, financial, intellectual, technological) are required to compete effectively within the external environment (political, economic, social, technological, environmental, legal).Strategic decision making should incorporate the concept of 'strategic stretch'. That is, to build on or stretch an organisation's resources and competencies to create opportunities and to capitalise on them.Strategic decisions can involve major changes to the organisation's resources in order to fend off threats or take advantage of opportunities.Strategic decisions must flow through to operational decision making. They must translate into the implementation phase to ensure there is consistency between the strategic goal and the day-to-day activities.Strategic decisions reflect the values and expectations of the various stakeholders of the organisation—those who have power in, and around the organisation.

The implications of these characteristics have a number of consequences:

Strategic decisions can be be complex.Strategic decisions may involve change in organisations.Strategic decisions may have to be made in conditions of uncertainty.Strategic decisions demand an integrated approach to managing the organisation.



S T R AT E G I C L E N S E S

How often have you heard the statement "they are looking at the world through rose coloured glasses", thus indicating they are seeing the world from a very favourable perspective? Johnson, Scholes and Whittington (2005) offer a similar perspective through which strategy in organisations can be viewed—that is, the lenses through which they view and think about organisational strategy.

STRATEGY AS DESIGN

This is the perspective that strategy development, can be a logical process by virtue of systematic thinking and reasoning.

Strategic thinking considers which economic forces and constraints are being imposed upon the organisation, and through analytical and evaluative techniques it establishes clear strategic intent and direction.


Its weakness lies in its implementation and its tendency to adopt a top-down approach. What looks good in theory can fail in reality due to the external environment influencing positioning and people influencing the rationality behind the process, e.g. change is not embraced and the strategy fails.

Some key management implications of this view are:

objective analysis, planning systems and evaluation techniques exist in most organisations and represent, as Johnson, Scholes and Whittington (2005) put it, "the orthodox language of strategy"it caters for a structured and logical approach to managing complexitythat managers are a formal method of control over events and people (for example, through reporting mechanisms)that rationality is deeply rooted in the human psyche by virtue of our education system and ways of thinking.

STRATEGY AS EXPERIENCE

There is a tendency for the organisational strategy to build on, and be a continuation of what has gone before. Future strategies are influenced by the experiences of managers and other key people in the organisation and are, subsequently, based on the adaptation of past strategies. Also, embedded in the culture of the organisation are assumptions about the ways things should be done.

As individuals, we have all got experiential backgrounds and inherent biases that influence our perspective of the world and allow us to create mental models that help us to make sense of what is happening around us. The collective mindsets of individual within an organisation form the basis of its culture, which in turn influences responses to proposed changes.

There are two sides to this coin. Does an organisation move down the path of a new strategy, disregarding what it knows and has learned for the sake of a new direction only to be seen as "thinking outside the box"? Or, do we develop an organisational strategy disregarding all that we have learned to date? In reality most strategies develop in an incremental way building on existing strategies and changing gradually.

Successful strategy implementation is often a result of having evolved gradually. To quote an old adage "how do you eat an elephant … one bit at a time".

STRATEGY AS IDEAS

The ideas lens sees strategy as the creation of order and innovation from the variety and diversity that exists within an organisation. Strategic development is seen as emergent rather than planned. Strategy emerges as people within and around the organisation cope with an uncertain and changing environment.

The ideas lens caters for a bottom-up approach with new ideas and innovation coming from anywhere in, or outside, the organisation. An organisation that is responsive and receptive to new ideas, and respects and enhances variety, will be in a far better position to innovate and adapt to external changes.


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A changing and unpredictable environment will foster a diverse range of ideas, whereas high degrees of control and strict hierarchy are likely to encourage conformity.

Consensus contributes to innovation and change because it facilitates collective action and a clear understanding of different perspectives. Innovation is likely to occur in organisations that have few boundaries or silos. Both formal and informal communication channels, networks and linkages fostering interaction and cooperation are required to produce innovative and creative ideas.

