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INTENDED STRATEGY DEVELOPMENT

Strategy leadership as design. It could be that the strategic leader has thought
through the strategy analytically. This might be by using the sort of techniques
associated with strategic analysis and evaluation, or it might simply be that the
individual has consciously, systematically and on the basis of his or her own logic
worked through issues the organisation faces and come to his or her own
conclusions.
Strategy leadership as vision. It could be that a strategic leader determines or
is associated with an overall vision, mission or strategic intent (see section 4.5.2)
that motivates others, helps create the shared beliefs within which people can
work together effectively and shapes more detailed strategy developed by others
in an organisation. Some writers see this as the role of the strategic leader.2
Strategy leadership as command. The strategy of an organisation might also
be dictated by an individual. This is, perhaps, most evident in owner-managed
small firms, where that individual is in direct control of all aspects of the
business. Danny Miller and Isabel Le-Breton suggest there are advantages and
disadvantages here. On the plus side it can mean speed of strategy adaptation
and sharp, innovative, unorthodox strategies that are difficult for other
companies to imitate. The downside can, however, be hubris, excessive risk
taking, and quirky, irrelevant strategies.

Strategic planning systems


Often, strategy development is equated with formalised strategic planning
systems.4 These may take the form of systematised, step-by-step, chronological
procedures involving different parts of the organisation. For example, in a study
of strategic planning systems of major oil companies, Rob Grant5 noted the
following stages
in the cycle for a large corporation:
Initial guidelines. The cycles starting point is usually a set of guidelines or
assumptions about the external environment (for example, price levels and
supply and demand conditions) and the overall priorities, guidelines and
expectations of the corporate centre.
Business-level planning. Business units or divisions then draw up strategic
plans to present to the corporate centre. Corporate centre executives then
discuss those plans with the business managers usually in face-to-face meetings.
On the basis of these discussions the businesses revise their plans for further
discussion.
Corporate-level planning. The corporate plan results from the aggregation of
the business plans. This coordination may be undertaken by a corporate planning

department that, in effect, has a coordination role. The corporate board then has
to approve the corporate plan.
Financial and strategic targets are then likely to be extracted to provide a
basis for performance monitoring of businesses and key strategic priorities on
the basis of the plan.
None the less a strategic planning system may have many uses. First, it may
indeed play a role in how the future organisational strategy is determined. For
example, it might:
Help structure analysis and thinking about complex strategic problems.
Encourage questioning and challenge of received wisdom taken for granted in
an organisation.
Encourage a longer-term view of strategy than might otherwise occur. Planning
horizons vary, of course. In a fast-moving consumer goods company, 35-year
plans may be appropriate. In companies which have to take very long-term views
on capital investment, such as those in the oil industry, planning horizons can be
as long as 15 years (in Exxon) or 20 years (in Shell).6
Enhance coordination of business-level strategies within an overall corporate
strategy.

A planning system may also facilitate converting an intended strategy into


organisational action by:
Communicating intended strategy from the centre to operating units.
Providing agreed objectives or strategic milestones against which performance
and progress can be reviewed.
Coordinating resources required to put strategy into effect. A planning system
may also have a psychological role by:
Involving people in strategy development, therefore perhaps helping to create
ownership of the strategy
Providing a sense of security and logic for the organisation, not least senior
management who believe they should be proactively determining the future
strategy and exercising control over the destiny of the organisation.

Henry Mintzberg has, however, challenged the extent to which planning provides
such benefits.7 Arguably there are four main dangers in the way in which formal
systems of strategic planning have been employed:
Confusing strategy with the plan. Managers may see themselves as managing
strategy when what they are doing is going through the processes of planning.
Strategy is, of course, not the same as the plan: strategy is the long-term
direction that the organisation is following, not just a written document linked to
this may be a confusion between budgetary processes and strategic planning
processes; the two may come to be seen as the same. The result is that planning
gets reduced to the production of financial forecasts rather than the thinking
through of the sort of issues discussed in this book. Of course it may be
important to build the output of strategic planning into the budgetary process,
but they are not the same.
Detachment from reality. The managers responsible for the implementation of
strategies, usually line managers, may be so busy with the day-to-day operations
of the business that they cede responsibility for strategic issues to specialists or
consultants. However, these rarely have power in the organisation to make
things happen. The result can be that strategic planning becomes an intellectual
exercise removed from the reality of operation. Strategic planning can also
become over-detailed in its approach, concentrating on extensive analysis that,
whilst technically sound in itself, misses the major strategic issues facing the
organisation. For example, it is not unusual to find companies with huge amounts
of information on their markets, but with little clarity about the strategic
importance of that information. The result can be information overload with no
clear outcome. At the extreme, strategic planners may come to believe that
centrally planned strategy determines what goes on in an organisation. In fact it
is what people do and the experience they draw on to do it that are likely to play
a much more significant role (see section 11.5.1 and Chapter 15). If formal
planning systems are to be useful, those responsible for them need to draw on
such experience and involve people throughout the organisation if planning is to
avoid being removed from organisational reality.
Lack of ownership. The strategy resulting from deliberations of a corporate
planning department, or a senior management team, may not be owned more
widely in the organisation. In one extreme instance, a colleague discussing a
companys strategy with its planning director was told that a strategic plan
existed, but found it was locked in the drawer of the executives desk. Only the
planner and a few senior executives were permitted to see it! There is also a
danger that the process of strategic planning may be so cumbersome that
individuals or groups might contribute to only part of it and not understand the
whole. The result can be that the business-level strategy does not correspond to
the intended corporate strategy. This is particularly problematic in very large
firms.
Dampening of innovation. Highly formalised and rigid systems of planning,
especially if linked to very tight and detailed mechanisms of control, can result in

