"What is Strategy - and Does it Matter?

(2002)" by Richard Whittington revolves around four different views on strategy or the "theories of action" in business strategy : the classical planning approach; the efficiency-driven evolutionary approach; the craft-like processual approach; and the internationally-sensitive, systemic approach. The Classical Approach to Strategy According to Whittington, for classicists profitability is the highest goal of business and rational planning as the means to attain it. Whittington quoted Alfred Sloan, former President of General Motors, who laid out the cornerstone for the Classical strategy based on profit. In his biography My Years with General Motors he said: The strategic aim of a business is to earn a return on capital, and if in any particular case the return in the long run is not satisfactory, the deficiency should be corrected or the activity abandoned. (1963:49) To sum it up, Classical approach to strategy requires that managers be ready and capable of adopting profit-maximizing strategies through rational long-term planning. Evolutionary Approach on Strategy Evolutionary approaches do not rely on top management’s skill to plan and act rationally. Instead of depending on managers, they believe that markets will determine profit maximization and not the managers. Whatever methods the managers will adopt, the best performance will be the ones that survive. Rational methods are not the basis for this approach because it is ‘evolution thatis nature’s cost-benefit analysis’ (Einhorn and Hogarth 1988:114). In evolutionary perspectives, competition is not overcomed by detached calculation such as in classical perspective but by constant struggle for survival in the jungle. The biological principle of natural selection is at the core of evolutionary theory wherein the most apt strategies often translate in the best performance allowing them to survive and progress. The weaker performers are driven out of the market.

In a systemic approach. The members of the organization bargain between themselves to arrive at a set of goals that is acceptable to them all. These social factors influence the the means and ends of a systemic approach and define what is the suitable behavior for their members. nations and states. According to them economic activity cannot be separated from social relations such as family. Micro-political view implies that firms are not united towards a single goal such as profit. The Processual Approaches were formulated by American Carnegie School most notably by Richard Cyert. The best Processual method is not to strive for the ideal but to work with what the reality offers. . James March and Herbert Simon. Systemic Approach on Strategy Sytemic theorists believe that the organization is capable of planning and acting effectively. organizations and markets are wrought with confusion and mess. The four theories of action in business strategy offer us an insight into the motivation behind the company’s vision and what strategies they most likely implement. The main strategy for this approach is to simplify complex processes. families and gender. The strategy then depends on the social environment of the firm. They believe that rational economic man is not possible because we cannot overlook all factors at the same time. the organization is not just made up of individuals but of social groups with interests. Human nature is simply flawed. The variables that Systemic contend with are class and professions. Instead it is made up of a number of individuals with different interests and bring them to the organization. However they do not agree with the evolutionary perspective either of leaving the profit-maximizing outcomes to the market. To them.Processual Approach to Strategy Processual approaches also do not subscribed to rational strategymaking forwarded by Classical approach. state or religion.

The levels of leadership and responsibilities are clear and well defined. Advantages and Benefits of the Classical Management Theory by Julianne Russ. Middle management oversees the supervisors.and Does it Matter?” (2002) Thomson Learning. Projects are broken down into smaller tasks that are easy to complete. Limitations of the rational planning approach (classical school) . Think of flexibility. setting department goals according to the approved budget. At the lowest level are the supervisors who oversee day-to-day activities. The top management is usually the board of directors or the chief executives who are responsible for the long-term goals of the organization. "What is Strategy . higher quality.Whittington 2001 u5s2p9 Remember . closeness to the customer. fastmoving environments. It became widespread in the first half of the 20th century. efficiency. and less conducive to more ambitious strategies based on stretch. as organizations tried to address issues of industrial management. Smallbusinesses owners can benefit from taking this approach if they are looking to increase production with minimal expense. While the three-level structure may not be suitable for all small businesses. Employees' responsibilities and expectations are clearly defined. Hierarchical Structure One of the advantages of the classical management structure is a clear organizational hierarchy with three distinct management levels.Reference: Whittington. Mintzberg 1994 argues that such rigidity discourages innovation. including specialization. it can benefit those that are expanding. as workers are not expected to multitask. Richard. The division of labor approach leads to increased productivity and higher efficiency. Each management group has its own objectives and responsibilities. cost reduction and management-worker relationships. Demand Media Classical management theory was introduced in the late 19th century. swiftness of decision making etc. It is very similar to the waterfall approach in software development and has many of the same weaknesses. While other management theories have evolved since then. address employee issues and provide employee training. . This approach allows workers to narrow their field of expertise and to specialize in one area. classical management approaches are still used today by many small-business owners to build their companies and to succeed. it is not very compatible with the rational approach. Division of Labor One of the advantages of classical management approach is the division of labor.rational approach is considered too "top down" and inflexible for modern. If your competitive strategies are based on these. UK.

