Acting Strategically

From Wikireedia
Jump to: navigation, search

Putting strategic thinking into practice

Contents

A Definition of Acting Strategically

A precise definition of thinking and acting strategically is difficult to develop because its interpretation is different depending on the perspective of the schools of strategy thought or the organization. Mintzberg has cautioned that it should not be merely an alternative nomenclature for anything to do with strategic management. In particular he views strategic thinking as different from strategic planning, which is systematic programming of pre-identified options. Strategic thinking on the other hand is a creative, intuitive and continuous process that develops unique and difficult to imitate outcomes that add value to the organization. Using that perspective it is possible to distinguish it from the normal and routine process and decisions that a manager makes on a daily basis. It is not written down in the organization’s policies and procedures but can be embedded in the company’s culture and character. The act of strategic thinking can be explicit and deliberate but it is just as likely to be implicit and instinctive.


In this assignment different ways an organization can act and think strategically will be identified including how the process is developed with reference to the organization’s history as well as the present and its future. It will also be discussed that different organizations may approach the process of strategic thinking and acting differently according to structure and culture of the organization.

Liedtka selected five major attributes of strategic thinking and specific techniques that encourage this kind of thinking. Strategic thinking…

  • 1. takes a systems view
  • 2. requires strategic intent
  • 3. means thinking in real time that links the past present and future
  • 4. is about developing hypothesis
  • 5. is opportunistic

The Systems view

Here the strategist has a mental model of the organization and the thinking focuses on the ‘whole’ and not the ‘part’ and seeks to understand the inter-dependencies of the processes within the organization and its relationship with its external environment. The organization is no longer viewed as set of mechanistic issues and solutions but as part of a business eco-system that is always changing. This provides new insights into ways companies cooperatively and competitively strive to satisfy the need for new products and new innovations.

Senge views systems thinking as a way to build learning organizations. The ‘Fifth Discipline’ describes systems thinking as reflecting on, describing and acting on the ‘big picture’ and looking beyond solutions to symptoms and quick fixes. The systems view may involve analysis to solve complex problems and making links between facets of the organization. This can take the form of ‘hard systems’ analysis common to the type that Fed-Ex employs through the use of simulations and other modeling techniques to solve connected problems such as optimization of routes using by combining, IT, engineering and mathematical expertise and functions.

Although ‘hard systems’ analysis can provide quantifiable solutions it cannot easily take into account unquantifiable values such as cultures, opinions and politics. However the system’s view also encompasses the ‘soft system’ analysis like the type devised by Peter Checkland . He recommends viewing organizations processes in terms of rich pictures that pictorially show the links and relationships that exist and showing feedback loops in an organization. More importantly, it analyzes discontinuities between processes that provides the analysis the company needs to take action to resolve these discontinuities. McKinsey's 7s’s is a combination of soft and hard systems that also explores the interrelationships between hard and soft system attributes that enables the strategist to solve strategic problems. Although adherence to the 7’S framework cannot guarantee success; without understanding the relationship between the 7 systems an organization is more prone to strategic failure.

The Focus on Strategic Intent

This emphasizes that strategic thinking is not aimless but directed towards a defined purpose. The strategic thinking is also driven by the continuous reshaping of intent. For instance Honda’s entry into the US market was a deliberate strategy based on a rational economic calculation but also, according to Hamel and Prahalad it was exploiting and stretching its core competences in a new market. Hamel and Prahalad see the three attributes of strategic intent as destiny, discovery and direction. The concept of discovery (and also learning) highlights that strategic intent includes emergent strategy. Using this perspective it has been argued by Pascale that Honda’s entry into the US market was initially strategic thinking and acting based upon economic calculation but once in that market Honda needed to think flexibly and creatively about the realities of the market to frame their ongoing strategy.

Another example of strategic thinking and acting that involved strategic intent and strategic stretch is Racal’s decision to purchase a license to operate a cellular network. Such was the success of its venture that the resulting Vodaphone became many times bigger than its parent. The contrast with the Honda example is that is was not moving into a new market but moving into a new product range that it could not definitively determine the demand for in the future. But its venture has the characteristic of intent in that it was taking a long-term market position that it was hoping to develop over a decade or more and it conveys a sense of discovery since the market was ill-defined and immature.

