Strategy Analysis: The Cultural and Configuration Schools

Strategy Analysis: The Cultural and Configuration Schools of Strategy Formation

Ruth M. Tappin © 2012

Running head: STRATEGY ANALYSIS DRAFT… i

ABSTRACT

Ever since the term “strategy” was associated with the plans and actions that businesses engage

in to gain a competitive advantage over their rivals and be successful and profitable, many

different ways of forming strategy have been theorized. Mintzberg, Ahlstrand and Lampel (2005)

organized these different approaches into ten schools: the design; planning; positioning

(prescriptive); entrepreneurial; cognitive; learning; power; cultural; environmental

(descriptive), and configuration (descriptive and prescriptive). This paper (1) compares the

culture and configuration schools of strategy, (2) evaluates them in relation to the tools and

theories upon which they are built, (3) synthesizes and analyzes how associated risks, uncertainty

and resource allocation is defined by strategy; furthermore, it (4) compares and analyzes the

market structures in which organizations that subscribe to these schools operate, and (5)

discusses how strategy in these two schools of thought is affected by stable or turbulent market

environments.

Running head: STRATEGY ANALYSIS DRAFT… ii

List of Tables and Figures

Table 1 ............................................................................................................................................ 9

Contents

ABSTRACT ..................................................................................................................................... i

Strategy ........................................................................................................................................... 1

Overview of Cultural School of Strategy ........................................................................................ 1

Cultural School Root and Context Dimensions .......................................................................... 1

The Cultural School: Content, Process and Tools ...................................................................... 3

Critique of the Cultural School ................................................................................................... 4

Overview of the Configuration School of Strategy ........................................................................ 5

Configuration School Root and Context Dimensions ................................................................. 5

Basic Processes and Tools in the Configuration School ............................................................. 5

Critique of the Configuration School .......................................................................................... 7

Overview of Organizational and Market Structures ....................................................................... 8

Organizational and Market Structures .......................................................................................... 10

Organizational Resource Allocation in the Cultural and Configuration Schools ......................... 11

Stable and Turbulent Market Environments Overview ................................................................ 12

Risk and Uncertainty Overview .................................................................................................... 16

Risk and Uncertainty in the Configuration and Cultural School .............................................. 16

Strategy and Resource Allocation ................................................................................................. 18

Running head: STRATEGY ANALYSIS DRAFT… iii

Differences between the Two Schools .......................................................................................... 20

Summary ....................................................................................................................................... 22

References ..................................................................................................................................... 24

Running head: STRATEGY ANALYSIS DRAFT… 1

Strategy

Rooted in military thinking, the concept of strategy in the practice of business has been

associated to decisions that lead to actions that result in profitability by gaining a sustainable

competitive edge over other organizations in the same industry. Wirtz, Mathieu and Schilke

(2007) define strategy as flows of decisions and patterns of activity that are aimed at achieving

organizational goals (p. 296); this seems to agree with Mintzberg, Ahlstrand and Lampel’s

(2005) reasoning that strategy is a pattern of consistent behavior over time (p.9). This pattern of

consistent behavior may be the result of deliberate strategy formulation by the strategist, or it

may form gradually, incrementally and even unintentionally (Mintzberg, 1978). Mintzberg

Ahlstrand and Lampel (2005) see strategy formulation and formation as many processes and

organized the different approaches to strategy creation into ten schools: the design; planning;

positioning; entrepreneurial; cognitive; learning; power; cultural; environmental, and

configuration schools. This paper (1) compares the culture and configuration schools of strategy,

(2) evaluates them in relation to the tools and theories upon which they are built, (3) discusses

how strategy in these two schools of thought is affected by stable or turbulent market

environments; furthermore, it (4) compares and analyzes the market structures in which

organizations that subscribe to these schools operate, and (5) synthesizes and analyzes how

strategy defines associated risks, uncertainty and resource allocation.

Overview of Cultural School of Strategy

Cultural School Root and Context Dimensions

Organizations are often referred to as members of the “business community”; the idea of

community has been rooted in the social sciences and has been studied for over 200 years

(Encyclopedia of Social and Cultural Anthropology, 2009). Borrowed from anthropology, the


term is hard to define (Green 1988; Mintzberg et al, 2005); however, O’Connor (2001) described

the attributes of various types of groups that form communities and described some of the

characteristics that are common to each. Commonalities that contribute to the idea of community

include people who may or may not know each other, but who share similar goals and

aspirations, are involved in similar activities, and share the same interests. From this perspective,

business organizations can be justifiably labeled as “communities” - an opinion shared by

Bekman (2001) in Oosterloo (2010). Underlying communities (including those of organizations)

and influencing their behavior is culture.

