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Why Is There So Much Disagreement About What Strategy Is?

Christopher Baird

Trinity College, Dublin

Michaelmas Term, November 2012

Strategic Management: Theory and Practice

Abstract

With such a large quantity of disagreement existing within the strategy field, it is
important that individuals do not become overwhelmed by it. This paper provides
the essential opportunity to understand the reasons behind differences over what
strategy is. By assessing Richard Whittington’s four ‘well‐regarded’ schools of
strategy, this paper gains a structured framework that allows us to address the
reasons for disagreement within three main areas of strategy: the outcomes of
strategy, the process of strategy, and the rationality of strategists. We begin to
ascertain that no body of knowledge on strategy is omniscient and sacrosanct.
Certain ‘strategy schools’ suit different situations and environments better than
others and as a result, disagreement becomes an important requisite. Finding the
‘school’ that best suits your organisation earns the greatest reward.
Table of Contents

1. INTRODUCTION 3

WHITTINGTON’S FOUR GENERIC APPROACHES TO STRATEGY 4

2. THE OUTCOMES OF STRATEGY: PROFIT MAX VS. PLURALIST 5

UNITARY/PROFIT MAXIMIZING 5

PLURALIST 6

WHY IS THERE DISAGREEMENT ON THE OUTCOMES OF STRATEGY? 6

3. THE PROCESS OF STRATEGY: DELIBERATE VS. EMERGENT 7


DELIBERATE 7

EMERGENT 8

WHY IS THERE DISAGREEMENT ON THE PROCESS OF STRATEGY? 9

4. THE RATIONALITY OF THE STRATEGIST 10

THE RATIONALITY CONTINUUM 10

WHY IS THERE DISAGREEMENT OVER THE RATIONALITY OF STRATEGISTS? 12

5. CONCLUSION 12

6. BIBLIOGRAPHY 15

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1. Introduction

Whether to trace strategy back to its presumed ancestral origins in ancient


Greece, mid 20th Century developments in North America (Chandler, 1962;
Ansoff 1965), or to the industrial economic policies throughout the ‘Golden Age
of Capitalism’ (Rumelt et al., 1991), the concept of strategy is immersed in
widespread dispute (Jones, 1999).

Some areas of management are distinguishably subjugated by a single discipline;


finance by economics, organizational theory by sociology. Strategic management
is different; there is no one discipline, it is driven by practical issues, permeable
in its very nature (Grant, 2010; Segal‐Horn, 1998). To address such practical
issues, strategic management is forced to be inclusive and eclectic with regard to
the concepts, ideas and theories that it draws upon (Grant, 1997; Hoskisson et
al., 1999). Jones goes so far as to say that strategy is without ‘essence’ in terms of
either content or method. Unable to be applicable for all time and circumstance,
it changes and transforms itself (Jones, 1999). Even so much as a definition of the
word strategy remains illusive (De Wit and Meyer, 2004), and it is consequently
unlikely that a single unifying paradigm will ever emerge (Jenkins et. al, 2007).

Whilst no single unifying paradigm exists, there is what can be considered to be a


mainstream of writers and approaches (Segal‐Horn, 1998). Contained within the
work of these scholars are numerous ideas and views on what is strategy, what is
important about strategy, and how research should be conducted on strategy.
Several of the more prominent disputes on the premises of strategic
management are as follows:

1. What are the outcomes that strategy seeks to realize?


2. Is the process of strategy deliberate or emergent?
3. Are strategists’ wholly rational and autonomous individuals, or limited
by human flaws and their social environments?
4. Who controls strategy –internal management or external environmental
forces?
5. What should be the content of strategy –the importance of the external
industry position, or the firm’s internal resources and competencies?
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It is not within the confines of this particular paper to comprehend the reasons
for disagreement within all of these themes. It would risk being vague, or at
worst banal. Instead, this paper gathers structure by applying itself to
Whittington’s well‐regarded framework (Jones, 1999) that poses four generic
approaches to strategy. Through exploiting Whittington’s framework, we
endeavour to bring the reader on a journey of understanding toward the first
two of our disputed premises. As we are introduced to Whittington’s four broad
groupings we see that they differ in two fundamental regards (Whittington,
2001).

