INDIVIDUAL ASSESSMENT:

QUESTION: EXPLAIN THE TERMS ‘INTENDED STRATEGY’ AND

‘REALISED STRATEGY’. IS A DIFFERENCE BETWEEN THE TWO A

PROBLEM FOR AN ORGANISATION?

LECTURER: PAUL FERGUSON

ASHWANI GOEL

RAZEYEH JALALI
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Think of an organization as a teapot. Here, the tealeaves represent the intended
strategies that a firm sets out with, and the hot water represents the levels, the
processes, the culture and the communication styles within the organization. As the
tea boils - or, as the organization carries out its daily operations, goes through its
resource allocation processes, communicates the ‘strategic intent’ of the firm through
various departments or levels - the intended strategy can either; become a common
aim or goal for everyone in the organization or; can lose its value and dilute itself to
something that is merely spoken word. The final product; or the tea that is poured into
a cup, represents all that has been absorbed into practice, by decision makers or lower
level managers: or, for this essay, the realized strategies. The residue of filtered
tealeaves represents what Mintzberg terms as “unrealized strategy”(Mintzberg &
Waters, 1985). This essay, with the help of examples, will not only explain what
intended strategy and realized strategy really mean, but will also explain the
relationship between the two. Understanding this relationship will help decide
whether a difference between the two hinders or nurtures a firm’s future success.

The following diagram will aid the understanding of a firm’s evolutionary process
from initial direction, to final outcome. It will be beneficial to keep this picture in
mind while reading the rest of this essay.

(Mintzberg & Waters, 1985)

Intended strategy is best described as an expression of strategic direction. Some

literature on this subject, also terms this strategic direction as “deliberate strategy”
(Mintzberg & Waters, 1985). While discussing the concept of deliberate strategy,
Mintzberg (1994) points out that with a goal in mind, and with managerial control,
most managers aim to ensure that this initial plan is realized into action. Hamel and
Prahalad (1989) on the other hand, use the term “strategic intent” (Hamel & Prahalad,

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1989). With this, a firm’s intent becomes the core value that is used to formulate a
strategic plan. Managers must understand that strategic planning is a continuous cycle
(Hamel & Prahalad, 1989) and is very dependant on the external and internal
environments.

If intended strategies can be classified as plans, then as Mintzberg points out, realized
strategies could be described as patterns. Patterns that are formed through
organizational culture, politics, external and other internal influences; that in turn
create strategies based on practices. If this is the case, the term “emergent strategy”
(Mintzberg & Waters, 1985) can be used. However, Mintzberg also says, these
strategies need not have evolved by ‘accident’ but can also be deliberately
transformed from intent into practice. When this happens, it can be said that the
intended strategy of a firm is the same as its realized strategy. However, the strategies
that have neither been adapted to changing environments, nor have been deliberately
transformed into action, lose their essence and eventually become ‘spoken word’-
from the teapot example. These strategies, according the Mintzberg are “unrealized
strategies”.

Mintzberg and Waters (1985) state that a firm’s intended and realized strategy will
only align if: the intention of the direction is specific and detailed; the intention is
explicitly communication throughout the organization and; this intention must not be
influenced by any external forces. Today’s turbulent economic environment makes it
almost impossible for the intended strategy of a firm to be translated- in its true form-
into something that the entire company realizes and accepts as practice. This
reiterates Burgelman’s realization that for most firms, more so for those in dynamic
industries, the strategic intent and strategic action will almost always differ.
(Burgelman & Grove, 1996).

This dissonance between intent and realization however, is not always a problem for a
firm. Company examples will be used to explain the different factors that affect
strategy formation. For now, by listing the factors that influence the evolution of a
strategy, the examples used further on will be made clear. First, Quinn’s (Quinn,
1978) concept of “logical incrementalism”, talks of subsystems within an
organization, and the relationships between these subsystems give rise to emergent
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strategies. Most literature on the subject of strategy formation says that there are
three main ‘subsystems’ that affect the final strategic outcome of the firm. These are:
the resource allocation methods a firm adopts, the organizational culture and
behavior, and the external environmental influences that shape managers’ decisions

The Bower- Burgelman (2007; 1994) view that strategy evolves as a result of the
resource allocation procedures within an organization can be best explained using
Intel’s transformation from 1982-when the firm first started facing competition from
Fujitsu and Hitachi - to 1985- when top management finally decided to exit the
DRAM market (Bower & Gilbert, 2007; Burgelman, 1994). The firm’s initial strategy
of securing a ‘leadership position’ in the DRAM market, was threatened competitors,
managers invested more in research and development. When this did not work,
management started to streamline the production capacities or to allocate them to
more profitable segments. Finally in October 1985, the unit used for DRAM
production was absorbed into another company division, and Intel as whole,
underwent reconstruction. From then on, top management focused on the more
profitable microprocessing segment, with an aim to bring it to a leadership position
(Burgelman, 1994). Thus, by adapting to the external environment, competitive
pressures, and resource needs in other departments, Intel emerged with a new strategy
to focus on the microprocessor product segment. With resources allocated now to
more profitable segments, the management was able to adapt to the “strategic
inflection point” (Burgelman & Grove, 1996), and steer the firm to a more positive
future. Thus the realized strategy here, although different from what was intended
helped end excessive expenditure on a product segment that was exited by lower level
managers while before top management caught up (Bower & Gilbert, 2007).

The way in which an organization is structured, affects the culture and

communication styles within it. R.N. Grant states that the structure of the firm;
whether more regulated and formal or, more flexible and informal; can also affect the
manner in which strategies are formed (Grant, 2003).