As of 1990, the idea of organizational culture was still fairly new; however, the

theoretical base of culture is rooted in the older disciplines of cultural anthropology,

interpretative sociology, social psychology, and organizational psychology (Schein [1990] p.

109). The cultural school of strategy emerged in the 1980’s (Mintzberg et al [2005]) from the

1970’s work of Swedish scholars E. Rhenman and R. Normann, and has been especially favored

in Sweden and Japan (Mintzberg, 1999). Culture has to do with the shared values, norms,

behavior, beliefs, unwritten laws and informal associations in communities as well as in

organizations and can be considered mini-societies within organizations. Mintzberg (2005)

associated organizational culture with collective cognition, and described it as the mind of the

organization that expresses itself in – for example – traditions, habits, stories symbols, buildings

and products (p. 265); the organization, therefore, has to be understood as a collective social

system in which learning and strategy making is a collective process. This school of strategy

formulation is best suited for large, missionary and machine type organizations that are in stable

stage and passive situations - although a crisis or traumatic situation such as occurs when

cultures clash during mergers and acquisitions can cause it to experience culture transforming


jolts that forces it into another stage into another stage. This school is ideal in situations where

strategic stability is preferred, such as in an organization like the Catholic Church or many types

of clubs (Mintzberg and Westley, 1992).

The Cultural School: Content, Process and Tools

Process in the cultural school is collective, as opposed to individual intent (Hurtado

[2008] in Tappin [2012]), and begins with learning from shared experiences that becomes the

dominant logic that contributes to culture formation and eventually settles into the organization

as ideology, values and norms (Mintzberg and Westley [1992]). Strategy in this school is about

common interest as opposed to individual/fragmented or personal interest and it is influenced by

the culture of the organization, which tends to resist change; therefore change, as previously

mentioned, is infrequent. Strategy formation is described as being deliberate, constrained and

ideological and is a process of social interaction based on the “shared beliefs and

understandings” that, as previously mentioned, individuals acquire through socialization

processes, or even indoctrination (Mintzberg [2005] in Tappin [2012], para. 2; Morrill [2008]).

Culture, Mintzberg et al (2005) assert, has direct bearing on leadership style of decision making,

and the use of formal processes and deliberative methods that might involve data, SWOT and

other type of analyses are the favored tools that leaders use in the cultural school’s strategy

forming process (p. 269). Since all organizations start at the stage of development, and since

many will grow through a full life cycle, culture will be inherent in all of the other types of

organization structures shown in Table 1, Column 1(p.12). This can affect strategy formulation

in different ways since forming strategy necessarily involves some degree of change – and

culture resists change.


Critique of the Cultural School

The literature portrays the cultural school as sluggish when it comes to change and

innovation, and can therefore discourage change; this can impede and thwart strategic initiatives

(Tappin, 2010); it can create what Mintzberg et al (2005) describe as strategic inertia (p. 270). In

organizations culture can both “facilitate and subvert” the accomplishment of the goals of

organizations (Selznick [1948] in Morrill [2008], p. 21). Bettis and Prahalad (1995) describe

what they term dominant logic as the DNA of an organization, a pervasive yet invisible influence

that permeates organizations and makes firms susceptible to problems related to strategy (p.8);

however, they also see it as a valuable resource in a firm (in Oblog, Oblog and Platt, 2010). In

essence, dominant logic seems to be the same as culture or, at the very least, that which informs

and supports culture. According to Mintzberg et al (2005), culture is like the “life force of the

organization, the soul of its physical body” (p. 266) – hinting at its cohesive power and its

elusive quality. As such, in the cultural school of strategy, this “life force” can serve to preserve

the status quo by maintaining strategic stability and by actively resisting strategic change in

organizations (p. 264). Despite this, Arogyaswamy and Byles (1987) describe culture as an

organization’s “set of implicit shared and transmittable understandings regarding the values and

the ideologies at a point in time” (p. 648 – italics mine), suggesting that culture can be changed –

or at least adjusted – at particular times such as after a successful change in strategy to a new one

that required changing dominant logic. This can occur after a merger or hostile takeover, in

which case an organization can take a transformative leap from one state to another.

Additionally, culture can also contribute to slow change over time when incremental variations

are made in the workplace (Morrill, 2008). When changes do occur, culture can contribute to the


support and stabilization of the new strategy. To change culture, people, whole systems, and

structures must be changed (Mintzberg and Westley, 1992, p. 41 – 43).