1) The extent to which organizations seek either profit maximizing (unitary)


or pluralist outcomes.
2) The extent to which strategy is deliberately planned rather than emerging
incrementally, accidently or through a muddled and uncertain process.

A further discussion of Whittington’s model subsequently allows us to address


the third and final premise of this paper, the rationality of strategists.

Whittington’s Four Generic Approaches to Strategy

Outcomes
Profit Max
Processes

Deliberate Emergent
Pluralistic

Fig 1. Whittington’s Four Generic Approaches to Strategy (with authors).


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It is important to recognise that although certain scholars have been placed in
certain schools, it is doubtful to assume that any particular view of strategy can
be entrusted exclusively within that school. It is extremely unlikely that any
writer ever desired to be included in one particular category or school.
Whittington’s categories are justified as a heuristic device –a way of clarifying or
categorizing a complex set of issues (Jones, 1999).

Let us now progress to discuss our first disparity as seen in Whittington’s model,
the outcomes of strategy.

2. The Outcomes of Strategy: Profit‐Maximizing vs. Pluralist

Whittington’s model formulates two different outcomes for strategy: Profit


Maximizing or Pluralist.

Profit Maximizing: Whittington perceives that the focal outcome of strategy for
both the Classical and Evolutionary schools is to profit maximize. The Classical
approach describes profitability as the ‘supreme goal of business’ and that
rational planning is the means by which to achieve it (Whittington, 2001). There
is an unequivocal nexus between the Classical school and the renowned
economic expressions of Adam Smith; self‐interest is ‘inherent in the very nature
of our being’ (Smith, 1776). Top management is in control of the organizations
strategy (Sloan, 1963) and consciousness must rest with the CEO (Mintzberg,
1990). For Evolutionists, the outcomes of strategy tell a similar story, albeit
markets, not managers will secure profit maximization (Henderson, 1989).

Can we however, deem the strategic outcome of profit maximization to be a


globally dominating principle? A study taken in 1993 asked executives whether
the only goal of a company was profit. 40% of American executives responded
yes, as opposed to a mere 8% in Japan, and 12% in Singapore (Hampden‐Turner
and Trompenaars, 1993). From this report, we can see that the US is a clear
outlier in understanding what matters in strategy, yet it is American practice and
research that dominates strategy textbooks worldwide (Whittington, 2001). The
profit‐maximizing premise cannot sustain a claim to universal prominence, and
hence, disagreement about the outcomes of strategy should arise (Biggart and
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Hamilton, 1992). If this is the case, the strategic management discipline requires
schools of thought that place pluralism at the heart of strategic outcomes (i.e.
more than just profit maximizing), and herein lay Whittington’s Processual and
Systemic schools.

Pluralist: Whittington’s Processual and Systemic schools look at the outcomes of


strategy as pluralistic; that is to say, additional outcomes are envisioned, not
solely profit. Processualists look at strategists not as those who ceaselessly
struggle for the optimal solution, but as individuals who merely wish to ‘satisfy’
themselves (Whittington, 2001). Scholars whose views fall within the Systemic
perspective (Granovetter, 1985; Mayer and Whittington, 1999; Thomsen and
Pederson, 2000) factor in the effect of social systems, such as political
institutions or national culture. The Taiwanese political system for instance, has
a long, complex and relatively hostile relationship with the Communist Party of
China (CPC). The relationship between both Taiwan and China has deep cultural
significance and has undoubtedly influenced the strategies of their respective
indigenous firms. Whittington uses the example of Taiwanese computer
manufacturers whose strategies tend to support the Taiwanese regime and resist
importing cheap labour from China at the expense of profit maximization
(Whittington, 2001). Likewise, in the context of societal impact, consider the life
of a fundamentalist Muslim who perceives life as following a path pre‐
determined by God. According to the Quran, profit maximization is not the only
and ultimate goal in the Islamic way of business (Abbas and Bari, 2011).

“Wealth and sons are attractiveness of the life of this world; but the things that
endure, good deeds, are the best in the sight of Allah, as rewards, and best as the
foundation for hopes.” (Quran, 18:46)

Why is there disagreement on the outcome of strategy?

