Advanced Strategic Management PDF

Advanced strategic management Ay 2023/2024 Murillo, 4 characters, Davide Genta Kimbell Art Museum Where Do We Find Strategy? in the heads of managers, in their articulations of strategy in speeches...

Advanced strategic management Ay 2023/2024 Murillo, 4 characters, Davide Genta Kimbell Art Museum Where Do We Find Strategy? in the heads of managers, in their articulations of strategy in speeches In written documents, in the decisions through which strategy is enacted. Only the last two are observable Advanced Strategic Management Davide Genta 2 THE STRATEGY LENSES: ways of looking at strategy issues differently in order to generate many insights Strategy as design → strategy development encourages a large investment in planning and analysis before making final decisions. can be ‘designed’ in the abstract, as an It tends to exclude improvisation in strategy development and underplay the unpredictable, conservative or political aspects of human organisations. being systematic, analytical and logical. architect Strategies are seen as driven by the taken-for-granted assumptions and ways of doing things embedded in people’s personal experience and the Strategy as experience. →the future strategy organizational culture. Strategy is likely to build on and continue what has gone on before. of an organisation is often heavily influenced But different views and expectations within the organisation exist and they will be resolved but through messy compromises and ad hoc deals. by its experience and that of its managers. the personal experience and interests of key decision-makers need to be understood. It sets low expectations of radical change. Strategy as variety. → strategy as emergent New ideas bubble up through unpredictable and competitive processes. from within and around organisations as It emphasises the importance of promoting diversity in and around organisations, in order to allow the seeding of as many genuinely new ideas as possible. people respond to an uncertain and changing Somebody with a variety lens would look for future strategies at the bottom and the periphery of organisations. They should be ready for surprises. environment with a variety of initiatives. how command of strategy discourse becomes a resource for managers by which to shape ‘objective’ strategic analyses Strategy as discourse. →Managers spend influence, power and legitimacy. Treating strategy as a discourse focuses attention on the ways managers use language to frame strategic problems, make strategy proposals, debate most of their time talking, persuading and issues and then finally communicate strategic decisions. negotiating. They are always using ‘discourse’. The discourse lens tries to look under the surface of strategy to uncover the personal interests and politicking in organisations. Taking a discourse lens thus encourages a somewhat skeptical view. Advanced Strategic Management Davide Genta 3 Strategy as design The managers → rational decision-makers. They should be taking decisions about how to optimise economic performance of their organisations. The principles of economics and the guidelines provided by the decision sciences support and feed the notion that this is what strategic management is all about. Most managers would probably agree that is what they are there to do. Rational choice → managers can and should be able to weigh the benefits and disbenefits of different strategic options on the basis of evidence that informs them of likely outcomes of decisions they make. This is the way strategic management is often explained in textbooks, Above all “how strategic decisions are made” Advanced Strategic Management Davide Genta 4 how strategic decisions are made: Systematic analysis. → forecast, predict, build Analytic thinking scenarios about future precedes and governs impacts → managers can action. → Strategy- think through the making is a linear conditions in which their process. organisation is likely to. operate. Strategic positioning. → basis for the matching of Objectives → clear and organizational strengths explicit and the basis and resources with upon which options are changes in the evaluated environment → SWOT management A strategic decision is then made on the basis of what is considered to be optimal, given all these considerations Advanced Strategic Management Davide Genta 5 assumptions about the nature of organisations: Organisations are hierarchies. → responsibility of top management to plan the destiny of the organisation. Lower levels and the rest of the organisation, carry out these decisions and implement the strategy decided at the top. Organisations are rational systems.