Overview of the Configuration School of Strategy

Configuration School Root and Context Dimensions

The base of the configuration school is History, which lumps episodes in time into

categorical periods and, according to Mintzberg et al (2005), some of its early proponents

included Chandler in 1962, Mintzberg and Danny Miller in the late 1970s, Miles and Snow in

1978 (p. 355). The champions of the configuration school have been lumpers, integrators and

change agents and this school of thought has been most popular in Holland and Germany among

lumpers, and in America, among change agents (Mintzberg et al, 2005). The integrative and

transformative character of the configuration school allows it to fit all of the environments that

the other schools of strategy might confront. These include environments that might be complex,

unpredictable, dynamic, divisive, cooperative, controllable, passive, competitive, or delineated

(p. 359; Miller [1996]); additionally, for the same reasons it favors all of the organizational

structures listed in Table 1(p. 12) and accommodates any stage of an organization’s life cycle –

especially when the organization is experiencing turnaround or revitalization such as when it is

in a stage of revolution that might have been introduced through hostile takeovers, acquisitions

and mergers.

Basic Processes and Tools in the Configuration School

A Capella class lecture (2012) claims that there is no [one] correct strategy for all

occasions but that strategic managers must draw upon a “broad depth of strategic options within

theoretical constructs” (Final Strategy Analysis Project Description and Scoring Guide, para. 2).

The configuration school is an easy to understand approach to strategy as it recognizes that there


are many types of organizations and organizational structures that they fit into, and they have

various stages of existence, as shown in Table 1, Column 3 (p. 12) and exist in different states

(of being). Two main sides of the configuration school view this as either a process of

transformation through change, or as a state in which the organization configures to its

environment (Mintzberg et al [2005] p. 302). This concept allows for the idea that all of the other

nine schools of strategy formulation are relevant at particular times and holds that organizations

must combine and configure different organizational characteristics together in “complementary

ways” (Mintzberg et al, 2005, p. 306) in order to be successful.

One premise of this school is that for a particular time in its existence a business might

operate in, for example, a particular environment, adopt a particular structure, be led in a

particular way, behave in a particular manner, and formulate strategies unique to a particular

configuration of structure, power, market environment, and behavior. Then again, other sets of

circumstances can arise which might cause the organization to be suddenly transformed from

that particular configuration into another (Mintzberg et al, 2005, pp. 305 - 306). Therefore, in

this school of thought strategy forming processes involve transformations (Mintzberg et al, 2005)

and can be simple, cerebral, judgmental, analytical, systematic, intuitive, visionary, emergent,

informal, messy, conflictive, deliberate, ideological, constrained, collective, passive, imposed,

integrative, or episodic (Mintzberg et al, 2005, p. 357) – in other words, since each of the ten

schools of strategy is relevant in its own time and space in the configuration school, the process

of strategy making in this school reflects the processes that are inherent in all of the other

prescriptive and descriptive schools combined. This agrees with Morgan’s (1998) observation

that different business and economic environments require different types of organizations

(p.50), and involves the combined consideration of strategy, organizational characteristics, and


the nature and characteristics of the environment (Wiklund and Shepherd [2005] in Tappin

[2012]). Common wisdom asserts that change in the configurational school tends to occur in

what has been described as “quantum leaps” or jolts. However, Miller (1996), an early champion

of this school, disputes this, pointing out that strategic and structural elements combine into

many more configurations than he had initially imagined and that organizational changes

between discrete configurations did not always occur in quantum leaps (p. 505), suggesting that

change in this school also occurs incrementally.

The tools of strategy making in this school would depend on the particular configuration

of organizational characteristics that is evident at the time; for example, in some configurations

the use of analytical tools such as data gathered through SWOT, PESTLE, Porter’s Five Forces

and other types of analyses would be employed, and change might be incremental, occasional or

revolutionary and the responsibility for strategy would depend on the particular configuration of

characteristics that the organization is experiencing sat the time. For example, it might be the

founder of an entrepreneurial organization, technocrats in machine organizations, and teams of

experts in adhocracies, as shown in Table 1 (p.12).

Critique of the Configuration School

A major critique of the configurational school is that it distorts, overly simplifies and

makes a caricature of a complex process (Mintzberg et al, 2005). Its ability to categorize and

“lump” organizational stages and patterns the way history lumps periods of time simplifies, but

ignores the fact that organizations are complex and nuanced constructs operating in complex and

nuanced environments and therefore cannot be so easily defined or lumped into simple

categories (Tappin, 2012). However, according to Danny Miller (1996) this may be an unfair

criticism based on a misunderstanding of his work due to what he described as his “poor job” of


communicating some key realities such as the fact that there are a great many configurations that

simply cannot be enumerated (p. 505).

