Week 5 strategic development

3BM020 Organisational Strategy and Decision Making Session Glyn Littlewood Strategic development Understanding strategy developments Outcomes covered in this session Following this session students should be able to understand: • What is meant by intended & emergent strategy development • Logical incremenatlism • How different processes of strategy development may be found in multiple forms & in different contexts • Strategic drift Strategy development processes Intended strategy: key concept Deliberately formulated or planned by managers May be the result of: • strategic leadership • strategic planning • external imposition of strategy Strategic planning  Structured means of analysis and thinking about complex strategic problems  Questioning and challenging received wisdom  Longer-term view of strategy  Means of coordination The role strategic planning Strategic planning may play several roles within an organisation: • Formulating strategy: a means by which managers can understand strategic issues • Learning – a means of questioning and challenging the taken-for-granted • Co-ordinating business-level strategies within an overall corporate strategy • Communicating intended strategy and providing agreed objectives or strategic milestones Strategic planning systems • Facilitates conversion of strategy into organisational action: – Communication of intended strategy from the centre – Agreed objectives or strategic milestones to measure progress – Coordination of resources to implement strategy Benefits of strategic planning There are additional psychological benefits:  can provide opportunities for involvement  a sense of ownership,  provides security to managers  re-assures managers that the strategy is ‘logical’ Problems with strategic planning Misunderstanding the purpose:  Danger that strategy thought of as the plan  Confusion between budgetary and strategic planning processes  Obsession with search for a right strategy  Documentation gives false appearance of proactive approach Problems with strategic planning systems • Problems in design: – Line managers may concede responsibility to consultants • no power to make things happen • becomes an intellectual exercise – Cumbersome process may result in not understanding the whole – Can be over-detailed – information overload – paralysis by analysis – Formalised and rigid systems can stifle ideas – dampening of innovation • Failure to gain ownership – Lack of broad involvement – Removed from organisational reality Strategic drift HMV: January 2013 – week In the news: HMV is profitable again Challenges for strategy development • Although infrequent, there may be transformational change in which there is a fundamental change in strategic direction • This pattern has become known as punctuated equilibrium: the tendency to develop incrementally with periodic transformational change Key points (1) • Intended versus emergent strategy • Intended strategy derives from: – – – – Planning systems carried out by top management Strategy workshops/project groups Strategy consultants Imposition by external stakeholders • Strategies may also emerge as a result of: – – – – Logical incrementalism Resource allocation routines Organisational culture Political activity Key points (2) • Challenge of strategic drift – Need to challenge taken for granted assumptions • Multiple processes of strategy development required – To create a learning organisation – To cope with dynamic and complex environments Summary: intended strategy • It is important to distinguish between intended strategy – the desired strategic direction deliberately planned by managers – and emergent strategy which may develop in a less deliberate way from the behaviours and activities inherent within an organisation • Most often the process of strategy development is described in terms of intended strategy as a result of planning systems carried out objectively and dispassionately There are benefits and disbenefits of formal strategic planning systems However, there is evidence to show that such formal systems are not an adequate explanation of strategy development as it occurs in practice • Intended strategy may also come about on the basis of central command, the vision of strategic leaders or the imposition of strategies by external stakeholders Summary: emergent strategy • Strategies may emerge from within organisations This may be explained in terms of:  How organisations may proactively try to cope through processes of logical incrementalism and organisational learning  The outcome of the bargaining associated with political activity resulting in a negotiated strategy  Strategy development on the basis of prior decisions, path dependency and the taken-for-granted elements of organisational culture that favour certain strategies  Strategies developing because organisational systems favour some strategy projects over others Sources & further reading • Grant, R Strategic Planning in a Turbulent Environment, Strategic management journal, vol 24, p 499, 2003 • Johnson, G., Scholes, K., & Whittington, R Exploring Corporate Strategy 7th Edition (2005) Prentice Hall • Lynch, R Corporate Strategy 4th Edition (2006) Prentice Hall • MIntzberg, H., Lampel, J., Quinn, J, B, & Ghoshal, S The Strategy Process 4th International Edition (2003) Strategy Development in Environmental Contexts Managing Strategy Development Processes • Organisation needs different processes for different purposes • What is the right emphasis at a given time? • What is the role of top management? • What are the strategy development roles at different organisational levels? • Do the different managerial levels acknowledge and value different roles? Strategy Development Routes Strategy Development Routes • Route - planned in terms of resource allocation, control systems, organisational structure and so on – typically associated with the development of intended strategy • Route - much of what is intended follows route and is unrealised; it does not come about in practice, or only partially so, plans are unworkable, the environment changes after the plan has been drawn up, people in the organisation or influential stakeholders not go along with the plan Strategy Development Routes • Route - emergent strategy/intended strategy whilst existing in the form of a plan of some sort, is not the realised strategy actually being followed by an organisation in practice If strategy is defined as the long-term direction of the organisation, which develops over time, then it can be emergent rather than planned up front • Route - if strategic plans exist they might not perform the role of formulating strategies so much as the useful role of monitoring the progress or efficiency of a strategy which emerges ... emergent strategy development • Logical incremenatlism • How different processes of strategy development may be found in multiple forms & in different contexts • Strategic drift Strategy development. .. be the result of: • strategic leadership • strategic planning • external imposition of strategy Strategic planning  Structured means of analysis and thinking about complex strategic problems... complex Life cycle effects – development processes will evolve and change over the life cycle Challenges for strategy development • Strategic drift – Incremental strategic change influenced by