10/3/2018 Miles and Snow Typology - strategy, organization, levels, model, type, company, business, Further studies

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MILES AND SNOW TYPOLOGY

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In their 1978 book Organization Strategy, Structure, and Process, Raymond E. Miles and Charles C.
Snow (/knowledge/C__P__Snow.html) argued that different company strategies arise from the way
companies decide to address three fundamental problems: entrepreneurial, engineering (or operational),
and administrative problems. The entrepreneurial problem is how a company should manage its market
share. The engineering problem involves how a company should implement its solution to the
entrepreneurial problem. The administrative problem considers how a company should structure itself to
manage the implementation (/knowledge/Implementation.html) of the solutions to the first two problems.
Although businesses choose different solutions to these problems, Miles and Snow suggested that many
companies develop similar solutions. As a result, they postulated that there are four general strategic
types of organizations: prospector, defender, analyzer (/knowledge/Analyser.html), and reactor
organizations.
Prospector organizations face the entrepreneurial problem of locating and exploiting new product and
market opportunities. These organizations thrive in changing business environments that have an
element of unpredictability, and succeed by constantly examining the market in a quest for new
opportunities. Moreover, prospector organizations have broad product or service lines and often promote
creativity over efficiency. Prospector organizations face the operational problem of not being dependent
on any one technology. Consequently, prospector companies prioritize new product and service
development and innovation to meet new and changing customer needs and demands and to create
new demands. The administrative problem of these companies is how to coordinate diverse business
activities and promote innovation. Prospector organizations solve this problem by being decentralized,
employing generalists (not specialists), having few levels of management, and encouraging collaboration
(/knowledge/Collaboration.html) among different departments and units.

Defender organizations face the entrepreneurial problem of how to maintain a stable share of the
market, and hence they function best in stable environments. A common solution to this problem is cost
leadership, and so these organizations achieve success by specializing in particular areas and using
established and standardized technical processes to maintain low costs. In addition, defender
organizations tend to be vertically integrated in order to achieve cost efficiency. Defender organizations
face the administrative problem of having to ensure efficiency, and thus they require centralization,
formal procedures, and discrete functions. Because their environments change slowly, defender
organizations can rely on long-term planning.

Analyzer organizations share characteristics with prospector and defender organizations; thus, they face
the entrepreneurial problem of how to maintain their shares in existing markets and how to find and
exploit new markets and product opportunities. These organizations have the operational problem of
maintaining the efficiency of established products or services, while remaining flexible enough to pursue
new business activities. Consequently, they seek technical efficiency (/knowledge/X_inefficiency.html) to
maintain low costs, but they also emphasize new product and service development to remain
competitive when the market changes. The administrative problem is how to manage both of these
aspects. Like prospector organizations, analyzer organizations cultivate collaboration among different
departments and units. Analyzer organizations are characterized by balance—a balance between
defender and prospector organizations.

Reactor organizations, as the name suggests, do not have a systematic strategy, design, or structure.
They are not prepared for changes they face in their business environments. If a reactor organization
has a defined strategy and structure, it is no longer appropriate for the organization's environment. Their
new product or service development fluctuates in response to the way their managers perceive their
environment. Reactor organizations do not make long-term plans, because they see the environment as
changing too quickly for them to be of any use, and they possess unclear chains of command.

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10/3/2018 Miles and Snow Typology - strategy, organization, levels, model, type, company, business, Further studies
Miles and Snow argued that companies develop their adaptive strategies based on their perception of
their environments. Hence, as seen above, the different organization types view their environments in
different ways, causing them to adopt different strategies. These adaptive strategies allow some
organizations to be more adaptive or more sensitive to their environments than others, and the different
organization types represent a range of adaptive companies. Because of their adaptive strategies,
prospector organizations are the most adaptive type of company. In contrast, reactor organizations are
the least adaptive type. The other two types fall in between these extremes: analyzers are the second
most adaptive organizations, followed by defenders.

Since business environments vary from organization to organization, having a less adaptive strategy
may be beneficial in some environments, such as highly regulated industries. For example, a study of
the airline industry in the 1960s and 1970s indicated that the defender airlines were more successful
than the prospector airlines in that the business environment changed slowly during this period because
of the heavy regulation. Hence, the emphasis on efficiency by the defender airlines worked to their
advantage.