Overview of Organizational and Market Structures

All organizations have a structure, experience change, and operate within the context of a

particular market structure. Additionally, all organizations experience a life cycle that can span

birth through demise. These variables are represented in Table 1 (p. 12, below), and inform how

organizations deal with risk, uncertainty and change in turbulent environments. The combination

and configuration of organizational structures, the power behind strategy making, an

organization’s life cycle, and the market structure that the firm is operating can inform how the

cultural and configuration schools of strategy compare to each other, and how strategy

formulation and resource allocation in the cultural and configuration schools are influenced by

these factors.


Organizational Structures, Power Bases, Organizational Stages, and Market

Structures

Table 1 (Source: Strategy Safari, ©2005)

1 2 3 4

Organizational

Structures

Power Behind

Strategy

Formulation

Life Cycle Stages

(Stages of Existence)

Market Structures

Entrepreneurial-

Simple, small; generally

young; informal and

flexible structure. (Large

firms under crisis can

assume this form)

Leader or founder

of organization

Stage of development

(hiring, setting up processes,

individual culture formed;

no collective culture)

Pure competition – easy to enter

and exit markets in which there

are many suppliers, products

are standardized and suppliers

are price takers who cannot

individually influence prices

Machine-

In stable mature

industries with mass

production (e.g.

automobile)

A technocratic

staff

Stage of stability

(Organization established;

processes established;

culture formed)

Monopolistic –

Easy to enter and exit, fewer

suppliers, products slightly

differentiated, can be price

setters

Professional-

Highly decentralized

structure (e.g. doctors,

researchers)

Highly trained

people

Stage of adaptation

(marginal changes in

structures and strategic

position)

Oligopoly – few suppliers, price

setters

Duopoly – a form of oligopoly

in which there are two suppliers

and supplier is a price setter

Diversified (many

divisions to an

organization)

Each division Stage of struggle

(seeking out new direction –

organization might be in a

rut, state of flux, or

experimenting)

Monopoly – one supplier of a

good or service, a price setter

that is often protected by the

government

Adhocracy-

adaptive; must innovate

in complex ways

Teams of expert –

(with expertise as

power)

Stage of revolution

(many organizational

characteristics changing all

at once)

Missionary -

Shared values hold

organization together

(e.g. clubs)

Strong culture -

(Power is

organization’s

collective

cognition)

Political-

Can be temporary or

permanent

Individuals or

groups (in the

absence of a

stable power

system)


Organizational and Market Structures

Organizations operate in particular markets that are determined by such things as the

organization’s age, organizational structure, stage of existence and even type of leadership.

Companies seek to gain a competitive advantage over rivals by formulating and employing

strategy. Competitive advantage has to do with the superiority of a firm’s market position over

its rivals in the mind of the targeted customer (Collins Dictionary of Business, 2006, para. 1 in

Tappin, 2012). The types of market structures that organizations operate in are pure competition,

monopolistic, oligopoly and monopoly. The influence of the cultural school on organization

structure and market structure in forming strategy is probably most evident in large, mature

organizations that are operating in monopoly markets. In these markets organizations have little

to fear because of their size, power, and the support and protections that they often receive from

governments. They are generally structured as machine or missionary organizations, are price

setters and have a high barrier to entry; a public service company or the United States Postal

Service is an example of a monopoly. In these organizations processes and routines are

established and institutionalized (Mintzberg and Westley, 1992; Schein, 1990); culture is set and

they face little threat of turbulent environments because their special status affords them a great

measure of stability. One can understand why they might depend on their routinized processes

for stability. Culture serves this market and organizational structure well since it will most likely

be in the interest to have a stable strategy that can be maintained and perpetrated - and the

cultural school is ideal for this situation. Due to its resistance to change and its insistence on

strategy stabilization, the culture school is not effective in other business structures or markets

since these organizations are affected by change and must react to it in some way or another.


The configuration school identifies strategy as “patterns in action” that last for specific

periods of time and recognizes that all organizations go through specific life cycle stages (Table

1) in which certain patterns are evident (Mintzberg et al, 2012); hence, for planning strategy, it

is more accommodating to all of the organizational and market structures, and this allows for

appropriate strategies to be formed based on a combination of variables that affect the

organization (stage, state, structure, etc). For example, an entrepreneurial organization in a

monopolistic market might create a differentiation strategy that is based on finding new

applications and markets for existing technology, as Japanese companies were successfully able

to do (Drucker, 1980). The configuration school would accommodate this type of strategy

because it calls for experimentation and risk-taking; the cultural school would not be able to

support this because of the school’s low tolerance for risk.

