STRATEGY SAFARI A GUIDED TOURTHROUGH THE WILDS OF STRATEGIC MANAGEMENT HENRY MINTZBERG BRUCE AHLSTRAND JOSEPH LAMPEL T H E FREE PRESS NEW YORK >aJ&aiz. u. frmiu/i «… * „. ;i••/ . • . . >•. »•.. . .. •.. •••. -. ••a/itiktSii^i THE FREE PRESS A Division of Simon & Schuster Inc. 1230 Avenue of the Americas New York, NY 10020 Copyright © 1998 by Henry Mintzberg, Ltd. , Bruce Ahlstrand, and Joseph Lampel All rights reserved, including the right of reproduction in whole or in part in any form.
THE FREE PRESS and colophon are trademarks of Simon & Schuster Inc. Designed by Carla Bolte Manufactured in the United States of America 10 9 8 7 6 5 4 Permissions acknowledgments appear on pages 393-395. Library of Congress Cataloging-in-Publication Data Mintzberg, Henry. Strategy safari: a guided tour through the wilds of strategic management / Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel. p. cm. Includes bibliographical references and index. 1. Strategic planning. I. Ahlstrand, Bruce W. II. Lampel, Joseph. III. Title. HD30. 28.
M564 1998 658. 4’012—dc21 98-9694 CIP ISBN 0-684 -84743-4 (hardcover) There are some people who begin the Zoo at the beginning, called WAYIN, and walk as quickly as they can past every cage until they come to the one called WAYOUT, but the nicest people go straight to the animal they love the most, and stay there. —A. A. Milne, in the Introduction to Winnie-The-Pooh We dedicate this book to such people who are more interested in open fields than closed cages. CONTENTS Embarkation 1 “And Over Here, Ladies and Gentlemen: The Strategic
Management Beast” 2 The Design School Strategy Formation as a Process of Conception 3 The Planning School Strategy Formation as a Formal Process 4 The Positioning School Strategy Formation as an Analytical Process ix 1 23 47 81 5 The Entrepreneurial School Strategy Formation as a Visionary Process 123 6 The Cognitive School Strategy Formation as a Mental Process 149 7 The Learning School Strategy Formation as an Emergent Process 175 8 The Power School Strategy Formation as a Process of Negotiation 233 9 The Cultural School Strategy Formation as a Collective Process 263 10
The Environmental School Strategy Formation as a Reactive Process 285 I I The Configuration School Strategy Formation as a Process of Transformation 301 12 “Hang On, Ladies and Gentlemen, You Have Yet to Meet the Whole Beast” References 375 Index 397 349 EMBARKATION T his trip began with a paper by Henry called “Strategy Formation: Schools of Thought,” published by Jim Fredrickson in a collection entitled Perspectives on Strategic Management (HarperCollins, 1990). Bruce used the paper in a course at Trent University and found that it worked well. “Why don’t you do a book on it? ” he suggested. “Why don’t we do it together? Henry replied. They both thought that Joe would make an excellent member of the team. So the safari was launched. We did not, however, write this as a textbook or some sort of academic treatise. From the outset, we believed that the book should have as much relevance for managers and consultants in practice as students and professors in the clasroom. So we set out to write an easily accessible explanation of the fascinating field of strategic management. Sure, some parts may appeal more to practitioners, while others may be more of interest to the academically inclined. This is in the nature of the beast.
We did not set out to domesticate it but to make it friendly. We wanted readers from everywhere to join our safari. But at the same time we want to challenge you. We take risks and hope that they will invigorate you. For as we argue throughout, the field of strategic management needs to be opened up, not closed down; it needs reconciliation among its many different tendencies, not the isolation of each. To enrich the experience of this safari, we hope to follow up with a Guidebook. We have also prepared an Instructor’s Manual to facilitate the use of this rather unconventional book in the classroom.
We owe many thank-yous. Bob Wallace of The Free Press must be especially singled out. In the musical chairs world of publishing these x EMBARKATION days, to be able to work with someone of his caliber, dedication, and experience is most unusual. Abby Luthin gave welcome support there as well. Kate Maguire provided great help, as she has so often in the past. (Kate labeled the manuscript “The Beast” long before it received its current title! ) She was supported admirably by Elana Trager, especially in tracking down some tricky bits of information.
Coralie Clement dealt with all the references and permissions, plus lots more, working across countries, authors, and problems with remarkable skill. At one point, she wrote in an e-mail, “I think it’s pretty awesome that I am communicating with a Franco-Anglo-Canadian in India about a book being published in the U. S. and Europe Ahhh, modern life. ” Particularly wise and helpful were comments on the manuscript provided by Joelle Meiic. Thanks also go to the doctoral students of Henry’s colloquium in Montreal, who made a number of helpful suggestions, and to Maeve Quaid, Doug Torgerson, and Melissa Nadler.
We also express our appreciation to Denise Fleck for doing the index. — I — “AND OVER HERE, LADIES AND GENTLEMEN: THE STRATEGIC MANAGEMENT BEAST” A fable to begin, often referred to, seldom known: THE BLIND M E N A N D THE ELEPHANT by John Godfrey Saxe (1816-1887) It was six men of Indostan To learning much inclined, Who went to see the Elephant (Though all of them were blind) That each by observation Might satisfy his mind. The First approached the Elephant, And happening to fall Against his broad and sturdy side, At once began to brawl: “God bless me but the Elephant
Is very like a wall. ” The Second, feeling of the tusk, Cried, “Ho! What have we here So very round and smooth and sharp? To me ’tis mighty clear This wonder of an Elephant Is very like a spear! ” The Third approached the animal, And happening to take The squirming trunk within his hands, Thus boldly up and spake: “I see,” quoth he, “The Elephant Is very like a snake! ” The Fourth reached out an eager hand, And felt around the knee, “What most this wondrous beast is like Is mighty plain,” quoth he; ” ‘Tis clear enough the Elephant Is very like a tree! The Fifth, who chanced to touch the ear, Said: “E’en the blindest man Can tell what this resembles most; Deny the fact who can, This marvel of an Elephant Is very like a fan! ” The Sixth no sooner had begun About the beast to grope, Than, seizing on the swinging tail That fell within his scope, “I see,” quoth he, “the Elephant is very like a rope! ” And so these men of Indostan Disputed loud and long, Each of his own opinion Exceeding stiff and strong, Though each was partly in the right, And all were in the wrong!
