Download Strategic Management: A Holistic Approach to Developing Coherent Strategies and more Study notes Strategic Management in PDF only on Docsity!
STRATEGY AS FOCUS
Strategy is about agreeing priorities and then implementing those priorities towards the realisation of organisational purpose.
In this book we address a very simple but powerful definition of strategy. We see strategy as about agreeing where to focus energy, cash, effort and emotion for long term sustainable success. We see strategic management as about implementing the agreements about where to focus energy, cash, effort and emotion. Thus, strategy is about agreeing priorities and then implementing those priorities towards the realisation of organisational purpose. This means resolving the debate about which issues deserve the most attention; there is always competition across an effective management team for which issues deserve priority attention. Each manager has their own view, and should have their own view, because they have different expertise, a different role with different accountabilities, and they have each experienced the different consequences of not paying attention to their own, let alone othersâ, views. Thus, strategic management can never be anything other than the outcome of negotiation among those with power to create the future of the organisation. In addition, strategic management requires an acceptance that one personâs claim on the future will be seen as operational to others, and othersâ claims will be seen as too broad and general. Managers who are good strategic thinkers (about what impacts the future success of their organisation) will often be thinking of extensive and sometimes complex ramifications of apparently operational actions but which can have significant strategic implications. It is also important to negotiate a coherent strategy where:
x Strategy statements do not contradict each other either singly or as meaningful âchunksâ of strategy. x Strategic action programmes do not contradict each other or the overall strategy statements.
6 Making Strategy
x Operational systems and procedures (costing, remuneration, transfer pricing) â including embed- ded routines â are not inconsistent with strategic intent and are designed so that they increase the likelihood of the implementation of strategy. x Personal and organisational reward systems are not inconsistent with strategic intent. x Actual behaviour of the management team does not contradict the rhetoric of strategy. 1
Strategic management is coherent when it can be recognised as a holistic phenomenon.
Thus, strategy and strategic management is coherent when it can be recognised as a holistic phenomenon. In this book we present four ways of thinking about and developing strategy (forums) â each are stand-alone but can come together to make a holistic strategy and take account of the above requirements for coherence and where the whole is greater than the sum of the forums (chapter 12). As implied by the above list, some of the supposedly operational systems can have enormous strategic implications: for example, the costing system, the transfer pricing system, the manage- ment information system, and the underlying assumptions about estimating processing time in the manufacture of products and services. However, we must recognise that often these systems will have grown accidentally rather than as an intended support to the delivery of strategy. Where there is internal coherence of this type of organisational system then these systems can become self-fulfilling and self-sustaining as determinants of the strategic future of the organisation â they support and strengthen one another. Similarly, each of the strategy forums can work together as self-fulfilling and self-sustaining determinants of the future.
NEGOTIATING A SUCCESSFUL STRATEGY: THE SOCIAL PROCESS OF
STRATEGY MAKING
Any organisational change that matters strategically will involve winners and losers.
The main thesis of this book is that the process of strategy making is the most important element in realising strategic intent. It is our clear and convinced view that when strategic management fails to manage the real activities of an organisation it is because of the inability of strategy to change the way in which key people in the organisation both think and act as managers of its future. Thus, the issue of political feasibility of strategic change will be central to our consid- erations. Political feasibility implies, at least, building a powerful coalition within which there is enough consensus to deliver coordinated action to create strategic change. 2 To argue that political feasibility is key is not new. What is new is that this book considers the issue in some depth (see particularly chapter 2) â relating it to the theory and practice of managing power, politics, multiple perspectives and the power of emotional as well as analytical commitment to delivering strategy. It is rare for strategy to promote the status quo. Strategy development will almost always imply changes in the organisation â in its relationship with the environment and in its relation- ship with itself. Any organisational change that matters strategically will involve winners and losers, 3 and so will involve some managers seeing themselves as potential winners and some as potential losers. It follows that any strategy development or thinking about strategy will, without deliberate intention, promote organisational politics. Thus strategy is an instrument of power, and so of change; âorganisations must be seen as tools ... for shaping the world as one
8 Making Strategy
x REQUIREMENT 1: managers as leaders are good strategic thinkers. x REQUIREMENT 2: managers can surface and respect the thinking of the different perspectives of their staff. x REQUIREMENT 3: managers can manage the negotiation between the different perspectives. x REQUIREMENT 4: managers can create the best from combining the wisdom, experience, and different perspectives. x REQUIREMENT 5: strategy can, and will, be implemented because it accepts that operations and strategy are not separable.