Taking account of such examples, it seems rather permissible to move beyond


mere profit maximization as the sole outcome for strategy. It seems that as the
strategic management practice moves outside of the Anglo‐American periphery
in which it originated, the principle of a profit‐maximizing outcome becomes
increasingly incompatible (Grant, 2010). Biggart and Hamilton (1992) argue that

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unitary outcomes are too ‘ethnocentric’ and fit poorly with Asian economies that
do not have the same institutional heritage. These economies have never had a
Western‐style legal system where each person is treated as a separate entity,
equal to all others. In China for instance, a network of friends, or kin, is
institutionalized (or ‘socially embedded’) into business and social practice
(Biggart and Hamilton, 1992; Granovetter, 1985).

Furthermore, as society has progressed, new sectors have emerged where profit
maximization is clearly not the dominant outcome for strategy. Consider the
rapid rise of the ‘social entrepreneurship’ phenomenon, a term that only gained
prominence in 1982 (almost 30 years following the early Classicists).

“Social entrepreneurs look for the most effective methods of serving their social
missions. Mission‐related impact becomes the central criterion, not wealth
creation”. Dees (1998: 1)

How then, does the outcome of strategy as shown by the Classical or


Evolutionary schools satisfy this need? The answer is, it doesn’t. The demands of
social change have forced strategy to transform and progress (Hunger and
Wheelan, 1993). Many industries and social environments now require more
than just profit maximization.

3. The Processes of Strategy: Deliberate vs. Emergent

The second fundamental variance in Whittington’s model formulates two


different processes of strategy: Deliberate and Emergent strategies.

Deliberate Process: Calling on Whittington’s model we observe both the


Classical and Systemic schools as having a deliberate process to strategy
building. During the late 1950’s and early 1960’s, senior executives began to
experience challenges in managing choices and sustaining control. Companies
were becoming much larger and more complex (Grant, 2007). Large firms
needed greater focus as financial budgeting’s value began to strain. Such
demands spawned the delivery of ‘corporate planning’, recognized to serve the
purpose of guiding the long‐term development of a firm (Howe, 1986).
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Chandler (1962) began referring to strategy as determining the long‐term
objectives of a corporation through an adoption of courses of action and the
allocation of resources necessary for carrying out such goals. Strategies were
decided by top management about how the company should position itself, as a
result of, investigating market opportunities and ‘appraising the distinctive
competences and resources of the firm’ (Andrews, 1981: 180). For the Systemic
school, Whittington believes systemic managers to be every bit as confident as
the Classicist in planning the future. The difference is that the Systemic manager
ensures their advance with much greater respect for the social resources around
them (Whittington, 2001:119).

However, are these formalized, often long‐term plans flexible enough to adapt to
periods of increased macroeconomic instability such as the oil shocks of 1974
and 1979 or more recently, the global financial crisis of 2007? Should strategies
not have the capacity to form and adapt through an emergent process of learning
and adaption? Evolutionists and Processualists argue they should.

Emergent Process: Critics from both the Evolutionary and Processual schools
argue that formalised and deliberate planning in the strategy‐making process is
rigid, sticky, and hard to adapt. Firms can no longer accurately forecast 3‐5 years
into the future (Grant, 2010). To rely on one deliberate strategy is inadequate to
cope with the complexities of a world in which most organisations are subjected
to changes beyond their control (Booth, 1993). Emergent strategies form
through a learning process, most commonly in response to external forces.
(Mintzberg and Waters, 1985) Evolutionists such as Alchian (1950) argue that
the most appropriate strategies ‘emerge’ as part of the competitive process. The
stronger performers survive; the weak are irresistibly squeezed from the
‘ecological niche’.

The Processualist school views organizations as sticky, messy phenomena.


Strategies emerge in confusion through small, incremental steps. Classicists are
seen by Processualists to be so technically sophisticated that their views amount
to naïve idealism (Whittington, 2001). The world’s complex, unpredictable
nature requires the awareness and adaptability of a craftswoman. Strategists

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should not indulge in the hubris of grand, long term planning, like a craftswoman
the process is one of continuous adaptation (Mintzberg, 1987).

Why is there disagreement in the process of strategy?

