lOMoARcPSD|11911780
Learning goals
- Understand the premises, assumptions and weaknesses of different schools
- Identify the most appropriate perspectives and approaches to analyze strategic challenges
Design school – A process of conception (prescriptive)
The design school proposes a model of strategy making that seeks to attain a match or fit between
internal capabilities and external possibilities. Economic strategy will be seen as the match between
qualifications and opportunity that positions a firm in its environment.
The basic design school model
The model emphasis on the appraisals of the external and internal situations. The figure shows two
other factors believed important in strategy making: 1. Managerial values: the beliefs and
preferences of those who formally lead the organization 2. Social responsibilities: three ethics of the
society in which the organization functions
Richard rumelt has provided the best framework for evaluating in terms of a series of tests. Keeping
strategies clear, simple and specific:
- consistency: in goals and policies
- consonance: daptive to environment, bring together internal state and external expectations
- strategic advantage: maintenance of a competitive advantage/distinctive competence
- feasibility: neither overtax available resources nor create unsolvable problems
Characteristics & premises
- Strategy formation as a deliberate process of conscious thought
- Responsibility for strategy rest with the CEO: there is only one strategist. This command and
control mentality allocates all major decisions to top management
- Process of strategy formation should be simple and informal: one way to ensure that
strategy is controlled in one mind is to keep the process simple
- Strategies should be unique/one of a kind. The process should be a creative act to build on
distinctive competence.
- Separation of formulation from implementation: strategy appears as a perspective, at some
point in time, fully formulated and ready to implement. There is little room for
incrementalism, which allows formulation to continue during and after implementation
- Strategy developed to attain match or fit between internal capabilities and possibilities
o SWOT
o Environment needs to be taken into account, but one can only navigate through and
not interact with
- Strategy design process is complete when strategy appears fully formulated as a perspective
- Strategy is explicit ( duidelijk, letterlijk zo gezegd)
o Strategies should be clear, simple and specific/explicit: simplicity is the essence of
good art
- Implementation follows formulation and articulation
- A strategy has first to be fully formulated and can then be implemented: only after these
unique full blown, explicit and simple strategies are fully formulated can they be
implemented. There is a sharp distinction between formulating and implementing. Structure
must follow strategy.
, lOMoARcPSD|11911780
“Volgens het incrementalisme is het besluitvormingsproces een serie kleine, veelal intuïtieve
veranderingen in plaats van enkele grote”
Design school: process
Design school: CEO - Central actor
- Strategist: CEO/head of organization
- Tasks:
o Gather information
o Analyze information
o Organize information
o Formulate strategy
- Idea of CEO to be main strategists is very much alive
o Uncommon CEO names lead to more deviating strategies
o CEOs cognitive flexibility aids the development of dynamic capabilities
o CEO characteristics determine the kind of acquisitions of a firm
“Dynamic capabilities, which are underpinned by organizational routines and managerial skills, are
the firm's ability to integrate, build, and reconfigure internal competences to address, or in some
cases to bring about, changes in the business environment”
Design school: structure follows strategy – organizational
structure
- Structure follows strategy
o Strategy determines long term goals and objectives the course of action and
allocation (toewijzing) of resources
o Structure is the design through which to administer the strategy
o Changes in an organization’s strategy lead to problems that require new structure
Design school: summary assumptions
- CEO has complete and perfect information
- The CEO has the mental/cognitive capacity to accurately process all information
- The environment can always be understood
- Situations and environment are predictable
- All information is documented and available
- Strategy is centrally formulated
Design school: criticism/limitations
- Structure follows strategy: unrealistic for most organizations
, lOMoARcPSD|11911780
- Assumption of universality: Structure is scarcely malleable, but it cannot be altered at will
just because a leader has conceived a new strategy. We conclude that structure follows
strategy the way the left foot follows the right foot in walking. Strategy formation is an
integrated system. Until we know the (new/ revised) strategy we cannot begin to respecify
the appropriate structure:
- The capacity to learn is ignored by analytical assessment of environment and internal
capabilities
- Promotion of inflexibility: hierarchical, centralized and explicit strategy formulation
- Detachment of thinking form acting: separation of formulation form implementation.
Strategy is a grand design that requires a grand designer. Managers should not remain in
their office to formulate a strategy so that other can implement it. The assumption that data
can be aggregated and transmitted up the hierarchy without significant loss or distortion is
incorrect. It destroys carefully formulated strategies in the process
- CEO is unlikely to have all and perfect information and the capacity to process this
information
- Economic man/homo economicus: “Agent who has complete information about the options
available for choice, perfect foresight of the consequences from choosing those options, and
the wherewithal to solve an optimization problem that identifies an option which maximizes
the agent’s personal utility.””
- Bouned rationality: rationality is limited and individuals make imperfect decisions
o Difficulty of the problem
o Boundaries to cognitive capability
o Limited time
Design school: contributions
- Vocabulary & tools
- Grand strategy
- Basic notion: fit between external environment and internal capabilities
- Started to promote the relevance of strategy in organizations as a field of research
- SWOT
We see a set of four conditions in particular that should encourage an organization to tilt toward the
design school model:
1. One brain can handle all of the information relevant for strategy formation: there are times
when organizations do need grand design. Grand strategy.