The concepts of destiny, discovery and direction also have a link to story telling. The idea of strategic thinking through story telling has been pioneered among others by 3M who use the stories as a creative way to develop strategy. By using dramatic components such a plot, climax and denouement, companies can describe complex issues, relationships, challenges and solutions in recountable, understood and innovative way compared with the traditional generic ‘bullet point’ method. More significantly, strategic narratives communicate insight and intent while lists and bullets convey data or issues and often lacks context.

Linking the past present and the future

When companies think about future strategies and actions their course of actions are shaped by experiences and decisions made in the past and the current capabilities and competences that the company employs in the present. Strategic thinking can be a deliberate breaking with past failed strategies or realization that new strategic thinking is required for a company to maintain its competitive advantage. The organization may also want to ensure some degree of continuity with the past that is aligned with the company’s character. The culture that is embedded in the organization over many years may shape the type of strategic thinking. Strategists at HP may be emboldened to think more radically given its culture of invention and innovation. Ikea’s strategic thinking is influenced by a historical culture of innovation at affordable prices and relatively limited resources as well as reflecting the personality and philosophical outlook of its founder. Strategic thinking and acting that has awareness of the past and present helps the organization exploit and stretch current core competences and avoid creative thinking and actions that would seem inauthentic to its customers.

Strategic thinking is hypothesis driven

Whereas the past and present strategies are known or knowable the future is uncertain. When the strategist attempts to think and act strategically he must develop a model of the future to test his/her hypothesis. A simple way to do this is to merely extrapolate today’s trends into the future but this may not be a creative way of thinking strategically. The creative strategist would build a series of hypothesis or scenarios of what the future might look like and then test their selected strategy against these possible futures or better still develop new strategies that respond to possible outcomes. Some organizations require many years to build core competences or need to make investments in capital intensive resources that will see a pay-off years in the future. The return on that investment is predicated on the result of future outcomes. This may be micro-focused in terms of the ability to build core competences or implement capital projects or more externally focused such as the state of the national or global economy, political policies and transnational political alliances and trends in consumer tastes and opinions. Oils and pharmaceutical companies are users of scenarios which may range from the optimistic through to pessimistic or probable through to possible. Although the strategist developing these scenarios must think creatively and innovatively, the scenarios must be logical and use the known and knowable and make assumptions about what is unknown. When the scenarios are developed the company can act strategically to flexibly respond to the scenario which turns out closest to reality or alternatively seek to influence the environment to engineer a future closest to its desired outcome. Large energy companies is the US have achieved the latter by participating in the governments long-term strategic energy plan. Boeing and Airbus looked at the future of aviation and came to different conclusions. Airbus saw the future as mass transit over large distances in larger but fewer aircraft. Boeing saw the future as rapid transit using more aircraft. Hence the formulation of creative thought resulted in the companies strategic actions being radically different.

Strategic thinking can be opportunistic

Opportunism views strategic thinking as emergent rather than planned and pre-determined. It also views the opportunity coming from anywhere in the organization and not just from the top. It has been documented that Intel’s dominant role in microprocessors was largely the result of a group of scientists acting against the wishes of its managers. More recently, Motorola’s development of the Razr is an example of a team of engineers and designers who defied Motorola’s own rule to develop this mobile phone. It has been described as a ‘skunkworks’ project whose team..

“Flouted Motorola’s rules for developing new products. They used materials and techniques that Motorola had never used before. After contentious internal battles they threw out accepted models of what a mobile phone should look and feel like. In short the Razr team broke the mold, and in the process rejuvenated the company”

The story of the development of the Razr employs all the components of thinking and acting strategically by redefining product development rules, re-appraising the use of the product, utilizing new techniques and using conflict to develop a new strategic paradigm.