Similar to our belief that changing social needs affect the outcome of strategy, it
seems reasonable to suggest that increased volatility in global markets (Hitt et
al., 1998) has boosted the utility of emerging strategies, and/or, has reduced the
utility of formalised, deliberate planning. Hyper‐competition and volatility
requires a new view of strategy (D’Aveni, 1995). Managers must be prepared and
able to change their thinking and aspirations accordingly,

“If the times and conditions change, he will be ruined because he does not change
his methods of procedure … because he cannot be persuaded to depart from a path,
having always prospered by following it.” (Machiavelli, 1513).

Mintzberg and Waters (1985) believe that certain industries will favour
particular strategies. For example, in a scenario where an airline such as Aer
Lingus was to commit a large quantity of resources buying expensive jet aircraft,
a more formal, deliberate planning structure seems logical. Planning must be
more certain to justify the allocation of substantial resources. Interestingly,
Mintzberg and Waters (1985) argue that some of the most effective strategies
combine the process of deliberation and control (deliberate), with flexibility and
organisational learning (emerging) to form a ‘sweet spot’ (Kipping and Cailluet,
2010). It appears that as strategic processes are applied in working practice,
different industries find certain strategy processes more suitable than others.

It is therefore reasonable to suggest that as the volatility of global markets has


increased, new and emerging processes of strategy have materialized. Different
industries require their own distinctive processes of strategy. Ideally, they
should look for the ‘sweet spot’ as shown in Fig 2.

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Deliberate

Stability &
Predictability

t
S po
t
ee
Sw

Innovation &
Adaptability

Emergent

Figure 2. The sweet spot in strategic process. (Mintzberg and Waters, 1985)

4. The Rationality of the Strategist

Having touched on the rationality of strategists whilst discussing Whittington’s


model, it is important to gather a more detailed understanding as to the disparity
in the ‘desirability of rationality’ between schools (Thomas, 1993). It allows for a
more pertinent understanding of differences in Whittington’s schools.

Emphasis on desirability of ‘rationality’


MOST LEAST

Classical School Evolutionary School Processual School Systemic School


E.g. Ansoff E.g. Henderson E.g. Mintzberg E.g. Granovetter

Fig 3. The rationality continuum for approaches to strategy (Thomas, 1993).

As seen through Fig. 3, Whittington’s Classical school places the greatest


emphasis on rationality. Classicist inheritance is strongly linked with the concept
of the ‘rational economic man’ (Hollis and Nell, 1975) ‘game theory’ (von
Neumann, 1928; Morgenstern, 1944) and industrial economics. Indeed,
economic theory has supplied much to the strategy field, such as Michael Porter’s
industry structure analysis (Porter, 1980), which derives both basic techniques
and concepts from economic theory (Rumelt et al., 1992). Classicists imagine
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autonomic individuals, entirely unconnected to other persons by social ties
(Landa and Wang, 2001). They conduct detailed, analytical research in an
attempt to deduce rules and laws that will work in all (or most) conditions.

As we move to the right on the rationality continuum, more organic approaches


to strategy begin to arise. Evolutionists express a lack of confidence in the ability
of top management to plan and act rationally. Detached calculation is not
enough; competition is a constant struggle for survival in a ‘dense, steamy jungle’
(Henderson, 1989; Whittington, 2001). It is management’s responsibility to be
‘rational optimizers’, as ‘evolution is nature’s cost‐benefit analysis’ (Einhorn and
Hogarth 1988: 114).

As we move further still, Processualists such as March and Simon (1958)


revealed and conceptualised the notion of ‘bounded rationality’, a theory built
upon by Quinn (1980) who identified a strategic process based on ‘logical
incrementalism’. Many works have shown individuals to be biased in their
interpretation of data; prone to accept the first satisfactory option that presents
itself (Simon, 1958, 1990; Tisdell, 1996). Firms are coalitions of individuals, each
cognitively constrained, yet also biased as they bring their own personal
objectives to the organization. Too much environmental scanning can be divisive,
time consuming, and never complete enough to facilitate pure rational decision‐
making (Rowe, 2008).