2. The brain is able to have full, detailed intimate knowledge of the situation in question:
potential for centralizing knowledge must be backed up by sufficient access to and
experience of the organization and its situation.
3. The relevant knowledge must be established before a new intended strategy has to be
implemented: the situation has to remain relatively stable or at least predictable. Not only
must the strategist have access to the relevant knowledge base, but there must also be some
sense of closure on that base. Individual learning come to an end before organizational
action can begin.
4. The organization in question must be prepared to cope with a centrally articulated strategy:
other people in the organization must be willing to defer to a central strategist.
These conditions suggest some clear contexts in which the design school model would seem to apply
the best. The design school model would seem to apply best at the junction of a major shift for an
, lOMoARcPSD|11911780
organization, coming out of a period of changing circumstances and into one of operating stability!
There is another context where the design school model might apply, and that is the new
organization, since it must have a clear sense of direction in order to compete with its more
established rivals.
Main takeaways Design School:
- Conception & fit
- Order and simplicity, reduce ambiguity
- Useful in relative stable environments
- Strategy has many variables and is inherently complex, but strategies must be simple and
informal
- Risk of not invented here / resistance
Overview Design school – Spider
Characteristics Congruence:agreement, compaility, harmony aka/fit, SWOT
Central actor CEO/Leader
Strategies are formed Deliberately
Organization chances Occasionally, quantum (when it changes, it is a large change)
Most important factor Leadership (by CEO)
View of environment Stable (predictable)
Favored organization form Machine organization
Simple or complex? Simple
Components or integrated Tightly integrated: The CEO makes everything up
Generic or unique Unique strategies have to be unique
Theoretical perspective Prescriptive, process of conception: CEO coming up with new
ideas
Young/old organization Young organisations/early development
Where to put design school Positioning cognitive planning design
Planning school – Formal process (prescriptive)
Planning school: origins
Military: organizations and military organizations must adapt to change and constantly improve to
gain/maintain an advantage
Strategy as a result of:
- Formal training
- Formal procedure
- Formal analysis
- Lots of numbers
Difference: organization strategy assume competition, military strategy
assumes conflict
Origins of the planning school:
- Ansoff corporate strategy predict and prepare
- Ansoff’s strategies for diversification
A strategic plan consists of 5 stages:
Learning goals
- Understand the premises, assumptions and weaknesses of different schools
- Identify the most appropriate perspectives and approaches to analyze strategic challenges
Design school – A process of conception (prescriptive)
The design school proposes a model of strategy making that seeks to attain a match or fit between
internal capabilities and external possibilities. Economic strategy will be seen as the match between
qualifications and opportunity that positions a firm in its environment.
The basic design school model
The model emphasis on the appraisals of the external and internal situations. The figure shows two
other factors believed important in strategy making: 1. Managerial values: the beliefs and
preferences of those who formally lead the organization 2. Social responsibilities: three ethics of the
society in which the organization functions
Richard rumelt has provided the best framework for evaluating in terms of a series of tests. Keeping
strategies clear, simple and specific:
- consistency: in goals and policies
- consonance: daptive to environment, bring together internal state and external expectations
- strategic advantage: maintenance of a competitive advantage/distinctive competence
- feasibility: neither overtax available resources nor create unsolvable problems
Characteristics & premises
- Strategy formation as a deliberate process of conscious thought
- Responsibility for strategy rest with the CEO: there is only one strategist. This command and
control mentality allocates all major decisions to top management
- Process of strategy formation should be simple and informal: one way to ensure that
strategy is controlled in one mind is to keep the process simple
- Strategies should be unique/one of a kind. The process should be a creative act to build on
distinctive competence.
- Separation of formulation from implementation: strategy appears as a perspective, at some
point in time, fully formulated and ready to implement. There is little room for
incrementalism, which allows formulation to continue during and after implementation
- Strategy developed to attain match or fit between internal capabilities and possibilities
o SWOT
o Environment needs to be taken into account, but one can only navigate through and
not interact with
- Strategy design process is complete when strategy appears fully formulated as a perspective
- Strategy is explicit ( duidelijk, letterlijk zo gezegd)
o Strategies should be clear, simple and specific/explicit: simplicity is the essence of
good art
- Implementation follows formulation and articulation
- A strategy has first to be fully formulated and can then be implemented: only after these
unique full blown, explicit and simple strategies are fully formulated can they be
implemented. There is a sharp distinction between formulating and implementing. Structure
must follow strategy.