Opportunism re-enforces the notion of strategic thinking as creative and innovative but does not view it as mere luck. In order to be ‘lucky’ the organization must be continuously scanning the environment looking for opportunities that emerge in the market. Not only must those opportunities emerge but they must also be recognized. 3M’s ‘Post-it’ note was a failed adhesive who’s potential was recognized only when an engineer adapted it to mark placeholders in a hymn book. Strategic thinking as opportunism has echoes of serendipity where strategic thinking sets you off in search of one creative discovery but leads you to a completely different innovative discovery. The 3M discovery is an example of inside-out strategic thinking where the creative process developed a product for which there was no known demand. However the opportunistic creative thinking can also outside-in. For instance, just a few years ago Nokia would not have expected that it would be the biggest manufacturer of cameras in the world but the demand for more and more features on mobile phones has made the company think differently about the products it produces.

How Different types of organizations approach strategic thinking and acting differently

During the post war years Sony viewed creative thinking as developing radically new technologies and products. Its employees were allowed a high degree of freedom to develop their creative potential. Sony’s structure was one of interconnected, collaborating, self-appraising cells that embodied a high level of team spirit and the development of multiple alternatives through trial and error. That enabled it to develop what Christensen has termed ‘disruptive technologies’, which is a product or technology that over turns an existing technology rather than merely innovates it. Sony were responsible for the development of disruptive technologies such as Transistorized TV’s, VCR’s, Sony Walkman’s and the Compact Disk.

More recently Sony has been criticized for losing that ability to create disruptive technologies. It was not a pioneer of digital photography, mp3 players, music downloads or internet video on demand. Instead it has been engaged in sustained innovation as shown through the development of the Vaio laptop and the Play Station games console. However, it cannot be said that Sony is not thinking strategically but its approach to strategic thinking has changed as it has become a more mature company.

It becomes apparent therefore that different strategists will view the concept of strategic thinking as, at one extreme, a chaotic and unpredictable endeavour that may or may not result in success. (The Learning School). For instance Nokia “Venturing” is an example of investments in radical ideas and products with the anticipation that a few of the ideas will become commercially successful. At the other extreme the Planning School might view strategic thinking as a more formalized program of prescriptive elements. In the middle the Positioning school would subscribe to the view that acting and thinking strategically is about analyzing the industry or market and then choosing between various strategic options. Companies using this approach would therefore look at models developed by Porter such as the Five Forces model or Generic strategy model or the Boston Box etc.

An organization that adopts one of these approaches should be aware of their limitations. The disadvantage of the Learning school approach is the potential waste of time and resources and one should be careful that it is not just an excuse for poor strategic thinking or the wrong type of strategic thinking that is not appropriate for the company. The limitation of Positioning school in relation to the solving of strategic problems could be a misguided belief that the analysis can easily point to a particular strategic option. There is also a tendency to think in terms of the options as being mutually exclusive instead of complementary. For instance one of the lessons of the Razr development was that niche products can have mass appeal. Despite being positioned as a high-end product its design features gave it mass popularity and production costs per unit plunged. By adopting the Planning approach it discourages real-time emergent strategic thinking and acts as a break of creative serendipity. Nonetheless, any of three approaches noted above might be successful if it faithfully reflects the vision, mission and culture of the organization. For instance, Google takes an extremely flexible and loosely defined approach to strategic thinking to the extent that it has said that strategy is about looking at any opportunity and deciding whether it can make money out of it. This interpretation of strategic thinking might be one that would be difficult to adopt at a university where finite budgets, accountability and values embodied in the institution require a more bounded approach to thinking and acting.

An Action Plan for Acting Strategically

When developing an action plan that results from the strategy formulation process the organization must be careful not to define it too narrowly and view it merely as a set of operational or administrative tasks that need to be accomplished in a given time frame and budget. Nor should the measure of success be defined too narrowly, either. The organization needs to be aware that there many components that can be assembled under the change management process umbrella. These include:

  • the view that stakeholders take of the changed strategy
  • the quality of the management and leadership skills
  • the core competence of the resources employed to render the changes
  • the riskiness of the change
  • the alignment or fit with the organization
  • the culture of the organization and its ability to absorb changes
  • the history and experience of change management initiatives in the past
  • the political and economic environment in which the change is taking place

