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Over the years, scholars have addressed strategy making from a number of different perspectives (e.g., Ansoff, 1965; Barnard, 1938; Hofer &
Schendel, 1978; Lindblom, 1959; March & Simon, 1958; Mintzberg, 1973;
Ouinn, 1978). These varying approaches have spawned a bewildering array of competing or overlapping conceptual models. Indeed, during the
past three decades, authors have developed scores of different strategymaking typologies (e.g.. Bourgeois & Brodwin, 1984; Chaffee, 1985; Mintzberg, 1978; Nonaka, 1988), resulting in "model proliferation." Associated
empirical work (e.g., Fredrickson & Mitchell, 1984; Miller & Friesen, 1977,
1983; Shrivastava & Grant, 1985; Wooldridge & Floyd, 1990) has covered
such a wide range of considerations that little cumulative knowledge has
resulted. A conceptualization that is capable of providing a framework for
ongoing research is lacking.
This article offers an integrative framework for strategy-making processes composed of five modes: command, symbolic, rational, transactive,
and generative. The framework is based on the contrasting roles top managers and organizational members play in the strategy-making process. It
illustrates the roles and describes the interaction among them. The modes
Kate Banbury, Dan Denison, Jane Dutton, Avi Fiegenbaum, Susan Schneider, and Paul
Shrivastava provided valuable comments and suggestions on earlier versions of this article.
The School of Business Administration at the University of Michigan provided support for the
research.
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represent "pure" process types that can be blended into different combinations. Together, the five modes serve to integrate and reconcile a number of
previous models and typologies.
Research propositions suggest relationships among the strategymaking modes and dimensions of firm performance, including the moderating effects of several key contingency factors. Because firms usually develop competence in several modes, propositions also describe the most
effective combinations of the five strategy-making modes.
PRIOR LITERATURE
Historical Evolution of the Field
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TABLE 1
Categorizing the Strategy-Making Process Typologies
Themes from the Literature
Rationality
Citation
Comprehensive
Bounded
Vision
Allison (1971)
Rational
OrganizationalBureaucratic
Normative;
Bureaucratic
BehavioralGroup;
Adaptive
Mintzberg (1973,
1978)
EntrepreneurialPlanning
Adaptive
Chaffee (1985)
Linear
Adaptive
Interpretive
Mintzberg
(1987a)
Plan; Ploy;
Position
Pattern
Perspective
Bourgeois &
Brodwin
(1984)
Commander;
Change
Collaborative
Cultural
Nonaka (1988)
Deductive
Ansoff (1987)
Systematic
Ad Hoc;
Reactive
Grandon(1984)
Optimizing
Satisficing;
Incremental
Shrivastava &
Grant (1985)
Managerial
autocracy;
Systematic
bureaucracy
Adaptive
planning
Mintzberg &
Waters (1985)
EntrepreneurialPlanned
Process;
Consensus
Involvement
Crescive
Inductive;
Compressive
Organic
Cybernetic
Random
Political
expediency
IdeologicalUmbrella
Unconnected;
Imposed
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tionality). The fourth, identified as the political expediency model, was similar to Bourgeois and Brodwin's (1984) crescive model because in this case
strategy resulted from negotiation among decentralized coalitions and interest groups within the organization.
Nonaka (1988) viewed strategy making as an exercise in information
creation and posited three modes: deductive, inductive, and compressive.
Deductive management is driven from the top-down and entails high levels
of central planning and analysis (high rationality, low involvement). Inductive management, by contrast, is bottom-up (like Bourgeois & Brodwin's,
1984, crescive model) and is driven by individual or group initiative within
the organization: Accordingly, the job of top management is primarily to
sponsor projects and make sense of the decentralized activity. Compressive
management combines both the deductive and inductive modes and entails
high levels of activity for both top managers and organizational members.
Thus, strategy making is both top-down and bottom-up.