→ people in the organisation will adopt and accept the logic behind planning The system can be controlled rationally → Control systems (for example, budgets, targets, appraisals) provide the means by which top management can measure the performance in terms of gaps. Organisations are mechanisms by which strategy can be put into effect→ machines. Advanced Strategic Management Davide Genta 6 Implications for management Dealing with complexity and uncertainty. coping with and talking about complex and uncertain issues in a rational, logical and structured way. Management power and legitimacy. → ways in which they can feel in control and exercise control Rationality is deeply rooted in our way of thinking and in our systems of education. Logic is easy and comfortable Stakeholder expectations. Important stakeholders (banks, financial analysts, investors and employees) may expect and value such an approach. The language of strategy. emphasis on analysis and control, orthodox approach Advanced Strategic Management Davide Genta 7 Strategy as experience (1950s), Nobel prize winner Herbert Simon and management theorist Charles Lindblom rational decision-making models is unrealistic. It is not possible to obtain the information necessary to achieve the sort of exhaustive analysis required; it is not possible to predict an uncertain future; there are limits in terms of cost and time in undertaking such analysis; organisations and environments are changing continually, e r ! >not possible for managers to take long-term decisions at a point in time. ev n e psychological limitations on managers →they cannot be expected to weigh the consequences of all options or be the m st ! objective analysts te a rby The best that can be expected is what Simon termed g re e ‘bounded rationality’; managers do the best they can within t h e s H the limits of their circumstances, knowledge and experience. o f a n k strategy development is the outcome of people’s individual and collective taken-for-granted assumptions and ways of O n e T h doing things. Advanced Strategic Management Davide Genta 8 Individual experience and bias Managers make sense of their complex world by drawing on their previous experience. Human beings recognise and make sense on the basis of past experience and what they come to believe to be true about the world. How we interpret issues we face can be explained in terms of the mental (or cognitive) models we build over time to help make sense of our situations. Managers face a problem → they make sense of it in terms of their mental models. > They relate such problems to prior events and therefore have comparisons to draw upon. Making sense of situations in this way is fast and, most often, efficient. But mental models simplify complexity. →It is not possible to operate in terms of ‘perfect knowledge’. → Managers will access part of that knowledge.> selective attention: selecting from total understanding the parts of knowledge that seem most relevant. Managers also use exemplars and prototypes. → commonly competitors become prototypical. → risk that the ‘chunk’ of information most often used becomes the only information used → stimuli from the environment are selected to fit these dominant representations of reality. → this distortion can lead to severe errors → managers miss crucial indicators because they are, in effect, scanning the environment for issues and events that are familiar or readily recognisable. Advanced Strategic Management Davide Genta 9 Bias Cognitive bias is inevitable. The idea that managers approach problems and issues of a strategic nature entirely dispassionately and objectively is unrealistic. > Tavistock Institute studies The future is likely to be made sense of in terms of the past. when it comes to strategic decisions they are likely to resolve a problem in much the same way as they dealt with a previous one seen as similar. This is one explanation of why strategies tend to develop incrementally from prior strategy Experience may confer legitimacy and power. Managers with extensive experience may well be seen as experts or have significant influence in an organisation Advanced Strategic Management Davide Genta 10 Collective experience and organisational culture How people make sense of situations and issues has a collective aspect > cultural influences are important>Clifford Geertz ‘socially established structures of meaning’. what is ‘taken for granted’ in terms of assumptions and in terms of activities or practices ‘the way we do things around here’. In organisational life>assumptions about top management, their roles and how they should behave. These also differ, for example between Western firms and Japanese firms. Taken-for-granted aspects of culture exist at different levels managerial function organisational unit professional grouping, industry sector national culture. Advanced Strategic Management Davide Genta 11 assumptions and taken-for-granted ways of behaving influence strategy in three ways. explain why managers within a group may see things in similar ways and respond to situations similarly. why such managers may adhere to familiar strategies and be reluctant to change them. why different groups see things differently; Japanese managers see things differently from European ones marketing managers see differently from accountants. → the management of strategy is often characterised by a good deal of bargaining and negotiation to reconcile such differences. Advanced Strategic Management Davide Genta 12 Implications for management The experience lens puts people, their experience and the culture in which they work at the centre of strategy development. strategic change or innovation is likely to be problematic. Dominance of own experience, influence, religious beliefs also sports teams. Strategic drift is a risk.