1. Strategy development processes
Intended or emergent?
Searching for ideas
Managing multiple processes

2. Strategy Making : Design or Process?
Strategy as Design
Strategy as Process
Many participants / groups
responding to multitude of
external and internal forces
Planning and
rational choice
Intended Strategy
Emergent Strategy
Realized Strategy 10

3. Intended strategy, or designed
An intended strategy is deliberately formulated or planned by managers.
This may be the result of deliberate rational analysis, or of strategic planning.

4. The role of rational analysis
Helps to evaluate alternative strategies and select the most appropriate for the given context
Helps to define direction and goals, and select proper course of action, and assign resources to implement the proposed strategy
Improves decision making down the organization by promoting a common understanding of issues and sharing common assumptions
Strategy analysis can enhance exploration of ideas, innovation and learning. 11

5. Beware of the limits of analysis ...
Complexity can be overwhelming, change can be unpredictable
the results of analysis can be wrong
Investment to more analysis may cost a lot
analytic units, numerous staff, time
or executives turned into analysts
...paralysis through analysis...
It may be isolated from actual decision making
ivory tower thinking 11

6. Example: AT&T and IMB initially got their forecasts wrong...
Their vision: convergence of telecom and software
AT&T: bought a computer company
IMB: bought a telecom company
Initial vision: shattered by
the rise of microcomputers
the advent of the Internet 11

7. Strategic Planning Systems
Epitome of rationality.... or bureaucracy?

8. Strategic Planning Systems: what are they?
Systematised, step by step, chronological procedures involving different parts of the organisation
Expression of collective rationality or part of “rationality” ritual?
Their design and use depends on context
In large firms tend to be formalized
In small firms they are less developed.

9. Strategic Planning Systems: components
Plans, long & medium term
Strategic plans, business plans
Corporate resource plans (e.g. HR, IS…)
Annual Plan and Budgets
Monitoring system
Reporting on progress (outcomes vs targets)
Related processes
Top down, bottom up

10. The role of strategic planning
Formulating strategy: a means by which managers can understand strategic issues and formulate strategy
Learning: a means of questioning and challenging the taken-for-granted
Co-ordinating business-level & functional strategies within an overall corporate strategy, share assumptions
Communicating intended strategy and providing agreed objectives or strategic milestones – a means for implementation.

11. Benefits of planning There are additional psychological benefits:
can provide opportunities for involvement,
leading to a sense of ownership,
provides a sense of security to managers and
re-assures managers that the strategy is ‘logical’.

12. Dangers associated with planning
Confusing strategy with the plan
Detachment from reality
Paralysis by analysis – staff, not line activity
Failure to gain ownership - narrow involvement
Dampening of innovation - cumbersome process, can stifle ideas .

13. Analysis & Design is not the only way in strategy development
The actual strategy making in practice is often less analytic, more unstructured and diffused
Often an outcome of negotiation, compromise and bargaining among multiple participants (political view)
The outcomes of rational analysis and design may have limited effect on the final choice of strategy, or may be bypassed by actual processes
Or simply, rational analyses may be an input in the diffused deliberation processes

14. Pattern in a series of decisions ……not a ‘grand plan’.
Emergent strategy
Pattern in a series of decisions
……not a ‘grand plan’.

15. The wider system in and out matters
It can produce successful strategies
Realizations cannot be totally guided by business plans and management intentions
Chance may matter, alertness to emerging ideas also
Emergent processes can be used, or even be managed to an extent
Strategy is both planned and also just happens

16. Emergent strategies ...
Ideas /outcomes may come from various sources, in and out
Outcome of social and political processes in and around organizations
Outcome of networking, of “open innovation” processes
May upset management’s intentions
May be outside the existing model, or the dominant logic

17. Managing emergent processes: “Logical incrementalism”
Logical incrementalism is the development of strategy by experimentation and learning – from partial commitments rather than through formulations of total strategies.
It involves:
Search for ideas
Experimentation
Co-ordinating emergent strategies – drawing together an emerging pattern of strategy from subsystems

18. External or internal search?
“Closed” innovation – the traditional approach to innovation relying on the organisation’s own internal resources – its own laboratories and marketing departments.
Usually it is secretive, anxious to protect intellectual property and avoid competitors free-riding on ideas
“Open” innovation involves the deliberate import and export of knowledge by an organisation in order to accelerate and enhance its innovation.
Exchanging ideas openly is seen as likely to produce better products more quickly
E.g. Procter & Gamble move from closed to open..

19. Strategy: planned or emerging?
Planned / Intended
Realized strategy differs from
Planned by 70 – 90 %
Outcome
Emerging
«Πρός γάρ τό τελευταίον εκβάν έκαστον των πρίν υπαρξάντων κρίνεται»
(Δημοσθένης)

20. Multiple Strategy development processes
Intended and emergent

21. Challenges for managing strategy development process
Multiple strategy development processes – most organisations will develop strategy involving several approaches.
There is no one right way to develop strategy but the context can be important.
Organisational context matters – Strategy development processes will differ according to context - environmental conditions and capabilities.

