Summary Organisation and Environment
Chapter 1 The strategic management beast
10 schools of strategic management:
- Design school: strategy formation as a process of conception
- Planning school: strategy formation as a formal process
- Positioning school: strategy formation as an analytical process
- Entrepreneurial school: strategy formation as a visionary process
- Cognitive school: strategy formation as a mental process
- Learning school: strategy formation as an emergent process
- Power school: strategy formation as a process of negotiation
- Cultural school: strategy formation as a collective process
- Environmental school: strategy formation as a reactive process
- Configuration school: strategy formation as a process of transformation
Design, planning and positioning schools are prescriptive in nature: more concerned with how
strategies should be formulated than with how they actually form. Entrepreneurial, cognitive,
learning, power, cultural and environmental schools are more descriptive: less concerned with
prescribing ideal strategic behaviour, more with how strategies get made. Configuration school
combines both.
5 definitions of strategy
- Strategies as plans and patterns: organizations develop plans for their future (intended
strategy) and they also evolve patterns out of their past (realized strategy).
- Strategies as deliberate and emergent: intentions that are fully realized can be called
deliberate strategies, patters that were realized but were not expressly intended can be
called emergent strategies. A purely deliberate strategy means no learning, a purely
emergent strategy means no control. A mix of both is required: exercise control while
learning. Umbrella strategy means that the broad outlines are deliberate, while the details
are allowed to emerge over time.
- Strategies as positions and perspective: strategy as a position means locating particular
products in particular markets: strategy looks down, to where the product meets the
customer, and out, to the external marketplace. Strategy as perspective is an organizations
fundamental way of doing things: strategy looks in, inside the organization, and up, to the
grand vision of the organization.
- Strategy as a ploy: a specific manoeuvre intended to outwit an opponent or competitor.
Advantages and disadvantages of strategy
- Strategy sets direction
Advantage: The main role of strategy is to chart the course of an organization in order for it
to sail cohesively through its environment
Disadvantage: Strategic direction can also serve as a set of blinders to hide potential dangers
- Strategy focuses effort
Advantage: Strategy promotes coordination of activity. Without focus, people can be pulled
in a variety of different directions.
Disadvantage: Groupthink arises when effort is too carefully focused.
1
,- Strategy defines the organization
Advantage: Strategy provides people with a shorthand way to understand their organization
and to distinguish it from others.
Disadvantage: To define an organization too sharply may also mean to define it too simply,
so that the rich complexity of the system is lost.
- Strategy provides consistency
Advantage: Strategy is needed to reduce ambiguity and provide order.
Disadvantage: Every strategy is a simplification that necessarily distorts reality. Strategies are
not reality themselves, only representations of reality in the minds of people.
2
,Chapter 2 The design school: strategy formation as a process of conception
The design school proposes a model of strategy making that seeks to attain a match, or fit, between
internal capabilities and external possibilities.
The basic design school model
Primary emphasis on external analysis (to uncover threats and opportunities in the environment) and
internal analysis (to reveal strengths and weaknesses of the organization) SWOT. Two other
factors in the model which are believed to be important for strategy making: Managerial values (the
beliefs and preferences of those who formally lead the organization) and Social responsibility (the
ethics of the society in which the organization functions, at least as these are perceived by its
managers). Little has been written about creation of strategy, other than this being a ‘creative act’.
Once alternative strategies have been determined, the next step is the model is to evaluate them
and choose the best one.
Framework for strategy evaluation: four tests.
1. Consistency: strategy must not present mutually inconsistent goals and policies
2. Consonance: strategy must represent an adaptive response to the external environment and
to the critical changes occurring within.
3. Advantage: strategy must provide for the creation and/or maintenance of a competitive
advantage in the selected area of activity
4. Feasibility: strategy must neither overtax available resources nor create unsolvable
subproblems
Once a strategy has been agreed upon, it is then implemented.
Premises of the design school
1. Strategy should be a deliberate process of conscious thought. Actions must flow from reason:
effective strategies derive from a tightly controlled process of human thinking.
3
, 2. Responsibility for that control and consciousness must rest with the chief executive officer:
that person is the strategist. To the design school there is only one strategist, and that is the
manager who sits at the apex of the organizational pyramid.
