Parallel Perspectives

Today I have been...

Reading more about the development of strategic management thought

Why?

Required reading! P5 Reader

So What?

In 2001, Whittington split strategic management into

1. Classical
2. Evolutionary
3. Processual (is that a word?!)
4. Systemic

 I've already blogged about 1.

Evolutionary (Nelson & Winter, 1982, Henderson 1989) states that the external environment is permanently a difficult place to be, meaning rational planning cannot be used. In a dynamic market, businesses must evolve or die, so managers are tasked with fitting their strategies to the turbulent environment.

Population Ecology suggests that structure, character and resource endowment of an organisation are fixed shortly after birth, and survival of the fittest means that it must ensure it acquires an adequate amount of resources to survive - kind of like how the different sides battle for mine resources in the Command & Conquer, Warcraft, Starcraft style games!

The Red Queen in Alice through the looking glass pointed out to Alice that in a fast world she has to run just to stand still. Barnett and Hansen in 1996 extended this idea to orgs.

 Over time, orgs learn from competitive experience, helping to create stronger competitors. They are less likely to fail if they have recent competitive experience!

Henry Mintzberg's view of strategy is Processual. Processual = emergent, that is, strategy is a process that emerges from a combination of influences and interests within the organisation in addition to top management. An amalgamation, perhaps. This way it not only reflects managerial objectives but also the practical pragmatism needed to satisfice the various internal stakeholders.

In other words, strategy that is attempted to be imposed, top-down, is not likely to be effective without factoring in relevant internal stakeholders. In this context strategy development cannot be a step-by-step series of analysis, evaluation and implementation as it is a continuous and iterative process.

Systemic strategy is a recognition of the work of systems thinkers such as Granovetter and Shrivastava. They see strategy as being moulded by context.

• Social Context,
• Geographic,
• Political,
• Cultural
• etc

For example, profit maximisation may drive strategic objectives in our systems (anglo saxon), where family, social or national welfare may be bigger drivers elsewhere.

Another example of systemic strategy is shown in the influence of social and peer networks. For example overlapping organisational membership, friends, family, professional networks etc lead to more shared information and knowledge. This increases the complexity of managing alliances.

Chandler looked initially at the link between organisational structure and strategy, and Bartlett and Ghoshal and Headlund have built on this work. The traditional M-Form org was considered to seek efficiency. Hedlund suggests N-Form organisations are "network" and virtual organisations which are becoming more prevalent as partnerships and outsourcing increase. Examples of co-operative strategies include things such as airline alliances and code sharing. Mintzberg's view is that structure is dependent on the strategic needs and purpose (back to Pyramid of Purpose again).


How will I use it?

More relevant background information, again it is interesting to see the links between this and some of the b713 material.

Development in the 1980s and 1990s

Today I have been... 

Continuing to read the about the development of strategic management thought.

Why?

Part of the reader.

So What?

Well, the planning approach started to fail in the 1970s. There was a realisation that things were more complicated than financial cost & risk.

Ghemawat (2002: 50) said planning alone was

leading to stalemates as more than one competitor pursued the same generic success factor Reader p4

 Hayes and Abernathy (1980) pointed out how the old-fashioned techniques made managers incapable and reticent of innovation and investing for the future. It could also be argued that the world never actually recovered from the oil crises of the 1970s which changed the external environment for most firms. Japanese, European and South-East Asian firms grew stronger.

As I write this I'm trying to think of examples - Sony, Nissan, Toyota for the Japanese - easy. European - BMW, Mercedes-Benz, Thomson, Fiat. South-East Asian? Well I can only think of Malaysian car firm Proton from the 70's and 80's (more success was felt by Indian firms in the 90s and after 2000), although Singapore and Malaysia certainly saw growth in manufacturing generally.

Interestingly I can't think of any UK firms that grew in strength in the 1980s internationally. I wonder if this is an example of the UK suffering in the same way that US firms did in comparison to Japanese, European and SE asian firms. When America sneezes, Britain catches a cold, and all that. I'm sure there must be some...

Competition and competitiveness became more important, and planning departments morphed into strategy departments.

Interestingly, this only happened at my employer (let's call them $EMPLOYER) recently. I wonder if this may have been because $EMPLOYER had very little competition until recently. The planning department was alive and well until 2005 I'm sure....

Harvard's Michael Porter wrote hugely influential works in 1980 and 1985, and can be thought of an Industrial Organisation (IO) economist. In his writings he emphasised the external environment, and analysis of industry structures to determine levels of industry attractiveness and comparative levels of potential industry profitability.

RBV - resource based view - arrived in the 1990s. This view of strategy from Prahalad and Hamel, 1990 and Grant, 1991), helped move strategic management away from desire for leading market positioning and market share to the workings of the firm itself as a basis for building strategies and finding sources of competitive advantage.

Andrews had first raised the notion of distinctive competencies in the 1970s (http://mbastudier.blogspot.com/2010/10/planning-approach-to-strategy-reader-p1.html) and RBV echoes it. Under RBV the firm is a collection of resources, and managers are tasked with the job of using, developing and building those resources to help achieve strategic objectives.

We've all seen examples of one firm outperforming another where they have access to the same resources and operate in the same market and environment. Tesco & Safeway anyone? Why the difference in performance? Well if the managerial capabilities vary (or other organisational capabilities/talent) then different performance levels will surely arise as a result of the similar resources but different competencies or capabilities. This is heterogeneity. RBV therefore puts managers under the huge responsibility of creating the ability for capability-improvement.

Porter (1996: 64) wrote

Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value

How will I use it?

This is more valuable background information. 

The Planning Approach to Strategy (reader p1-4)