Moral So oft in theologic wars, The disputants, I ween, Rail on in utter ignorance Of what each other mean, And prate about an Elephant Not one of them has seen! W e are the blind people and strategy formation is our elephant. Since no one has had the vision to see the entire beast, everyone has grabbed hold of some part or other and “railed on in utter ignorance” about the rest. We certainly do not get an elephant by adding up its parts. An elephant is more than that. Yet to comprehend the whole we also need to understand the parts. The next ten chapters describe ten parts of our strategy-formation STRATEGY SAFARI beast. Each forms one “school of thought. ” These ten chapters are framed by this first chapter, which introduces the schools as well as some ideas about strategy itself, and a last chapter which returns to the whole beast. Why Ten? In a colorful article entitled “The Magic Number Seven, Plus or Minus Two: Some Limits on Our Capacity for Processing Information,” psychologist George Miller (1956) asked why we tend to favor a quantity of about seven for categorizing things—for example seven wonders of the world, seven deadly sins, and seven days of the week.
This reflects our cognitive makeup, he concluded: seven is about the number of “chunks” of information that we can comfortably retain in our shortterm memories. * Three wonders of the world would fall a little flat, so to speak, while eighteen would be daunting. But those of us interested in strategy are, of course, no ordinary mortals—at least in terms of our cognitive capacities—and so should be able to comprehend, say, one more than the magic number seven plus two. Accordingly, this book proposes ten schools of thought on strategy formation.
Cognition aside, in reviewing a large body of literature, ten distinct points of view did emerge, most of which are reflected in management practice. Each has a unique perspective that focuses, like each of the blind men, on one major aspect of the strategy-formation process. Each of these perspectives is, in one sense, narrow and overstated. Yet in another sense, each is also interesting and insightful. An elephant may not be a trunk, but it certainly has a trunk, and it would be difficult to comprehend elephants without reference to trunks.
The handicap of blindness does have an unexpected advantage, sharpening the other senses to the subtleties that can escape those who see clearly. THE SCHOOLS. Accordingly, in each of the ten subsequent chapters, we present one of the schools from its own limited perspective. Then we critique it, to extract both its limitations and its contributions. These * Actually, Miller argues for a limit of this order to the number of “bits” we can handle in what he refers to as “absolute judgment” and the number of “chunks”—combinations of these bits—in “intermediate memory. ” “AND OVER HERE, LADIES A N D G E N T L E M E N : . . . ” 3 chools, together with the single adjective that seems best to capture each one’s view of the strategy process, are listed below: strategy formation as a process of conception strategy formation as a formal process The Planning School: The Positioning School: strategy formation as an analytical process The Entrepreneurial School strategy formation as a visionary process The Cognitive School: strategy formation as a mental process The Learning School: strategy formation as an emergent process The Power School: strategy formation as a process of negotiation The Cultural School: strategy formation as a collective process The Environmental School: strategy formation as a reactive process The Configuration School: strategy formation as a process of transformation* Our ten schools fall into three groupings.
The first three schools are prescriptive in nature—more concerned with how strategies should be formulated than with how they necessarily do form. The first of these, which presented in the 1960s the basic framework on which the other two built, focuses on strategy formation as a process of informal design, essentially one of conception. The second school, which developed in parallel in the 1960s and peaked in a flurry of publications and practice in the 1970s, formalized that perspective, seeing strategy making as a more detached and systematic process of formal planning. That school was somewhat displaced in the 1980s by the third prescriptive school, less concerned with the process of strategy formation than with the actual content of strategies.
It is referred to as the positioning school be*In an interesting alternative mapping Martinet (1996) has divided the field into teleologic, sociology, ideologic, and ecologic. (Lauriol, 1996, has mapped our ten schools onto these four. ) See also Bowman (1995) for another interesting cut of the field. The Design School: 6 STRATEGY SAFARI cause it focuses on the selection of strategic positions in the economic marketplace. The six schools that follow consider specific aspects of the process of strategy formation, and have been concerned less with prescribing ideal strategic behavior than with describing how strategies do, in fact, get made. Some prominent writers have long associated strategy with entrepreneurs/up, and have described the process in terms of the creation of vision by the great leader.
But if strategy can be personalized vision, then strategy formation has also to be understood as the process of concept attainment in a person’s head. Accordingly, a small but important cog’ nitive school has also developed that seeks to use the messages of cognitive psychology to enter the strategist’s mind. Each of the four schools that follow has tried to open up the process of strategy formation beyond the individual, to other forces and other actors. For the learning school, the world is too complex to allow strategies to be developed all at once as clear plans or visions. Hence strategies must emerge in small steps, as an organization adapts, or “learns. Similar to this, but with a different twist, is the power school, which treats strategy formation as a process of negotiation, whether by conflicting groups within an organization or by organizations themselves as they confront their external environments. In contrast to this is another school of thought that considers strategy formation to be rooted in the culture of the organization. Hence the process is viewed as fundamentally collective and cooperative. And then there are the proponents of an environmental school, organization theorists who believe strategy formation is a reactive process in which the initiative lies not inside the organization, but with its external context. Accordingly, they seek to understand the pressures imposed on organizations. Our final group contains but one school, although it could be argued that this school really combines the others. We call it configuration.
People in this school, in seeking to be integrative, cluster the various elements of our beast—the strategy-making process, the content of strategies, organizational structures and their contexts—into distinct stages or episodes, for example, of entrepreneurial growth or stable maturity, sometimes sequenced over time to describe the life cycles of or- “AND OVER HERE, LADIES A N D G E N T L E M E N : . . . ” 7 ganizations. But if organizations settle into stable states, then strategy making has to describe the leap from one state to another. And so, another side of this school describes the process as one of transformation, which incorporates much of the huge prescriptive literature and practice on “strategic change. ” These schools have appeared at different stages in the development of strategic management.
A few have already peaked and declined, others are now developing, and some remain as thin but nonetheless significant trickles of publication and practice. We shall describe each school in turn, with our own interpretation of its development and its difficulties, before concluding with our final integrative comments in the closing chapter. Note that all of these schools can be found in the literature, often in very clearly delineated pockets: particular academic journals, special practitioner magazines, certain styles of books. But most are, or have been, equally evident in practice, both within organizations and from the consulting firms that serve them. Practitioners read and are influenced by the literature, just as the literature is influenced by the practice.