, lOMoARcPSD|11911780
“Volgens het incrementalisme is het besluitvormingsproces een serie kleine, veelal intuïtieve
veranderingen in plaats van enkele grote”
Design school: process
Design school: CEO - Central actor
- Strategist: CEO/head of organization
- Tasks:
o Gather information
o Analyze information
o Organize information
o Formulate strategy
- Idea of CEO to be main strategists is very much alive
o Uncommon CEO names lead to more deviating strategies
o CEOs cognitive flexibility aids the development of dynamic capabilities
o CEO characteristics determine the kind of acquisitions of a firm
“Dynamic capabilities, which are underpinned by organizational routines and managerial skills, are
the firm's ability to integrate, build, and reconfigure internal competences to address, or in some
cases to bring about, changes in the business environment”
Design school: structure follows strategy – organizational
structure
- Structure follows strategy
o Strategy determines long term goals and objectives the course of action and
allocation (toewijzing) of resources
o Structure is the design through which to administer the strategy
o Changes in an organization’s strategy lead to problems that require new structure
Design school: summary assumptions
- CEO has complete and perfect information
- The CEO has the mental/cognitive capacity to accurately process all information
- The environment can always be understood
- Situations and environment are predictable
- All information is documented and available
- Strategy is centrally formulated
Design school: criticism/limitations
- Structure follows strategy: unrealistic for most organizations
, lOMoARcPSD|11911780
- Assumption of universality: Structure is scarcely malleable, but it cannot be altered at will
just because a leader has conceived a new strategy. We conclude that structure follows
strategy the way the left foot follows the right foot in walking. Strategy formation is an
integrated system. Until we know the (new/ revised) strategy we cannot begin to respecify
the appropriate structure:
- The capacity to learn is ignored by analytical assessment of environment and internal
capabilities
- Promotion of inflexibility: hierarchical, centralized and explicit strategy formulation
- Detachment of thinking form acting: separation of formulation form implementation.
Strategy is a grand design that requires a grand designer. Managers should not remain in
their office to formulate a strategy so that other can implement it. The assumption that data
can be aggregated and transmitted up the hierarchy without significant loss or distortion is
incorrect. It destroys carefully formulated strategies in the process
- CEO is unlikely to have all and perfect information and the capacity to process this
information
- Economic man/homo economicus: “Agent who has complete information about the options
available for choice, perfect foresight of the consequences from choosing those options, and
the wherewithal to solve an optimization problem that identifies an option which maximizes
the agent’s personal utility.””
- Bouned rationality: rationality is limited and individuals make imperfect decisions
o Difficulty of the problem
o Boundaries to cognitive capability
o Limited time
Design school: contributions
- Vocabulary & tools
- Grand strategy
- Basic notion: fit between external environment and internal capabilities
- Started to promote the relevance of strategy in organizations as a field of research
- SWOT
We see a set of four conditions in particular that should encourage an organization to tilt toward the
design school model:
1. One brain can handle all of the information relevant for strategy formation: there are times
when organizations do need grand design. Grand strategy.
2. The brain is able to have full, detailed intimate knowledge of the situation in question:
potential for centralizing knowledge must be backed up by sufficient access to and
experience of the organization and its situation.
3. The relevant knowledge must be established before a new intended strategy has to be
implemented: the situation has to remain relatively stable or at least predictable. Not only
must the strategist have access to the relevant knowledge base, but there must also be some
sense of closure on that base. Individual learning come to an end before organizational
action can begin.
4. The organization in question must be prepared to cope with a centrally articulated strategy:
other people in the organization must be willing to defer to a central strategist.
These conditions suggest some clear contexts in which the design school model would seem to apply
the best. The design school model would seem to apply best at the junction of a major shift for an
, lOMoARcPSD|11911780
organization, coming out of a period of changing circumstances and into one of operating stability!
There is another context where the design school model might apply, and that is the new
organization, since it must have a clear sense of direction in order to compete with its more
established rivals.
Main takeaways Design School:
- Conception & fit
- Order and simplicity, reduce ambiguity
- Useful in relative stable environments
- Strategy has many variables and is inherently complex, but strategies must be simple and
informal
- Risk of not invented here / resistance
Overview Design school – Spider
Characteristics Congruence:agreement, compaility, harmony aka/fit, SWOT
Central actor CEO/Leader
Strategies are formed Deliberately
Organization chances Occasionally, quantum (when it changes, it is a large change)
Most important factor Leadership (by CEO)
View of environment Stable (predictable)
Favored organization form Machine organization
Simple or complex? Simple
Components or integrated Tightly integrated: The CEO makes everything up
Generic or unique Unique strategies have to be unique
Theoretical perspective Prescriptive, process of conception: CEO coming up with new
ideas
Young/old organization Young organisations/early development
Where to put design school Positioning cognitive planning design
Planning school – Formal process (prescriptive)
Planning school: origins
Military: organizations and military organizations must adapt to change and constantly improve to
gain/maintain an advantage
Strategy as a result of:
- Formal training
- Formal procedure
- Formal analysis
- Lots of numbers
Difference: organization strategy assume competition, military strategy
assumes conflict
Origins of the planning school:
- Ansoff corporate strategy predict and prepare
- Ansoff’s strategies for diversification
A strategic plan consists of 5 stages:
