Organization & Environment summary
Chapter 1: The strategic management beast
Organization and environment are fully concentrated around the strategy formation. We will
focus on the different perspectives of how strategy is formed in organizations.
To comprehend the whole, we must understand the separate parts. 10 schools of thought in
book, divided into:
- Prescriptive schools (how the strategy should be made): design school, planning
school, and positioning school.
- Descriptive school (how the strategy is made): entrepreneurial, cognitive, learning,
power, cultural, environmental, and configuration school.
Strategy
Strategy doesn’t have one easy definition, but strategy requires 5, the 5 P’s (Mintzberg):
1 Plan: consciously intended direction, guide, or course of action to move from a present state
to a (desired/imagined) future state. People say it’s a plan, but most of the time it is not what
you intend to do, but what you do.
2 Pattern: recognizable similar actions that emerge (intended or unintended) over
time/consistency in behavior over time (realized strategy).
3 Position: the organization’s location in the imaginary landscape of the competitive
environment or particular products in particular markets (looks outside).
4 Perspective: an organization’s fundamental way of doing things (looks inside). The
interpretation of managers of the organization and its environment.
5 Ploy: a specific maneuver intended to outwit an opponent, or competitor as a thread (part of
power school), f.e. buy a land to discourage a competitor.
Between the state of an intended and a realized strategy there are other kinds of strategies:
- Deliberate strategy: intention that is fully realized (no learning).
- Unrealized strategy: intention that is not realized.
- Emergent strategy: a pattern that is realized that was not expressly intended (no
control).
- Umbrella strategy: the broad outlines are deliberate, while the details are allowed to
emerge and route.
If you combine plan and pattern with position
and perspective, you get a matrix with 4 basic
approaches that correspond to some of the
schools: strategic planning (planning, design,
and positioning schools), strategic visioning
(entrepreneurial, design, cultural, and cognitive),
strategic venturing (learning, power, and
cognitive), and strategic learning (learning and entrepreneurial).
,Lecture 1 – Introduction
We can learn a lot from animals, because their
behavior is much more rational than people’s.
This is the reason why strategy formation is
called ‘the BEAST’.
The picture shows a prescriptive way of
formating strategy (how it’s done in the books).
But in reality this process is not exactly
followed; you have to adapt to the organization.
- Identifying: you first set your mission and vision.
- Diagnosing: next you look at the strengths and weaknesses of the environment.
- Conceiving: then you look at the options; how are we going to achieve the mission
given the opportunities and weaknesses in the environment?
- Realizing: then you act and check; are we achieving our mission?
Strategy is formed by visionaries/whoever is the strongest politically/imitating other firms and
more perspectives to come. In other words, strategy is formed by humans, which results in
biases in strategic decision-making (bounded rationality).
Perspectivism: taking different perspectives in tackling a problem.
- It is important to know that the different schools are like lenses through which you
look, so you can apply every school to every company!
Chapter 2: Design school
Strategy formation as a process of conception
The design school sees strategy formation as a process of conception, where the school seeks
to attain a match or fit between internal capabilities and external possibilities. A famous model
connected to this school is the SWOT analysis. The basic design school model emphasized
the appraisals of the external and internal situations and contains part of the SWOT. There are
2 other factors in the model:
- Managerial values: the beliefs and preferences of those who formally lead the
organization.
- Social responsibilities: the ethics of society in which the organization functions, but
within this school most authors do not accord a lot of attention to values and ethics.
Next step is evaluating the strategies, Rumelt (1997) made this evaluation with some tests:
- Consistency: the strategy must not present mutually inconsistent goals and policies.
- Consonance: the strategy must represent an adaptive response to the external
environment and to the critical changes occurring within it.
- Advantage: the strategy must provide for the creation/maintenance of a competitive
advantage in the selected area of activity.
- Feasibility: the strategy must neither overtax available resources nor create unsolvable
subproblems.
,7 underlying premises & characteristics of the design school
1 Strategy formation should be a deliberate process of conscious thought.
2 Responsibility for that control and consciousness must be with the CEO (1 strategist).
3 The process of strategy formation must be kept simple and informal.
4 Strategies should be one of a kind: the best ones result from a process of individualized
design. Must be developed to attain a fit between internal capabilities and external
possibilities. Can be done through SWOT analysis.
5 The strategy design process is complete when the strategy appears fully formulated as a
perspective. No room for incrementalistic or emergent strategies.
6 These strategies should be explicit, so they can be shown to people.
7 Implementation follows formulation and articulation. The structure must follow strategy,
so thinking and acting are separate processes.
