2016 OE - Lecture 2 - Design and Planning School - Rick Aalbers

15-4-2016
Design School
&
Planning School
April 15th , 2016

Dr. Rick Aalbers
Associate professor Strategy & Innovation
O&E by Dr. R. Aalbers
This presentation is copyrighted by the lecturer usage holds for internal Radboud teaching purposes only
https://www.youtube.com/watch?v=QkvEqmZmES0 (0:00-2:00)
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15-4-2016
Four basis approaches to strategy formation
Strategic process as:
Strategy
content
as:
Deliberate
plans
Emergent
plans
Tangible
positions
Strategic
planning
Strategic
venturing
Broad
perspective
Strategic
visioning
Strategic
learning
3
Strategic reorientation at ING
Strategic process as:
Strategy
content
as:
Deliberate
plans
Emergent
plans
Tangible
positions
Strategic
planning
Strategic
venturing
Broad
perspective
Strategic
visioning
Strategic
learning
4
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Different schools of thought
?
5
Financial crisis
Loss of
resources, loss
of knowledge
Stock price, FTE
number, buffers
Involvement of
DNB, Brussels,
Labor Unions
Financial crisis
Internals and
externals
Multiple
businesses, labels,
client types,
countries
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Overview for this week: Lecture 2 and 3

Design School
Ideal image of strategy, characteristics and assumptions,

limitations, contribution
Planning School
Ideal image of strategy, characteristics and assumptions,
limitations, contribution, comparison
Learning school (Next lecture)
7
But first: The pop quiz, remember?

(exam preparation)
Which of the following statements are true for the Design School?
I.
Strategy is meant to attain match, or fit, between internal capabilities

and external possibilities
II. Responsibility for strategy rests with the CEO
A.
B.
C.
D.
Statement I is true, statement II is false.

Statement I is false, statement II is true.
Both statements are false
Both statements are true
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The design school

Economic strategy will be seen as the match between
qualifications and opportunity that positions a firm in its
environment (Christensen et al. 1982: 164)
9
Strategists
Gather information
Analyse information
Organize information
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Design school: characteristics and premises - I

1. Strategy formation as a deliberate process of conscious
thought
2. Strategy to attain match, or fit, between internal
capabilities and external possibilities
3. Responsibility for strategy rests with the CEO
4. The process of strategy formation must be kept simple
and informal
11
Design school: characteristics and premises - II

5. Strategies should be unique
6. Strategies should be clear, simple and specific
(Tregoe and Tobia, 1990).
7. Separation of formulation from implementation
8. A strategy has first to be fully formulated and can

then be implemented
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Strategic framing: Strategy as...
... Grand conception
... Grand strategy
... Unique
http://www.simply-strategic-planning.com/what-is-strategy.html
13
Simple and informal...
http://www.youtube.com/watch?NR=1&v=1QztwBzcVaw&feature=endscr
een
Strategy and the IPhone
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Keeping strategies clear, simple and specific

Consistency in goals and policies
Consonance: adaptive to environment
Bringing together: internal state and external
expectations
Strategic advantage
Distinctive competence (by Selznick 1957)
Feasibility
Resources
15
Design school: ideal course of strategy formation
1. Analysis
2. Creation
3. Evaluation and
choice
4. Implementation
16
Simplified model design school, based on Mintzberg et al. 2009

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Structure follows strategy

Until we know the (new/ revised) strategy we cannot begin
to respecify the appropriate structure (Andrews 1980)
1. Strategy as the determination of long-term goals and
objectives, the adoption of courses of action and
allocation of resources to achieve goals
2. Structure as the design of the organisation through
which strategy is administered.
3. Changes in an organisation's strategy lead to new
administrative problems which require a new or
refashioned structure for the successful implementation
of the new strategy.
17
SWOT analysis
And how about the competition...?

18
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Critique: Structure follows strategy ! / ?