3. The model of strategy formation must be kept simple and informal. Elaboration and
formalization will sap the model of its essence. One way to ensure that strategy is controlled
in one mind is to keep the process simple.
4. Strategies should be one of a kind: the best ones result from a process of individualized
design. It is the specific situation that matters, not any system of general variables. Strategies
should therefore be tailored to the individual case.
5. The design process is complete when strategy appears fully formulated, as perspective.
Design school offers little room for emergent strategies, which allow formulation to continue
during and after implementation.
6. These strategies should be explicit, so they have to be kept simple. Strategies should be
explicit for those who make them, and, if possible, articulated so that others in the
organization can understand them.
7. Only after these unique, full- blown, explicit, and simple strategies are fully formulated can
they then be implemented. Design school clearly separates thinking from acting: structure
must follow strategy. Each time a new strategy is formulated, the state of structure and
everything else in the organization must be considered anew.
Critique of the design school
- Assessment of strengths and weaknesses: bypassing learning. The capacity to learn is ignored
by analytical assessment of the environment and internal capabilities.
- Structure follows strategy. Claiming that strategy must take precedence over structure
amounts to claiming that strategy must take precedence over the established capabilities of
the organization, which are embedded in its structure. Structure cannot be altered at will just
because a new strategy has been conceived. Structure and strategy both support the
organization, as well as each other.
- Making strategy explicit: promoting inflexibility. Organization must function, not only with
strategy, but also during the formation of strategy. During periods of uncertainty, the danger
is not the lack of explicit strategy but the opposite. Even when uncertainty is low, there are
dangers with explicit strategies. They can impede strategic change when it does become
necessary: they can breed a resistance to change.
- Separation of formulation and implementation: detaching thinking from acting. By separating
thinking from acting, the people responsible for strategy formation will not be able to gather
relevant information for strategy formation in the organization’s environment. The
assumption that data can be transmitted up the hierarchy without distortion is often wrong,
destroying carefully formulated strategies in the process. In an unstable environment,
thinking and action have to proceed closely associated.
- Assumption of universality
4
Chapter 1 The strategic management beast
10 schools of strategic management:
- Design school: strategy formation as a process of conception
- Planning school: strategy formation as a formal process
- Positioning school: strategy formation as an analytical process
- Entrepreneurial school: strategy formation as a visionary process
- Cognitive school: strategy formation as a mental process
- Learning school: strategy formation as an emergent process
- Power school: strategy formation as a process of negotiation
- Cultural school: strategy formation as a collective process
- Environmental school: strategy formation as a reactive process
- Configuration school: strategy formation as a process of transformation
Design, planning and positioning schools are prescriptive in nature: more concerned with how
strategies should be formulated than with how they actually form. Entrepreneurial, cognitive,
learning, power, cultural and environmental schools are more descriptive: less concerned with
prescribing ideal strategic behaviour, more with how strategies get made. Configuration school
combines both.
5 definitions of strategy
- Strategies as plans and patterns: organizations develop plans for their future (intended
strategy) and they also evolve patterns out of their past (realized strategy).
- Strategies as deliberate and emergent: intentions that are fully realized can be called
deliberate strategies, patters that were realized but were not expressly intended can be
called emergent strategies. A purely deliberate strategy means no learning, a purely
emergent strategy means no control. A mix of both is required: exercise control while
learning. Umbrella strategy means that the broad outlines are deliberate, while the details
are allowed to emerge over time.
- Strategies as positions and perspective: strategy as a position means locating particular
products in particular markets: strategy looks down, to where the product meets the
customer, and out, to the external marketplace. Strategy as perspective is an organizations
fundamental way of doing things: strategy looks in, inside the organization, and up, to the
grand vision of the organization.
- Strategy as a ploy: a specific manoeuvre intended to outwit an opponent or competitor.
Advantages and disadvantages of strategy
- Strategy sets direction
Advantage: The main role of strategy is to chart the course of an organization in order for it
to sail cohesively through its environment
Disadvantage: Strategic direction can also serve as a set of blinders to hide potential dangers
- Strategy focuses effort
Advantage: Strategy promotes coordination of activity. Without focus, people can be pulled
in a variety of different directions.