22. Create conditions for better strategy to happen
Integrate diffused processes with deliberate strategic planning
Integrate multiple inputs / perceptions from many sources in and out
Balance influences, broaden or streamline representation in the strategy making processes
Address competitive edges, challenge taken for granted assumptions
Create the conditions for strategies to emerge.

23. Strategy ideas for the new era
We need a portfolio of ideas, not just one from the top
Encourage ideas to surface, select ideas, provide incentives to come out
Networking, developing relations
Develop radar capabilities,
“Surfing on the wave of change”
Understanding the potential of open innovation 6

24. Perceptions of strategy development
Strategy will be seen differently by different people:
Senior executives usually see strategy in terms of intended, rational, analytic planned processes
Middle managers may see strategy as the result of vertical and lateral influences and political processes
Extending the strategic role of leadership
To managing the system & processes of strategy creation
To exploit mid level management capability

25. The role of middle managers
… as strategic partners

26. How Honda entered the USA market
Formal strategy in the 1960s:
Sell bigger and more luxurious motorcycles
To beat Harley-Davington
Hesitated to push the small 50cc Supercubs
Soon larger bikes started to break
Honda used the small 50cc bikes to ride around on errands
Clients from sport goods stores spotted the small bikes
Honda responded
Sold small bikes to retail stores
Not to traditional dealers!

27. How Intel started: Epoch I
Memory devices
Intel begun as a supplier of memory devices (DRAMs)
1971: an engineer invented the microprocessor
Processors were peripheral
All through the 70s the lion’s share of sales was on DRAMs
Resources were heavily invested in DRAMs
Processor sales grew gradually in emergent applications

28. How Intel entered the microprocessors: Epoch II
Market conditions changed
In the early 80s Japanese DRAM makers attacked the USA market
DRAM profit margins dropped significantly
By 1984 Intel was on a crisis
Move towards microprocessors
Some people cultivated the idea
Explicit change of strategy: a deliberate move towards microprocessors.

29. Mid level managers as strategic partners
Middle level managers can exercise important influence
Decisions of middle managers often shape strategies
They know better the resources & capabilities (RBV)
They can develop cross functional coordination, cutting across “silos”
Need to involve mid levels in strategy creation
Not only in execution of top level strategy
To create environment conductive to strategy creation
Design participative processes

30. What mid level managers can do
Translate / communicate strategy down
Strategy execution & creation
Select / screen new ideas
Facilitate, encourage initiative
Create environment for strategies to emerge, built skills, relations

31. Wide participation in strategy: Values Jam at IBM
IBM integrates its staff in strategy making
Global debate on strategic issues, theme based
Grassroots discussion of ideas
Reinvention of values in 2002 by Palmisano (CEO)
50000 employees took part in an intranet discussion of company values
22 million pages were analyzed with language software
Structured improvisation, such as Jam in the jazz music 6

32. Seek ideas: Let all flowers blossom…

33. But select ideas for implementation

34. Who to involve in strategy making
Selective participation
Select experts, managers and externals who know
Mainly in strategy formulation
Wide participation
Activate employees, open participation
Continuous discussion, workshops…
Include selected externals (experts, consultants, other)
Narrow participation
Managers and staff directly involved
Selected employees, from operations involved in implementation
Those to be involved in implementation operations
Project teams
Implementation consultants
Low
e.g.new
unrelated
activity
Familiarity
with strategic
option
High
e.g.new
related
activity
Low
High
Implementation requirements / difficulty

35. Summary: challenges in managing strategy development processes
Top and middle management have to be alert to:
Recognising that different processes of strategy development may be needed at different times and in different contexts
Recognising the systems and processes that give rise to emergent strategy
Managing multiple processes of strategy development
Establish processes for selecting and evaluating emergent in addition to planned strategies
Assigning a proper role to middle managers in strategic planning

36. Manage external influences in strategy
Strategies may be imposed by powerful external stakeholders:
Government can determine strategy in public sector organisations (e.g. police, utilities).
Multinational companies may have elements of strategy imposed (e.g. forming local alliances).
Business units may have their strategy imposed by head office (e.g. part of a global strategy).
Top management has a role to manage these influences to an extent.

37. A personal lesson for you: Extend your role in strategy making
“Seek involvement” in ongoing moves
Align with change initiators
Combat inertia, take calculable risk
Exercise leadership
Take initiative, search for new ideas
Sell your ideas
“Issue selling”
Package your idea in strategic frame
Seek opinions, find info, use experts
Use formal and informal channels
Mobilize support, form coalitions 6

38. Avoid common myths
“Top management makes strategy, the people down the hierarchy implement it”.
Strategy ideas are also generated by people down the organization in the course of implementation
Implementation feeds back to strategy with new ideas and knowledge about what works in practice
There are limits to top management knowledge and capability
“Strategy is produced by analytical units and staff experts in a strategic room next to the CEO”
Isolates strategy making from executive hierarchy and the implementing organization
Often irrelevant (ivory tower thinking)
Plans, analyses and studies produced by central units are one of the inputs in strategy making 6