So this is a book of the school of thought on strategy formation both in publication and in practice. A Field Review The literature of strategic management is vast—the number of items we reviewed over the years numbers close to 2,000—and it grows larger every day. Of course, not all of this comes from the field of management. All kinds of other fields make important contributions to our understanding of the strategy process. William Starbuck has written that to discuss “all aspects of organization which are relevant to adaptation . . . means . . . that one could legitimately discuss everything that has been written about organizations” (1965:468).
This is, in fact, an understatement, because the last word in the quotation should read “collective systems of all kinds. ” What biologists write about the adaptation of species (for example “punctuated equilibrium”) can have relevance for our understanding of strategy as position (“niche”). What historians conclude about peri- 8 STRATEGY SAFARI ods in the development of societies (such as “revolution”) can help explain different stages in the development of organizational strategies (for example, “turnaround” as a form of “cultural revolution”). Physicists’ descriptions of quantum mechanics and mathematicians’ theories of chaos may provide insights into how organizations change. And so on.
Add to this all the other literatures that are more commonly recognized as relevant to the study of organizations—psychology on human cognition as well as leadership charisma, anthropology on cultures in society, economics on industrial organization, urban planning on formal planning processes, political science on public policy making, military history on strategies of conflict, and on—and the result is an enormous, dispersed body of literature capable of rendering all sorts of insights. At the limit, strategy formation is not just about values and vision, competences and capabilities, but also about the military and the Moonies, crisis and commitment, organizational learning and punctuated equilibrium, industrial organization and social revolution. We consider this literature in its own terms. We do not, however, seek to review it comprehensively. We had no more wish to write several thousand pages than most people have to read it. ) This, in other words, is a field review, not a literature review. We seek to cover the literature and the practice—to set out its different angles, orientations, tendencies. In so doing, we cite published work either because it has been key to a school or else because it well illustrates a body of work. We apologize to the many insightful writers and consultants whose work is not mentioned; we hope that we have left out no significant bodies of work. We must add one point, however. There is a terrible bias in today’s management literature toward the current, the latest, the “hottest. This does a disservice, not only to all those wonderful old writers, but especially to the readers who are all too frequently offered the trivial new instead of the significant old. We express no such bias in this book. Ours is a review of the evolution as well as the current state of this field. Later in this book we argue that ignorance of an organization’s past can undermine the development of strategies for its future. The same is true for the field of strategic management. We ignore past work at our own peril. Indeed, we believe that time works on the literature and practice of strategic management much like it works on wine “AND OVER HERE, LADIES A N D G E N T L E M E N : . . . ” in barrels: it reveals what is excellent. We therefore apologize to no one for reminding the reader of so many wonderful old publications. Five Ps for Strategy The word strategy has been around for a long time. Managers now use it both freely and fondly. It is also considered to be the high point of managerial activity. For their part, academics have studied strategy extensively for about two decades now, while business schools usually have as their final required capstone a course in strategic management. The word strategy is so influential. But what does it really mean? It is part of human nature to look for a definition for every concept.
Most of the standard textbooks on strategy offer that definition, usually presented in the introductory chapter, more or less as follows: “top management’s plans to attain outcomes consistent with the organization’s missions and goals” (Wright et al. , 1992:3). No doubt such definitions have been dutifully memorized by generations of students, who have later used them in thousands of corporate reports. We offer no such easy definition here. Instead, we argue that strategy (not to mention ten such different schools about it) requires a number of definitions, five in particular (based on Mintzberg, 1987). Ask someone to define strategy and you will likely be told that strategy is a plan, or something equivalent—a direction, a guide or course of action into the future, a path to get from here to there.
Then ask that person to describe the strategy that his or her own organization or that of a competitor actually pursued over the past five years—not what they intended to do but what they really did. You will find that most people are perfectly happy to answer that question, oblivious to the fact that doing so differs from their very own definition of the term. It turns out that strategy is one of those words that we inevitably define in one way yet often also use in another. Strategy is a pattern, that is, consistency in behavior over time. A company that perpetually markets the most expensive products in its industry pursues what is commonly called a high-end strategy, just as a person who always accepts the most challenging of jobs may be described as pursuing a highrisk strategy.
Figure 1-1 contrasts strategy as plan—looking ahead, with strategy as pattern—looking at past behavior. 10 STRATEGY SAFARI FIGURE l-l STRATEGIES AHEAD AND BEHIND Strategy as plan (intended) Strategy as pattern (realized) Now, both definitions appear to be valid: organizations develop plans for their future and they also evolve patterns out of their past. We can call one intended strategy and the other realized strategy. The important question thus becomes: must realized strategies always have “AND OVER HERE, LADIES A N D G E N T L E M E N : . . . ” II been intended? (That intended strategies are not always realized is all too evident in practice. There is a simple way to find out. Just ask those people who happily described their (realized) strategies over the past five years what their intended strategies were five years earlier. Were they the same? A few may claim that their intentions were realized perfectly. Suspect their honesty. A few others may answer that what they realized as strategies had nothing to do with what they intended. Suspect their behavior. In our experience, the vast majority of people give an answer that falls between these two extremes—a bit of this and a bit of that, they say. They did not stray completely from their intentions, but neither did they achieve them perfectly.
For, after all, perfect realization implies brilliant foresight, not to mention an unwillingness to adapt to unexpected events, while no realization at all suggests a certain mindlessness. The real world inevitably involves some thinking ahead as well as some adaptation en route. As shown in Figure 1-2, intentions that are fully realized can be called deliberate strategies. Those that are not realized at all can be called unrealized strategies. The planning school, for example, recognizes both, with an obvious preference for the former. But there is a third case, which we call emergent strategy—where a pattern realized was not expressly intended. Actions were taken, one by one, which converged over time to some sort of consistency or pattern.
For example, rather than pursuing a strategy (read plan) of diversification, a company simply makes diversification decisions one at a time, in effect testing the market. First it buys an urban hotel, next a restaurant, then a resort hotel, then another urban hotel with a restaurant, then a third of these, and so on, until a strategy (pattern) of diversifying into urban hotels with restaurants has emerged. As implied earlier, few, if any, strategies are purely deliberate, just as few are purely emergent. One means no learning, the other means no control. All real-world strategies need to mix these in some way: to exercise control while fostering learning. Strategies, in other words, have to form as well as be formulated.