Organizational Resource Allocation in the Cultural and Configuration Schools

One of the ways that firms compete for market share and gain a competitive edge is

through effective allocation of their organizational resources. According to Camelo-Ordaz,

Martin-Alazar and Valle-Cabrera (2003) the literature describes organizational resources as the

inputs and factors that organizations use in order to carry out its activities (p. 96). Resources

must be coordinated in such a way that the organization will gain superior results, and a

company’s full set of resources are defined in the literature as its capacity, which is its “ability to

pursue its basic tasks better than its competitors” (para. 7). Another way to understand capacity

is that it is the totality of knowledge and abilities of the employees of an organization – their

skills and competencies expressed in the organization’s ability to adapt, change and innovate

over time (para. 9) and it is also the ability of an organization to “conceive, select, and

implement strategies” (Barney [1992] in Barney in Camelo-Ordaz et al [2003]).


Resource allocation in the culture school can be generally inefficient when there is a

collective resistance to strategic change. However, resource allocation might be efficient in a

bureaucratic organization that is operating in a stable, monopoly market environment when

culture preserves and stabilizes strategy. Likewise, when an entrepreneurial organization is

competing in a monopolistic market and the strategist is the founder or leader of the firm, in this

case culture is individual and will most likely support adaptation with available resources since

young organizations tend to be agile and adaptive, and - with responsibility for strategy invested

in the leader - the ability to change and pivot in response to the business and economic

environment is at its optimum in this cycle of an organization’s life. In an entrepreneurial

organization it is likely that resources will be allocated efficiently since the simple, informal

structure of this type of organization allows for quick responses to environmental stimuli, and the

organization’s most valuable resource might actually be the in the mind and abilities of the

founder – making it valuable, rare, inimitable, and hard to substitute. Allocation of resources in

the configuration school might be generally more efficient than in the cultural school simply

because this school is more adaptable and responsive to the different states, stages and structures

of the organization than the cultural school; therefore, resources will be allocated differently

under the various circumstances according to the special or particular configuration in which the

organization finds itself.

Stable and Turbulent Market Environments Overview

Terms such as turbulent markets, hypercompetition and high velocity have been used to

describe environments in which rapid and simultaneous changes are occurring (Wirtz et al,

2007); these conditions can be caused by changes in customer demands, technology, competitor

behavior, or legal and regulatory requirements (pp. 296 – 297). In order to have sustainable and


long term success in a competitive environment firms must be able to “handle unpredictable

rapid market shifts while maintaining enduring capabilities” (Juttner and Wehrli, 1994, p. 42).

These types of environments are fraught with uncertainty, thereby increasing risks for

organizations.

A stable market is one in which there is little turbulence, and the organization faces low

risks. This is more inherent in missionary, bureaucratic or machine organizations that are

operating as monopolies. The configurational and cultural schools deal with change and stability

differently. For example, in the configuration school, firms that are operating in pure

competition, monopolistic, oligopolistic and monopoly markets are affected by turbulence in

varying degrees. Monopolistic markets and oligopolies are probably the most susceptible to

turbulence due to the competitive nature of the market and the effect that external conditions

such as laws, changing consumer tastes, increased globalization, and competitor actions impose

on companies in these markets; pure competition and monopoly markets are the least affected.

Monopolistic and oligopoly firms operate in a competitive environment in which they

and their rivals strive for market share and so may adopt differentiation strategies to gain market

position and competitive edge. This calls for the organization to have the ability to innovate,

change and adapt; the degree to which they are able to do so will affect their effectiveness.

Although these firms are price setters and there are few firms (sometimes only two, as in a

duopoly) in an oligopoly market (e.g. the automobile or airline industries), these firms are highly

sensitive to change since they, like monopolistic firms, must be prepared to respond to any

moves (even minor ones) that their competitors make, or be prepared themselves to move (often

boldly) and create changes that alter the paradigms (change the games) that they might have been

operating under.