. can have an advantage in taking this approach. All decisions are made at the top level and communicated down. and competition (see evolutionary organization theory) -.at three different levels of analysis as well as the interplay between the different levels. competitors. External forces determine the basis of competition in each of these positions. but does not focus on the details.variation. providing a panoramic scene which contains everything related to the industry and company. such a board of directors. Consistent with the traditional industry structural analysis.Monetary Incentive According to classical management theory. This tool has five interrelated variables --  Basis of competitive advantage in the industry -. Tool III looks at the internal corporate venturing associated with the autonomous process. retention. Non-market forces. are also potentially important. Employees feel appreciated when being rewarded for hard work. Small businesses. In other words. and the coevolution of industry-level and company-level forces. This gives management easier control over the workforce. Tool II zooms in on the strategy-making process at the company-level. these forces encompass customers. Autocratic Leadership The autocratic leadership approach is the central part of classical management theory. especially sole proprietorships. Tool I: Dynamic forces driving company evolution -This tool in the framework helps examine strategy-making at the industry-company interface level of analysis. employees should be motivated by monetary rewards. 2002. with its integrated induced and antonymous strategy process. selection. evolutionary organization strategy framework Definition: Source: Burgelman. Other forces may be significant as well. as they need a strong leader to grow.Most industries contain several viable positions that companies can occupy. It states that an organization should have a single leader to make decisions. to organize and direct the employees. Tool I focuses on the big picture. This is a conceptual framework for studying the role of strategy-making in Intel's evolution. suppliers. new entrants. they will work harder and become more productive if they have an incentive to look forward to. A small-business owner can take this approach to motivate the employees to achieve production goals. especially in rapidly evolving industries. without having to consult with a large group of people. The autocratic leadership approach is beneficial in instances when smallbusiness decisions need to be made quickly by a leader. It is made up of three different ""tools"" which form the perspectives of the evolutionary organization processes -. and substitution. such as the government.

a company can attempt to proactively change the basis of competitive advantage in the external selection environment. the structural and strategic contexts correspond to internal selection. Competition involves the internal struggle of different businesses for corporate resources and the external struggle for survival in the competitive environment. the relative importance of different distinctive competencies for competitive advantage. selection.They are not easy to change. The internal selection environment plays a crucial role in helping the company find new ways to reestablish alignment between the dynamic forces. position.Strategic action is what the company actually does-the consequential actions that it engages in. there needs to be alignment between the basis of competition and distinctive competencies and between official strategy and strategic action. and competition processes by conceptualizing strategy-making in terms of induced and autonomous processes.Official corporate strategy concerns top management's statements about the company's intended strategy. retention. These are the most important drivers of a company's strategy. Tool II: Evolutionary Framework of the Strategy Making Process -Tool II gives substance to the variation.  Strategic action -. and routines that a company possesses to meet the basis of competitive advantage in the industry. For instance. Position without strategic action is unlikely to fully exploit advantage and without distinctive competencies is precarious. These remarks reflect top management's beliefs about the basis of the company's past and future success. of course. Strategic action without position has limited ability to be exercised and without distinctive competencies is powerless. Distinctive competencies are intrinsic to a company's identity and character. .  Internal selection environment -. Deep competencies are also likely to be a well-spring of new opportunities. but in dynamic environments this alignment is likely to come under severe pressure.In principle. strategic action must react to the changing external selection environment. core values that help determine what the company will and will not do.that a company will pursue.  Official corporate strategy -. Strategic action in large companies is usually distributed over different levels of management and different. The form the basis of the capabilities that a company can deploy. and competencies mutually support each other. Through strategic action that links position and distinctive competencies in novel ways. and financial and other objectives. Induced and autonomous strategic action correspond to variation. and the concept of corporate strategy corresponds to internal retention. they very much determine the generic corporate strategy -. Key beliefs concern product-market domain.differentiation or cost leadership -. specialized groups.Distinctive competencies concern the differentiated skills. Strategic action. Distinctive competencies of the firm -. Often. because most positional advantages erode and eventually vanish. Distinctive competencies without strategic action are aimless and without position cannot be fully leveraged. complementary assets.