Structure may be somewhat malleable, but it cannot
be altered at will just because a leader has conceived
a new strategy.
19
An example: Scanning the environment

Economical changes
Sociological changes
20
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An example: systematic market analysis (1/3)

Definition
21

Characteristics and measurability
22
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Analysis
23
Summarizing: Assumptions of the design school

1. The CEO has complete information and is absolutely informed
2. The CEO has the capacity to process all information
3. The environment can always be understood
4. Situations and environments are predictable
5. All information is documented and available
6. Strategy is centrally formulated
24
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Summarizing: What do Mintzberg et al. exactly criticize?
Structure follows strategy (Chandler 1962) >>> Wiping

the slate clean?
Structure scarcely malleable
Assumption of universality
Learning ignored by only analytically assessing
environment
Making strategy hierarchical, centralized and explicit =
promoting inflexibility
Separation of formulation from implementation = detaching
thinking from acting
25
Design school: contributions

Vocabulary and tools
Grand strategy
Basic notion: fit between external opportunities and internal
capability
Started to promote the relevance of strategies in organizations
and strategy as a field of research
26
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PLANNING SCHOOL
Big Data and energy
http://www.youtube.com/watch?v=pdrQDOhjF24
27
Planning school: a definition of planning
Planning is a formalized procedure to produce articulated

results by using an integrated system of decisions
28
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Comparing business strategy and military strategy
Strategic planning started in the military

Similarity
- Both business and military organization must adapt to
change and constantly improve
Difference
- Business strategy assumes competition
- Military strategy assumes conflict
29
Planning school: characteristics and premises - I
Strategy is based on rational and systematic science
Rules of thumb are replaced by insights into regularities
Strategy forming is a conscious, formal and controlled process
Strategy must be composed into discrete steps
Strategy forming is supported by checklists and analytical

techniques
Rational and systematic approach = influence of Taylorism
30
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15-4-2016
Planning school: characteristics and premises - II

Organizations are like machines machine metaphor
(Taylorism)
Organization have a clear-cut system of values, competencies
and reward system
These are stable and easy to recognize
Responsibilities are split up
Planning and implementation are two separate steps
The environment of organizations is stable and predictable
31
Operational planning
Links strategic goals to tactical goals and objectives.
Describes:
Milestones,
Conditions for success
Operational planning / phasing
Links the strategic plan with the activities the organization

will deliver and the resources required to deliver them.
Operational plans establishes the activities and budgets for
each part of the organization for the next 1 3 years.
32
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Planning school: strategy as a formal process

Origins: Ansoff: Corporate Strategy
Predict and prepare (Ackoff 1983: 59)
33
Ansoffs strategies for diversification

Harvard Business Review article: 'Strategies for
Diversification
Simplified competitive position of firms by defining two
dimensions:
I. the products - what it sold;
II. the markets - to whom they are sold.
Long-range planning necessary to drive managerial
decision making when speed of change exceeds a firm's
ability to respond
34
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15-4-2016
Ref: Adapted from The Boston Consulting Group, Inc., Perspectives, No. 66,
The Product Portfolio. 1970.
An example: Product / market analysis by McKinsey
36
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Planning school: the ideal course of planning

1. Set objectives (at best: quantitative ones)
2. Analyze the situation
3. Create scenarios and evaluate different potential

strategies
4. Operationalize
5. Schedule
37
What to plan on? Management research has a rich tradition

on the studying of performance measures
Examples?
38
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Analysis: Inputs for scenario planning
39
Analysis: competitor analysis
40
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15-4-2016
Scenarios & Real Options: Applicable in business life?
41
From planning to execution a clear divide

Responsibility for overall process rests with the CEO
Responsibility for its execution rests with staff planners in
practice.
Strategies appear from this process full blown, to be made
explicit so that they can then be implemented through
detailed attention to objectives, budgets, programs, and
operating plans of various kinds.
42
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15-4-2016
Planning school: problems and limits - I
The fallacy of predetermination
The fallacy of detachment (manage by remote control - Jellinek)
The fallacy of formalization
developed in
a structured,
Strategic planning not as aid, as support for natural managerial processes