Firms in pure competition markets are price takers and have little effect on market; if the

environment is too turbulent they can easily exit. Monopoly markets are the least susceptible to

change due to their size, the fact that they are price setters, and also because they generally enjoy

a high degree of stability that is often provided by government support or protection (in the

Columbia Encyclopedia, 2008). When it comes to managing change and adapting in turbulent

markets the configuration school is more accommodating to firms of all organizational structures

than the cultural school, which – due to the effect of culture – renders organizations sluggish and

resistant to change… unless, for example, the company is facing a trauma such as an acquisition

or a merger. In this case, due to its transformative nature, the configuration school is more

appropriate. The change resisting cultural school will not be a good fit for oligopolies since there

are few firms in this type of market and each is highly sensitive to the actions of the other, so

they must be quick to respond to changes in the market place. Since the configuration school

accommodates the idea of an appropriate time for every type organization, and that different

organizational structures, states, stages and market structures inform different ways of

formulating strategy, it is better at handling change than the cultural school. For example, in the

configuration school, entrepreneurial firms that operate in monopolistic markets, with a leader or

founder in charge of strategy making, are adaptable and flexible and their informal structure

allow them to react quickly to changing situations. Adhocracies (since their organizational form

demands that they be adaptive and innovate in complex ways), diversified, and political

organizations too, can be highly adaptable and responsive to change under the configuration

school. Machine and missionary organizations do not handle change well in turbulent

environments because they generally have deeply embedded cultures that are resistant to change


and – except in the case of crises – prefer to deal with change in small increments (Tarter and

Hoy, 1998).

In accordance with its premise that there is a time and a space for each school of strategy,

in stable environments that are not threatened by unpredictability, the configuration school

allows that the other schools of strategy also have a space and a purpose. Some of these schools

rely on case studies, data collection, checklists, formal analyses and calculations that are based

on data, predictions and assumptions of a relatively stable present and future environment

(Mintzberg and Lampel, 1999, Mintzberg et al, 2005), and Game Theory scenario building in

order to manage risk and to gain a competitive edge in the market. In this hypothetical stable

(and albeit highly unrealistic) environment, culture can enhance the efficacy of strategic plans by

maintaining strategic stability and consistency. The same results may be obtained for mature,

machine organizations operating in monopoly, duopoly and oligopoly markets even though the

external environment that they are operating in might be fraught with uncertainty and turbulence.

An example of a monopoly operating under these conditions might be a public utility service

company or the United States Postal Service because such companies are generally supported by

local, state or federal government (in Penguin Dictionary of Economics, 2003), and are price

setters – their customers are powerless price takers and they have no competitors because of the

extremely high barriers to entry in their industries, or legal government protection that allows

these types of companies to operate as a monopoly. Government support of monopolies virtually

ensures their present and future market stability and accommodates the cultural school of

strategy formation since maintaining strategy and resisting change might, in itself, actually be a

desirable strategy to pursue. While strategic stability and resistance to change might be


efficacious under certain unique conditions, they are detrimental to organizations that are

affected by turbulent conditions.

Risk and Uncertainty Overview

Risk is generally about the possibility of loss, the probability of which can be assessed,

and possible outcomes predicted and quantified based on past events (Tappin, 2012, in OM8012,

Unit 3). According to Tversky and Fox (1995), in the classical theory of decision making under

risk “…the utility of each outcome is weighted by its probability of occurrence” (p. 269).

Uncertainty has to do with the number and nature of events that cannot be quantified (The

Penguin International Dictionary of Finance, 2003), and one in which there is no historical

information to refer to; there is a lack of information that prevents a decision maker from making

an informed decision, so intuition becomes important in managing uncertainty (Leggio [2004] in

Tappin [2012]).

Risk and Uncertainty in the Configuration and Cultural School

Depending on its resources, an organization might employ any number or combinations

of tools to manage risk; these tools range from simple checklists to complex simulation programs

and Game Theory to manage, affect, and change the environments that they are operating in. The

cultural school is less capable of dealing with risk and uncertainty than the configurational

school due to the constraints imposed on the organization by its culture and its high dependence

on a collective support of change initiatives. The favored structures of the cultural school

(machine, missionary organizations) have deeply embedded cultures and entrenched,

institutionalized process that allow them to be less subject to risk and uncertainty than other

organizational structures; so, regardless of the external conditions, they are more or less able to

operate in their own stable environments - in enclaves, so to speak (Mintzberg and Westley


(1992) - maintained and supported by culture. Mintzberg et al, (2005) offer the Catholic Church

as an example of an organization that operates in such a stable environment, regardless of

whether or not other organizations existing at the at the same time and economic environments

are faced with risks and uncertainties. For the culture school, maintaining the status quo might be

the best risk mitigation factor that it has.

