Strategy Formation Mintzberg & Waters model DELIBERATE Intended Realised strategyStrategy Unrealised StrategyEmergent Strategy

Strategy Formation

Mintzberg & Waters modelMintzberg & Waters model

DELIBERATEIntended Realisedstrategy Strategy

Unrealised Strategy Emergent

Strategy

Strategic Management 1 - Strategy Formation

• Is strategy deliberate? Planned

• Is strategy emergent? Incremental

• Is strategy some of both?


• Planned - strategies are intentionally designed, much as an Engineer designs a bridge. Phases of

• Formulation

• Situational analysis

• Rough designs to be assessed

BUT THE INFORMATION IS THERE


• Chakravarthy & LorangeChakravarthy & Lorange - managing planning in five stages

• First - to set the objectives of the plan for the firm and its underlying units and departments.

• Objectives should be a matter of consensus• Objectives are long term - so shorter term goals

should be set along the way.• Objectives are based on forecasts provided to top

management (the strategists) of the key environmental factors


• Secondly strategic programming:

• defining the cross-functional programmes and activities required to achieve goals set in the first stage.

• This is intended to forge an agreement between the different units

• The programmes must be authorised by senior management

• These programmes can look ahead for several years - often at least five for a financial plan


• Thirdly - budgeting for the corporation and constituent departments.

• The strategic budget identifies the contributions different departments are expected to make the whole corporation - for instance new products. This can have long term implications

• The operating budget provides the resources to enable them to do these things - this is based on past trends and is held to be of only short term significance


Fourthly -Fourthly -

• Monitoring, control and learning

• Checking that the key milestones - the goals - are being met - and if not, why not?


FifthlyFifthly

• incentives and staffing

• - ensuring that the firm has enough employees properly trained in the most appropriate skills, and that they are effectively motivated.


• Advantages of a planned approach:Advantages of a planned approach:

• gives a sense of direction - what its about;

• allows for organisational programming - optimise the organisation for the new strategy;

• helps develop overall co-ordination

• allows strategy tasks to be formalised and differentiated

• encourages long term thinking and commitment


• BUT planning• requires assumptions and forecasts to be made -

these may be wrong

the future can be predicted only by extrapolating from the past, yet it is fairly certain that the future will be different from the past (Makridakis). Hence

• Contingency planning• Scenario planning


Foreign policy development - Graham Allison

• Model One - Rational Policy Development - dominant model used to explain foreign policies.

• Basic unit of analysis is the nation or its national government selecting the course of action which will achieve maximum effect for their goals and objectives. It is in terms of these courses of action that an analyst will seek the explanation.


Organising concepts

• national actor - nation behind the government

• action is selected in the context of the problem perceived. So if a nation has taken a particular course of action, it must have had ends for which that action was optimal

• taking action is a steady state choice among known alternatives

• choice is rational in the usual sense


Model two - strategy as an organisational process

• The basic unit of analysis is the government as a loose analysis of sub-organisations, each with a substantial agenda of their own

• Action is no longer a deliberate choice of leaders, but more the output of large organisations operating to SOPs


International politics reflect organisational processes in three respects:

• the events are outputs of organisations - for instance going to war is organised by government

• organisational routines are the main options for governments taking most types of action (e.g. political leaders cannot act in a practical sense beyond the powers of their government)

• outputs 0 what can be done - are the constraints within which the decisions must be taken.


Organising concepts• unit of analysis is the alliance of organisations

what constitute government• the complexity of the various elements of

foreign policy require it be divided among various organisations - Treasury, Industry, etc.

• Parochialism is encouraged by the process - information is provided selectively; similar types are recruited into the organisation; members are tenured; effect of small group pressure; rewards are given for maintaining stability


The output of the organisation is taking action, characterised by

• goals being aimed at acceptable levels of performance;

• goals being given sequential attention;• SOPs• programmes and repertoires of organisational

behaviour;• avoidance of uncertainty• Search being elicited only by non-standard

problems• organisational learning and change


• Behaviour by the organisation is to be explained by its behaviour yesterday - and its behaviour tomorrow by what it does today.

• This can be explained by :- SOPs and repertoires of behaviour, which change only slowly and usually in straight lines.


Model three - “bureaucratic” politics

Not the kind of bureaucracy we are familiar with - “hundreds of issues compete for players’ attention every day. Each player is forces to fix upon his issues for that day, fight them on their own terms and then rush onto the next. Thus the character of emerging issues and the pace at which the game is played converge to yield government decisions and actions as collages. (Allison PG..... 198)


The organising concepts of this model include:

• the actor is neither the nation, nor a liaison of organisations, but individuals in action - “men in jobs”.

• Positions define what players can do - a good position, or favourable rules yield power;

• Personality matters - see Daniels in BJM 3/98


• How the problem is perceived and what solutions are put forward depends on the position from which they are understood

• The outcome reflects the powers of the players• Solutions are not derived by analysis of the

problem, but by (a) what part of the problem the player must act upon, (b) when he must act (e.g. deadlines). This means there can be a considerable gap between the analyst’s problem and the player’s problem


• Bargaining between players does not just happen - there are routines - action channels - to be gone through. These routinise events, and give structure. Most importantly they distribute advantages - and disadvantages - to particular players, as well as determining who will dispose of the problem - whose department will take the chosen action

• Action emerges neither from rational calculation nor as an organisational outcome - but from shared power and separate judgement.