AN INTEGRATIVE FRAMEWORK
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ConuncniQ
Symbolic
Rational
Transactive
Generative
Style
(Imperial)
Strategy driven
by leader or
small top
team
{Cultural)
Strategy driven
by mission
and a vision
of the future
(Anaiyticaij
Strategy driven
by formal
structure and
planning
systems
{Procedural)
Strategy driven
by internal
process and
mutual
adjustment
(Organic)
Strategy driven
by organizational actors'
initiative
Role of Top
Management
{Commander)
Provide
direction
{Coach)
Motivate and
inspire
(Boss)
Evaluate and
control
{Facilitator)
Empower and
enable
(Sponsor)
Endorse and
support
Role of Organizational
Members
(Soidier)
Obey orders
{Player)
Respond to
challenge
{Subordinate)
Follow the
system
{Participant)
Learn and
improve
{Entrepreneur)
Experiment and
take risks
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active mode, top management emphasis is placed on the design and facilitation of effective organizational systems and processes. The organizational
levers available to top management can thus be conceptualized as ranging
from the articulation of corporate mission and vision, on the one extreme, to
concern for informal processes and people on the other, with a range of
levers falling in between. Table 3 summarizes the relationships between the
five strategy-making modes and the associated levers used by top managers.
The five modes of the framework integrate the wide range of literature
on the strategy-making process. Table 4 utilizes the framework to map the
key typologies discussed in the previous section. The command and rational
modes clearly reflect the two different aspects of comprehensive rationality,
whereas the transactive mode contains much of the content from the
bounded rationality category. The syrnbolic mode reflects directly the vision
theme. Finally, content from the involvement theme is captured primarily in
the generative mode.
The five modes are not seen as mutually exclusive. In practice, organizations may combine two or more modes into distinctive combinations of
strategy-making processes. These process modes and configurations may
have significant implications for firm performance.
Command Mode
Command
Symbolic
Rational
**
Transactive
Generative
Mission
Vision
Goals
Strategy
Sfructure
Systems
*
*
*
*
*
*
**
Processes
People
*_
* Primary focus
** Secondary focus
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TABLE 4
Mapping the Typologies on the Integrative Framework
Citation
Command
Symbolic
Allison (1971)
Rational
Transactive
Rational
Organizational;
Bureaucratic
Nutt (1981.
1984)
Normative
Bureaucratic
Behavioral;
Group;
Adaptive
Mintzberg
(1973, 1978)
Entrepreneurial
Planning
Adaptive
Generative
Chaffee (1985)
Interpretive
Linear
Adaptive
Mintzberg
(1987a)
Perspective
Plan; Position;
Ploy
Pattern
Cultural
Change;
Collaborative
Crescive
Compressive
Deductive
Inductive
Bourgeois &
Brodwin
(1984)
Gommander
Nonaka (1988)
Ansoff (1987)
Cybernetic
Grandori
(1984)
Shrivastava &
Grant (1985)
Managerial
autocracy
Mintzberg &
Waters
(1985)
Entrepreneurial
Ideological;
Umbrella
Systematic
Ad hoc reactive
Organic
Optimizing
Satisficing;
Incremental
Random
Systematic
bureaucracy
Adaptive
planning
Political
expediency
Planned
Process;
Consensus
Unconnected;
Imposed
be implemented. The top manager is the commander in this mode of strategy making, and organizational members are good soldiers who execute
the strategy as it is articulated by the top (Bourgeois & Brodwin, 1984; Mintzberg & Waters, 1982).
The annals of business history are filled with stories of strong entrepreneurs and business leaders credited with presiding over either the creation
or growth of enterprises (GoUins & Moore, 1970); for example, Henry Ford
(Ford Motor Gompany) and Tom Watson (IBM) have become folk heroes in
both the academic and popular literatures. More recently, people like Bill
Gates (Microsoft) and Steve Jobs (Apple) have attracted a great deal of
attention for their stunning success stories. In each case, a single individual
(or very small inner circle) had a comprehensive business plan and succeeded in imposing it on the organization.