On the other hand, prospector organizations clearly have an advantage over the other types of
organizations in business environments with a fair amount of flux. Companies operating in mature
markets in particular benefit from introducing new products or services and innovations to continue
expanding. As Miles and Snow note, no single strategic orientation is the best. Each one—with the
exception of the reactor organization—can position a company so that it can respond and adapt to its
environment. What Miles and Snow argue determines the success of a company ultimately is not a
particular strategic orientation, but simply establishing and maintaining a systematic strategy that takes
into account a company's environment, technology, and structure.

FURTHER STUDIES
Scholars have attempted to verify the reliability and validity of the Miles and Snow typology. Such a study
by Shortell and Zajac indicated that this typology of strategic orientations and its predictions generally
were accurate. They found that prospectors are likely to be the first organizations to adopt new products
and services, analyzers are likely to be the first organizations to adopt new managerial procedures and
systems, and defenders are usually the first organizations to adopt new production-related technology.
Moore carried Miles and Snow's framework to the retail environment, and concluded that the typology is
generally applicable to retail contexts.

Other researchers further broadened the scope and applicability of Miles and Snow's typology, relating
the strategic approaches strategic decision processes, international strategies, and functional areas
within organizations. Subramanian, Fernandes, and Harper (/knowledge/Harper.html) found that
strategic types differed in terms of how managers perform environmental scanning. Prospectors tended
to be more proactive in their scanning, followed by analyzers; defenders tended to be less proactive or
"ad hoc."

As an example of the effects of functional expertise in an international context, Naranjo-Gil explored the
impact of sophisticated accounting information systems on strategic performance among hospitals in
Spain. Findings indicated that performance was enhanced primarily through sophisticated accounting
information systems' role in implementing the prospector strategy.

Clearly, the Miles and Snow typology has contributed to our understanding of organizational behavior in
a variety of settings. As demonstration for its further applicability, Peng, Tan, and Tong
(/knowledge/Tong.html) studied firms in the emerging Chinese economy. These authors concluded that
the type of firm ownership can help predict strategic group membership. Specifically, state-owned
enterprises tended to adopt defender strategies, and privately-owned enterprises tended to adopt
prospector strategies. The analyzer orientation was also represented, most commonly under collective
(/knowledge/Collective.html) and foreign ownership. Future research efforts aimed at the extension of
Miles and Snow's typology to international settings appears warranted.
SEE ALSO: First-Mover Advantage (../Ex-Gov/First-Mover-Advantage.html) ; Generic Competitive
Strategies (../Ex-Gov/Generic-Competitive-Strategies.html) ; Innovation (../Gr-Int/Innovation.html) ;
Technology Management (../Str-Ti/Technology-Management.html)

Karl Heil

Revised by Bruce Walters

FURTHER READING:
Fox-Wolfgramm, Susan J., Kimberly B. Boal, and James G. Hunt. "Organizational Adaptation to
Institutional Change: A Comparative Study of First-Order Change in Prospector and Defender Banks."
Administrative Science Quarterly, March 1998, 87.

Ghobadian, Abby, et al. "Evaluating the Applicability of the Miles and Snow Typology in a Regulated
Public Utility Environment." British Journal of Management, 15 September
(/knowledge/September_15.html) 1998, S71.

Miles, Raymond E., and Charles C. Snow. Organizational Strategy, Structure, and Process. New York:
McGraw-Hill, 1978.

Moore, M. "Towards aConfirmatory Model of Retail Strategy Types: An Empirical Test of Miles and
Snow." Journal of Business Research 58 (2005): 696–704..
Naranjo-Gil, D. "The Role of Sophisticated Accounting Systems in Strategy Management." International
Journal of Digital Accounting Research 4, no. 8 (2004): 125–144.

Peng, M. W., J. Tan, and T.W. Tong. "Ownership Types and Strategic Groups in Emerging Economies."
The Journal of Management Studies 41 (2004): 1105–1129.

Ramaswamy, Kannan, Anisya S. Thomas, and Robert J. Litschert. "Organizational Performance in a

Regulated Environment: the Role of Strategic Orientation." Strategic Management Journal, January
1994, 63.

Shortell, Stephen (/knowledge/Stephen.html) M., and Edward J. Zajac. "Perceptual and Archival
Measures of Miles and Snow's Strategic Types: A Comprehensive Assessment of Reliability and
Validity." Academy of Management Journal (1990): 817.

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10/3/2018 Miles and Snow Typology - strategy, organization, levels, model, type, company, business, Further studies
Subramanian, R., N. Fernandes, and E. Harper. "An Empirical Examination of the Relationship Between
Strategy and Scanning." Mid-Atlantic Journal of Business 29 (1993): 315–330.

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