An umbrella strategy, for example, means that the broad outlines are deliberate (such as to move upmarket), while the details are allowed to emerge en route (when, where, 12 STRATEGY SAFARI FIGURE 1-2 STRATEGIES DELIBERATE AND EMERGENT and how). Thus, emergent strategies are not necessarily bad and deliberate strategies good; effective strategists mix these in ways that reflect the conditions at hand, notably the ability to predict as well as the need to react to unexpected events. Alongside plan and pattern, we can add two more “p” words. Some years ago, McDonald’s introduced a new product called Egg McMuffin—the American breakfast in a bun. This was to encourage the use of their restaurant facilities in the morning.
If you ask people whether Egg McMuffin was a strategic change for McDonald’s, you will inevitably hear two answers: “Yes, of course: it brought them into the breakfast market,” and “Aw, come on, it’s the same old stuff—the McDonald’s way—just in a different package. ” In our view, the real difference between these people is in how they implicitly define the content of strategy. To some people, strategy is a position, namely the locating of particu- “AND OVER HERE, LADIES A N D G E N T L E M E N : . . . – 13 FIGURE 1-3 STRATEGIES ABOVE AND BELOW Strategy as position Strategy as perspective lar products in particular markets—Egg McMumn for the breakfast market.
As Michael Porter reiterated recently, “Strategy is the creation of a unique and valuable position, involving a different set of activities” fundamental wayinof phrase, thisaisproductMcDonald’s an down—towell “x” that marksothers, doing isas position, strategy looks organization’s Drucker’s memorable strategy thingsitsthe meets the business”InasPeter (1996:68). shown spot where the perspective, of the customer, 1994). As To the Figure 1-3, “theory namely way. (1970:5; the o 14 STRATEGY SAFARI as out—to the external marketplace. As perspective, in contrast, strategy looks in—inside the organization, indeed, inside the heads of the strategists, but it also looks up—to the grand vision of the enterprise. Again, we need both definitions. McDonald’s introduced Egg McMuffin successfully because the new position was consistent with the existing perspective.
The executives of McDonald’s seemed to understand well (although not necessarily in these terms) that one does not casually ignore perspective. (Anyone for McDuckling a l’Orange? ) Changing position within perspective may be easy; changing perspective, even while trying to maintain position, is not. (Just ask Swiss watchmakers about the introduction of quartz technology. ) Figure 1-4 illustrates examples of this. Thus, we have four different definitions of strategy. A fifth is in common usage too: strategy is a ploy, that is, a specific “maneuver” intended to outwit an opponent or competitor. A kid may hop over a “AND OVER HERE, LADIES A N D G E N T L E M E N : . . . ” 15 ence to draw a bully into his yard, where his Doberman Pinscher waits for intruders. Likewise, a corporation may buy land to give the impression it plans to expand its capacity, in order to discourage a competitor from building a new plant. Here the real strategy (as plan, that is, the real intention) is the threat, not the expansion itself, and as such is a ployFive definitions and ten schools. As we shall see, the relationships between them are varied, although some of the schools have their preferences—for example, plan in the planning school (as noted), position in the positioning school, perspective in the entrepreneurial school, pattern in the learning school, ploy in parts of the power school.
There may not be one simple definition of strategy, but there are by now some general areas of agreement about the nature of strategy. The accompanying box summarizes these. Strategies for Better and for Worse Any discussion of strategy inevitably ends on a knife-edge. For every advantage associated with strategy, there is an associated drawback or disadvantage: 1. “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. Setting out on a predetermined course in unknown waters is the perfect way to sail into an iceberg.
While direction is important, sometimes it is better to move slowly, a little bit at a time, looking carefully but not too far ahead, as well as to each side, so that behavior can be shifted at a moment’s notice. 2. “Strategy focuses effort. ” Advantage: Strategy promotes coordination of activity. Without strategy to focus effort, chaos can ensue as people pull in a variety of different directions. 16 STRATEGY SAFARI THE STRATEGY BEAST: AREAS OF AGREEMENT (adapted from Chaffee, 1985:89-90) • Strategy concerns both organization and environment. “A basic premise of thinking about strategy concerns the inseparability of organization and environment. . . . The organization uses strategy to deal with changing environments. • The substance of strategy is complex. “Because change brings novel combinations of circumstances to the organization, the substance of strategy remains unstructured, unprogrammed, nonroutine, and nonrepetitive ” • Strategy affects overall welfare of the organization. “… Strategic decisions . . . are considered important enough to affect the overall welfare of the organization…. ” • Strategy involves issues of both content and process. “. . . The study of strategy includes both the actions taken, or the content of strategy, and the processes by which actions are decided and implemented. ” • Strategies are not purely deliberate. “Theorists . . . gree that intended, emergent, and realized strategies may differ from one another. ” • Strategies exist on different levels. “… Firms have . . . corporate strategy (What businesses shall we be in? ) and business strategy (How shall we compete in each business? )” • Strategy involves various thought processes. ” . . . Strategy involves conceptual as well as analytical exercises. Some authors stress the analytical dimension more than others, but most affirm that the heart of strategy making is the conceptual work done by leaders of the organization. ” Disadvantage: “Groupthink” arises when effort is too carefully focused. There may be no peripheral vision, to open other possibilities.
A given strategy can become too heavily embedded in the fabric of the organization. “AND OVER HERE, LADIES A N D G E N T L E M E N : . . . ” 17 3. “Strategy defines the organization. ” Advantage: Strategy provides people with a shorthand way to understand their organization and to distinguish it from others. Strategy provides meaning, plus a convenient way to comprehend what the organization does. Disadvantage: To define an organization too sharply may also mean define it too simply, sometimes to the point of stereotyping, so that the rich complexity of the system is lost. 4. “Strategy provides consistency. ” Advantage: Strategy is needed to reduce ambiguity and provide order.
In this sense, a strategy is like a theory: a cognitive structure to simplify and explain the world, and thereby facilitate action. Disadvantage: Ralph Waldo Emerson said that “A foolish consistency is the hobgoblin of little minds. . . .” Creativity thrives on inconsistency—by finding new combinations of hitherto separate phenomena. It has to be realized that every strategy, like every theory, is a simplification that necessarily distorts reality. Strategies and theories are not reality themselves, only representations (or abstractions) of reality in the minds of people. No one has ever touched or seen a strategy. This means that every strategy can have a misrepresenting or distorting effect. That is the price of having a strategy.