The configuration school seems to be more capable of managing risk and uncertainty

because, depending on the particular configuration of the organization at the time, it can use

formal tools, experience gleaned from previous learning and intuition to handle risk and

uncertainty. For example, in fairly stable market environments risk, as a force that impacts

strategy, might be easily managed by using a variety of tools that range from the simple to the

complex such as checklists to scenario building or simulation to predict various outcomes under

a variety of imagined scenarios. Firms operating in dynamic environments might also use similar

tools such as brainstorming or other risk assessment tools in attempts to manage risk. In any

case, as a vital part of their risk management processes in relation to strategy, organizations must

employ sound decision-making practices to their strategies as a risk management tool. Tarter and

Hoy (1998) point out that every organization must make decisions but, although there is no best

way to make decisions, there are ways that are more effective than others and the most effective

way is the one that fits the circumstance (Hoy and Miskel [1991] in Tarter and Hoy, paras. 1-2);

this agrees with the configuration school’s theory of a place and a time for different approaches

to strategy.

Organizations at every stage of their existence must understand their levels of tolerance

to risk when forming strategy. For example, in the configuration school an organization (whether

a new venture or a mature organization) that is adopting an entrepreneurial approach to strategy


formation in order to enter new markets might use different entrepreneurial approaches to

strategy that could expose the company to varying degrees of risk. Drucker (1985) described

some strategies associated with entrepreneurial organizations and their associated level of risk:

first entrant (high risk), creative imitation (medium risk), and entrepreneurial judo (lowest risk

and most likely to succeed). When mature organizations employ new strategies that are contrary

to dominant logic, resistance to change might arise. This is a risk that must also be managed –

sometimes by retraining, repositioning, or even replacing individuals in the organization (Lorsch

[1986] in Mintzberg et al [2005]).

Strategy and Resource Allocation

All strategy must be supported by the allocation of resources, and resource allocation

depends greatly on how decisions are made, and what counts as a resource. As mentioned earlier,

as negative as culture may seem, it can be thought of as a valuable resource. It gives

organizations their unique characters and is not replicable and cannot be transferred to other

organizations with departing employees. Culture can both limit and expand a company’s

opportunities. For example, the 125-year old Coca Cola beverage company is a mature

organization whose culture (expressed in consistency, artifacts and symbols) is closely

associated with American culture; this identification has helped to make Coca Cola successful in

over two hundred international markets (The Coca Cola Company, 2012).

In volatile environments where uncertainty is predominant managers may not have all

the information that they need to make good decisions and run the risk of allocating resources

inefficiently; in this case, they must often rely on intuition in some types of decision making.

Culture can impede an organization’s ability to use this tool to make strategy decisions that can

give the company a competitive edge. For example, Bower and Gilbert (2006) described how a


transformative jolt affected strategy formation in the General Motors (GM) bureaucracy when

the East Berlin wall fell and GM sent a division manager, Louis R. Hughes, newly elevated to

the status of Chairman of the Board of Opel to introduce lean manufacturing, reduce bureaucracy

and explore opportunities to expand its market in that area; he was supposed to move cautiously

and gather business intelligence, which GM would (in the tradition of the cultural school) later

analyze. Organizations that operate in oligopolistic or monopolistic markets need to be agile and

responsive to market information, so this type of reliance on analysis can slow down decision

making, as would have been the case in this situation. Rather than going through the established

process of formal data gathering processes and analysis based on new data, Hughes ignored

headquarters’ directives, acted in a manner and made decisions that were contrary to established

corporate procedures when it looked as if Volkswagen would capture the newly opened up

market and gain first market entrant advantage. This would have given Volkswagen a

competitive edge over GM. In order to break through the existing culture that supported the

descriptive schools of strategy making (i.e. reliance on deliberate, formalized procedures).

Hughes took unsanctioned actions that were new to GM and seized the opportunity to launch

inspiring appeals to the corporation in order to get support for his radical moves. He was able to

break through tradition, get the resources that he needed, and was able to successfully pre-empt

Volkswagen in establishing GM in the new territory (pp. 1-5).

This case study demonstrates: (1) had the entrenched GM culture prevailed, resources

would not have been allocated to support the new entrepreneurial strategy that was responding to

a major social and economic upheaval in the environment (2) how organizations can go through

different states and stages and create strategy based on many elements that configure in new

ways; even a bureaucratic organization such as GM can, in a transformational moment, become


entrepreneurial. This supports the theory behind the configuration school, which asserts the idea

that there is a right strategy that is applicable at the right time. In this case, the configuration

school’s response to the situation allowed resources to be allocated effectively. The cultural

school, as demonstrated by GM’s initial resistance to the change in their corporate strategy,

would not have allocated resources to this particular effort and would have preserved the status

quo. It took the adaptability of the configuration school to jolt GM into changing its dominant

logic. This serves to prove that the cultural school can be a poor allocator of resources, and that

the configuration school allows organizations to be more efficient allocators of resources. In all

of the other schools, decision-making can have different affects on resource allocation, but the

efficacy of all strategy depends on the organization’s commitment of resources to the process. It

is assumed that in the configuration school organizations of different structures that are in

different stages in risky environments will allocate resources differently and more efficiently

than the cultural school would under similar circumstances.