Explanation under this model:

• action does not presuppose an intention by the organisation - rather its action is the summation of individual acts

• the perceptions of the individual players determines their views both hierarchically and laterally within the organisation (i.e. the effect of context)


Comparison of the three models:Comparison of the three models:• each produces its own distinct explanation of behaviour• the three models are not exclusive - each emphasises

what the others leave out. Thus the question may not be• planning OR incremental?Rather it might better be considered • how much of each can we locate in any set of

circumstances?


Quinn and IncrementalismQuinn and Incrementalism

“such planning (incrementalism)is just one building block in a continuous stream of events that really determine corporate strategy” (page 174)


The study:

• analysis of the development of strategy in 10 major companies, as perceived by those involved (I.E. not to the researcher)

• shows strategies emerge from the different sub-systems in the organisation (e.g. divisions, departments etc)


• Issues other than hard - quantifiable - matters of significance in developing strategy:

• organisation structure/ management style• relationships with government or other

interest groups• acquisition/ divestiture, or divisional control• developing innovation and personnel

motivation to increase growth;• past and anticipated technological change


• In developing strategy on such matters:

• few are dealt with analytically

• the successful companies used different sub-systems to formulate strategy for each major class of issue;

• no single analytical procedure could deal with all all contingencies


• WHY should this be?• Often events were outwith management

control or could not be predicted• these required a piecemeal but urgent

response, which shaped the future strategy• rather than committing the whole organisation,

managers would respond in a tentative way - – subject to review in the future – testing assumptions, learning about this

unexpected situation.


• This incremental logic was found to apply too in the strategic subsystems - e.g.

• Government relations - a well established area of analysis and clearly important and acknowledged by the sample to be so.

• Quinn finds that very few of his 10 companies had a cohesive strategy to manage their relationship with government

• Strategies were piecemeal, ad hoc and evolutionary


It is hard to say in advance exactly what public response any particular action might create. So we tend to test a number of different approaches on a small scale with only limited or local company identification. If one approach works we’ll test it further and amplify its use. If another bombs, we try to keep it from being used again. Gradually the successful approaches merge into a pattern of actions that becomes our strategy.

Quinn page 180


Role of formal planning in an incremental system (i.e. not either/ or, but both/ and)

• disciplining force• rigorous communication• longer term analysis of what might happen• longer time horizon on R & D• creates a psychological context and information

framework for planning• fine-tune commitments• formalise cost reduction• help co-ordinate implementation


• Logical incrementalism:

• strategic decisions do not lend themselves to aggregation into a single decision matrix where all factors can be disposed of simultaneously to achieve a holistic optimum (page 183)

• all the factors cannot be made to deliver at the same time - i.e. different parts of the problem will be dealt with the at different times. Can this be managed?


• Quinn finds that executives usually deal with different sub-systems (i.e. different parts of the overall strategic problem) on their own merits. But at the same time, they keep in mind an overall pattern of decisions (vision) which they try to maintain.

• Successful executives will have been able to link together a whole series of such decisions over a period of years


• At the beginning, events and forces relevant to the future of the company cannot be predicted;

• all managers can do is to identify those forces likely to be relevant, and in what way(s);

• they can then build a resource base and corporate posture that the firm is able to survive;

• they would chose markets and product segments they can dominate, with some bolt holes in case things go wrong.


• Incrementally they deal with urgent matters, • start longer term courses of action whose

consequences are unknowable• respond to unforeseen events• build on success, and cut out losses on failure• reassess the future constantly• identify new congruencies


• blend organisational skills and resources into new combinations of domination and risk aversion, developing better but never perfect alignments

• the process has no beginning or end

• it is about flexible, experimental responses as we move from the broad to the specific


The rise and fall of strategic planning - The rise and fall of strategic planning - MintzbergMintzberg

• The pitfalls of planning

• the purpose of conventional strategic planning is to reduce the power of management over strategy making - “The CEO should not be deeply involved, but rather be the designer in a general sense” - Lorange

• at lower levels strategy is used as a control mechanism ex ante and ex post.


• Fallacies of strategic planning

• Grand fallacy = because analysis includes synthesis, strategic planning is strategy making. Three fallacious assumptions:

1 that we can safely predict the future. While there are repetitive situations - the seasons - forecasting discontinuities (technology, prices etc) is virtually impossible


2 that strategy making managers can be detached from the events relevant for developing the strategy. If they are there are several problems

2 getting the necessary information to them on time and in an appropriate form;

• the processes of strategic planning, strategic thinking and strategy making are synonymous;

• strategy is always deliberate - never emergent• strategy has no element of learning to it - it is

all in the analysis


3 That we can formalise planning in the sense of forcing it into a rational sequence of analysis followed by action:

• it can be action followed by analysis - act in order to think as well as think to act;

• planning does not deal well with discontinuities

• strategy can proceed without planning, but planning cannot proceed without strategy - planning = strategy programming.


• Planning and programming

• the role of planning is to operationalise - NOT MAKE - strategy.

• The planner is the person left behind with the owner, once the strategy has been decided on.


• Planning will involve:• codification - clarifying and expressing the

strategy in sufficiently clear terms that they can be put into effect with known consequences

• elaboration - breaking the codified strategy down into sub strategies and ad hoc programmes (e.g. build four new supermarkets


• conversion - what effect will all this have on our existing operations - budgets, control systems etc. and how will they be reconsidered and reworked?

• HOWEVER this is not the only way to proceed - or even the best way. Sometimes things have to be left open, left broad. Only when things are stable and relatively sure can we proceed on this basis.

Documents

Strategy Formation Mintzberg & Waters model DELIBERATE Intended Realised strategyStrategy Unrealised StrategyEmergent Strategy