Innovation and creativity need sufficient order to emerge. On the one hand, too much order leads to rigidity and negates innovation, but no control leads to a lack of cohesion. Research clearly indicates that an ordered but open environment is most conducive to innovation.

There are several organisational implications of this view within the context of strategic management:

senior management do not come with crystal balls and therefore should not be expected to know, understand or plan the future—the future will evolvemanagement needs to be open to internal and external environmental changes and encourage variety and diversity within the organisationformal planning processes and systems must take their rightful place and support innovationaccept that change is likely to be incremental than disruptive.

A C T I V I T Y

Give thought to the three 'lenses'—strategy as design, strategy as experience and strategy as ideas—and determine which one, you feel most comfortable with.

If you were the CEO of an organisation, which 'lens' do you believe is the most effective in terms of the business world we now operate in?


By understanding the lenses perspectives we can appreciate how different people will come to different conclusions based on the lens through which they view the environment or a particular task. The important point is not that any one lens is necessarily right, but that by understanding the perspective taken, we can more accurately interpret outcomes. In addition, we again see the dichotomy of paradigm regarding strategy planning and strategy implementation being raised. Strategy planning and development naturally tend to come from the design lens perspective because that is how we inherently perceive the planning process. The implementation process has a strong tendency to the experience lens as it involves the behavioural aspects of people.

Innovation in strategy is attributed to the ideas lens. Experience tends to reproduce what has gone before even though this may not have occurred in the current setting. Design, by definition, excludes innovation and creativity in that the basis is rationality and logic.

Figure 1 shows the relationship of the three lenses against the criteria of rationality and innovation.

Figure 1

New ideas/ high innovation

Ideas

Design

Experience

Conformity/ low innovation

Low rationality High rationality

Source: Johnson, Scholes and Whittington (2005), Exploring Corporate Strategy


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People make sense of complex situations in more than one way. Subsequently, our capacity to see and think about different perspectives of a particular problem or issue enhances our capacity to handle the situation.


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S T R AT E G I C M O D E L S

THE RATIONAL STRATEGIC MODEL

According to many strategy textbooks, strategic thinking can be divided into two segments: strategy formulation followed by strategy implementation.

Strategy formulation (see Figure 2) involves:

strategic analysis including:

developing a vision (long-term) and mission (medium-term) statement, and a set of corporate objectivescompleting an environmental analysis (internal and external)completing a SWOT analysis (Strengths, Weakness, Opportunities and Threats)

making strategic decisions as to the strategic path and intent of the organisation—these are made at the varying levels of the organisation from corporate to the business unit

developing tactical business plans to reflect the strategic business plan.

Figure 2: The primary components of the strategic process

Business-level strategy

The strategy planning process determines where you are now, where you want to go, and how to get there.

Strategic analysis

Vision, mission and values

External analysisSWOT

Internal analysis

opportunities and threatsstrengths and weaknesses

Corporate-level strategy

Strategic Choices

Strategy implementation

Resourcing

Designing Designing control

organisational structure systems

Managing strategic

change


The implementation phase involves:

allocating resources (personnel, financial etc.)

establishing a control system including:

allocating tasksreporting processesmanaging the change process

setting up an organisational structure that fits the strategy.


The downside of this model is that it does not take into account the dynamics of the real world. If the world was a predictable and consistent environment, the model may be well suited. The dynamic strategic model is an alternative model that supports strategic thinking not only through the initial planning process, but through the whole of life process.

THE DYNAMIC STRATEGIC MODEL

Theorists have recognised the issues with a purely rational, if not, static model. They see strategy as a more dynamic and iterative process. Quinn (1978) developed an approach called "logical incrementalism" where strategic outcomes were attained through a series of step by step actions. Quinn states:

Constantly integrating the simultaneous incremental process of strategy formulation and implementation is the central art of effective strategic management.