(including intuition), but as strategy making replacing intuition.
The grand fallacy of strategic planning
Analysis cannot substitute for synthesis
planning, rather than providing new strategies, could not proceed without their
prior existence.
43
Predetermination (interlude)
Rail travel at high speeds is not possible because passengers, unable to
breathe, would die of asphyxia.
- Dionysius Lardner, Professor of Natural Philosophy and Astronomy at University
College, London
This telephone has too many shortcomings to be seriously considered

as a means of communication. The device is inherently of no value to us.
- Western Union Co. internal memo 1876
There is not the slightest indication that nuclear energy will ever be
obtainable. It would mean the atom would have to be shattered at will.
- Albert Einstein
44
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Planning school: problems and limits - II
Lack of efficiency
Lack of commitment
Lack of flexibility
Lacking sense of reality
Planning the unplannable (entrepreneurial?)
http://www.youtube.com/watch?v=CzZYgSEVDQs
45
46
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A comparison of the design &

the planning school
Design School
Strategy formation as a process of conception
Approach: Clear and unique strategies are
formulated in a deliberate process.
This process takes the internal and the
external environment into account
Simplification may distort reality
Planning School
Strategy as a rigorous set of steps taken, from
analysis of the situation to the execution
Strategy as a machine
Predictions from an ivory tower
47
Questions?
48
24

2016 OE - Lecture 2 - Design and Planning School - Rick Aalbers

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15-4-2016

April 15th , 2016

O&E by Dr. R. Aalbers

Four basis approaches to strategy formation

Strategic process as:

O&E by Dr. R. Aalbers

Strategic reorientation at ING

Strategic process as:

Different schools of thought

Overview for this week: Lecture 2 and 3

Ideal image of strategy, characteristics and assumptions,

Learning school (Next lecture)

But first: The pop quiz, remember?

Strategy is meant to attain match, or fit, between internal capabilities

Statement I is true, statement II is false.

The design school

Design school: characteristics and premises - I

Design school: characteristics and premises - II

8. A strategy has first to be fully formulated and can

Strategic framing: Strategy as...

... Grand conception

... Grand strategy

O&E by Dr. R. Aalbers

Simple and informal...

Strategy and the IPhone

Keeping strategies clear, simple and specific

Design school: ideal course of strategy formation

Simplified model design school, based on Mintzberg et al. 2009

Structure follows strategy

And how about the competition...?

Critique: Structure follows strategy ! / ?

An example: Scanning the environment

An example: systematic market analysis (1/3)

An example: systematic market analysis (2/3)

An example: systematic market analysis (3/3)

Summarizing: Assumptions of the design school

Summarizing: What do Mintzberg et al. exactly criticize?

Structure follows strategy (Chandler 1962) >>> Wiping

Design school: contributions

Planning school: a definition of planning

Planning is a formalized procedure to produce articulated

Comparing business strategy and military strategy

Strategic planning started in the military

Planning school: characteristics and premises - I

Strategy is based on rational and systematic science

Rules of thumb are replaced by insights into regularities

Strategy forming is a conscious, formal and controlled process

Strategy must be composed into discrete steps

Strategy forming is supported by checklists and analytical

Rational and systematic approach = influence of Taylorism

Planning school: characteristics and premises - II

O&E by Dr. R. Aalbers

Conditions for success

Operational planning / phasing

Links the strategic plan with the activities the organization

Planning school: strategy as a formal process

Ansoffs strategies for diversification

An example: Product / market analysis by McKinsey

Planning school: the ideal course of planning

3. Create scenarios and evaluate different potential

What to plan on? Management research has a rich tradition

Analysis: Inputs for scenario planning

Analysis: competitor analysis

Scenarios & Real Options: Applicable in business life?