Depending on the characteristics of the organization and the situational factors any of these may be more or less critical to the change management process. They way that an organization analyses these factors could be well defined and planned through a set of change management policies and procedures or emergent or even implicit and embedded in the way the company works. For instance if the company culture is change-oriented then there may be no need for formal change plans as change it is embedded in the organization’s culture. Apple computers for instance has shown itself to be highly adaptable in response to the domination of Microsoft. Alternatively, a continuous change mentality could be counter-productive in organizations that are effective at creating stable environments and are locked-in to certain operating policies based upon long-term agreements, commitments and franchises. In those organizations, change management is shown by periods of stability punctuated by bursts of activity. British commercial TV companies and the BBC between the 1970’s to 2000’s were examples of discontinuous change when operating franchises and charters were renewed.

How firms incorporate strategic changes in the organization can have a profound effect on its success. Pettigrew, Whipp and Rosenfeld discovered five interrelated factors that explained the relative performance of companies operating in broadly similar markets including quality of management, coherence of policy, environmental scanning, humans resources as assets and the linking of strategic and operation change. In addition, the context in which the change is taking place can also influence the receptiveness and the likely success of the change. When the change is about the survival of the company, the change process and the personality of the leadership is critical. Quite often radical restructuring of organizations is preceded by the entrance of new leader with a strong and not necessarily favorable personality. The example of British Leyland (BL) in the 1970’s is one example. The key features of the change process that BL embarked on was:

  • Recruit an outsider with a strong charismatic personality to make radical changes to avert crisis. (Edwardes forcefully pushed through his agenda against occasional government and senior management resistance and union/worker hostility)
  • A leader with a high emotional intelligence. (Edwardes had energy, displayed decisiveness and had clear mental map of how he wanted the car manufacturer to develop)
  • Reducing the forces of resistance. (reducing the power of the shop stewards)
  • Focus on operational issues to cut costs and improve productivity (Closing Speke and Solihull assembly plants and concentrating investment at Longbridge).
  • Restructure the company to compete with increasing global competition. (Focus on the Austin and Rover Brands. This was especially the focus of Edwardes successor Graham Day)

Edwardes term as BL chairman had elements of environmental assessment, the linking of operations and strategic changes, coherence of policy and improvement in the quality of management that Whipp and Rosenfeld suggested. One of the characteristics of recruiting outside managers to solve crisis is that their tenure is likely to be short and this would seem to relegate the importance of team learning and the development of core competences. One of the residual failures of the Edwardes tenure was that for all the operational improvements that were implemented, BL failed to develop design skills that would develop cars that customers would find attractive.

One of the most researched areas of change management is the resistance to change. Resistance to change can be a personal un-communicated response to uncertainty or it can take on a more explicit form at an individual, team, group (union, association, pressure group), organizational or extra-organizational level. The relative power of these groups does not necessarily correlate with the number of members of that group. For instance a ‘gatekeeper’ is a key person who has power to thwart or promote change. This can be through access to other influential stakeholders, high charisma, possession of a key skill, or owner of voting shares. Resistance, in some cases can come from the Executive Management itself. For instance Eisener at Disney was latterly seen as break on change and eventually ousted. Resistance can come from groups within the organization such as trade unions or outside the organization. The key issue here is that because resistance to change is so diverse it requires a range of strategies to resolve it. Kotter and Schlesinger developed a matrix of approaches to resolving resistance to change depending on its context. In some cases where change is a response to a crisis, coercion is the chosen course of action (National Coal Board, British Leyland). This is a good approach if parochial self-interest is the reason for the resistance. It is also a risky approach and has the disadvantage of there being a winner and loser that can be detrimental in the long-term. In some cases the company may be willing to buy-off the resistance through monetary incentives or promises about job security (National Coal Board again, GM, Ford). This strategy could be used where there is a low tolerance for change and stability is embedded in the culture but may be expensive and the commitment to change may be still be low. Where there is either misunderstanding, mistrust or a genuine disagreement of the nature of the change then the approach is to educate, communicate, facilitate and encourage participation. Finally, another strategy (not explicitly mentioned by Kotter) is to seek to reduce the power of forces resisting change. (Legislative action to reduce the power of the print unions in the UK or Air Traffic Controllers in the US in the 1980’s).