We function best when we can take some things for granted, at least for a time. And that is a major role of strategy in organizations: it resolves the big issues so that people can get on with the little details— like targeting and serving customers instead of debating which markets are best. Even chief executives, most of the time, must get on with managing their organizations in a given context; they cannot constantly put that context into question. There is a tendency to picture the chief executive as a strategist, up there conceiving the big ideas while everyone else gets on with the little details. But the job is not like that at all. A great deal of it has to do 18 STRATEGY SAFARI ith its own little details—reinforcing the existing perspective (and “culture”) through all kinds of figurehead duties, developing contacts to find important information, negotiating agreements to reinforce existing positions, and so on. The problem with this, of course, is that eventually situations change—environments destabilize, niches disappear, opportunities open up. Then all that is constructive and effective about an established strategy becomes a liability. That is why, even though the concept of strategy is rooted in stability, so much of the study of strategy focuses on change. But while formulas for strategic change may come easily, the management of that change, especially when it involves shifting perspective, comes hard.
The very encouragement of strategy to get on with it—its very role in protecting people in the organization from distraction—impedes their capacity to respond to changes in the environment. In other words, retooling is expensive, especially when it is human minds, and not just machines, that have to be retooled. Strategy, as mental set, can blind the organization to its own outdatedness. Thus we conclude that strategies are to organizations what blinders are to horses: they keep them going in a straight line but hardly encourage peripheral vision. All this leads to our final conclusion, which is that strategies (and the strategic management process) can be vital to organizations by their absence as well as their presence. See the accompanying box. ) Strategic Management as an Academic Discipline Also for better and for worse, strategic management has become an academic discipline in its own right, like marketing and finance. The field has its own academic journals, its own “clubs,” its own conferences. Its literature is vast and, since 1980, has been growing at an astonishing rate. There has been a general tendency to date that literature back to the mid-1960s, earlier perhaps to a 1951 book by William Newman, but the writings on military strategy go back much further: indeed, Sun Tzu wrote his Art of War in about the fourth century B. C. (Griffith, in Sun Tzu, 1971:ix).
For the most part, the teaching of strategic management has highlighted the rational and prescriptive side of the process, namely our “AND OVER HERE, LADIES A N D G E N T L E M E N : . . . ” 19 STRATEGY ABSENCE AS VIRTUE (from Inkpen and Choudhury, 1995:313-323) « . . . Strategy absence need not be associated with organizational failure. . . . Deliberate building in of strategy absence may promote flexibility in an organization. . . . Organizations with tight controls, high reliance on formalized procedures, and a passion for consistency may lose the ability to experiment and innovate. • Management may use the absence of strategy to send unequivocal signals to both internal and external stakeholders of its preference not to engage in resource-consuming ceremony….
For example, various articles have described Nucor’s disdain for formal planning systems and the firm’s reliance instead on a consistency in action at all levels in the organization. Nucor has no written strategic plan, no written objectives, and no mission statement. For Nucor, an absence of many of the supposed elements of strategy is symbolic of the no-frills, non-bureaucratic organization Nucor has worked hard to become. • An absence of a rigid pattern of strategic decision making may ensure that “noise” is retained in organizational systems, without which strategy may become a specialized recipe that decreases flexibility and blocks learning and adaptation first three schools (design, planning, and positioning).
Strategic management has commonly been portrayed as revolving around the discrete phases of formulation, implementation, and control, carried out in almost cascading steps. This bias is heavily reflected in practice, particularly in the work of corporate and governmental planning departments as well as of many consulting firms. This book departs from this traditional view in its attempt to provide a more balanced survey of the field, with all of its contradictions and controversies. Significant space is given to the nonrational/nonprescriptive schools, which point to other ways of looking at strategic 10 STRATEGY SAFARI management. Some of these schools have a less optimistic view about the possibility for formal strategic intervention.
Where we become unbalanced somewhat is in our critiques of the different schools. The three prescriptive schools have so dominated the literature and practice that we find it appropriate to include rather extensive discussions that bring much of this conventional wisdom into question. Of course, we critique all ten schools, since each has its own weaknesses. But when people are seated on one side of a see-saw, it makes no sense to try to get them into balance by pulling from the center. Put differently, to maintain balance among our critiques of the ten schools would only help to perpetuate the unbalance that we believe currently exists in the literature and practice.
Pervasive strategic failure in many large corporations may well be attributed to the army of business school graduates who have been sent out with an incomplete tool kit. This book seeks to open up the range of perspectives by providing a more varied set of ideas for such students as well as practicing managers. As Hart has noted, “High performing firms appear capable of blending competing frames of reference in strategy making. They are simultaneously planful and incremental, directive and participative, controlling and empowering, visionary and detailed” (1991:121). Or, as F. Scott Fitzgerald put it, more bluntly: “The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time and still retain the ability to function. To function as a strategist, of course, means not just to hold such opposing views, but as Spender (1992) has pointed out, to be able to synthesize them. We ask you, the reader, to hold ten such views! The field of strategic management may itself be moving toward such synthesis. As we shall see, some of the newer work cuts across our schools. This may seem to make a bit of a mess of our framework. But our schools may, in fact, help us to see how this work draws important aspects of strategy formation together. We applaud such work, and cite it where we can. It suggests a certain coming of age of the field. But synthesis cannot happen in general. It must ultimately take place in the specific mind of the beholder, namely you the reader. We A N D OVER HERE, LADIES A N D G E N T L E M E N : . . . ” 21 shall provide help where we can, but the task is up to those who deal with strategy in their jobs. We all know what a whole elephant is, yet we often have to describe it by its parts. That is in the nature of verbal description: words in linear order, chapters in a book. So hang on—here we go! 2 THE DESIGN SCHOOL STRATEGY FORMATION AS A PROCESS OF CONCEPTION “Gentlemen, let us pool our expertise. ” ,_… j«s#J..! ~. ASii/$ai3*”,. ,.. ‘J’… ,.. < »->.. f Jl ft… *… {. At i*u&Li _.. ., “The damn guy just sits there waiting for a case study. ” —Manager, about a Harvard MBA T e design school represents, without question, the most influential view of the strategy-formation process. Its key concepts continue to form the base of undergraduate and MBA strategy courses as well as a great deal of the practice of strategic management. Professors, consultants, and planners worldwide have filled untold numbers of blackboards and flipcharts with its famous notion of SWOT—the assessment of Strengths and Weaknesses of the organization in light of the Opportunities and Threats in its environment. At its simplest, the design school proposes a model of strategy making that seeks to attain a match, or fit, between internal capabilities and external possibilities.