Numerous other strategists took this to another level stating that these steps were completed by a numerous people at all levels within an organisation, a theory that supports the rationale behind strategic thinking.

With the significant levels of change occurring at all levels of business, the traditional rational model (though still useful) is no longer the complete process. Markides (1999) describes the strategy process as a perpetual, integrated process requiring continuous review and reassessment.

Mintzberg (1987) saw the affects of change on strategic processes and made the distinction between deliberate strategy and emergent strategy. Emergent strategy is not a result of the strategic planning process, but a result of the interaction of the organisation with its environment. This interaction can manifest itself by way of opportunities or threats.


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E M E RG E N T S T R AT E G I E S

Although organisations evaluate their environment as part of a strategic process, no one can predict the future. Issues and situations will arise that will challenge any assumptions made and contradict our forecasts. Equally, opportunities or threats may present themselves spontaneously, outside of a formal strategic "planning" process. Mintzberg presents the following model incorporating emergent strategies.

Figure 3: Mintzberg's forms of strategy

Imposed strategy

Intended Deliberate Realised strategy strategy strategy

Unrealised Emergent strategy strategy




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The formal process produces the intended strategy which may then take two paths:

1. Be put into action and become a deliberate strategy providing the organisation with a purpose and direction 2. Become an unrealised strategy as the strategic plan has more value as a door stop or dust collector.

Having taken the path of the deliberate strategy, the organisation's aim is to achieve a "realised strategy". However, two "interference paths", both emergent, may impact on the organisations ability to realise its intended strategy—one providing a choice of action, where the other does not. Imposed strategies are those that are forced upon an organisation or industry, for example, through the actions of acts of parliament and industry regulators where compliance may be mandatory and strategies may have to adapt. On the other hand, an emergent strategy develops when an organisation chooses to take a series of actions in response to environmental changes that turn into a consistent pattern of behaviour over time, but were not intended in the original planning process.

Organisations need to be alert to recognise advantageous emergent strategies, and need to be flexible to accept them and establish a competitive advantage. On the other hand, an ineffective intended strategy may not bring the desired results, and a beneficial emergent strategy will not be allowed to thrive. For instance, an organisation planning to enter the Asian market in late 1996, may have completed a thorough and detailed strategic plan; however, the Asian currency crisis of 1997 could have brought about a significant change to the original planning.

When a deliberate strategy is realised, the outcome matches the intended strategy, but when an emergent strategy is realised it implies that organisational learning has taken place.

In a rapidly changing and unpredictable business environment one could hypothesise that the unintended strategic process may shape the future of many organisations. We should therefore take emergent strategy seriously. Why? Because environmental changes can affect even the largest of companies, and the length of the strategic planning cycle would normally preclude rapid response when needed. This does not mean that the rational process should not be taken seriously. Some organisations such as government departments, airlines and resource companies do need a formal framework to support their operational stability and requirements.

S C H O O L S O F S T R AT E G Y

In this section we will introduce ten different schools of strategy. Strategic thinking can be influenced by context, circumstance and environmental events. By presenting the different schools you will see some of the many perspectives of strategy that exist. Mintzberg, Ahlstrand and Lampel (1998) outline ten different schools of thought. These schools of strategic thought are:

1. The design school 2. The planning school 3. The positioning school 4. The entrepreneurial school 5. The cognitive school 6. The learning (or emergent) school


7. The power school 8. The cultural school 9. The environmental school 10. The configuration (or transformation) school.

The underlying basis that the Mintzberg et al. try and portray is that the "strategy beast" is not independently any one of these, but a blend of different schools, each representing a partial picture of what strategy is. Academics may be free to analyse individual elements of the "beast"; however, practitioners have to be able to work and operate within the context of the whole beast.

The ten schools are divided into two categories—the prescriptive and the descriptive schools. The prescriptive schools attempt to identify corporate directions based on an analysis of its current situation and that of its operating environment. The descriptive schools attempt to understand the historical reasons why a given company is where it is at a particular point in time.