Whereas ‘change agents’ either recruited to the organization or as management consultants generate short-term results some organizations take a long-term view to change management. Jack Welch of GE and Cor Boonstra of Philips are examples of leaders of organizations who see change as a journey rather than a destination. At the beginning of the 1990’s both companies were global and had a differentiated portfolio of companies. The first stage of the journey was the appointment of these charismatic leaders who began a process of competence development. Consequently, new capabilities, metaphors, market responsiveness initiatives were developed and driven from the top. Philip’s developed the metaphor ‘Let’s Make Things Better’. This initiated a conversation within the organization of how processes, products and design could be improved. One of the outputs of this transformational approach was an initiative called “One Philips” The initiative was not about technology or tactics but ‘strategic conversations’ about building the internal confidence of the employees, stimulate cross-functional/cross border co-operation to create new ways of working. The characteristic of the initiative was that the contribution could come from anywhere in the organization. It encouraged the exchanging of views, the debating of scenarios and the exploitation of strategic tensions to create new products such as the first affordable DVD-recorder. The strategic conversation used the medium of the internet and other collaboration technologies and culminated in one-day summits . More recently the metaphor has evolved to become ‘Sense and Simplicity’ This has a more outward looking customer focus. Philips now looks to consumers for its inspiration. The 8,000 R&D workers from all the six divisions work together in teams called theme teams who work towards creating technologies to enhance the customer’s experience of technology products by making them simple and intuitive to use. The key feature of this transformational change management initiative is the dynamism of the groups as they are assembled, re-configured and disbanded as the need arises.

Initiatives such as these reflect the changing emphasis of change management. Firstly, the change of emphasis from a capital perspective and productivity improvement focus towards a capabilities perspective where the investment in human resources is the key driver of delivering change in the organization. Another feature is an acknowledgement that, especially in large companies, the leader cannot dictate change but can create an environment where they can orchestrate change by delegating innovative management throughout the organization. Consequently, the organization should configure its structure in order to deliver the strategy. This means flatter and less rigid organizational structures with more vertical and horizontal linkages between functions . In addition, decentralized structures that encourage devolved decision making and creative strategy responsibility. Pettigrew, Whittington et al found that companies that made a hold raft of complementary changes to structures, processes and organizational boundaries were more likely to better performers than companies that only made partial changes. Whipp and Pettigrew’s models for Managing Change for Competitive Success stresses the need for a balance of continuity and change and acknowledge that the present and past can be key indicators of the future. Kotter’s model Eight steps to transforming your organization uses a similar approach by highlight the holistic nature of change by establishing a sense of urgency, crating a vision and empowering others to act upon the vision and creating improvements which spur further changes.

Consequently by simultaneously analyzing context , process and content of the change process and interplay between these factors over time, the organization can seek to implement strategic plans that are ‘fit for purpose’, include the right participants and are delivered in a processual way.

References

  • Liedtka, J.M. (1998), “Linking Strategic Thinking with Strategic Planning”, Strategy and Leadership, 26(4), 30-35
  • Senge The Fifth Discipline 1990
  • Soft Systems Methodology 1990
  • Strategic Intent HBR 1989, 67,3
  • Pascale Perspectives on Strategy The real story behind Honda’s success California Management Review 1984
  • How to Build a Great Team Fortune May 2006
  • The Innovator’s Dilemma Christensen 1997
  • Culture and Competitive Evidence from mature UK Industries Journal of Management Studies, 26 1989
  • Choosing strategies for change 1979 HBR March/April
  • The Innovating Organization 2000 as quoted in Images of Strategy
  • Kotter Leading Change Why Transformation Efforts fail HBR Mar/April 1995


<comments/>

Retrieved from "https://wikireedia.net/wikireedia/index.php?title=Acting_Strategically&oldid=8909"
Facts about Acting StrategicallyRDF feed
AuthorKotter +, Mintzberg +, Liedtka +, Senge + and Hamel +
TermSituational factors +
Personal tools
Namespaces

Variants
Actions
Navigation
Toolbox