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Strategic Development Processes in Organizations**

Strategic Planning Systems**: Often Strategy


development is equated with Strategic planning
system. This is manifestation of Design approach to
formulating /managing strategy. This takes form of
highly systemized step by step, chronological
procedures involving many people from different
parts of the organization.
Formalized Planning provide a structured means of
analysis and thinking about complex strategic
problems, providing opportunity to managers to
question and challenge the perceived wisdom they
take for granted.
Company Mission
&Goals
External Environment
Operating
Industry
Remote
Company Profile
(Resources & capa-
bilities)
Strategic Analysis and Choice
Long-term Objectives Generic & Grand Strategies
Annual Plans &
Short term Objectives
Functional / Operating
Strategies/ tactics
Policies that empower
action
Institutionalization of Strategy & implementation
Strategic Control & continuous improvement
? Possible
? Desired
<
^
^ ^
v
STRATEGIC MANAGEMENT PROCESS
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It encourages a longer term view of strategy than
might otherwise occur. Planning horizons vary with
nature of an industry . In FMCG, 3-5 years may be
appropriate. In companies, which have to take very
long-term views on capital investment, such as oil
industry, planning horizons can be as long as 14
years ( in Exxon) or 20 years ( as practiced in Shell).
Strategic planning system approach can be a useful
means of co-ordination and help communicate the
intended strategy and create ownership of the
strategy by involving large number of people in
development process.
Planning systems provide a sense of security and
feel of exercising control over the destiny of the
organization.

Viewed through Experience lens, Planning may help
in drawing together experiences of people and
ensure effective communication.
Viewed from Ideas lens, Planning systems provide a
selection mechanism by which new ideas can be
evaluated. New ideas and innovations compete or
prove their worth.
There are some pit falls also in the formalization of
strategic Planning process:
Line managers, due to their pre-occupation with day to day
work, may actually cede responsibility for strategic issues
to specialist. This may result in strategic planning
becoming an intellectual exercise removed from the reality
of operations.
The process of Strategic planning may sometimes be so
cumbersome that individuals or groups in the firm might
contribute to only part of it and not understand the whole.
Planners may overlook the cultural & political dimensions of
the organization , and also importance of experiences of those
in the organization.
Very formal system of planning, especially with tight
mechanism of control, can stifle ideas and have dampening
effect on innovative capacity.
Planning can become obsessed with search for a definitively
right strategy.

Logical incrementalism**: In a study of major
multinational businesses, Quinn concluded that the
strategic management process could be best
described as logical incrementalism.
Managers have a view of where they want the
organization to be in years to come and try to move
towards this position incrementally.
They do this by attempting to ensure the success &
development of a strong , secure but flexible core
business while using the experience gained to
develop business and perhaps experiment with side
bets. Encourage ideas to emerge from lower levels
as well.
The Learning Organization : The concept of the
learning organization, and strategy development as
a learning process, became popularized in the
1990s . In many respects it corresponds to the
aspects of logical incrementalism, especially the
argument that the uncertainty & complexity of the
world can not be understood purely analytically.
The Learning organization is capable of continual
regeneration from variety of knowledge, experience
and skills within organization which encourages
questioning and challenge around a shared
purpose.
Characteristics of the experience and ideas lens more
closely match those of learning organization.
Experimentation is the norm. Informality and network
of working relationships ( rather than hierarchies) help
the process. Organizations can be seen as social
networks.
Political process of bargaining and negotiation is
inherent in learning organization, so conflicts and
disagreements will occur due to diversity & variety in
the organization. This should not be seen as negative in
the process of strategy development.

Strategic Leadership**
Strategic Development may , in certain cases, be
strongly associated with an individual.
A strategic Leader is an individual upon whom
strategy development and change are seen to be
dependent. Others in the organization willingly giving
him the position. In some organization the individual
may be owner or founder, often in case of small
businesses and start-ups. In some cases it could also
be an individual chief executive who has turned
around a business in difficult time.
The design lens suggests the individual carries out
the analysis & evaluation. These could be using his
own logic or using techniques associated with
strategic planning & analysis.
The experience lens suggests that strategy advanced
by individual is formed on basis of the individuals
experience, perhaps within the organization or
perhaps from some other organization where he
previously worked. The strategy advanced by a chief
executive new to an organization may be based on a
successful strategy followed in previous organization.
The strategy of an organization may be more
symbolically with an individual, for example founder
in a family controlled business.

Viewed from Ideas lens, Evolutionary theorists
emphasize the way in which the strategies
develop from competing ideas, so tend to
diminish the role of so called strategic leader.
However, a strategic leader can provide the
vision with sufficient clarity within which the
discretion of others in the organization can be
exercised.
Organizational Politics**: The political view of
strategy development is that strategies
develop as the outcome of process of
bargaining and negotiation among powerful
internal or external interest groups ( or
stakeholders). This is the world of boardroom
battles portrayed in films & TV dramas.
The design lens sees it as inevitable but
negative influence on strategy development.