PRESCRIPTIVE SCHOOLS

Design school

The design school sees strategic management as a process of attaining a fit between the internal resources and capabilities of the organisation and the possibilities in the external business environment—a concept known as 'strategic fit'.

Planning school

The planning school follows the tenets of formal strategic planning, following a rigorous set of steps from analysis to the development of the formal plan. It uses analytical tools in the exploration of various strategic alternatives.

Positioning school

The positioning school is influenced by the ideas and works of Porter (1996). It advocates that the strategy must place the business within the context of the industry taking into account five factors to improve its competitive position. These are:

1. Barriers to entry for new entrant to the market 2. Actions of suppliers 3. Actions of buyers 4. Actions of competitors 5. Threats of substitutes to existing products.

DESCRIPTIVE SCHOOLS

Entrepreneurial school

The entrepreneurial school sees strategy formation as a visionary process that emphasises that a primary role must be played by a charismatic leader within an organisation.

Cognitive school

The cognitive school regards strategy formation as a mental process. It looks at the minds of strategists and analyses how people perceive patterns and how they process information.


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Learning school

The learning school sees strategy formation as an emergent process where people learn about emerging issues and their organisation's ability to deal with it. Management of the organisation pays close attention to outcomes and incorporates 'lessons learned' into ongoing strategic direction.

Power school

The power school sees strategy development as a process of negotiation between the organisation's internal and external power brokers.

Cultural school

The cultural school views strategy formation as a process that reflects the culture of the organisation. This involves all levels of the organisation, the corporate culture and the underlying sub-cultures.

Environmental school

The environmental school focuses on the organisation's response to changes in the external environment. Here, strategy formation is dependent on how the organisation responds to these changes.

Configuration school

In this final approach, the purpose of strategy formation is seen as a process of transforming the organisation from one type of decision-making structure into another.

None of the above schools are able to completely take an organisation through the strategic management process—from the gathering of information to its synthesis and eventual choice of different courses of action. Coming back to the analogy of the blind men, none of their descriptions of the elephant were adequate yet they all held elements of the truth. As it is with the ten schools; none are complete in themselves. However, all have useful concepts and advantages and disadvantages.

A C T I V I T Y

Mintzberg et al. (1989) state:

Every strategy process has to combine various aspects of the different schools. Can anyone possibly imagine strategy making in any serious organisation without mental and social aspects, without the demands of the environment, the energy of leadership, and the forces of organisation, without tradeoffs between the incrementals and the revolutionary? And can any strategy process be realistically pursued as purely deliberate or purely emergent? To deny learning is as silly as to deny control.

Within your organisation which schools do you see affecting the corporate strategy? What impact do they have and why?

If there is a missing school what is it and why would it be beneficial to have?


T H E L I E D T K A M O D E L O F S T R AT E G I C T H I N K I N G

So far we have looked at many different perspectives that strategic thinking can be influenced by. These have included:

the different lensesMintzberg's five Psten schools of strategy.

However, we have yet to see a model on strategic thinking. Liedtka (1998) developed a model which defines strategic thinking as a particular way of thinking, with five very specific and clearly identifiable characteristics. Figure 4 illustrates the five elements of strategic thinking.

Figure 4: The five elements of strategic thinking

Systems Intent

Perspective Focused

Strategic

Thinking

IntelligentThinking in

Opportunism Time

Hypothesis

Driven


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ELEMENT ONE

The first element is a "Systems Perspective". Liedtka (1998) states:

A systems or holistic view. Strategic thinking is built on the foundation of a systems perspective. It includes a mental model of the complete end-to-end system of value creation, and an understanding of the interdependencies it contains. It involves looking at each part not as a sum of its specific tasks, but as a contribution to a larger system that produces outcomes of value…

One of the fundamental strengths of a very good strategic thinker is that they have a highly developed mental model of the complete process of value creation within the context of their organisation and beyond. They must understand the interdependencies within the value-creation chain. The model must be robust, flexible and be able to cater for the vagaries of both the internal and external environments. Furthermore, the greater the business context the better the model must be. Preferably, the model will cater for "greater than industry context" termed a 'business ecosystem' by Moore (1993). He further states:

I suggest that a company be viewed not as a member of a single industry but as part of a business ecosystem that crosses a variety of industries.