Managers have to devise ways of tricking themselves into regularly thinking about the important rather than the urgent.
A strategy need not be, and rarely should be, a detailed plan, and this book does not assume a plan will be developed. 10 It does assume that a more or less detailed framework for stra- tegic change will be developed. Strategic opportunism 11 is not rejected as inappropriate, but rather thought of as highly appropriate in some organisational contexts. Thus, it may be appropriate to keep many different issues and activities on the go at once, so that chance encounters are likely to be relevant and acted upon with respect to some part of the frame- work for strategic action. Often there is no time to gather more than a very small amount of the information on most issues; managers have to make use of âintelligent guessworkâ and hunches. There is a strong tendency for âthe urgent to drive out the importantâ, and so many managers have to devise ways of tricking themselves into regularly thinking about the impor- tant rather than the urgent. Thus, making strategy must be engaging for those who have to deliver the strategy â strategy should not be made by those without the responsibility and accountability for its implementation. Strategy making is influenced by the way in which issues are presented,^12 the identification of their significance, their exploration as the group constructs a shared understanding of them, and the point at which a negotiated settlement is likely. Coordination depends on developing, understanding and agreeing processes and procedures that are coherent with each other, analyti- cally sound, objectively workable and designed with respect to the realities of their importance to the organisation. Cooperation depends on good working social relationships as well as on procedures and bureaucracy. Cooperation is crucial to managing strategic futures, because stra- tegic opportunism depends not only on the ability to work together on issues that cannot be dealt with by current procedures, but also on the ability to effectively engage in team work, and pay attention to multiple perspectives. Thus, making and delivering strategy uses experience and wisdom. Strategy making is about a future that does not yet exist and so evidence from the past may be useful but may also be irrelevant. Strategy making is a creative act that should not be overwhelmed by âparalysis by analysisâ. The process of making strategy needs, therefore, to be a designed process but one that allows experience, wisdom and different perspective to open up the strategic conversation before clos- ing it down and reaching agreements and closure. Active sense making^13 by human beings is more important than âhard dataâ. Thus, strategy making is, in this book, seen to be a creative act that must be undertaken by those with the power to make it happen, rather than just an act of analysis by support staff. It is also an âinside-outâ approach to strategic management, where the management team will seek to develop and exploit their uniqueness in serving customers (exploiting the inside of the organisation) and then test, adapt and/or extend this strategy against the outside world. This approach is in contrast to an âoutside-inâ way of building strategy, where the organisation seeks to understand the external world and adapt to it.^14
Strategy as Focus 9
Effective organisational change relies upon incrementalism, upon many âsmall winsâ, rather than the single âbig winâ.
It is possible to incrementally change an organisation over time and achieve the same outcome as what might be expected only with revolutionary change.^15 Effective organisational change relies upon incrementalism, upon many âsmall winsâ, rather than the single âbig winâ.^16 Major organisational change is more likely to arise from the systemic and strategic confluence of lots of small wins rather than through a single âbig bangâ change programme. Sometimes, of course, incrementalism is not possible,^17 but we are suggesting that it will usually stand a better chance of success. In this book we discuss in detail four strategic conversations each of which encourage incremental movement towards a successful strategic future.
