Harvard Business School 9-399-179

Rev. November 1, 1999

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The Processes of Strategy Definition and

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Implementation
When described in concise, exquisitely written Harvard Business School cases, companies’
strategies usually appear to be the product of a planned, organized and rigorous planning process.
However, the way that business strategies come to be defined in the real world is actually quite
different. New strategies often coalesce as an accumulation of day-to-day operating and

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prioritization decisions in the absence of or in spite of top management intentions. Leaders need to
understand the processes by which strategies are shaped in order to guide their companies
effectively.

Intended and Emergent Strategies

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Henry Mintzberg and James Waters define strategy as “a pattern in a stream of decisions.”
This definition emphasizes an organization’s actions rather than the statements it makes about its
plans and objectives. They call plans created by an organization’s leadership or by consultants
employed by senior management intended strategies. Usually intended strategies are developed in
discrete projects through analytical processes—companies often invest significant amounts of time
and expense to define just what their business is framed around.
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Intended strategies might be executed exactly as envisioned if three conditions are met. First,
those in the organization must understand each important detail in management’s intended strategy.
Second, if the organization is to take collective action, the strategy needs to make as much sense to
each member of the organization as they view the world from their own context, as it does to the
management. Finally, the collective intentions must be realized with little unanticipated influence
from outside political, technological or market forces. Since it is difficult to find a situation where all
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three conditions apply, it is rare that an intended strategy can be implemented without significant
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alteration.

In many of the companies they studied, Mintzberg and Waters saw a pattern of actions that
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were carried out “despite, or in the absence of, intentions.” Emergent strategies—as they call them—
result from other, often unforeseen threats or opportunities that demand response in the daily work
of those managers who are tasked with executing the organization’s strategy. Others have
commented on this disconnect between the strategies which the top management of companies
develops and the strategies which end up being executed through day-to-day operating decisions of
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Professor Clayton Christensen and Jeremy B. Dann, Research Associate and MBA '98 prepared this note as the basis for
class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
Copyright © 1999 by the President and Fellows of Harvard College. To order copies or request permission to
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 399-179 The Processes of Strategy Definition and Implementation

line managers. Andrew Grove, former CEO of Intel, described the difference between strategic plans

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and strategic actions in his book, Only the Paranoid Survive. “I’m convinced that corporate strategy is

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formulated by a series of [strategic actions], far more so than through conventional top-down
strategic planning….In my experience, the latter always turns into sterile statements, rarely gaining
traction in the real work of the corporation. Strategic actions, on the other hand, always have real
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impact.” In essence, to understand companies’ actual strategies, pay attention to what they do, rather
than what they say.

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A case in point is the push by Japan’s Honda into the American motorcycle industry. During
the immediate post-War era in Japan, Honda became a supplier of small, rugged “Supercub”
motorcycles that could easily maneuver through the country’s congested urban areas. In 1959, sales
of the bike grew to almost 300,000 units, and management, eager to take advantage of the low-
production costs for exports, targeted the North American market. Research showed that Americans
used motorcycles for long, over-the-road excursions, rather than the type of short trips the Supercub
was designed for. Even though it took the company out of its area of expertise, Honda engineers
developed a powerful bike for the American market. With its well-reasoned intended strategy,

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Honda management sent three employees to Los Angeles to ramp up the marketing and sales efforts
for the powerful new motorcycle.

The three employees ran into a series of setbacks in America. Most motorcycle dealers were
unwilling to accept an untested product line. When the team finally sold a few hundred units,
Honda’s inexperience in design for vehicles in highway use became apparent as clutch problems and
oil leaks severely damaged the engines. Repairs on warrantied bikes were a significant drain on the
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company.

The Honda employees responsible for US sales efforts looked for some release for their
frustrations and vented steam by “dirtbiking” their Supercubs through the hills of Los Angeles. Some
neighbors saw their “dirt-biking” activities and thought it looked fun. As more and more people
began requesting a motor-bike so they could participate in the off-road biking activity, the Honda
representatives realized they were onto something. They tried to convince Honda management to
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switch strategies, foregoing the difficult opportunities in the market for powerful over-the-road
cycles and instead to focus on a wide-open, but untested market for recreational off-road dirt bikes.
An emergent strategy began to coalesce.