→ the strategy of the organisation gradually drifts away from the realities of its environment and towards an internally determined view of the world. Bargaining and negotiation may take place between managers on the basis of different interpretations of events according to their past experience or cultural differences. → importance of managers’ personal reputation and standing are likely to be based partly on such experience. strategy development as a political process Advanced Strategic Management Davide Genta 13 Strategy as variety The variety lens helps explain: innovative strategies, processes and products; how organisations face with fast-changing environments and short decision horizons, high-technology businesses or the fashion industries speed of change and innovation required. complexity theory and evolutionary theory. McKinsey (Shona Brown) and Stanford (Kathy Eisenhardt)> helpful when it comes to explaining the conditions that help generate innovation. evolutionary theory > variation, selection and retention > understanding of how organisational context is important in relation to the generation of new ideas and how managers may help shape that context. The emphasis → how systems cope with uncertainty in non-linear ways top-down design and direction of strategy is de-emphasised. → strategies are seen as emerging from ideas that bubble up from the variety in and around organisations. Advanced Strategic Management Davide Genta 14 The importance of variety New ideas are generated in conditions of variety whereas conditions of uniformity give rise to fewer new ideas. uniformity is not the norm → variety. > ever-changing environment + different types of businesses + a variety of groups and individuals, a variety of their experience and ideas, and there are deviations from routine ways of doing things.→ Variety is likely to be greatest where the environment is changing fastest. Organisations in industry sectors that are developing and fragmented tend to be more innovative variety occurs naturally and quite likely outside managers’ direct control.→ new ideas quite likely come from low down in an organisation, not just from the top. Ideas will be more or less well in-formed > ‘distributed intelligence’ of an organisation.> innovation in large organisations often comes from outside their boundaries, perhaps from smaller businesses (Bill McKelvey). Variation may not, however, always be intentional. > it comes about because of imperfections that may provide the basis for a ‘fitter’ organism in a changing environment. In organisations, too. Managers in one organisation may seek to copy the strategy of another, but will not do things in exactly the same way. Some of these imperfect copies will not be successful; but others may be. A famous example is Post-its, which originated in an ‘imperfect’ glue being applied to paper, but resulted in a semi-adhesive for which the researcher saw market potential. Advanced Strategic Management Davide Genta 15 Selection and retention The variety lens and evolutionary theory in particular do not deny the deliberate acts of managers. They do suggest, that selection is ‘blind’ > outcomes cannot be known. strategies developed are the result of other processes of selection and retention. Advanced Strategic Management Davide Genta 16 Processes of selection and retention Experience and culture. filters of ideas not ‘fitting’. Functional benefit. An idea may meet the needs of environmental and market forces but many of these can at best be partially known. → other functions → serving the interests of individuals within the organization (career aspirations) Alignment. An idea is likely to be more successful if it aligns with other successful ideas→ what other organisations are doing or it fits the culture and experience of the organisation itself. > bandwagon Some strategic ideas are more or less attractive than others.1 Attraction. ideas that are altruistic tend to spread and get adopted most > ‘positive feedback’, some ideas are more likely to attract this than others. >a new product idea in a science-based company persisted despite strong evidence of its lack of commercial viability. ‘Retention occurs when selected variations are preserved, duplicated or otherwise reproduced’, leading to their future repetition. Retention. Routinisation → formal procedures (for example, job descriptions), accounting and control systems, management information systems, training, organisation structuring, to the formal or informal standardisation of work routines and the eventual embedding of such routines in the culture of the organisation. Advanced Strategic Management Davide Genta 17 Implications for management managers need to directly control the generation and adoption of new ideas > managers can foster new ideas and innovation by creating the context and conditions where they are more likely to emerge. The more the boundaries between the organisation and its environment are reduced, the more innovation is likely to occur. As that environment changes, so do the ideas in the network. managers can promote behaviours likely to encourage new ideas in at least : five ways Interaction and cooperation Questioning and challenge Experimentation Adaptive tension> innovation and creativity emerge when there is sufficient order to make things happen but not when there is such rigidity of control as to prevent such innovation Order-generating rules. few ‘order-generating rules’ or ‘simple rules’. top management need to consider their role in developing strategy. Advanced Strategic Management Davide Genta 18 Strategy as discourse Managers spend 75 per cent of their time