an inflexible, hierarchical organisation with a resultant stifling of ideas and


dampening of innovative capacity.
The evidence of the extent to which the pursuit of such a systemised approach
results in organisations performing better than others is equivocal8 not least
because it is difficult to isolate formal planning as the dominant or determining
effect on performance. However, there is some evidence that it may be
especially beneficial in dynamic environments, where decentralised authority for
strategic decisions is required (see Chapter 12) but where there is a need for
coordination of strategies arising from such decentralisation.9 Certainly there
has been a decline in the use of formal corporate planning departments10 and a
shift to line managers taking responsibility for strategy
Strategic planning is becoming more project based and flexible.11 In this
respect, strategic planning ceases to be a vehicle for the top-down development
of intended strategy and more of a vehicle for the coordination of strategy
emerging from below
Strategies being imposed in such ways may have been determined using the
tools of analysis and evaluation associated with a rational/analytic approach, or
perhaps through systematic strategic planning; or they may have developed in a
more emergent fashion (see section 11.3). However, to the managers of the
organisation having it imposed on them, it is certainly experienced as an
intended strategy.

EMERGENT STRATEGY DEVELOPMENT


Strategies do not typically change in major shifts of direction. They typically
change by building on and amending what has gone before.
So such a pattern is consistent with a view of strategy development as an
intentional, considered and deliberate process. However, it is also possible to
account for the same pattern as a persistent application of the familiar
organisations repeatedly taking decisions based on where they have come from,
rather than a considered view of their future12 or as the outcome of routines,
activities and processes within an organisation leading to decisions that become
the long-term direction the strategy of an organisation.13 These cumulative
decisions may then subsequently be more formally described, for example in
annual reports and strategic plans, as the strategy of the organisation. This
section explains the organisational processes that might account for such
emergent strategy development.

Emergent strategy comes about through everyday routines, activities and


processes in organisations leading to decisions that become the long-term
direction of an organisation

Logical incrementalism
Logical incrementalism is the deliberate development of strategy by
experimentation and learning from partial commitments.
Logical incrementalism is the development of strategy by experimentation and
learning from partial commitments rather than through global formulations of
total strategies.15 There are a number of reasons this is likely to be so:
Environmental uncertainty.
Generalized view of strategy
Experimentation
Coordinating emergent strategies.

Quinn argues that, despite its emergent nature, logical incrementalism can be a
conscious, purposeful, proactive, executive practice to improve information
available for decisions and build peoples psychological identification with the
development of strategy. In a sense, then, logical incrementalism encapsulates
processes that bridge intention and emergence, in that they are deliberate and
intended but rely on social processes within the organisation to sense the
environment and experiments in subsystems to try out ideas.
Since change will be gradual, the possibility of creating and developing a
commitment to change throughout the organisation is increased. Because the
different parts, or subsystems, of the organisation are in a continual state of
interplay, the managers of each can learn from each other about the feasibility of
a course of action.