Differences between the Two Schools

One of the major differences between the cultural and configuration schools is in their

intended and realized messages. The intended message of the cultural school is to band together

rather than change; this disposition results in a realized message to perpetrate existing strategy

(Mintzberg and Lampel, 1999) through avoidance, for example, rather than deal with trauma and

confrontation that change can bring. This only serves to make the organization resistant to

change. In turbulent environments this makes the cultural school sluggish, less able to pivot and

adapt – but highly effective in, for example, stable monopoly markets that mechanistic,

bureaucratic or large organizations might be operating in. The configuration school, on the other

hand, with its recognition of organizations and their various structures in relation to different


states, stages and types of leadership style at different times, is more responsive to change than

the cultural school and thus better able to cope with dynamic environments. Additionally, the

configuration school’s intended message is to integrate and transform, while its realized message

is “lump and revolutionize”– very different from the cultural school. As previously mentioned,

change in the configuration school is understood in terms of being a transformative process in

one view, and in the context of configurations or relationships between the organization and its

surrounding environment (Mintzberg et al, 2005, p. 302) in another; it does not resist change,

while the cultural school does. It can accommodate “quantum leaps” where change is concerned,

while the cultural school prefers to not deal with no change at all or, if it must, incrementally.

This overall view of the configuration school as transformative and considerate of the

organization in relation to its environment suggests dynamism – movement, learning and change.

This is in stark contrast to the cultural school in which culture can “freeze” an organization in a

specific state that renders strategy static and resistant to change – although transformative shocks

(such as a merger or acquisition) can break through and change deeply embedded culture, after

which the culture eventually refreezes again. Another difference is how strategy is made in both

schools, and in the tools and processes that they utilize. The configuration school can employ a

variety of different processes based on the variables of structure, stage and market structure; the

cultural school prefers deliberative, formal processes and the use of data and analysis in

decision-making. Each organization has a structure that can change; each operates in a particular

industry so culture would necessarily have bearing on the efficacy of strategy in every

organization. As a factor in maintaining strategic stability it will have bearing on how any

organization deals with issues such as change, risk, uncertainty and resource allocation in

turbulent or stable market environments.


Summary

Two schools of strategy were discussed in this paper: the cultural and the configuration,

and how they formed strategy, managed change and allocated resources were examined.

Research confirmed that culture exists in every organization, supports and perpetuates existing

strategy, is difficult to change, and is not responsive to innovation (Mintzberg et al, 2005, pp.

267-268). However, although it can effect strategy formation when it is resistant to change, it can

also assist strategy when it supports and stabilizes the desired strategy. Examples were given of

when and how this can occur in missionary organizations that are operating in stable

environments and need to remain so. Organizations that wish to change from one state to another

might have to change their organization’s culture before structural changes can be made. That

can be accomplished if leaders challenge beliefs, raise questions, suggest new ideas, educate

middle managers, and rotate managers among functions and businesses to combat the lethargy

that is inherent in culture (Mintzberg et al, p. 270). Old habits – ways of being – will have to

change, but when that happens, support for the new strategy will be collective and it will be

maintained until change is needed again.

This paper found that the configuration school of thought is more responsive to strategy

in all of the organizational structures and in all of the market structures because the school is able

to recognize the unique combination of circumstances in an organization’s life cycle that would

mandate different strategies to match the organizations specific circumstance. Today’s business

environment has been described as dynamic, turbulent and fast changing. Organizations operate

in environments fraught with risk and uncertainty and must make decisions based on many

variables in order to form strategy. When environmental uncertainty is prevalent and risk is

heightened, as previously mentioned, even a machine organization that is operating in a stable


environment might be jolted into transformational change (such as with the introduction of new

technology) that forces it to form new strategy. In this case organizations must find ways to

change the culture so that the new strategy might be embraced. Research supported the theories

that the cultural school is resistant to change (unless it is jolted out of its passivity) and is not

suited for certain organizational and market structures. Effective strategy can afford

organizations a competitive edge over their rivals in the same industry, therefore businesses must

be prepared to be agile and adaptive in order to respond to changes, benefit from opportunities,

and manage risks. When strategists understand the theories and the principles that underlie these

schools – as well as the other schools of strategy proposed by Mintzberg et al. (2005) – and when

they apply the appropriate tools to strategy formation, they will increase their chances of making

better strategy decisions, and increase their chances of gaining a competitive advantage over

their rivals.


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Strategy Analysis: The Cultural and Configuration Schools