communicating with others 25 in gathering information, persuading others of a course of action or following up decisions. the management of strategy has a high discursive component. managers use the language of strategy for their own ends, to gain influence and establish their legitimacy as strategists. The ability to use discursive resources effectively can be an advantage and competence for a manager (on strategy practice which discusses strategy ‘conversations’). → “well said effect” Looking at strategy development in terms of strategy as discourse provides insight into how the language of strategy is used by managers to persuade others, to gain influence and power or establish their identity as strategists. Advanced Strategic Management Davide Genta 19 Discourse and rationality appearing rational is key to making strategy: ‘To be rational is to make persuasive sense.’ managers can call on it and employ it to justify the ‘rightness’ of their arguments and views. when managers find themselves unable to achieve their goals they do not deny the logic of the strategy, merely the ability of the organisation to achieve it. They may employ this language because they are themselves persuaded of the logic of a strategy, they believe that by doing so their arguments will carry more weight with others, by so doing, it positions them as an authority on the subject. Advanced Strategic Management Davide Genta 20 Discourse and influence Strategy is often associated with ‘heroic’ chief executives or successful firms. Strategy discussions take place in important places such as boardrooms or strategy away-days. There is also evidence that the employment of strategy discourse works. vocabulary and concepts of strategy to effect change, to justify and legitimise strategies that are to be followed, or to ensure conformity to the right ways to manage strategy. managers draw on the concepts of strategy and the apparent ‘rightness’ of strategy concepts to convince others they should comply. Advanced Strategic Management Davide Genta 21 Discourse, identity and legitimacy How managers talk about strategy also positions them in relation to others, Discourse is therefore also related to the identity and legitimacy of managers. previous experience as a ‘hands-on worker’. reference to prior experience in turning around an organisation may matter ‘visionary leader’ or the innovative entrepreneur may be employed. Strategy discourse may also be consciously or unconsciously employed by managers – particularly top managers – to provide certain benefits for themselves. It helps legitimise a manager as a knowledgeable strategist, employing the right concepts, using the right logic, doing the right thing and being at the forefront of management thinking. sense of centrality, of ‘making a difference’ to the most important aspects of organizational survival. some elements of discourse are likely to be more effective than others at different times. strategy has become discussed and communicated more in terms of capabilities and competences. Advanced Strategic Management Davide Genta 22 Discourse as power the discourse of strategy is linked to power and control. By understanding the concepts of strategy it is top managers or strategy specialists who are positioned as having the knowledge about how to deal with the really difficult problems the organization faces. The possession of such knowledge gives them power over others who do not have it. Social control. Groups may adopt particular ways of thinking, behaving and speaking about strategy. For example, some organisations, especially firms of consultants, have developed their own discourse on strategy. ‘offshoring’ ‘the world is flat’ > legitimization of the transfer of work from highly paid employees in home countries to cheaper labour in Asian countries. We don’t have budget… We need experienced people/ We need young and enthusiastic people… Advanced Strategic Management Davide Genta 23 Implications for management the language of strategy they employ matters. in practical terms offers concepts and cues by which managers can manage more effectively, for example: Discourse and context. Discourse and the management of strategic change. Common discourse. critical perspective for managers Advanced Strategic Management Davide Genta 24 A summary of the strategy lenses Advanced Strategic Management Davide Genta 25 Strategic management: Do we need strategic management? success or failure? Planning does pay Advanced Strategic Management Davide Genta 26  many companies throughout the world practise some form of strategic management→ a body of chief executives hold this conviction. But what they all do under the name of strategic management is immensely variable. organisations may be dedicated to strategic management, and still take the wrong decision Advanced Strategic Management Davide Genta 27 Planning does pay many of the benefits of a planning process are difficult to prove in surveys evidence → many have a long way to go before they could be absolute terms → once planning is introduced, the company changes, classified as effective planners. → you can speculate almost continuous research → planning has not worked as well as it it is almost impossible to identify costs. should have The Society for Long Range Planning study → what planning companies did and did not do. most practised formal financial planning, forecast external events and reviewed performance against plan, only 25 per cent undertook contingency planning, 22 per cent diversification planning 22 per cent divestment planning. only 45 per cent undertook formal organisation planning 53 per cent formal manpower planning. why companies decide to change to a system of corporate planning? → the introduction of planning is a direct result of major changes at board level.