Experience lens helps to explain the likelihood of political
activity. People in organizations are rooted in their experience
& therefore in approaching major problems, seek to be
protective of their views preserving or enhancing the power
of their positions.
Political activity may then seen as one explanation of
incremental, adaptive strategy development. Very significant
change to strategy may be very threatening to the power of
certain managers.
The experience lens also suggests that the analytical
processes that go into planning may not be entirely based on
objective and neutral facts.
Powerful individuals and groups may also strongly influence
the identification of key issues and indeed the strategies
eventually selected. Planning thus has a political dimension.
Political activity has to be taken seriously as an influence on
strategy development.

The ideas lens also suggests that
organizational politics can be seen as
manifestation of the sort of conflict that
results from innovation and new ideas. The
variety and diversity that exists in
organizations takes form in new ideas
supported or opposed by different
champions.
Imposed Strategy : Imposition of strategy by agencies
or forces external to the organization. Government
may dictate a particular direction eg: in public sector
or when it chooses to privatize a PSU.
MNCs are subjected to regulations in different
countries. An operating business within a multi-
divisional organization might see overall corporate
strategic direction as an imposition on it.
It might be argued that imposed strategy is a way of
overcoming the sort of strategic inertia that had
arisen as a result of strategies developing
incrementally based on history, experience or
compromises resulting from bargaining & negotiations
of powerful groups.
Multiple Processes of Strategy Development**:

First, there is no one right way. The way in which strategies
develop in a fast changing environment is not likely to be
same in an environment where little changes.
Second, it is very likely that the way the strategies are
developed will be seen differently by different people.
Senior executives tend to see strategies more in terms of
design, where as middle management tend to see them as a
result of cultural political processes.
Managers who work for government organizations tend to
see strategy as more imposed than those in the private sector.
There will be multiple processes at work. Even in a
predominantly Planning system, some level of political activity
and certain elements of imposed strategy is likely to be there.
Implications for Strategy Development
Intended and realized Strategies
Strategic Drift
Strategic Management in Uncertain and
complex conditions
Intended , Realized and Emergent strategies
Strategy is typically developed by managers in an intended,
planned fashion.
Intended strategy is a deliberate , designed process of
development and implementation.
A companys realized strategy is often the product of intended
strategies and unplanned or emergent strategies.
Emergent strategies are the unplanned response to
unforeseen circumstances. They often arise from actions by
managers / employees within organization based on
experience, learning , intuition, creativity and not out of the
formal top down planning mechanism.
Managers typically reconcile different views through
negotiations & political activity. So strategy could develop in
an emergent fashion as the outcome of cultural & political
process

Contd.
Some part of Intended strategy is unrealised for
reasons like plans were unworkable, environment
changed after plans were drawn, influential
stakeholders did not go along with the plan etc.
There could be certain imposed restrictions on the
strategy regulatory / governmental actions
Strategy development as explained in terms of logical
incrementalism or learning may also take form of
emergent strategy
Intended Strategy
Realized Strategy
Unrealized
Strategy
Emergent
Strategy
Imposed Strategy
Deliberate Strategy
Emergent strategies arise
Out of learning, cultural &
political process, intuition etc

Hondas successful entry into US Motor Cycle industry
in 1960s
HBS Case Honda (A) , 1984 A rational, analytical
approach to strategy. Based on exploiting volume
based economies to attain cost leadership in world
motor cycle industry (between 1960 &73, share of British cos
BSA, Triump 49%9%)
HBS Case Honda (B), 1984 Honda had originally
believed that its main opportunities lay with larger
bikes. But outstanding success was due to surprise
acceptance of Honda 50cc Supercub (Nicest people
campaign)
Hondas entry into U.S. Motorcycle market
Intended Strategy
Focus on 350cc &250 cc MCycles ( rather than 50 cc
Honda cubs, which were hit in Japan- instinct told them
US market preferred bigger , macho product) to take a
share of imported UK heavy bikes
Emergent Strategy
Bigger bikes ran into technical problems , Sales sluggish ,
looked Hondas strategy was failing
Japanese executives running on 50 cc bikes in Los Angles
were attracting lot of attention
Call from Sears , sports goods dealers that they wanted to
sell small bikes to a different segment
( Honda executives were initially hesitant to push small
bikes for fear of alienating serious bikers)
Realized Strategy
Finally Honda had stumbled onto a untouched market
segment that was to prove huge
Honda example demonstrate the critical points
In practice, the strategies of most organizations are
probably a combination of Intended and the emergent
The message for the management is that it needs to
recognize the process of emergence and to intervene
when appropriate, killing off bad emergent strategies but
nurturing potentially good ones.
Management must be able to judge the worth of emergent
strategies
Mintzberg stresses that an organizations capability to
produce emergent strategies is a function of kind of
corporate culture that the organizations structure &
control system fosters

The existence of the Intended strategy helps to
evaluate the efficiency of emergent options & act as
the base for comparison.
Intels Emergent Strategy transformation from
being a Memory Company to Micro Processor
Company
Originally DRAM & EPROM Memory mfg
Core competence in design & fabrication of chips
Manufacturing resources were allocated between memory
chips & microprocessor chip
Strategy of treating memory business as the core business.
Lions share of R&D allocation by top management to
memory
Due to changes in market, middle management changed
allocation of manufacturing capacity.