CHANGING MINDS AND BEHAVIOUR: THE ROLE OF CAUSAL BELIEFS
In this book we are taking commitment to delivering strategy as almost more important than the results of analysis. But, there need not be a conflict, as long as commitment from the power brokers is held to be paramount. The power brokers, possibly a management team, are a social group. Agreeing strategy is thus a social and psychological negotiation (changing minds and relationships). Good analysis must inform this negotiation where possible. However, managing the negotiation to achieve emotional and thinking (cognitive) commitment drives the process of making effective strategy. As we have argued above, the designed social process is what can determine commitment. Negotiation that can lead to consensus, rather than compromise, requires a number of important features:
x Start from âwhere each participant is atâ â their immediate and personal or role concerns. If these concerns are not addressed then they will inhibit the negotiation in a dysfunctional manner. x Seek to develop new options rather than fight over âoldâ options. Get the group to be creative about pulling together the wisdom of each member of the team. 18 x Actively engage every member of the team. Use fair processes that ensure that those with the loudest voices are not treated as if they only have the best views^19 (attend to âprocedural justiceâ).^20 x Use a âtransitional objectâ â a picture/model that is equivocal (fuzzy but meaningful phrases that have uncertain authorship rather than precise assertions and numbers) and changing, and that facilitates shifting of positions.^21 This is a picture that all of the group jointly construct and change as the designed conversation moves forwards.
The use of natural language â conversation, debate and arguments â as the basis of modelling facilitates a positive role for equivocality. Equivocality in this sense means the provision of suf- ficient degrees of âfuzzinessâ to encourage negotiation. The fuzziness allows for gentle shifts in thinking and positions that are imperceptible to others (and sometimes to the participant them- selves). This transitional process is more likely when the modelling process is visually interac- tive 22 and so the publicly displayed picture becomes a âtransitional objectâ.^23 In seeking to find out âwhere each participant is atâ it is helpful to use the notion of claims â claims that seek to persuade others towards a particular course of action.^24 By getting managers to consider the varying claims and capture these, a more complete picture can be gained ensur- ing both procedural justice and an easy understanding of why a particular procedure is being
Strategy as Focus 11
STRATEGY MAKING AND STRATEGIC âPROBLEM SOLVINGâ
This introductory chapter has presented some of the key assumptions about strategy making that inform the content of the book. In summary, these key assumptions are:
x Strategy is about focus, strategy making is about focusing argument and agreements on what matters. x Strategy must be practical and politically feasible to be implemented, and so:
{ strategy is negotiated â using wisdom, experience, insight and so different perspectives; { strategy making is a social process; { strategic management is about organisational change â and so it is about understanding causality; { strategy delivery involves changing minds and behaviours.
x Operational decisions, systems and structures are integrally linked to strategic management.
In many respects strategic management and strategic problem solving are, therefore, interlinked. Indeed three of the four strategy making forums presented in this book are just as relevant for tackling strategic problems as they are for making strategy. 30 All strategic problems need to be addressed from the standpoint of: issue management, purpose and stakeholder management, and with exactly the same commitment to gaining ownership, using experience and wisdom, and so group processes. Similarly, and as with strategy making, the problem structuring stage is the crucial forerunner to any more detailed analysis using, for example, operational research techniques â particularly simulation modelling,^31 and spreadsheet modelling. The four ways of making strategy that are presented in this book are designed to be ânatu- ralisticâ for participants. A participant, and the manager-client, is expected to appreciate each forum as âan obvious and practical wayâ of creating a robust strategy, and each step is expected to seem like the next âobvious stepâ. Two tests of its voracity are: (1) the extent to which reason- ably sophisticated strategy making can happen without any use whatsoever of âbusiness school jargonâ, and (2) where strategic management deliverables appear at intervals of one hour or less â where participants can describe the deliverable as an agreement that will guide strategic change. As each hour passes and each forum unfolds, the strategy becomes increasingly more robust, coherent and practical. These requirements are demanding and ambitious, but have been met within the contexts of, at least, several hundred different organisations and facilitated by managers, post-experience manager-students, consultants and the authors.