Critiques of the design school
1 The capacity to learn is ignored. You can’t know your strengths without testing.
2 Structure follows strategy in the design school, but when you get a new strategy, you can’t
just change the whole structure of the organization.
3 Promotion of inflexibility through hierarchical, centralized, and explicit strategy
formulation can make it difficult to change and it is time-consuming.
4 The assumption of universality.
5 Detachment of thinking from acting.
Marketing myopia: the failure to see ‘down the road’.
- Don’t see yourself as selling a product rather than seeing that you are providing a
solution to a need.
Marketing hyperopia: a better vision of distant issues than of near ones.
- F.e. worrying too much about what will happen if your current source of product fails.
Marketing macropia: an overly broad view of your industry.
- F.e. trying to sell every kind of clothing ever made, instead of just t-shirts.
4 conditions to tilt toward the design school model
1 One brain can, in principle, manage all the information relevant for strategy formation.
2 That brain is able to have full, detailed, intimate knowledge of the situation in question.
, 3 The relevant knowledge must be established before a new intended strategy has to be
implemented. The situation must remain relatively stable or at least predictable.
4 The organization in question must be prepared to cope with a centrally articulated strategy.
Context
- The design school is most applicable to stable environments. The design school is
promotion inflexibility, meaning the environment has to be stable and not dynamic.
- The design school is most applicable for strategy formation in large, old, established
organizations because these are mechanical organizations in stable environments.
Conclusions
Besides the critique, the design school has developed an important vocabulary discussing a
grand strategy that underlies a lot of the prescription in the field, namely that strategy
represents a fundamental fit between external opportunities and internal capabilities. Also, it
started to promote the relevance of strategy in organizations and as a field of research.
Lecture 2 – Design school
The strategist is the CEO of the organization. His tasks are gathering information, analyzing
information, organizing information, and formulating strategy.
SWOT analysis
Strengths & weaknesses: marketing, R&D, management team, operations, finance, HR, etc.
Opportunities & threats (environment): societal, governmental, economic changes, etc.
Additional to the organizational structure: structure follows strategy.
- Changes in an organization’s strategy lead to problems that require a new structure.
Additional criticism/limitations
1 The CEO is unlikely to have perfect information and the capacity to process all of it.
2 Economic man/Homo economicus: always has complete information (no one is one).
3 Bounded rationality: rationality is limited, and individuals make imperfect decisions.
Chapter 1: The strategic management beast
Organization and environment are fully concentrated around the strategy formation. We will
focus on the different perspectives of how strategy is formed in organizations.
To comprehend the whole, we must understand the separate parts. 10 schools of thought in
book, divided into:
- Prescriptive schools (how the strategy should be made): design school, planning
school, and positioning school.
- Descriptive school (how the strategy is made): entrepreneurial, cognitive, learning,
power, cultural, environmental, and configuration school.
Strategy
Strategy doesn’t have one easy definition, but strategy requires 5, the 5 P’s (Mintzberg):
1 Plan: consciously intended direction, guide, or course of action to move from a present state
to a (desired/imagined) future state. People say it’s a plan, but most of the time it is not what
you intend to do, but what you do.
2 Pattern: recognizable similar actions that emerge (intended or unintended) over
time/consistency in behavior over time (realized strategy).
3 Position: the organization’s location in the imaginary landscape of the competitive
environment or particular products in particular markets (looks outside).
4 Perspective: an organization’s fundamental way of doing things (looks inside). The
interpretation of managers of the organization and its environment.
5 Ploy: a specific maneuver intended to outwit an opponent, or competitor as a thread (part of
power school), f.e. buy a land to discourage a competitor.
Between the state of an intended and a realized strategy there are other kinds of strategies:
- Deliberate strategy: intention that is fully realized (no learning).
- Unrealized strategy: intention that is not realized.
- Emergent strategy: a pattern that is realized that was not expressly intended (no
control).
- Umbrella strategy: the broad outlines are deliberate, while the details are allowed to
emerge and route.
If you combine plan and pattern with position
and perspective, you get a matrix with 4 basic
approaches that correspond to some of the
schools: strategic planning (planning, design,
and positioning schools), strategic visioning
(entrepreneurial, design, cultural, and cognitive),
strategic venturing (learning, power, and
cognitive), and strategic learning (learning and entrepreneurial).
,Lecture 1 – Introduction
We can learn a lot from animals, because their
behavior is much more rational than people’s.
This is the reason why strategy formation is
called ‘the BEAST’.
The picture shows a prescriptive way of
formating strategy (how it’s done in the books).
But in reality this process is not exactly
followed; you have to adapt to the organization.
- Identifying: you first set your mission and vision.
