Approaches to Strategy Henry Minzberg

What is strategy? Strategy is the direction and scope of an organization over the long-term, which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations. It also helps answer the question how to do something. In other words, strategy is about: Where is the business trying to get to in the long-term direction? Which markets should a business compete in and what kinds of activities are involved in such markets this would include the type of markets and the scope it has. How can the business perform better than the competition in those markets; this would include the company having a distinctive advantage in the market over its competitors. What resources skills, assets, finance, relationships, technical competence, facilities can be used by the organizations to compete in this market. What are the external, environmental factors affecting the businesses' ability to compete? What are the values and expectations of those who have power in and around the business that are the stakeholders of the organization which would include everyone involved or related to the organization. Strategy at Different Levels of a Business Strategies exist at several levels in any organization - ranging from the overall business or group of businesses through to individuals working in it. Corporate Strategy - is concerned the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business. Corporate strategy is often stated explicitly in a "mission statement". It helps provide a direction to the organization. Business Unit Strategy - is concerned more with how a business competes successfully in a particular market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc. Functional Strategy - organizations run with the help of different departments that are needed to perform different types of work. Based on these different departments the functions are distributed and in short its the working of different departments in the organization Operational Strategy - is concerned with how each part of the business is organized to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc. The 5 Ps of Strategy Strategy as Plan - is a direction, guide or course of action into the future, in simple words the how will an organization get from here to there. Strategy as Pattern - is the consistency in the behavior over time; such is done on the bases of past behavior or working styles. From the above strategies there will arise intended (strategy as plan) and realized strategy (strategy as Pattern). When intensions are fully realized they are termed deliberate strategy and

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Approaches to Strategy Henry Minzberg

when not realized they are termed unrealized strategy. Emergent strategy are those that may be caused due to short term changes in the organization. Strategy as Position - it is the creation of a unique and valuable position that would create a sense of superiority in the minds of others trying to compete Strategy as Perspective - this is the fundamental way of doing things in an organization, this is due to the values or beliefs and the approach of the organization. Strategy as Ploy - this is the technique and manipulative skills used by the organizations in the short term to achieve their objectives. This 5 Ps along with the 10 schools of thoughts helps understand strategy. The following are the Different thoughts of schools of strategy1. Design School (strategy formation as a Process of Conception) - This strategy primary emphasis on the understanding of the external and internal environmental factors that organizations need to understand. This process would help them analyze the threats and opportunities in the market and the environment and the internal strengths and weaknesses within them selfs so the required steps are taken and corrected for the proper establishment of the organization. There are 2 factors that are important in strategy making they are managerial values that is the beliefs and preferences that lead the organization and social responsibilities that are the ethical issues in society the organization functions. It should follow a frame work that would include: Consistency that is the strategy must not present mutually inconsistent goals and policies. Consonance the strategy should be adoptive and responsive to the changes in external environment. Advantage - the strategy should have a competitive edge over its competitors. Feasibility - the strategy should be actionable and should be able to deliver results. Premises: Strategy formation should be a deliberate process of conscious thought that is the managers should know what they are doing. The CEO is the strategist its his/her duty or responsibility to take all the major decisions. The model of strategy formation must be kept simple and informal Strategies should be one of a kind: the best ones result from a process of individualized design that is strategy should be tailor made depending on the individual cases encountered. The design process is complete when strategies appear fully formulated as perspective. These strategies should be explicit, so they have to be kept simple. Finally following all these steps the strategies can then be implemented.

2. Planning School (strategy formation as a Formal Process) - In this strategy the principle is to take the SWOT model, divide it into steps, articulate each of these with lots of checklists and techniques and give special attention to the setting of objectives for different departments in the organization that includes the elaboration of budgets and operating plans. Premises: Strategies result from a controlled conscious process of formal planning each delineated by checklists and supported by techniques. Responsibility for that overall process rests with the CEO; the execution rests with staff planners.

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Approaches to Strategy Henry Minzberg

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 plan of various kinds.

3. The Positioning School( Strategy Formation as an Analytical Process) - This strategy helps in setting the position for an firm in a market depending on the strategy that they want to differentiate themself from their competitors in the same market. This would include product differentiation etc. To do so they will follow the Porters 5 forces:

Threat of new Entrants- the number of firms entering the same market Bargaining Power of Firms supplier- more power is concentrated in the hands of the suppliers and they dominate the pricings etc Bargaining Power of Firms Customers- more power in the hands of the customers hence they are the dominating factor. Threat of Substitute Products- there is a product that tends to substitute the firms existing product. Intensity of Rivalry Among Competing Firms- the level of competitions among the existing firms Porter argued that there are two basic types of competitive advantage: 1) Low cost 2) differentiation 4. The Entrepreneurial School (strategy Formation as a Visionary Process) - This strategy follows a process that is focused on the single leader and is built on a vision. The chief characteristics to strategy making includes being in an entrepreneurial mode, were strategy making is dominated by the active search for new opportunities. The power is centralized in the hands of a single leader which may result in dramatic leaps forward in the face of uncertainty. Growth is the dominant goal of the entrepreneurial organization. This phase is all about checking the vision of the organization and moving on those guidelines. Firstly to choose a direction, a leader must develop a mental image of a possible and desirable future for the organization. This image is called a vision. The critical point is that a vision articulates a view of a realistic, credible, attractive future for the organization. With a vision, the leader provides the all-important bridge from the present to the future of the organization. Frances Westley and Henry Mintzberg (1998) contrasted two views of visionary leadership: Repetition (rehearsal) - that is when success comes from the deep understanding of the knowledge of the subject in hand. Representation (performance) - it means keep performing and try to repeat the past results. PremisesStrategy exists in the mind of the leader as a perspective, a vision of the organizations future The process of strategy formation is semiconscious since its rooted in the experience and intuition of the leader. The leader promotes the vision under close personal control in order to be able to reformulate specific aspects if necessary The strategic vision is thus malleable, and so the entrepreneurial strategy tends to be deliberate and emergent The organization is likewise malleable, a simple structure responsive to the leaders directives

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Approaches to Strategy Henry Minzberg

Entrepreneurial strategy tends to take a form of a niche, one or more pockets of market position protected from the forces of outright competition 5. The Cognitive School (Strategy Formation as a Mental Process) - This strategy helps understand the mindset of the strategist and connect the decisions made by them on the bases of: Cognition as Confusion- this may arise from how individual process information to make decisions them may be a result of their biases and distortions that they exhibit. Due to the fact that the human brain is highly limited decision making becomes not so much rational. Cognition as information processing- this helps understand the importance the flow of information, the importance of having access to the right information and the use and storage of this information so that it can be best used in the future. This would include the ability to have great attention and understanding of the need to select and ignore information. Encode the information by looking for a fit between the information and existing categories. Store/retrieve in the mind that may include the policies, rules etc of the organization and its important to make them a part of their routine. Choices are made and outcomes are achieved through feedbacks. Cognition as Mapping- this is the creation of strategy maps and models in the minds and work towards it this may help when stuck in difficult crises as an idea of how to move would help. Cognition as Concept Attainment- creation or formation of a strategy concept by old term form cognitive psychology. Cognitive as construction- it is the view after its analyzed the external environment. This is mostly as a result of all the decoding and biases and filtering that may result I view that best suits ones idea of that view and may not be right. PremisesStrategy formation is a cognitive process that takes place in the mind of the strategist Strategies thus emerge as perspectives that shape how people deal with inputs from the environment. These inputs flow through all sorts of distorting filters before they are decoded by the cognitive maps. 6. The Learning school (Strategy Formation as an Emergent Process) - This strategy suggests that strategies emerge as a result of people and the sudden need for change in different situations and the organizations need of dealing with it. The management pays close attention over time to what does work and doesnt work. This is so because the world is so complex to allow strategies to work as they were planned hence strategies must emerge as small steps and organizations should constantly trying to adopt and learn. This helps provide solutions to deal with complexity and unpredictability. Premises Strategy making should be of a form of a process of learning over time Leaders must learn to be alert and aware at all times and should always be a learner, This learning proceeds in emergent fashion, through behaviour that stimulates thinking retrospectively, so that sense can be made of action