Most text books on Strategic Management cover
rationalist, analytic approach to strategy formulation
in preference to the crafting approach advocated by
Mintzberg. This is not because planning is necessarily
superior to crafting we have already noted that
strategy is about identity and direction rather than
detailed planning. Nor is it because one wishes to
downplay the role of skill, dedication, involvement,
harmony, or creativity.
Studies by Henry Mintzberg and his colleagues at
McGill University into the process of strategy making
also distinguish between intended & realized
strategy

Strategy development is a multidimensional process that must
involve both rational analysis and intuition, experience, and
emotion.
Without analysis, in the process of strategy formulation, there
will be no basis for comparing and evaluating alternatives.
Moreover, critical decisions become susceptible to the whims
and preferences of individual managers, to contemporary fads.
Concepts, theories, and analytic frameworks are not
alternatives or substitutes for experience, commitment, and
creativity.
But they do provide useful frames for organizing and assessing
the vast amount of information available on the firm and its
environment and for guiding decisions, and may even act to
stimulate rather than repress creativity and innovation.

Strategic Drift
Historical studies of organizations have shown
prevalence of processes leading to emergent strategy.
There are long periods of relative continuity during
which established strategy remains largely unchanged
or changes incrementally, there are also periods of
flux in which strategies change but in no very clear
direction.
Transformational change, when there is a
fundamental change in strategic direction, does take
place but is infrequent.
The above pattern is known as punctuated
equilibrium.


There are strong forces at work which are likely to push
organizations towards this pattern. Incremental strategic
change is a natural outcome of the influence of experience.
The influence of the paradigm and the way we do things
around here is likely to mean that faced with changes in
environment, managers try to look for solutions with which
they are familiar and therefore minimize the extent to which
they face ambiguity and uncertainty.
There is a danger that incremental strategic changes are not
enough to keep pace with environmental changes, and more
fundamental or transformational change is needed.
Indeed, often Transformational change tends to occur at times
when performance has declined significantly. There is a danger
that Organizations under such pressure may be acting
reactively to the environment.
See Exhibit 2.13 for phases of Strategic drift.
Organizations that seek to innovate could also
sometimes face problems by developing products or
services much ahead of its environment ( market
demand)
All these goes to emphasize the delicate balance
required while developing strategy. Internal cultural
pressures tend to constrain strategy development
and at the same tome the organizations need to
cope with environmental forces.
Strategic Management in Uncertain & complex conditions
Different organizations face environments which differ in form
& complexity. Since one of the main problems of strategic
management is coping with uncertainty , the above aspect is
very important.
In simple / static conditions, the environment is easy to
understand & does not undergo significant change. Raw
material suppliers & some mass manufacturing companies are
examples. Technical processes may be fairly simple and
competition & markets change very little. If environmental
changes does occur, analysing past historical patterns /
forecasting helps predict them .
In situations of relatively low complexity, it may also be
possible to identify some predictors of environmental
influences. For example birth rates is a good indicator to
determine provision for schooling.
So in simple / static conditions strategy development in
design terms may make sense.
In Dynamic conditions, managers need to consider
the environment of future, not just the past. They
may employ structured ways of making sense of the
future , such as scenario planning, or they may rely
more on encouraging active sensing of
environmental changes low down in the organization
and the sort of diversity and variety seen as through
the ideas lens.
The emphasis should be on creating organizational
conditions which encourage individuals & groups to
be intuitive and challenging in their thinking about
possible futures through the sort of learning
organisation.
Organizations in Complex situations face an
environment difficult to comprehend. They may face
dynamic conditions too, and therefore combination
of complexity & uncertainty. A multinational firm or
a government authority with many services, may also
be in a complex condition because of diversity, while
different operating companies within it face varying
degrees of complexity & dynamism
Difficult to handle complexity by relying only on
analysis & planning. So organizational design is
important. Decentralization with different parts of
the organization made responsible for different
aspects & given the resources and authority to
handle their own parts.
Organizations have to learn to cope with
complexity in different ways. Top management
has to recognize that specialist down the line
know more about the environment know
more than they do. This strategic competence
based on experience may provide competitive
advantage . Taken-for-granted has to be
challenged
Simple Complex
ENVIRONMENTAL
CONDITIONS
Static
Dynamic
Historical Analysis
Forecasting
Scenario
Planning
Decentralization of
Organization
Experience &
Learning
Strategy development in environmental contexts