and other administrative and cultural mechanism that top management uses to maintain the link between strategic action and the existing corporate strategy. perpetuate the company's identity.this context encompasses the organization structure.  Structural context -.the environment that is the focus of the official corporate strategy. Autonomous strategic action -. It is shaped by the structure context. The induced strategy process carries out the strategic intent of the firm. seeks to reduce variation. produces a degree of instability. changes the identity of the company.the official corporate strategy. This context is shaped by and shapes the autonomous strategic action. This context is shaped by induced strategic action and the official corporate strategy.    Emerging external environments -. Collectively these variables account for the autonomous strategy processand the induced strategy process.  Concept of corporate strategy -. See these two processes for an in-depth description. planning and control systems. The variables are as follows --  Familiar external environment -. It also shapes the official corporate strategy and the strategic context for the autonomous strategy process.  Induced strategic action -. Strategic context -. The autonomous strategy process is variation increasing.Induced and deliberate strategies are similar. both to adjust to it changes and to shape it to the firm's advantage.these are the environments emerging that may become relevant to the company. and made by the combination of the structural context and strategic context.the initiatives of individuals outside the scope of the corporate strategy.the strategic context for the autonomous initiatives serves to evaluate and select autonomous strategic actions outside the regular structural context.the official corporate strategy. Related evolutionary ideas --  Emergent and deliberate strategy -. I shapes the concept of corporate strategy. produce continuity. produce stability.This framework consists of seven interrelated variables which ultimately manifest themselves in the concept of corporate strategy -.21 The link with . and exploit. shaped by and for the familiar external environment.action initiated by the operational and middle-level managers that fit with the concept of corporate strategy and leverage the organizational learning that it embodies. and explores new opportunities. but the induced strategy process provides more detail on what is involved in getting the organization to actually implement corporate strategy.

autonomous strategic initiatives. The deliberate actions taken by these leaders help develop new competencies and help create a new strategic position that may open up a new business opportunity for the corporation. Autonomous initiatives involved in generating and developing a new business opportunity usually involve deliberate actions taken by leaders below top management. Yet there are two important differences: First.  Ambidextrous organizations -. on the other hand. on the other hand. a strategy that emerges at a high level of the corporation often has its roots in deliberate actions by leaders at lower levels in the corporation.  Punctuated equilibrium -. ideas of deterministic chaos concern organizations that experience counteracting forces that produce nonlinear dynamics. induced and autonomous initiatives do not necessarily map onto incremental and radical technological change. other forces push the system toward instability and disorder. Some forces push the organization toward stability and order. In the induced strategy process. can be very large. Second. change through the autonomous strategy process usually comes about fortuitously and unexpectedly. Change in the induced strategy process.The theory of self-organization and of organizations as chaotic systems is a useful perspective in organization theory and strategic management. It is also concerned with turning the results of exploration into new exploitation opportunities.The autonomous strategy process dissects exploration into autonomous strategic initiatives and the process of strategic context determination. Because prediction is difficult in dynamic environments. it always involves doing things that are not familiar to the company-doing what it is not sure it can do well. Self-organizing systems discover answers to their problems through experimentation.  Exploration and exploitation -. incremental simply means change that is well understooddoing more of what the company knows how to do well. Resolving this indeterminacy is the most difficult challenge facing autonomous strategic initiatives. is more complicated. while incremental. The latter serves to select viable autonomous initiatives and link them to the corporate strategy thereby amending it. The autonomous strategy process thus goes beyond exploration. developing a new microprocessor is incremental for Intel but involves hundreds of millions of dollars in development costs and billions in manufacturing investments. Strategy-making as adaptive organizational capability balances variation-reduction (induced) and variation-increasing (autonomous) processes at any given time and over time. Change through the autonomous process. However. the organization develops a catalog of responses and stimulates learning through experimentation. This highlights the importance of the strategic context determination process.The punctuated equilibrium view of company evolution posits that organizations evolve through long periods of incremental change .  Strategy-making and self-organization -. The idea is closely related to the framework of induced and autonomous strategy processes. Similarly. For instance. can be radical but is initially usually rather small. Initially senior and top management have no clear understanding of its strategic importance for the company and how it relates to the company's distinctive competencies. Thus.Ambidextrous organizations are designed to handle both incremental and revolutionary change.