The Systemic school, which is shown by Thomas (1993) to place the least
‘emphasis on the desirability of rationality’, looks upon economic activity as
something that cannot simply be placed as a detached sphere of impersonal
financial calculation. Granovetter (1985) and Swedberg (1987) found people’s
economic behaviour and rationality to be embedded in a network of social
relations, involving family, religion, the state etc. Strategists cannot operate as
perfectly rational, autonomous individuals; their environment influences them.
They operate to the ‘modus operandi’ of a particular social context (Whittington,
2001). Boundly rational models of Systemic decision‐making must not only take
into account the cognitive limitations of the mind, but also the adaptive
relationship between decision strategies and the ecological, social, and
institutional constraints of the environment (Landa and Wang, 2001).

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Why is there disagreement over the rationality of strategists?

In order to be purely rational, an individual must have the capacity to perceive


without any kind of subjective interpretation that could open up the possibility
of distortion (Stacy, 2011). Through empirical evidence and developed cognitive
understanding, we have seen that humans do not perceive in this manner,
thereby restricting the circumstances in which pure technical rationality can be
applied. As new discoveries and further interpretations emerged (Lindbolm,
1959; Simons, 1960; Quinn, 1978, 1980; Collingridge, 1980), a greater
understanding of the cognitive ability of humans materialized into strategy
schools that demanded more than the oft claimed ‘purely rational decision
maker’ of the Classicists.

5. Conclusions

At this stage, we have identified a number of different areas and subsequent


explanations for why disagreement has arisen in the strategic management field.
Table 1 provides a brief summary.

Area of Disagreement Reasons for Disagreement

Outcomes of Strategy • As strategic management theory has moved


outside of the Anglo‐American periphery in
which it originated, the unitary practice of profit‐
maximization does not necessarily fit with other
societies value.
• Components of social change and the emergence
of new sectors demand more than unitary, profit‐
maximising outcomes of strategy.

Processes of Strategy • Increased volatility, rapid technology advance‐


ments, and hyper‐competition in global markets
have meant that LT planning is less accurate.
This has led to an increase in the utility of
emerging strategies.
• Different industries find certain strategy pro‐
cesses to be more suitable than others.

• Advances in cognitive studies and the failure of


Rationality of Strategists
strictly rational quantitative models have facili‐
tated the belief that humans are ‘boundedly
rational’. Table 1. 12
While we need to recognise the differences and disagreements found above, they
need not overwhelm us. Incompatible approaches can still be merged together in
practical situations, even if the mix will fluctuate from one set of problems to the
next (Jones, 1993). Rather than get overly occupied in the disagreements, a more
valuable proposal is to categorize certain ‘industries’ that would be most suited
within Whittington’s four schools. Whilst not providing a panacea to solve all
disagreements, it gives strategists a better understanding of the type of strategy
school they may first consider. Based on cumulative evaluations carried
throughout this paper, we can draw Fig. 4 to summarize the nature of firms for
which different strategy schools may carry the greatest utility.

Outcomes

Classical Evolutionary
Profit Max

• Capital Intensive • Small, Emerging Firms


• Mature Indusrties • Anglo‐Saxon
• Monopoly Power • Conglomerates
• E.g. Mining, Airlines,
Nuclear Power Plants
Processes

Deliberate Emergent

Systemic Processual
Pluralistic

• Family and State Firms • Knowledge‐Based


• Non‐Anglo‐Saxon Firm
• Non‐Prolit Orgs • Protected
• E.g. Social Bureaucracies
entrepreneurs, Ethics

Fig 4. Different Contexts for Strategy (adapted from Whittington, 2001:120).

The vital concluding remark is to confirm that no body of knowledge on strategy


is omniscient and sacrosanct. Disagreement is always likely to remain.

“Thus, if I am to accept Henry’s (Mintzberg) verdict, I have spent 40 years


contributing solutions which are not useful in the practice of strategic
management. Therefore, it should not be surprising that I rise in defence of the
school to which I belong in an effort to set the record straight and thus salvage a
lifetime of work.” (Igor Ansoff, 1991: 450)
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What is important is that managers and interested parties alike, understand the
reasons for disagreement in strategy, and then use this understanding to their
advantage in plotting the most effective course for their organisation (Jenkins
and Ambrosini, 2007). The theories found within Whittington’s framework are
not independently designed to supply all of the answers. It is our responsibility
to understand and use constructively the theories and their subsequent critique,
to better guide us in forming decisions and making judgements, which will affect
the future of our organisations.

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