In the words of this school’s best-known proponents, “Economic strategy will be seen as the match between qualifications and opportunity that positions a firm in its environment” (Christensen, Andrews, Bower, Hamermesh, and Porter in the Harvard policy textbook, 1982:164). “Establish fit” is the motto of the design school. This chapter discusses and then critiques this highly influential school, which contains some of the most deeply seated assumptions about strategic management. Unexamined assumptions that appear perfectly plausible can sometimes prove to be rather misleading. We wish to raise doubts about these assumptions, not to dismiss the important contribution of the design school, but to understand better where it fits, alongside the very different views of some of the other schools.
We must appreciate where the early ideas of strategic management came from, why they became so influential, and what role they should and should not play today. Origins of the Design School The origins of the design school can be traced back to two influential books written at the University of California (Berkeley) and at M. I. T. : Philip Selznick’s Leadership in Administration of 1957, and Alfred D. Chandler’s Strategy and Structure of 1962. Selznick, in particular, intro- duced the notion of “distinctive competence” (1957:42-56), discussed the need to bring together the organization’s “internal state” with its “external expectations” (67-74), and argued for building “policy into the organization’s social structure” (1957:91-107), which later came to be called “implementation. Chandler, in turn, established this school’s notion of business strategy and its relationship to structure. But the real impetus for the design school came from the General Management group at the Harvard Business School, beginning especially with the publication of its basic textbook, Business Policy: Text and Cases (cited above), which first appeared in 1965 (by Learned, Christensen, Andrews, and Guth). This quickly became the most popular classroom book in the field, as well as the dominant voice for this school of thought. Certainly its text portion, attributed in the various editions to co-author Kenneth Andrews (see also Andrews, 1987), stands as the most outspoken and one of the clearest statements of this school.
By the 1980s, this textbook was one of the few left that represented the ideas of the design school in their pure form, most others having come to favor the more elaborated renditions of them in the planning and positioning schools. Accordingly, we use the Andrews text (in Christensen et al. , 1982) as a primary source of our discussion, and shall reference pages there in the following discussion (unless otherwise noted). As we shall see, in a sense the Harvard group pursued its own strategy, for there is a clear fit between the view of strategy formation that it has promoted for several decades and its own favored pedagogy of case study teaching. The Basic Design School Model
Our depiction of the basic design school model (similar to Andrews’s own [187], but with other elements added) is shown in Figure 2-1. Consistent with the attention accorded in the Andrews text, the model places primary emphasis on the appraisals of the external and internal situations, the former uncovering threats and opportunities in the environment, the latter revealing strengths and weaknesses of the organization. Andrews’s text on each of these is not extensive (nor, for that matter, is his whole text portion of the book, which numbers just 114 pages in the 1982 edition; the other 724 pages are devoted to cases). 26 STRATEGY SAFARI FIGURE 2 – 1 BASIC DESIGN SCHOOL MODEL
On external appraisal, aside from 12 pages inserted in this edition from Michael Porter’s (1980) book (whose work, as we shall see, clearly falls into the positioning school), there are eight pages on the technological, economic, social, and political aspects of a company’s environment, and brief consideration of the issues of forecasting and scanning. Andrews concluded his discussion with questions such as “What is the underlying structure of the industry in which the firm participates? ” and “How might foreseeable change in the social, political, and macroeconomic context impact the industry or the firm? ” (179-180). ;&is . v JCmturrt* ifc, i f f v-1 tiiSS. s &4t&no3,.. ;.. »• THE DESIGN S C H O O L 27
On internal appraisal, Andrews touched on a variety of points, such as the difficulty “for organizations as well as for individuals to know themselves” (183) and the idea that “individual and unsupported flashes of strength are not as dependable as the gradually accumulated product-and-market-related fruits of experience” (185). This ties back to an important theme in Selznick’s book, that “commitments to ways of acting and responding are built into the organization,” indeed are intrinsic to its very “character” (1957:67). Figure 2-1 shows two other factors believed important in strategy making. One is managerial values—the beliefs and preferences of those who formally lead the organization, and the other is social responsibilities—specifically the ethics of the society in which the organization functions, at least as these are perceived by its managers.
With the notable exception of Selznick (1957), however, most authors associated with this school do not accord a great deal of attention to values and ethics. Andrews, for example, offered his two brief chapters well after he developed the framework dealing with external and internal appraisals. On the actual generation of strategies, little has been written in this school besides an emphasis on this being a “creative act,” to quote Andrews (186). Once alternative strategies have been determined, the next step in the model is to evaluate them and choose the best one. The assumption, in other words, is that several alternative strategies have been designed and are to be evaluated so that one can be selected (105, 109).
Richard Rumelt (1997), a DBA from the Harvard General Management group, has perhaps provided the best framework for making this evaluation, in terms of a series of 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 and/or maintenance of a competitive advantage in the selected area of activity. 28 STRATEGY SAFARI Feasibility: The strategy must neither overtax available resources nor create unsolvable subproblems. Finally, virtually all of the writings of this school make clear that once a strategy has been agreed upon, it is then implemented.
We show implementation in the diagram as flaring out from formulation, to suggest that after the appraisals have been completed to narrow down to convergent choice, the process diverges again to ensure implementation across the entire organization. Interestingly, here is one place where Andrews became rather specific: he listed twelve steps in the implementation process (backed up by a fair amount of text), encompassing many aspects of the strategy process not considered in formulation. While, as we shall see, the strategic management field has developed and grown in many different directions, most standard textbooks continue to use the SWOT model as their centerpiece.