Symbolic Mode
The symbolic mode involves the creation by top management of a compelling vision and a clear corporate mission. The corporate vision gives
meaning to the company's activities and provides a sense of identity for
employees; it defines the basic philosophy and values of the firm (Bennis &
Nanus, 1985; Block, 1988; Dutton & Dukerich, 1991). The use of symbols.
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metaphors, and emotion are central to this process (Conger & Kanungo,
1988; Edelman, 1971; Willner, 1984). NEC's vision, for example, is "C&C,"
the union between computers and communication, a powerful metaphor
that captures the importance of technological synergy within the firm.
Strategy making in the symbolic mode also requires the crafting of a
long-term mission for the organizationan articulation of strategic intent
(Hamel & Prahalad, 1989). This mission becomes translated into specific
targets, either internal to the organization (e.g., develop capability) or external (e.g., overtake a competitor), which inspire organizational members
to higher levels of achievement (Hasegawa, 1986; Imai, 1986). At Komatsu,
for example, the mission is "Maru-C"to encircle Caterpillar, its primary
rival.
Similar to a coach in athletics, the role of top management in the symbolic mode is to motivate and inspire organizational members (Nonaka,
1988). Through speeches, persuasion, slogans, new projects, and recognition, top management provides the necessary focus and momentum to
guide the creative actions of organizational players (Itami, 1987). In this
way, the symbolic mode creates an implicit control system, which is based
on shared values (Pascale, 1985; Weick, 1987). It hinges on the nurturing of
a shared perspective for all organizational members, that is, a clear mission, shared values, and an emotionally appealing corporate vision or
dream (Torbert, 1987). At Matsushita, for example, founder Konosuke Matsushita developed a grand 250-year vision. The vision was operationalized
through the "Seven Spirits of Matsushita"the shared values of the company. Each year, Matsushita rededicates the company's mission to its vision
by weaving its short-term goals into the company dream, captured through
a slogan that serves as the theme for the year.
Rational Mode
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To ensure effective implementation, top management carefully monitors and controls the activities of subordinates who are held accountable for
performance benchmarked against the plan. Through structure and formal
systems, organizational members are induced to behave in desired ways.
In short, the rational mode is rooted in top management's drive to consider
as much data as possible in the formulation of an explicit business strategy.
Transactive Mode
The essence of the transactive mode is strategy making based on interaction and learning rather than the execution of a predetermined plan
(Fiol & Lyles, 1985). Both cognitive limits (March & Simon, 1958; Slovic,
Fischhoff, and Lichtenstein, 1977) and environmental uncertainty (Dutton,
Fahey, & Narayanan, 1983; Lyles & Mitroff, 1980) serve to limit top management's ability to separate the formulation of strategy from its implementation. Strategy is crafted based upon an ongoing dialogue with key stakeholdersemployees, suppliers, customers, governments, and regulators.
Cross-functional communication among organizational members is central
to this mode. Feedback and learning necessitate an iterative approach to
strategy making (Argyris & Schon, 1978). In this case, top management is
concerned with facilitating a process for transacting with key stakeholders
and linking the outcomes of those processes together over time to determine
strategic direction (Mintzberg, 1987b).
The transactive mode is reflected in recent efforts by many companies
to foster employee involvement, customer focus, and total quality management (Ishikawa & Lu, 1985; Lawler, 1986; Shapiro, 1988). This mode usually
necessitates the creation of lateral (cross-functional) communication channels and new mechanisms for involving customers and other key stakeholders in planning and decision making. Initiatives common to the transactive
mode include just-in-time management, program management, quality circles, and quality function deployment. In the United States, companies such
as Motorola, Xerox, and Ford have dedicated great energy to the fostering
of such transactive processes. The Demmg Prize m Japan and the recently
created Malcolm Baldridge National Quality Award in the United States are
granted based on a firm's ability to demonstrate strong organizational
learning capability fostered by transactive relationships among suppliers,
customers, and employees.