The strategic thinker must also understand the interdependencies inside the organisation in order for it to operate effectively. Each business unit must, therefore, work together. From a systems perspective there needs to be a fit between all levels of the business ecosystem and the strategic thinker must understand this. According to Liedtka (1998) the fit within the business ecosystem is fundamental to success. The actions of a well-intentioned but parochial manager seeking to optimise their part of the business ecosystem without considering the whole organisation will be damaging.




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ELEMENT TWO

The second element is a "Focus on Intent". Strategic thinking is intent-driven, meaning it provides a focal point for the organisation to move towards. Subsequently, it allows members of the organisation to know what the organisation does and where it is going. This allows the people in an organisation to strive for those organisational goals (Liedtka 1998).

Hamel and Prahalad (1994) state:

Strategic intent is our term (that) implies a particular point of view about the long-term market or competitive position that a firm hopes to build over the coming decade or so. Hence, it conveys a sense of direction. A strategic intent is differentiated; it implies a competitively unique point of view about the future. It holds out to employees the promise of exploring new competitive territory. Hence, it conveys a sense of discovery. Strategic intent has an emotional edge to it; it is a goal that employees perceive as inherently worthwhile. Hence, it implies a sense of destiny. Direction, discovery, and destiny, these are the attributes of strategic intent.

Strategic thinkers need a context in which to operate—intent provides this. We need to know where we are going otherwise any strategy will do. This quote from Lewis Carol's Alice in Wonderland puts it nicely:

At the fork in the road, Alice asked the Cheshire Cat which road to take. The Cheshire cat asked, "Where do you want to go?" To which Alice replied, "I don't know". "Then," said the cat, "it doesn't much matter which way you go".

ELEMENT THREE

The third element is "Thinking in Time". Thinking in time means strategic thinkers link the past, present and future. Traditional strategic focus is on rational thinking and is usually influenced by one perspective. Liedtka advocates the importance of a complete temporal view, fundamentally requiring the strategist to consider different perspectives.

This is supported by Hamel and Prahalad (1994) who advocate that strategy is not solely driven by the future, but by the gap between the current reality and the intent for the future. These gaps will usually require the organisation to stretch its capabilities. This stretch may find the organisation short on resources and without adequate infrastructure. From a traditional perspective, a fit is sought between the organisation, external environment and opportunities or threats presented. Strategic intent supports a misfit created by stretch, fostering a more creative environment using limited resources or infrastructure.

In essence, a number of perspectives need to be held. Taking the viewpoint of the lenses, experience is the past, design is the present and ideas are the future. However, one by itself is not sufficient—you need to be able to look through all three lenses to be a true strategic thinker. This provides us with a way of linking the past, present and future. Neustadt (1986) states that:

Thinking in time (has) three components. One is recognition that the future has no place to come from but the past; hence the past has predictive value. Another is recognition that what matters for the future in the present is departures from the past, alterations, changes, which prospectively or actually divert familiar flows from accustomed channels … A third component is continuous comparison, an almost constant oscillation from the present to future to past and back, heedful of prospective change, concerned to expedite, limit, guide, counter, or accept it as the fruits of such comparison suggest.


Strategic thinking connects the past, present, and future. The past provides the stability and continuity for the future to be made through innovation and ideas. Handy (1994) believes that a sense of continuity with our past and a sense of direction for our future is required in order to maintain a feeling of control in the midst of change. Having our strategic intent in mind, he puts forth an interesting question:

Having seen the future that we want to create, what must we keep from that past, lose from the past, and create in our present, to get there.