Tables 2-1 and 2-2 show typical guidelines on internal and external approaches from one such book. Likewise, despite the rate at which they introduce new techniques, many strategy consultants continue to rely on the SWOT model and other design school notions. As the planning school faltered in the 1980s, attention turned back to the language of the design school. Consulting firm Kepner-Tregoe’s “law of parsimony,” for example, was an almost direct quote from Andrews’s early work: “. . . keep strategies clear, simple, and specific” (Tregoe and Tobia, 1990:16-17). In our opinion, this school did not develop so much as provide the basis for developments in other schools.
In other words, people took some of these ideas and elaborated them in terms of other assumptions about the strategy process (often, as we shall see, in contradiction to Andrews’s own stated beliefs): for example, by adding the formality of the planning school and the analyses of the positioning school, or, in the work of Hamel and Prahalad, the adaptability of the learning school. Premises of the Design School A number of basic premises underlie the design school, some fully evident, others only implicitly recognized. Seven are listed on pages 29 through 32 (together with supporting references to Andrews’s writings in the 1982 Christensen et al. Harvard text): THE DESIGN S C H O O L 29 TABLE 2-1 ENVIRONMENTAL VARIABLES CHECKLIST 1. Societal Changes Changing customer preferences—Impacting product demand or design Population trends—Impacting distribution, product demand or design 2. Governmental Changes New legislation—Impacting product costs New enforcement priorities—Impacting investments, products, demand 3.
Economic Changes Interest rates—Impacting expansion, debt costs Exchange Rates—Impacting domestic and overseas demand, profits Real personal income changes—Impacting demand 4. Competitive Changes Adoption of new technologies—Impacting cost position, product quality New Competitors—Impacting prices, market share, contribution margin Price changes—impacting market share, contribution margin New Products—Impacting demand, advertising expenditures 5. Supplier Changes Changes in input costs—Impacting prices, demand, contribution margin Supply Changes—Impacting production processes, investment requirements Changes in number of suppliers—Impacting costs, availability 6.
M a r k e t Changes New uses of products—Impacting demand, capacity utilization New markets—Impacting distribution channels, demand, capacity utilization Product obsolescence—Impacting prices, demand, capacity utilization Source: From Power et al. (1986:38). 1. Strategy formation should be a deliberate process of conscious thought (94, 543). Action must flow from reason: effective strategies derive from a tightly controlled process of human thinking. Andrews suggested in another publication, for example, that managers “know what they are really doing” only if they make strategy as “deliberate” as possi- 30 STRATEGY SAFARI TABLE 2 – 2 STRENGTHS A N D WEAKNESSES CHECKLIST 1. Marketing Product quality Number of product lines Product differentiation Market share Pricing policies Distribution channels Promotional programs Customer service Marketing research Advertising Sales force 2.
Research and Development Product R capabilities Process R capabilities Pilot plant capabilities 3. Management Information System Speed and responsiveness Quality of current information Expandability User-oriented system 4. Management Team Skills Value congruence Source: From Power, et al. (1986:37). Team spirit Experience Coordination of effort 5. Operations Control of raw materials Production capacity Production cost structure Facilities and equipment Inventory control Quality control Energy efficiency 6. Finance Financial leverage Operating leverage Balance sheet ratios Stockholder relations Tax situation 7. H u m a n Resources Employee capabilities Personnel systems Employee turnover Employee morale Employee development le (1981a:24). Strategy making in this sense is an acquired, not a natural, skill (185) or an intuitive one—it must be learned formally (6). 2. Responsibility for that control and consciousness must rest with the chief executive officer: that person is the strategist (3, 19, 545). To the de- THE DESIGN S C H O O L 31 sign school, ultimately, there is only one strategist, and that is the manager who sits at the apex of the organizational pyramid. Thus Andrews associated the whole process with the “point of view” of the “chief executive or general manager” (3), and he titled one section of his book “the president as architect of organizational purpose. As Robert Hayes characterized it, “this ‘command-and-control’ mentality allocates all major decisions to top management, which imposes them on the organization and monitors them through elaborate planning, budgeting, and control systems” (1985:117). It might be noted that this premise not only relegates other members of the organization to subordinate roles in strategy formation, but also precludes external actors from the process altogether (except for members of the board of directors, who Andrews believed must review strategy [1980, 1981a, b]). This, in fact, is just one aspect of a larger issue associated with the design school—the relegation of the environment to a minor role, to be accounted for and then navigated through but not so much interacted with. 3. The model of strategy formation must be kept simple and informal.
The preface to the Harvard textbook contains a quotation by Andrews that “the idea of corporate strategy constitutes a simple practitioner’s theory, a kind of Everyman’s conceptual scheme” (14). Fundamental to this view is the belief that elaboration and formalization will sap the model of its essence. This premise, in fact, goes with the last: one way to ensure that strategy is controlled in one mind is to keep the process simple (182). However, this point, together with the first, forced Andrews to tread a fine line throughout his text between nonconscious intuition on one side and formal analysis on the other, a position he characterized as “an act of judgment” (108).
This distinguishes the design school from the entrepreneurial school on one side and the planning and especially positioning schools on the other. 4. Strategies should be one of a kind: the best ones result from a process of individualized design (187). As suggested above, it is the specific situation that matters, not any system of general variables. It follows therefore that strategies have to be tailored to the individual case. As a result, the design school says little about the content of strategies 32 STRATEGY SAFARI themselves, but instead concentrates on the process by which they should be developed. And that process above all should be a “creative act” (186), to build on distinctive competence. 5.
The design process is complete when strategies appear fully formu- lated as perspective. This school offers little room for incrementalist views or emergent strategies, which allow “formulation” to continue during and after “implementation. ” The big picture must appear—the grand strategy, an overall concept of the business. Here, in other words, we find not a Darwinian view of strategy formation, but the Biblical version, with strategy as the grand conception, the ultimate choice. That strategy appears as perspective, at some point in time, fully formulated, ready to be implemented. 6. These strategies should be explicit, so they have to be kept simple (105-106).
Andrews, in common with virtually all the writers of this school, believed that strategies should be explicit for those who make them, and, if at all possible, articulated so that others in the organization can understand them. It follows, therefore, that they have to be kept rather simple. “Simplicity is the essence of good art,” Andrews wrote, “a conception of strategy brings simplicity to complex organizations” (554). 7. Finally, only after these unique, full-blown, explicit, and simple strategies are fully formulated can they then be implemented. We have al- ready noted the sharp distinction made in this school between the formulation of strategies on one hand and their implementation on the other.