Tool III: A process model of internal corporate venturing -The process model of internal corporate venturing is a matrix-like framework that documents the simultaneous as well as sequential strategic leadership activities of different levels of management (the rows in the matrix) in the different levels of strategy-making (the columns). through sheer accumulation. Forces associated with impetus and strategic context integrate the top-down and bottom-up forces. Companies always want to spot such changes sooner rather than later. The introduction of intracompany variation. The model considers three generic levels of management: (1) venture team. Many radical changes-technological or otherwise-are the cumulative result of continuous small changes over a long period of time. Impetus is gained if . and (3) corporate management. retention. While there are many examples of sudden radical changes. So. The process model documents the set of business-level strategy-making and the corporate-level strategy-making. the second force is to a large extent a bottom-up force. not prescriptive. so the first force is to a large extent a top-down force. Truly exogenous shocks such as large meteorites hitting the earth and destroying existing ecosystems are always a possibility but fortunately a remote one. Sometimes these changes originate in the company's autonomous strategy process and sometimes outside of the company altogether. A second force derives from the definition part of the process. Creating the structural context is top management's responsibility. The model is descriptive. cause lumpy radical strategic change. Corporate-level strategymaking encompasses the determination of the structural and strategic contexts (overlaying processes). Definition revolves around initiatives driven by strategic leadership activities of operational and middle-level managers. and competition processes to study strategy-making provides a tool for identifying the underlying-more continuous and finer grained-strategic leadership activities that eventually. although not necessarily. Simultaneous conflicting forces at work in the framework -There are two major opposing forces simultaneously at work in the process model. It serves as a diagnostic tool to better understand key problems that are encountered as well as generated by the organization's strategic leaders who are involved in entering a new business. One force derives from the structural context part of the process. punctuated equilibrium views beg the question of where these sudden radical changes come from. The model also considers two generic levels of strategy-making: (1) corporate-level strategy-making and (2) business-level strategy-making. Business-level strategy-making encompasses definition and impetus (core processes). (2) middle/senior management. selection. Often they happen inside and outside simultaneously. The definition of new business entry usually. frame-breaking change.punctuated by discontinuous. originates at levels below top management.

It also helped explain how autonomous initiatives were selected and retained in Intel's corporate strategy. suppose one measured the average characteristics of companies in the semiconductor industry in 1960 and did so again in 1999. Tool III was particularly helpful to examine the strategic leadership activities involved in the development of Intel's chipset venture (chapter 7) and ProShare. shedding additional light on how Intel attempted to control its destiny in an extremely dynamic environment. Organizational ecology would explain these changes in terms of incumbent companies exiting the industry (usually because of failure) and new companies (with different characteristics) entering the industry. And suppose one found significant differences in average company characteristics. and networking ventures (chapter 9). Organizational change must be understood at the level of entire populations of similar organizations and as the result of replacement and selection rather than of adaptation. Tool I helped explain why the basis of competition in Intel's core business and its distinctive competencies diverged over time and why the company's strategic actions diverged from its stated strategy. The key argument of the original formulation of the theory went as follows. Tool II helped explain how Intel's induced. Implications -The tools of the evolutionary research lens helped answer specific research questions.and autonomous-strategy processes took shape over time and why strategy could lead to inertia.operational-level champions are able to draw resources to their initiative and establish a beachhead in the market with their product or service. An important contribution of the process model is to clearly show that the bottoms. Hood River. The analysis informs two important subjects of evolutionary organization theory. Organizational ecology emerged as a new theoretical approach in the mid-1970s.organizational ecology and organizational learning-as well as the practice of strategic leadership. For instance. Organization ecology -The radical view. The strategic context for the new business initiative can be determined by middle/senior-level champions who convince top management to incorporate the new business into the corporate strategy and to put the full support of the company behind it. It also helped explain how Intel overcame these divergences and managed to adapt. This book addresses these and related questions. Tool III helped explain how the activities of leaders situated in different positions in the organization combined in the autonomous process and where and why the process was likely to break down. Incumbent companies failed in the face of . The process model provides a tool for representing the simultaneity. and that they are in play simultaneously.up and top-down forces are opposing forces.