→ planning is a perceived need to deliberately meet a factor of change which the company faced or expected to face. Advanced Strategic Management Davide Genta 28 Denning/Lehr survey (1972) complex, high-capital, technological companies are the companies most likely to benefit from corporate planning; they are likely to perceive the need for planning before other types of company where they lead other industries will follow. Advanced Strategic Management Davide Genta 29 A Brief History of Business Strategy: Origins and Military Antecedents The term strategy derives from the Greek word strategia, meaning “generalship.” the concept of strategy did not originate with the Greeks: Sun Tzu’s classic, The Art of War, from about 500 BC is regarded as the first treatise on strategy. Military strategy and business strategy share a number of common concepts and principles: the distinction between strategy and tactics. Strategy is the overall plan for deploying resources to establish a favorable position; a tactic is a scheme for a specific action. Tactics are concerned with the maneuvers necessary to win battles, strategy is concerned with winning the war. Strategic decisions, whether in military or business spheres, share three common characteristics: they are important they involve a significant commitment of resources they are not easily reversible. Advanced Strategic Management Davide Genta 30 From Corporate Planning to Strategic Management Advanced Strategic Management Davide Genta 31  The strategy process How Is Strategy Made? The Strategy Process Advanced Strategic Management Davide Genta 32 Design versus Emergence: Mintzberg strategy as conceived of by the leader or top management team. intended strategy less a product of rational deliberation and more an outcome of negotiation, bargaining, and compromise among the many individuals and groups involved in the strategy-making process. the actual strategy that is implemented—only partly realized strategy related to that which was intended (Mintzberg suggests only 10–30% of intended strategy is realized). The primary determinant of realized strategy—the emergent strategy decisions that emerge from the complex processes in which individual managers interpret the intended strategy and adapt to changing circumstances. Advanced Strategic Management Davide Genta 33 Henry Mintzberg : critic of rational approaches to strategy design “The notion that strategy is something that should happen way up there, far removed from the details of running an organization on a daily basis, is one of the great fallacies of conventional strategic management.” rational design is not only an inaccurate account of how strategies are actually formulated but also a poor way of making strategy: The emergent approaches to strategy making permit adaptation and learning through a continuous interaction between strategy formulation and strategy implementation in which strategy is constantly being adjusted and revised in the light of experience. Advanced Strategic Management Davide Genta 34 Design versus Emergence: Honda case Honda’s successful entry into the US motorcycle market during the early 1960s. The Boston Consulting Group lauded Honda for its single minded pursuit of a global strategy based on exploiting economies of scale and learning to establish unassailable cost leadership. subsequent interviews with the Honda managers in charge of its US market entry revealed a different story: a haphazard, experimental approach with little analysis and no clear plan. As Mintzberg observes: “Brilliant as its strategy may have looked after the fact, Honda’s managers made almost every conceivable mistake until the market finally hit them over the head with the right formula.” In practice, strategy making involves both thought and action: “Strategy exists in the cognition of managers but also is reified in what companies do.” Advanced Strategic Management Davide Genta 35 top-down rational design is combined with decentralized adaptation The design aspect of strategy comprises a number of organizational processes: board meetings a formalized process of strategic planning more broadly participative events>such as strategy workshops. + strategy is continually enacted through decisions that are made by every member of the organization by middle managers especially. (Nonaka-Takeuchi) The decentralized, bottom-up process of strategy emergence often precedes more formalized top-down strategy formulation. Intel’s historic decision to abandon memory chips and concentrate on microprocessors was initiated in the decisions taken by business unit and plant managers that were subsequently promulgated by top management as strategy. Advanced Strategic Management Davide Genta 36 As the business environment becomes more turbulent and less predictable, so strategy making becomes less about detailed decisions and more about guidelines and general direction. Advanced Strategic Management Davide Genta 37