Consistent with classical notions of rationality—diagnosis followed by prescription and then action—the design school clearly separates thinking from acting. Central to this distinction is the associated premise that structure must follow strategy. It appears to be assumed that each time a new strategy is formulated, the state of structure and everything else in the organization must be considered anew. According to Andrews, “Until we know the strategy we cannot begin to specify the appropriate structure” (551). If we need one image to capture the sense of this school, it is that famous picture of Thomas J. Watson Sr. sitting, looking very proper, THE DESIGN S C H O O L 33 nder a sign that says THINK. Thousands of copies of this picture were distributed in the late 1940s to his employees at IBM. Critique of the Design School A strategy that locates an organization in a niche can narrow its own perspective. This seems to have happened to the design school itself (not to mention all the other schools) with regard to strategy formation. We have already suggested that the premises of the model deny certain important aspects of strategy formation, including incremental development and emergent strategy, the influence of existing structure on strategy, and the full participation of actors other than the chief executive.
We wish to elaborate on these shortcomings in this critique, to indicate how they narrow the perspectives of the design school to particular contexts. One point should be made first. Proponents of this school may well argue that we are interpreting these writings too literally, that it is unfair to take apart a model—a specified sequence of prescriptive steps— when all that was intended was a simple framework. In our view, however, both rest on the same set of assumptions, a critique of which forms the basis of our argument. These assumptions concern the central role of conscious thought in strategy formation, that such thought must necessarily precede action, and, correspondingly, that the organization must separate the work of thinkers from that of doers.
We develop our critique at some length because of the influence the design school has had—and continues to have, all too often without being realized—on the teaching and practice of strategic management as well as on the planning and positioning schools in particular (which renders much of this critique applicable to them, as we shall see). ASSESSMENT OF STRENGTHS AND WEAKNESSES: BYPASSING LEARNING. Our comments here revolve around one central theme: this school’s promotion of thought independent of action, strategy formation above all as a process of conception rather than as one of learning. We can see this most clearly in a fundamental step in the formulation process, the assessment of strengths and weaknesses. How does an organization know its strengths and weaknesses? On 34 STRATEGY SAFARI his, the design school has been quite clear—by consideration, assessment, judgment supported by analysis; in other words, by conscious thought expressed verbally and on paper. One gets the image of executives sitting around a table (as in the cartoon at the beginning of this chapter), discussing the strengths, weaknesses, and distinctive competences of an organization, much as do students in a case study class. Having decided what these are, they are then ready to design strategies. But are competences distinct even to an organization? Might they not also be distinct to context, to time, even to application? In other words, can any organization really be sure of its strengths before it tests them?
Every strategic change involves some new experience, a step into the unknown, the taking of some kind of risk. Therefore no organization can ever be sure in advance whether an established competence will prove to be a strength or a weakness. In its retail diversification efforts, a supermarket chain was surprised to learn that discount stores, which seemed so compatible with its food store operations, did not work out well, while fast-food restaurants, ostensibly so different, did. The similarities of the discount store business—how products are displayed, moved about by customers, and checked out—were apparently overwhelmed by subtle differences of merchandising: styling, obsolescence, and the like.
On the other hand, the restaurants may have looked very different, but they moved simple, perishable, commoditylike products through an efficient chain of distribution—much as did the supermarket business (Mintzberg and Waters, 1982). The point we wish to emphasize is: how could the firm have known this ahead of time? The discovery of “what business are we in” could not be undertaken merely on paper; it had to benefit from the results of testing and experience. And the conclusion suggested from such experiences is that strengths often turn out to be far narrower than expected, and weaknesses far broader. Nowhere does this come through more clearly in practice than in all those attempts at related diversification by acquisition. Obviously, no organization can undertake such an effort without a prior assessment of its strengths and weaknesses.
Yet so many experiences reported in the popular press and the published research suggest that related diversifi- THE DESIGN S C H O O L 35 cation is above all a learning process, in which the acquiring firm has to make a number of mistakes until it gradually figures out, if it ever does, what works for it (see, for example, Miles, 1982; also Quinn, 1980a:28). STRUCTURE FOLLOWS STRATEGY… AS THE LEFT FOOT FOLLOWS THE RIGHT. T h e design school promotes the dictum, first articulated by Chandler (1962), that structure should follow strategy and be determined by it. Yet what ongoing organization can ever wipe the slate clean when it changes its strategy?
The past counts, just as does the environment, and organization structure is a significant part of that past. 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. (Indeed, in this school’s own model, as in Figure 2 – 1 , these capabilities are inevitably shown as inputs to strategy formulation, part of the organization’s strengths. ) Structure may be somewhat malleable, but it cannot be altered at will just because a leader has conceived a new strategy. Many organizations have come to grief over just such a belief.
Sitting and concocting strategies in an office rather than digging down in the pit with real products and real customers can be a dangerous business! We conclude, therefore, that structure follows strategy the way the left foot follows the right foot in walking. In effect, the development of strategy and the design of structure both support the organization, as well as each other. Each always precedes the other, and follows it, except when the two move together, as the organization jumps to a new position. Strategy formation is an integrated system, not an arbitrary sequence. MAKING STRATEGY EXPLICIT: PROMOTING INFLEXIBILITY. Once strategies have been created, then the model calls for their articulation. Failure to do so is onsidered evidence of fuzzy thinking, or else of political motive. But there are other, often more important, reasons not to articulate strategy, which strike at the basic assumptions of the design school. To so articulate strategy, a strategist must know for sure where he or she wishes to go, with few serious doubts. But organizations have to 36 STRATEGY SAFARI cope with conditions of uncertainty too. How can a company come “to grips with a changing environment” when its “strategy is [already] known” (Andrews, 1981a:24)? Our point is that organizations must function, not only with strategy, but also during periods of the formation of strategy, which can endure for long periods.
As James Brian Quinn has noted, “It is virtually impossible for a manager to orchestrate all internal decisions, external environmental events, behavioral and power relationships, technical and informational needs, and actions of intelligent opponents so that they come together at a precise moment” (1978:17). During periods of uncertainty, the danger is not the lack of explicit strategy but the opposite—”premature closure. ” Moreover, even when uncertainty is low, the dangers of articulating strategies must still be recognized. Explicit strategies are blinders designed to focus direction and so to block out peripheral vision. They can thus impede strategic change when it does become nece