and lead them to be selected by the environment over firms that are not reliable. employees. which no single established company could possibly match. and accountable to key constituencies. the new argument was that environmental selection leads to organizational inertia. One such challenge concerns multibusiness companies. Companies that rely on positional advantage shield themselves from competitive pressures and do not need to develop strong distinctive competencies to succeed. Multibusiness companies may thus be weakened overall unless their internal selection environment matches the competitive intensity of the external selection environment. There is strong empirical evidence in support of this theory of organizational inertia. give them legitimacy. To reduce this threat. suppliers. Hence. As an example. is that they will not be able to match the variation generated in their environment. The revised view. These attributes allow companies to overcome the liabilities of being new. and accountable. On the other hand.to shield some of their businesses from the severity of competitive pressures that standalone businesses encounter. companies that rely on distinctive competencies to compete with similar others may be able to hone these competencies and become best in class. But such distinctive competencies become highly specialized and make the companies vulnerable to new competitors deploying different competencies. the organizational ecology argument was subtly modified because the original formulation begged the question of why companies would be inert in the first place. and industry analysts. which often face pressures-inertial and/or political. But this makes them vulnerable to new competitors using novel strategies to attack their position. During the 1980s. But these very attributes make it difficult for companies to change in major ways after they have been selected. New organizational ecology research continues to draw attention to important challenges that strategy-making faces. predictable. witness the enormous variation spawned by the Internet in recent years. Another challenge involves a potential tradeoff between competitive advantage based on position and competitive advantage based on distinctive competencies.28 The revised theory posited that companies need to develop routines and procedures that make their behavior reliable. Newer views. even those with a well-functioning autonomous. established . some variations may threaten the incumbent companies. such as customers. The study of Intel's exit from its original core business adds to that evidence.strategy process. Eventually.environmental change because organizational inertia prevents them from adapting. predictable. In short. The rates of founding and disbanding drive organizational change. Still another challenge faced especially by companies in opportunity-rich technological environments. organizational inertia causes companies to be selected against.

Almost all companies start small and are subject to liabilities of newness (they are unknown. deliberately drives strategic action in a more or less foreseeable pattern toward desired outcomes. Some companies. Induced strategic action commits a company to a course of action that is difficult to reverse. This book integrates strategy-making and organizational ecology. lacking legitimacy. The autonomous-strategy process. with the perspective adopted in this book. because top management is keen to understand why strategic actions produce the results that the company obtains. which is to determine in advance the ensemble of strategic actions that will achieve desired outcomes. The argument runs as follows. Most do not survive external selection pressures. however. untested. The major force faced by small. Equally important is the work that comes afterward. Although large. ""We can say that some outcome has occurred because of some prior sequence of events. do survive and become large and established. Sometimes this work involves abandoning a course of action. new companies is environmental selection. The induced-strategy process. which views strategy-making in established companies as a dynamic organizational learning process. internal selection is concerned with a company's entering new businesses and exiting from failing ones over time. established companies continue to remain subject to the selection force of the external environment-and many succumb to it in the long runthese companies have gained the opportunity to substitute internal for external selection. Analogous to external selection. Such understanding provides a basis for taking further strategic actions. which is concerned with exploring new business opportunities. Learning in the induced process. Learning in the autonomous process. There is no conflict. Thorough preparation prior to deciding on such a course of action is important. An integrative view.companies may have to complement the internal variation generated by their autonomousstrategy process with other approaches. however. such as corporate venture capital. even though we could not have foreseen. prior to the fact. which is concerned primarily with exploiting existing business opportunities. As one evolutionary scholar put it. that particular sequence unfolding. exiting from a losing business. Organization learning -Indeterminacy. involves somewhat more complex . and so on).""32 This seems almost the exact antipode of the traditional view of strategy. Adopting an evolutionary perspective implies that outcomes are viewed as indeterminate and can be explained only after the fact. for instance. Organizational ecology provides a useful theoretical framework within which the evolutionary dynamics of small companies can be more clearly understood.

The learning at a lower level becomes the stepping-stone for more-encompassing strategic action at the next managerial level. such as disruptive technologies autonomous initiatives having a dissipative effect on the corporate resources and distinctive competencies autonomous strategic initiatives may undermine the existing competitive position of a company without providing an equally secure new position . The effectiveness of the process depends on correct. of results at each level. even though one process or the other may be more prominent at different times in the company's evolution. Here. strategic action at higher levels in the management hierarchy benefits from interpretation of the outcomes of strategic action at lower levels.organizational learning. Need for balance -Strategy making as an adaptive organization capability involves keeping both the induced and autonomous processes in play simultaneously at all times. Risks to manage --      exploration consuming the firm's exploitive capacity and capability exploitation crowding out explorative capacity and capability autonomous strategic action that posses a threat to the current strategy.

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