NOTES
1 âTheories in useâ versus âespoused theoriesâ (Argyris and Schon, 1974). 2 See John Kotterâs eight steps to transforming your organisation and the role of forming a powerful coalition (Kotter, 1995). 3 The significance of winners and losers is a key part of considering who to involve in a strategy making team (Ackermann and Eden with Brown, 2005: chapter 2). 4 Perrow (1986: 11). 5 The notion of emergent strategising â allowing strategy to emerge from the patterns of thinking and behaviour embedded in the organisation â is important in this book. We shall refer to the idea in several of the future chapters, particularly in relation to making strategy
12 Making Strategy
through prioritisation and management of key issues (chapters 3) and agreement of pur- pose (chapter 5). 6 Raimond and Eden (1990). 7 Frost (1987); Mangham (1978); Perrow (1986). 8 Thomas and Thomas (1928: 572). 9 The principle of learning how to approach strategic issues from a number of perspec- tives has been a matter of interest in the redevelopment of MBA programmes so that they develop critical thinking and leadership â see Datar, Garvin and Cullen (2010). 10 The continuum from deliberate emergent strategising to strategic planning is depicted in Eden and Ackermann (1998: 9). 11 See Isenberg (1987). 12 Dutton and Ashford (1993); Dutton and Ottensmeyer (1987). 13 The work of the authors, over the past 20 years, has been significantly influenced by the writ- ing of Karl Weick and his way of understanding sense making in organisations (of particular note are Bougon, Weick and Binkhorst, 1977; Weick, 1979; Weick, 1983; Weick, 1995). 14 Igor Ansoff was an early proponent of âgap analysisâ (between the external and internal worlds) as the basis for designing a corporate plan (Ansoff, 1965). More recently scenario planning is an example of an outside-in approach (see, for example, van der Heijden, 1996). 15 Balogun and Hope Hailey (2004). 16 Bryson and Roering (1988). 17 Logical incrementalism studied by Quinn (1978) centres strategy development around experimentation and learning from partial commitments. 18 This assertion derives from the Harvard School of international conciliation (Fisher and Ury, 1982), and also attends to âgroup-thinkâ issues. These aspects of strategy making are considered in more detail in chapter 3_._ 19 This means considering air-time, anonymity and being listened to. Procedural justice is an important element of good group work in strategy making and it is discussed fully in chapter 2. 20 See chapter 2 for the significance of procedural justice in strategy making. 21 The process of cognitive change involves elaborating a personal construct system (Kelly, 1955; Kelly, 1991), or âscaffoldingâ (Vygotsky, 1978). 22 For more information on the use of visual interactive modelling see Ackermann and Eden (1994). 23 De Geus (1988) and Winnicott (1953). 24 Nutt (2002). 25 Procedural rationality is a term introduced by Herbert Simon (Simon, 1976). 26 Nutt (2002: 25). 27 A causal map is a network of causality â a âdirected graphâ (Harary, Norman and Cartwright,
- that shows phrases (statements/claims) linked to each other by arrows that show the direction of causality. It is a representation of the impact of change, the impact of strategy. In some respect a causal map is akin to a âcognitive mapâ â a representation that translates Kellyâs theoretical framework (Personal Construct Theory â Kelly, 1955) into a practical tool by acting as a device for representing that part of a personâs construct system which they are able and willing to make explicit. Therefore, while Kelly is clear that a construct is not the same as a verbal tag it is nevertheless useful to collect verbal tags as if they were con- structs. As a result a cognitive/causal map, in practice, is dependent upon the notion that language is a common currency of organisational life and so can be used as the dominant medium for accessing a construct system. Causal maps and cognitive maps have been at the centre of understanding sensemaking in organisations for the last couple of decades, and before (see, for example, Balogun, Huff