A C T I V I T Y

Does your organisation "Think in Time"? How? If not, what would your organisation need to do to take a more comprehensive temporal perspective?

ELEMENT FOUR

The fourth element is "Hypothesis Driven" and is about coming up with hypotheses and then testing them. It allows the organisation to take a number of tactics including:

new idea hypothesisstrategy improving hypothesisscenario driven hypothesis.

This allows the strategist to consider a wide range of options (Liedtka 1998).

The hypothesis driven element brings in the 'What … If' and 'If … Then' scenario elements of the strategic thinking. According to Liedtka (1998) this approach is somewhat foreign to most managers:

Yet in an environment of ever-increasing information availability and decreasing time to think, the ability to develop good hypotheses and test them efficiently is critical … the ability to work well with hypotheses is the core competence of the best strategy consulting firms.

Strategic thinking needs to be both creative and critical, although accomplishing both types of thinking simultaneously is seen to be difficult. The concept of divergent thinking (creativity / what … if ) followed by convergent thinking (critical / if … then) allows us to operate in both modes.


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ELEMENT FIVE

The fifth element is intelligently opportunistic. Liedtka (1998) states: The dilemma involved in using a well-articulated strategy to channel organizational efforts effectively and efficiently must always be balanced against the risks of losing sight of alternative strategies better suited to a changing environment … There must be room for intelligent opportunism that not only furthers intended strategy but that also leaves open the possibility of new strategies emerging.

This concept is supported by Mintzberg (1999) with his model of emergent strategies. The strategic thinker must not be hamstrung by the "well-articulated strategy" and be able to move freely in a changing environment. Being opportunistic requires a comfortable suit of clothes, not a straight jacket!

Traditionally, strategy formulation has been a top-down approach and is not conducive to intelligent opportunism. To be truly effective the organisation will need to realise that intelligent opportunism is an organisation-wide attribute and not simply limited to the domain of the executive suite. This allows the scope for ideas and innovation to increase substantially with the addition of a multitude of new mindsets. Hamel (1997) puts it differently:

If you want to create a point of view about the future, if you want to create a meaningful strategy, you have to create in your company a hierarchy of imagination. And that means giving a disproportionate share of voice to the people who have until now been disenfranchised from the strategy making process. It means giving a disproportionate share of voice to the young people … (and) … to the geographic periphery of your organization—because, typically, the farther away you are from headquarters, the more creative people are: they don't have the dead hand of bureaucracy and orthodoxy on them. And it means giving a disproportionate share of voice to newcomers.

SUMMARY OF THE FIVE ELEMENTS

The five elements, taken together describe a more complete strategic thinker that can see both the forest and the trees. They can see every level of strategy (global, corporate, business and operational), and can see from the past to the point of strategic intent.

The strategic thinker will also be able to validate how appropriate the organisation's strategic intent is and intervene if it needs a change of direction. But it will remain open to emergent strategies (both in response to opportunities and threats). In summary, the benefits of the five elements to the strategic thinker are (Liedtka (1998):

The system perspective allows them to improve their operations, processes and infrastructure in order to enhance organisational performance both in effectiveness and efficiency.The intent focus will allow a clear understanding of the organisation's direction.The ability to "think in time" allows them to consider lessons learned, where they are now and where they want to be when making decisions. It will also allow for a streamlined implementation in trying to achieve a "realised strategy".The ability to be "hypothesis driven" supports a more creative problem solving environment."Intellectual Opportunism" supports environmental scanning, makes the strategic thinker less likely to be caught out by the unexpected, and instead makes them able to see and grasp opportunities.


R E F E R E N C E S

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WEBSITES

Work911.com http://www.work911.com/articles/deadplan.htm

Shearon for schools http://www.shearonforschools.com/Strategy_Safari.htm


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T HI N KI N G


Documents

Strategic Thinking · Under this de!nition, strategy is a means of gaining market share or a strategic competitive advantage through a speci!c manoeuvre, designed to outwit or outperform