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Approaches to Strategy Henry Minzberg

The role of leadership thus becomes not to preconceive deliberate strategies, but to manage the process of strategic learning, strategies appear first as pattern out of the past, only later, perhaps, as plans for the future, as perspectives to guide the present. 7. The Power School (Strategy Formation as a Process of Negotiation) This strategy is a result of the political power games that are evident in organizations that can help dissociate the frame work of the planned strategy. There are 2 types of power relation surrounding organizations they are (1) Micro Power that deals with the play of politics of illegitimate and a legitimate power inside an organization. This would consist of individuals with dreams, hopes, jealousies and fear etc. (2) Macro Power that deals the politics that arises between the organization and its environment. This would include the relationship of the organization with its suppliers, buyers, investment bankers. PremisesStrategy formation is shaped by power and politics, whether as a process inside the organization or as a behaviour of the organization itself in its external environment The strategies that may result from such a process tend to become emergent, and take the form of positions and ploys more than perspectives Micro Power sees strategy making as an interplay and sometimes direct confrontation, in the form of political games Macro Power sees the organization as promoting its own welfare by controlling or cooperating with other organizations, through the use of strategic manoeuvring as well as collective strategies in various kinds of networks and alliances 8. The Cultural School (Strategy Formation as a Collective Process)- This strategy suggest that the culture of the organization is strongly associated to the working style of the organization. This are reflected by the organization through traditions and habits and also in the form of stories, symbols. The more closely interpretations and activities are woven together the more deeply rooted is the culture. PremisesStrategy formation is a process of social interaction, based on the beliefs and understandings shared by the members of an organization. An individual acquires these beliefs through a process of acculturation, or socialization, which is largely tacit and nonverbal through the course in the organization. Culture do not encourage strategic change; at best, they tend to promote shifts in positions 9. The Environmental School (Strategy Formation as a Reactive Process) - This model follows the contingency theorists that say it all depends: on the size of the organization, its technology, the stability of its context, external hostility, and so on. This approach is a response to the challenges imposed by the external environment to which the organizations have to adopt and change in order to continue.

Copyright December 2011, Savio Glenville Ribeiro, MBA 20, BMA

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Approaches to Strategy Henry Minzberg

PremisesThe environment, presents itself to the organization as a set of general forces on which a central actor of strategy-making process is followed. The organization must respond to these forces, in order to continue. Leadership thus becomes a passive element for purposes of reading the environment and ensuring proper adaptation by the organization 10. The Configuration School (Strategy Formation as a Process of Transformation) - This strategy says that there are states in strategizing for adopting to the surrounding context that is called configurations due to this there is a strategy making process called as transformation. If an organization adopts sates of being then strategy making becomes a process of leaping from one state to another is called transformation is a consequences of configuration. Organizations have to go through the following stagesStage of development- this the when the organization is growing Stage of stability- this is when the organization is moving in a steady Stage of adaptation- this is when the organization that is adjusting to the changes Stage of struggle- this is when the organization is trying to get back or recovering from problems Stage of revolution- this is when the organization adapts to the surrounding and tends to work towards new methodologies to revive its self. PremisesMost of the time, an organization adopts a particular form of structure matched to a particular type of context which causes it to engage in particular behaviours that give rise to a particular set of strategies States of configuration and periods of transformation may order themselves over time into pattern sequences, for example describing life cycles of organizations The key to strategic management, therefore, is to sustain stability or at least adaptable strategic change most of the time.

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