Generative Mode
The generative mode of strategy-making is dependent upon the autonomous behavior of organizational members. Strategy is made via intrapreneurshipnew product ideas emerge upward, and employee initiative
shapes the firm's strategic direction (e.g., Kanter, 1983; Peters & Waterman,
1982). In this case, top managers are primarily involved in selecting and
nurturing high-potential proposals that emerge from below (Mintzberg &
McHugh, 1985). Established firms make innovations by behaving more like
small entrepreneurial ventures (Maidique & Hayes, 1984; Quinn, 1985). In
the generative mode, new strategies are germinated by separating inno-
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Existing empirical work indicates significant differences between successful and unsuccessful firms with respect to strategy-making processes
(Fredrickson, 1984; Fredrickson & Mitchell, 1984; Miller & Friesen, 1977,
1983). The five strategy-making modes developed in this article should also
exhibit significant performance differences. At one extreme (command
mode), top management prescribes desired behavior by dictating strategy
from the top down, leaving little role for organizational members except as
implementers. Organizational members behave more like "sheep" than like
active participants in the strategic process. At the other extreme (generative
mode), top management abdicates strategic control by endorsing and sponsoring projects proposed from the bottom up and adjusting strategy accord-
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Symbolic
Rational
Transactive
Generative
"Strategic
Abdication
ise of Strategic
Direction"
Role of
Top Management
Role of
Organizational
Members
Lower
Performance
(Role
imbalance)
Higher Performance
(Greater balance between
relative contributions of
top managers and
organizational members)
Lower
Performance
(Role
imbalance)
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1989; Miller, 1987a, 1989). It is clear that future researchers must examine or
control for key contingency factors.
Miller (1987b) has argued that a number of forces restrict organizational
variety and give rise to particular modes of strategy making. He cited four
imperatives that drive strategy making: environment, structure, leadership,
and strategy. Because leadership is captured within the integrative framework, three key contingency factors are proposedenvironment, structure
(firm size, stage of firm development) and strategy. Contingencies for these
factors are therefore developed for each of the five modes of strategy
making (Table 5).
Command mode. Because strategy is driven almost completely by the
top manager in the command mode, it is essential that the industry environment not be too complex for one person (or a very small topmanagement team) to comprehend. The command mode should, therefore,
function well only in relatively simple situationsa task environment low in
complexity (Dess & Beard, 1984). For the same reason, the command mode
should be found more often in relatively small organizations, where one
person can still maintain effective control. Virtually any competitive strategy
should be achievable through the command mode, so long as the top manager maintains adequate levels of control over the company. Thus, the
following proposition:
Proposition 2a: The command mode will be most prevalent among small organizations in relatively simple environments. Furthermore, the command mode will be associated with higher performance in these situations.
Symbolic mode. Unlike the command mode, which should be limited to
small organizations, the symbolic mode might become necessary in larger,
more differentiated organizations. To be effective, the symbolic mode must
produce a corporate mission and vision that permeate the entire organization. If organizational members cannot be persuaded to share the vision or
if they perceive it as false or superficial, the resulting lack of commitment
TABLE 5
Strategy-Making Modes and Contingency Factors
Contingency
Factors
Command
Symbolic
Environment
Simple;
Low-level
complexity
Dynamic; High
velocity or
radical
change
Stable; Low
degree of
change
Complex; Many
stakeholders
Turbulent;
Dynamic
and
complex
Firm Size
Small
Medium-Large
Medium-Large
Large
No relation
Stage of Firm
Development
No relation
Rapid growth;
Reorientation
Steady growth
Mature
No relation
Strategic
Orientation
No relation
Proactive
change
(Prospector/
Analyzer)
Solidify position
(Defender)
Continuous
improvement
(Analyzer)
Innovation
(Prospector)
Rational
Transactive
Generative
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