Resource allocation processes


The resource allocation process (RAP) explanation of strategy development is
that realised strategies emerge as a result of the way resources are allocated in
organisations.16
The RAP explanation then emphasises the formal and informal processes by
which this is done, particularly
Negotiation across organisational levels
The influence of RAP

Organisational politics

The RAP explanation highlights the role of negotiation between organisational


levels in strategy development. This signals the importance of organisational
politics. Managers often suggest that the strategy being followed by their
organisation is really the outcome of the bargaining and power politics that go on
between important executives or between coalitions within the organisation and
major stakeholders.
The political view21 of strategy development is, then, that strategies develop as
the outcome of processes of bargaining and negotiation among powerful internal
or external interest groups (or stakeholders)

In approaching strategic problems, people may be operating within an overall


organisational culture (see Chapter 4) but within this, they are likely to be
differently influenced by at least:
Personal experience from peoples roles within the organisation.
Competition for resources and influence between the different subsystems in
the organisation and powerful people within them who are likely to be interested
in preserving or enhancing the power of their positions.23
The relative influence of stakeholders on different parts of the organisation.
For example, a finance department may be especially sensitive to the influence
of financial institutions whilst a sales or marketing department will be strongly
influenced by customers.24
Different access to information or the salience of that information given their
roles and functional affiliations.

In such circumstances emergent and incremental patterns of strategy


development are likely. Emergent in the sense that it is this bargaining and
negotiation that gives rise to strategy rather than carefully analysed, deliberate
intent.
Incremental for two reasons. First, if different views prevail in the organisation
and different parties exercise their political muscle, compromise may be
inevitable. Second, it is quite possible that it is from the pursuit of the current
strategy that power has been gained by those wielding it. Indeed it might be
very threatening to their power if significant changes in strategy were to occur.

Cultural processes
So a cultural explanation of strategy development is that it occurs as the
outcome of the taken-for-granted assumptions and behaviours in organisations.
The important thing to stress here is that this taken-for-grantedness works to

define, or at least guide, how the people in an organisation view that


organisation and its environment. It also tends to constrain what is seen as
appropriate behaviour and activity.

PATTERNS OF STRATEGY DEVELOPMENT


Multiple strategy development processes
For example, in practical terms, if a planning system exists in a large
organisation, that organisation will also have RAP. Within these there will
undoubtedly be some level of political activity; indeed the planning system itself
may be used for negotiating purposes. Moreover, if there is a dominant mode of
strategy development in an organisation, it is most likely that other processes
will be evident too. Indeed, there is evidence that those organisations that
employ multiple processes of strategy development may perform better than
those that take more singular approaches.27
Contextual differences.
Processes of strategy development are likely to differ over time and in different
contexts.
Different strategy development processes tended to be more pronounced at one
stage in its development than another and, apparently, beneficially for the
organisation.

Managers in public sector organisations tend to see strategy as externally


imposed more than managers in commercial businesses, largely because their
organisations are answerable to government bodies.30

Managing intended and realised strategy


realised strategy: that is, the strategy actually being ollowed by an organisation
in practice (route 3) rather than planned up front.

The learning organisation


Traditionally, organisations have been seen as hierarchies and bureaucracies set
up to achieve order and maintain control, as structures built for stability rather
than change. A learning organisation, however, is one capable of continual
regeneration from the variety of knowledge, experience and skills of individuals
within a culture that encourages mutual questioning and challenge around a
shared purpose or vision. It emphasises the potential capacity and capability of
an organisations to regenerate itself from within, and in this way for dynamic
strategies to emerge naturally

Advocates of the learning organisation31 point out that the collective knowledge
of all the individuals in an organisation usually exceeds what the organisation
itself knows and is capable of doing; the formal structures of organisations
typically stifle organisational knowledge and creativity.
encourage processes that unlock the knowledge of individuals, and encourage
the sharing of information and knowledge, so that every individual becomes
sensitive to changes occurring around them and

The central tenets of organisational learning are:


Managers facilitate rather than direct.
Information flows and relationships between people are lateral as well as
vertical.
Organisations are pluralistic, where conflicting ideas and views are welcomed,
surfaced and become the basis of debate.
Experimentation is the norm, so ideas are tried out in action and in turn
become part of the learning process

Strategy development in uncertain and complex


conditions
shows how organisations may seek to cope with conditions that are more or less
stable or dynamic, and simple or complex:34
In complex situations managers face an environment that is difficult to
comprehend. This may be because of the knowledge complexity of an industry.
Such organisations, of course, face dynamic conditions too, and therefore a
combination of complexity and uncertainty. The electronics industry is in this
situation. In such circumstances top managements need to recognise that the
possibility of planning detailed strategies from the top is limited, arguably
dangerous since specialists lower down in the organisation know more about the
environment in which the organisation operates than they do. Top managements
role may be more to do with setting overall strategic direction and coordinating
and shaping emerging strategy from below. Insights from the ideas lens (see the
commentaries) and, again, of organisational learning may be helpful here too.