Disadvantage: Groupthink arises when effort is too carefully focused.
1
,- Strategy defines the organization
Advantage: Strategy provides people with a shorthand way to understand their organization
and to distinguish it from others.
Disadvantage: To define an organization too sharply may also mean to define it too simply,
so that the rich complexity of the system is lost.
- Strategy provides consistency
Advantage: Strategy is needed to reduce ambiguity and provide order.
Disadvantage: Every strategy is a simplification that necessarily distorts reality. Strategies are
not reality themselves, only representations of reality in the minds of people.
2
,Chapter 2 The design school: strategy formation as a process of conception
The design school proposes a model of strategy making that seeks to attain a match, or fit, between
internal capabilities and external possibilities.
The basic design school model
Primary emphasis on external analysis (to uncover threats and opportunities in the environment) and
internal analysis (to reveal strengths and weaknesses of the organization) SWOT. Two other
factors in the model which are believed to be important for strategy making: Managerial values (the
beliefs and preferences of those who formally lead the organization) and Social responsibility (the
ethics of the society in which the organization functions, at least as these are perceived by its
managers). Little has been written about creation of strategy, other than this being a ‘creative act’.
Once alternative strategies have been determined, the next step is the model is to evaluate them
and choose the best one.
Framework for strategy evaluation: four tests.
1. Consistency: strategy must not present mutually inconsistent goals and policies
2. Consonance: strategy must represent an adaptive response to the external environment and
to the critical changes occurring within.
3. Advantage: strategy must provide for the creation and/or maintenance of a competitive
advantage in the selected area of activity
4. Feasibility: strategy must neither overtax available resources nor create unsolvable
subproblems
Once a strategy has been agreed upon, it is then implemented.
Premises of the design school
1. Strategy should be a deliberate process of conscious thought. Actions must flow from reason:
effective strategies derive from a tightly controlled process of human thinking.
3
, 2. Responsibility for that control and consciousness must rest with the chief executive officer:
that person is the strategist. To the design school there is only one strategist, and that is the
manager who sits at the apex of the organizational pyramid.
3. The model of strategy formation must be kept simple and informal. Elaboration and
formalization will sap the model of its essence. One way to ensure that strategy is controlled
in one mind is to keep the process simple.
4. Strategies should be one of a kind: the best ones result from a process of individualized
design. It is the specific situation that matters, not any system of general variables. Strategies
should therefore be tailored to the individual case.
5. The design process is complete when strategy appears fully formulated, as perspective.
Design school offers little room for emergent strategies, which allow formulation to continue
during and after implementation.
6. These strategies should be explicit, so they have to be kept simple. Strategies should be
explicit for those who make them, and, if possible, articulated so that others in the
organization can understand them.
7. Only after these unique, full- blown, explicit, and simple strategies are fully formulated can
they then be implemented. Design school clearly separates thinking from acting: structure
must follow strategy. Each time a new strategy is formulated, the state of structure and
everything else in the organization must be considered anew.
Critique of the design school
- Assessment of strengths and weaknesses: bypassing learning. The capacity to learn is ignored
by analytical assessment of the environment and internal capabilities.
- Structure follows strategy. Claiming that strategy must take precedence over structure
amounts to claiming that strategy must take precedence over the established capabilities of
the organization, which are embedded in its structure. Structure cannot be altered at will just
because a new strategy has been conceived. Structure and strategy both support the
organization, as well as each other.
- Making strategy explicit: promoting inflexibility. Organization must function, not only with
strategy, but also during the formation of strategy. During periods of uncertainty, the danger
is not the lack of explicit strategy but the opposite. Even when uncertainty is low, there are
dangers with explicit strategies. They can impede strategic change when it does become
necessary: they can breed a resistance to change.
- Separation of formulation and implementation: detaching thinking from acting. By separating
thinking from acting, the people responsible for strategy formation will not be able to gather
relevant information for strategy formation in the organization’s environment. The
assumption that data can be transmitted up the hierarchy without distortion is often wrong,
destroying carefully formulated strategies in the process. In an unstable environment,
thinking and action have to proceed closely associated.
- Assumption of universality
4