Using Amazon.com here, from an interview with its CEO, Bezoz (Kirby & Stewart,
2006), we learn that constant changes on the company’s website are due to the
constant changes in plans made by those in charge. From the article, we learn that the
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company’s ‘strategy makers’ meet every week to review the current position, deal
with and plan for contingencies ahead. This illustrates the entrepreneurial structure of
the company. With this structure, a constant trade off must be made between short
term performance measuring and a futuristic approach to new information received
(Hamel & Prahalad, 1989). Therefore, the decision to include third party sellers on the
company’s website does conflict with short-term profit making capabilities. However,
in the long run, Amazon could gain bargaining power with its publishers and
electronics goods suppliers – as price conscious customers will be willing to purchase
second hand goods for cheaper on the same website. Here, the company has
maintained the initial strategy of“ what’s better for the customer”(Kirby & Stewart,
2006). By adopting a new practice, the company has created a new and improved
version of the intended strategy. For the purpose of this essay, this can be termed as
the ‘realized strategy’.

Sometimes, a firm is forced to adopt externally developed strategies, by either

imitating competitors or by responding to market demands. (Mintzberg, 1978). In
1974- 1975, after three years of declining profits, Volkswagen, decided to alter its
core design strategy, and model its new product design around Audi’s strategy. This
new and stylish product strategy also called for changes in their marketing and
resource allocation strategies, and resulted in increased profits for the second half of
1975(Mintzberg, 1978). Here, in an attempt to adapt to customers’ changing demands,
the company had to step away from its initial “Porsche”(Mintzberg, 1978) strategy to
the one mentioned above.

Once an emergent strategy has been identified, for it to be formalized into the ‘new’
intended strategy, the “strategic inventory”(Hambrick and Fredrickson, 2001) must be
checked out. Say, for example, Canon (Hamel & Prahalad, 1989), realized that it
could differentiate itself with the newly designed cartridges aimed at preventing
Kodak’s entry into the personal copier market. If top management here, wanted to
make this product differentiation strategy, Canon’s new direction, it would need
answers to a few questions. These questions relate to- the environmental fit (possible
healthy profit potential) of the strategy; whether the strategy exploits the firm’s key
resources; whether the strategy is a sustainable differentiator; whether the elements of
the strategy will be internally consistent with the organization; whether there are
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sufficient resources to support the new strategy; and finally, whether the strategy can
be implemented (Hambrick and Fredrickson, 2001). When all these questions have
been answered, management can then decide whether to formalize the strategy, or
allow it to become ‘unrealised one’.

With the help of the examples used above, it can be seen that the question of strategic
dissonance arises continuously in organizations.The relationships between the
subsystems within an organization affect the strategic outcome for a firm. Using the
concept of strategy evolution rather than strategy formulation, we can see (with the
help of the three examples) that there is indeed a difference between a firm’s intended
and realized strategies. However, the emergent strategies that were formed helped
steer the firm towards a more optimistic future. In all three cases, continued adherence
to the planned strategy would have led to wasted resources, wasted opportunities and
loss of market share. Therefore, in today’s tumultuous environment, a firm has no
choice but to expect that it may not maintain the strategic path it sets out on.

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LIST OF REFERENCES

1. Bower, J. L., & Gilbert, C. G. 2007. How Manager’s Everyday Decisions

Create - Or Destroy Your Company’s Strategy. In Harvard Business Review
on Strategic Renewal, pp. 129 - 146. Boston, MA: Harvard Business Press.

2. Burgelman, R. A. 1994. Fading Memories: A Process Theory of Strategic

Business Exit In Dynamic Environments. Administrative Science Quarterly,
Vol: 39, pp. 24- 56.

3. Burgelman, R. A., & Grove, A. s. 1996. Strategic Dissonance. California

Management Review, Vol 38; (2), pp. 8-28.

4. Grant, R. M. 2003. Strategic Planning In a Turbulent Environment: Evidence

From the Major Oil Majors. Strategic Management Journal, Vol 24, pp. 491 -
517.

5. Hamel, G., & Prahalad, C. K. 1989. Strategic Intent. Harvard Business

Review, The Best of HBR

6. Kirby, J., & Stewart, T. A. 2006. The Institutional Yes - An interview with
Jeff Bezoz. In Harvard Business Review on Strategic Renewal, pp. 29 - 50.
Boston, MA: Harvard Business Press.

7. Johnson, G., Scholes, K., & Whittington, R. 2008. Chapter 11: Understanding
Strategy Development. In Exploring Corporate Strategy: Texts and Cases, pp.
564 - 595. New Delhi

8. Mintzberg, H., & Waters, J. A. 1985. Of Strategies, Deliberate and Emergent.

Strategic Management Journal, Vol. 6, pp. 257 - 272.

9. Mintzberg, H. 1994. The Fall and Rise of Strategic Planning. Harvard

Business Review, January - February, pp.107- 114.

10. Mintzberg, H. 1978. Patterns in Strategy Formation. Management Science,

Vol 24 ( 9), pp. 934- 948.

11. Palmer, I., Dunford, R., & Akin, G. 2006. Diagnosis for Change - Framework
by Hamrbick and Fredrickson, 2001. In Managing Organisational Change: A
Muiltiple Perspective Approach pp. 119. Mc Graw Hill.

12. Quinn, J. B. 1978. Strategic Change: “Logical Incrementalism”. Sloan

Management Review, Vol 20 (1), pp. 7 - 19.