- Diagnosing: next you look at the strengths and weaknesses of the environment.
- Conceiving: then you look at the options; how are we going to achieve the mission
given the opportunities and weaknesses in the environment?
- Realizing: then you act and check; are we achieving our mission?
Strategy is formed by visionaries/whoever is the strongest politically/imitating other firms and
more perspectives to come. In other words, strategy is formed by humans, which results in
biases in strategic decision-making (bounded rationality).
Perspectivism: taking different perspectives in tackling a problem.
- It is important to know that the different schools are like lenses through which you
look, so you can apply every school to every company!
Chapter 2: Design school
Strategy formation as a process of conception
The design school sees strategy formation as a process of conception, where the school seeks
to attain a match or fit between internal capabilities and external possibilities. A famous model
connected to this school is the SWOT analysis. The basic design school model emphasized
the appraisals of the external and internal situations and contains part of the SWOT. There are
2 other factors in the model:
- Managerial values: the beliefs and preferences of those who formally lead the
organization.
- Social responsibilities: the ethics of society in which the organization functions, but
within this school most authors do not accord a lot of attention to values and ethics.
Next step is evaluating the strategies, Rumelt (1997) made this evaluation with some tests:
- Consistency: the strategy must not present mutually inconsistent goals and policies.
- Consonance: the strategy must represent an adaptive response to the external
environment and to the critical changes occurring within it.
- Advantage: the strategy must provide for the creation/maintenance of a competitive
advantage in the selected area of activity.
- Feasibility: the strategy must neither overtax available resources nor create unsolvable
subproblems.
,7 underlying premises & characteristics of the design school
1 Strategy formation should be a deliberate process of conscious thought.
2 Responsibility for that control and consciousness must be with the CEO (1 strategist).
3 The process of strategy formation must be kept simple and informal.
4 Strategies should be one of a kind: the best ones result from a process of individualized
design. Must be developed to attain a fit between internal capabilities and external
possibilities. Can be done through SWOT analysis.
5 The strategy design process is complete when the strategy appears fully formulated as a
perspective. No room for incrementalistic or emergent strategies.
6 These strategies should be explicit, so they can be shown to people.
7 Implementation follows formulation and articulation. The structure must follow strategy,
so thinking and acting are separate processes.
Critiques of the design school
1 The capacity to learn is ignored. You can’t know your strengths without testing.
2 Structure follows strategy in the design school, but when you get a new strategy, you can’t
just change the whole structure of the organization.
3 Promotion of inflexibility through hierarchical, centralized, and explicit strategy
formulation can make it difficult to change and it is time-consuming.
4 The assumption of universality.
5 Detachment of thinking from acting.
Marketing myopia: the failure to see ‘down the road’.
- Don’t see yourself as selling a product rather than seeing that you are providing a
solution to a need.
Marketing hyperopia: a better vision of distant issues than of near ones.
- F.e. worrying too much about what will happen if your current source of product fails.
Marketing macropia: an overly broad view of your industry.
- F.e. trying to sell every kind of clothing ever made, instead of just t-shirts.
4 conditions to tilt toward the design school model
1 One brain can, in principle, manage all the information relevant for strategy formation.
2 That brain is able to have full, detailed, intimate knowledge of the situation in question.
, 3 The relevant knowledge must be established before a new intended strategy has to be
implemented. The situation must remain relatively stable or at least predictable.
4 The organization in question must be prepared to cope with a centrally articulated strategy.
Context
- The design school is most applicable to stable environments. The design school is
promotion inflexibility, meaning the environment has to be stable and not dynamic.
- The design school is most applicable for strategy formation in large, old, established
organizations because these are mechanical organizations in stable environments.
Conclusions
Besides the critique, the design school has developed an important vocabulary discussing a
grand strategy that underlies a lot of the prescription in the field, namely that strategy
represents a fundamental fit between external opportunities and internal capabilities. Also, it
started to promote the relevance of strategy in organizations and as a field of research.
Lecture 2 – Design school
The strategist is the CEO of the organization. His tasks are gathering information, analyzing
information, organizing information, and formulating strategy.
SWOT analysis
Strengths & weaknesses: marketing, R&D, management team, operations, finance, HR, etc.
Opportunities & threats (environment): societal, governmental, economic changes, etc.
Additional to the organizational structure: structure follows strategy.
- Changes in an organization’s strategy lead to problems that require a new structure.
Additional criticism/limitations
1 The CEO is unlikely to have perfect information and the capacity to process all of it.
2 Economic man/Homo economicus: always has complete information (no one is one).
3 Bounded rationality: rationality is limited, and individuals make imperfect decisions.
