This action might not be possible to undo. Are you sure you want to continue?
STRATEGY FORMATION AS A PROCESS OF CONCEPTION
Ayesha Sa Bahria University
"Gentlemen, let us pool our expertise."
SUMMARY OF DESIGN SCHOOL
Source Intended Messages Realized Messages School Category Some Shortfalls Champions P.Selznick FIT/MATCH Think (strategy making as case study) Prescriptive Neither analytical, nor intuitive. Too static for the era of rapid change. Case study teachers (especially at or from Harvard University)
Source: Sloan Management Review, 1999
The Design School
The Design school proposes a
model of strategy making that seeks to attain a match, or fit, between internal capabilities and external possibilities. "Economic strategy will be seen as the match between qualifications and opportunity that positions a
Origins of the Design School
Two influential books written at the
University of California (Berkeley) and at M.I.T (Massachusetts Institute of Technology)
Philip Selznick's Leadership in Administration
of 1957 Alfred D. Chandler's Strategy and Structure of 1962
General Management group at the Harvard
Business Policy: Text and Cases in 1965 by
Primary emphasis on: Appraisals of the external and
the former uncovering threats and
opportunities in the environment, the latter revealing strengths and weaknesses of the organization.
Managerial Values--the beliefs and
preferences of those who formally lead the organization Social Responsibilities--specifically the ethics of the society in which the organization functions, at least as these are perceived by its managers.
Alternative strategies – Choose the
Framework for Evaluation by Richard Rumelt (1997)
Richard Rumelt (1997), from the Harvard
General Management group, the best framework for evaluation
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. Feasibility: The strategy must neither overtax available resources nor create unsolvable sub problems.
Consulting firm Kepner-
Tregoe's law of parsimony, was an almost direct quote from Andrews's early work: ". . . Keep strategies clear, simple, and specific"
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. Market Changes New uses of products—Impacting demand, capacity utilization
•Control of raw •Product quality •Financial leverage •Number of product materials •Operating leverage •Production capacity •Balance sheet lines •Production cost •Product ratios structure differentiation •Stockholder •Facilities and •Market share relations equipment •Pricing policies •Tax situation •Inventory control •Distribution channels •Quality control •Energy efficiency •Promotional programs •Customer service Human Resources morale •Employee •Marketing research •Employee •Advertising •Employee capabilities development •Sales force •Personnel systems •Employee turnover
STRENGTH AND WEAKNESSES CHECKLIST
Research and Development
Management Management Team Information System
•Product R&D capabilities •Process R&D
•Speed and responsiveness •Quality of current information
•Skills •Value congruence •Team spirit
Premises of Design School
Strategy formation should be a
deliberate process of conscious thought.
Strategy making in this sense is an acquired,
not a natural, skill or an intuitive one—it must be learned formally.
Responsibility for that control and
consciousness must rest with the chief executive officer: that person is the strategist
the president as architect of organizational
The model of strategy formation must be
kept simple and informal.
"the idea of corporate strategy constitutes a
simple practitioner's theory, a kind of Everyman's conceptual scheme“
This distinguishes the design school from the
entrepreneurial school on one side and the planning and especially positioning schools on the other.
Strategies should be one of a kind: the
best ones result from a process of individualized design
Strategies have to be tailored to the
Design School concentrates less on the contents of
strategy and emphasize more on the process through which it is developed.
"creative act“ to build on distinctive
The design process is complete when
strategies appear fully formulated as perspective.
The big picture must appear—the grand
strategy, an overall concept of the business.
These strategies should be explicit, so they
have to be kept simple
articulated so that others in the organization
can understand them "Simplicity is the essence of good art“
Finally, only after these unique, full-
blown, explicit, and simple strategies are fully formulated can they then be
Thomas J. Watson Sr.
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. Model deny certain important aspects of strategy formation including
Incremental development Emergent strategy The influence of existing structure on strategy Full participation of actors other than the chief
OF STRENGTHS WEAKNESSES: BY PASSING LEARNING
STRUCTURE FOLLOWS STRATEGY... AS THE LEFT
FOOT FOLLOWS THE RIGHT
OF FORMULATION FROM IMPLEMENTATION: DETACHING THINKING FROM ACTING
adapted from Mintzberg
The basic point was that firms should
define themselves in terms of broad industry orientation—”underlying generic need”. Words on paper do not transform a company. Levitt's intention was to broaden the vision of managers.
“Marketing hyperopia” where "vision is
better for distant than for near objects”
Behind the very distinction between
formulation and implementation lies a set of very ambitious assumptions: that environments can always be understood. In an unstable or complex environment, this distinction has to be collapsed, in one of two ways.
Either the "formulator" has to be the
"implementor," or else the "implementors" have to "formulate."
In other words, thinking and action have
to proceed in tandem, closely
Four conditions encourage an organization to tilt toward the design school model:
1. One brain can, in principle, handle all of
the information relevant for strategy formation 2. That brain is able to have full, detailed, intimate knowledge of the situation in question.
3. The relevant knowledge must be
established before a new intended strategy has to be implemented—in other words, the situation has to remain relatively stable or at least
Strategy is a grand design that requires a
grand designer. There is a process of designing that leads to outputs called designs. The design school has focused on the process, not the product.
Over simplified and restricted in
application but has contributed profound as an informing idea
This action might not be possible to undo. Are you sure you want to continue?