Chapter 7 Strategy Formation Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683

© 2014, Cengage Learning EMEA, ISBN 97814082683 Contents Introduction The issue of realized strategy The paradox of deliberateness and emergence Perspectives on strategy formation Managing the paradox of deliberateness and emergence Strategy formation in international perspective Readings and Case 7 Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683

The issue of realized strategy Strategy formation activities Strategic issue identification activities – mission setting and agenda setting Strategic issue diagnosis activities – external assessment (of both the direct market environment and the wider environment) and internal assessment (of the systems used by the company itself) Strategy conception activities – option generation and option selection Strategy realization activities – action taking and performance control Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683

The issue of realized strategy The main strategy formation activities Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683

The issue of realized strategy Strategy formation roles There can be significant differences in who carries out the conception activities Top vs. middle vs. bottom roles – different levels of management involved Line vs. staff roles – many organizations have staff members involved in the strategy formation process Internal vs. external roles – some roles can be outsourced Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683

The paradox of deliberateness and emergence Duality of wanting to design the future while needing to explore, learn and adapt to an unfolding reality; the need to figure things out in advance, versus the need to find things out along the way Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683

The paradox of deliberateness and emergence The demand for deliberate strategizing Advantages: Direction – plans give organizations a sense of direction Commitment – by setting objectives and drawing up plans organizations can invest resources, train people, build up production capacity and take a clear position within their environment Coordination – all strategic initiatives are brought into a single cohesive pattern Optimization – plans facilitate optimal resource allocation Programming – plans allow activities to be programmed and controlled Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683

The paradox of deliberateness and emergence The demand for strategy emergence A strategy emerges when it comes into being along the way, gradually shaped during an iterative process of thinking and doing Advantages: Opportunism – able to grab unforeseen opportunities as they emerge Flexibility Learning – learning by experimentation Entrepreneurship Support – building support is an on-going process – changes cannot always be imposed from the top down Read carefully Exhibit 7.1 TomTom: Navigating through uncharted waters Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683

Perspectives on strategy formation The strategic planning perspective Strategies should be deliberately planned and executed ‘Think before you act’ The purpose of strategizing is to give organizations direction Allows for formalization and differentiation of strategy tasks Encourages long-term thinking and commitment But – plans will always be based on assumptions about future events which are hard to predict so useful to have contingency plans Read carefully Exhibit 7.2 STMicroelectronics plan to unveil new strategic plan Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683

Perspectives on strategy formation The strategic incrementalism perspective New strategies emerge over time Strategy is not about rigidly setting the course of action in advance but flexibly shaping the course of action by blending together initiatives into a pattern of action Planning and control are valuable for routine activities but less suitable for non-routine activities – doing new things Strategy formation is essentially an innovation process, inherently subversive Planning is inappropriate when dealing with wicked problems Read carefully Exhibit 7.3 Institutionalizing emergent strategy: Pixar’s process for ‘going from suck to non-suck’ Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683

Perspectives on strategy formation The strategic incrementalism perspective Planning is inappropriate when dealing with wicked problems Problems cannot be simply recognized and analysed, the strategizing manager must make sense out of complex problems A full analysis of a wicked problem is impossible Dangerous to develop a comprehensive plan to tackle a wicked problem As soon as an organization starts to implement a plan, the plan will be outdated Strategy has to do with the future which is unknown Read carefully Exhibit 7.3 Institutionalizing emergent strategy: Pixar’s process for ‘going from suck to non-suck’ Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683

Managing the paradox of deliberateness and emergence Balancing Within business units production departments are generally more planning-oriented, product development units take a more incremental process, research and development takes a bit of both Balancing the paradox of deliberateness and emergence can be institutionalized into a formal process Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683

Managing the paradox of deliberateness and emergence Strategic planning versus strategic incrementalism perspective Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683

Managing the paradox of deliberateness and emergence cont. Juxtaposing A corporate level manager needs to engage in different strategy formation processes. The strategizing manager is involved in the corporate strategy process and in formation processes in other corporate units and company-wide initiatives, international activities and ad hoc projects. The manager needs to be juxtaposing, managing opposites simultaneously. Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683

Strategy formation in international perspective Level of professionalism Formal planning systems are popular in Australia, UK, Canada, New Zealand and the US In Germany and Japan senior employees are expected to be involved in operational matters while junior employees are expected to contribute to strategy formation Formalized planning and control systems are a logical consequence of having professional management The national propensity to engage in formal planning is influenced by the level of professionalism of management within the country Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683

Strategy formation in international perspective Preference for internal control Countries also differ with regard to the level of internal control their citizens prefer. In some cultures, people have a strong desire for order and structure. Planning as a means for structuring and controlling is particularly important in cultures where there is little confidence in self-organization. In individualistic cultures organizational members cannot always be counted on to work towards the common good and control systems are used to get people to serve the organization’s interests. In cultures with a stronger group-orientation, there is more trust that individuals will be team players so formal control mechanisms are not needed. Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit © 2014, Cengage Learning EMEA, ISBN 97814082683