The US Honda representatives still found it difficult to push their products through the
traditional motorcycles sales channel. Instead of continuing to pursue motorcycle dealers, they
sought to convince sporting goods retailers to carry the product line. Since Honda’s small bike
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designs were world-class, once it gained a foothold in this new channel, the popularity of the bikes
began to soar. Production volumes increased, prices were lowered and Honda became the dominant
player in the US motorcycle market. At this point, with its greater understanding of the forces at
work in the market, Honda’s intended strategy could take hold. Traditional giants of the industry
found they could not compete with Honda in this growing segment of the market, and tried to play
to their strengths by emphasizing sales of larger and more powerful bikes. Firmly entrenched in the
American market, by 1970, Honda began to introduce successful upmarket products that further
eroded the positions of other players. By 1988, it was the dominant brand in America, almost by
accident.
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The Resource Allocation Process

The key process that filters both the intended and emergent factors during strategy
formulation and implementation is called the resource allocation process. It is the process through
which proposals to invest capital, talent and other resources to develop new products, services and
processes are evaluated. In the resource allocation process, some proposals get approved and are

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 The Processes of Strategy Definition and Implementation 399-179

accorded high priority. Some get approved but are given lower priority. Many proposals never get

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approved, and never get the resources they require to be developed and implemented successfully.

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Professor Joseph L. Bower, of the Harvard Business School and Professor Robert Burgelman
of the Stanford Business School, who have documented how resources get allocated among
competing proposals, note that the vast majority of ideas for developing new products, services and
processes “bubble up” from employees within the organization. The middle managers cannot carry
all of the ideas up to senior management for approval and funding, and must decide which of the

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ideas bubbling up to them they will throw their weight behind, and which they will allow to
languish. The middle managers’ decisions play a crucial role in the resource allocation process which,
in turn, has a primary effect on the definition and implementation of strategy.

Bower suggests that generally, proposals go through a process comprising four components:
definition—the articulation of the problem or idea; impetus—the determination of whether the defined
proposal is viable and worthy of support or funding; structural context—the organizational forces
that influence the definition and impetus processes; and measurement—the determination of the

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proposal’s return on investment.

The impetus process that occurs during the resource allocation process can be shaped by a
variety of circumstances. In making their decisions about which proposals to support when
submitting to the senior levels, middle managers apply certain criteria to the formal and informal
proposals they receive. Some of these criteria come down from senior management in the form of
intended strategies and investment hurdle rates. Some criteria come from the organization’s choice
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of customers, or from the pressure to satisfy shareholders and Wall Street. Other criteria, however,
are created at the middle management layer itself. For example, middle managers in most companies
are under strong pressures to meet operating budgets. They are eager to back ideas that will easily
help them meet their numbers, but would find it difficult to support proposals which might lower
their performance levels, even temporarily. Similarly, middle managers’ own career ambitions exert a
powerful influence on how resources get allocated. Backing an innovative, but risky proposal that
ultimately fails, can derail the career of a good manager.
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Many human resource systems are designed to promote good managers about every two
years. Because their performance determines how rapidly they will rise in the organization, middle
managers feel deep pressure to achieve results within the timeframe defined by their career
trajectory, and will make prioritization decisions based on that criteria. Bower writes that the
manager not only “puts his reputation for good judgement on the line,” but, “is careful in computing
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the costs and benefits to him of making such a commitment.” Managers will tend to push forward
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those proposals that are certain to achieve results within the time period set by internal promotion
systems, and quite naturally, will often allow riskier ideas to wither, unfunded.

Many factors influence how resource allocation decisions actually get made—and they get
made at every level of the company, ranging from executive-level decisions to acquire companies and
build plants, to salesperson-level decisions about which products to push, and which customers to
call.

The diagram below illustrates how the resource allocation process acts as the gate through
which the intended and emergent inputs into the strategy development process must pass. Those
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who allocate resources must filter the alternatives through such screens as the organization’s culture
and capabilities, customer demands, their own career management, financial market pressure,
organizational planning methods, and the need to meet the bottom line. Once the resource allocation
decisions are made, new products, services and processes are developed that define the actual
strategy that is implemented. This leads to results, which then creates better understanding which
feeds back into the intended strategy flow. The results also create new unanticipated crises and
opportunities, which feed back into the emergent strategy flow—in a continuous process.

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 399-179 The Processes of Strategy Definition and Implementation

Seen in this light, the division in some people’s minds that strategies are first formulated,

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and then implemented, is a false one. Strategy formulation—whether intended or emergent—occurs

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at the beginning of the process and then continues as the resource allocation process defines what the
company actually does. Strategy is never static—each resource allocation decision, no matter how
slight, continually shapes what the company actually does, creates a new set of opportunities, and
generates new intended and emergent contributions into the process.

Figure 1: Processes of Strategy Formulation and Implementation

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Filters

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Intended Resource Allocation Emergent
Strategy: Process: Strategy:
Analytical project Decisions about what to do, Response to
followed by what not to do, and what to unforeseen
implementation prioritize opportunities
and crises
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New products,

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services, processes,
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Actual strategy
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Results

Implications: The Mixing of Intended and Emergent Strategies

Describing a certain company’s strategy as “intended” or “emergent” does not mean passing
judgement in any way on the effectiveness of the strategy or the firm’s management. The strategy
types explained above all have different benefits and drawbacks depending on the firm’s
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environment. In particular, Mintzberg and Waters point out that a tendency toward emergent
strategies within a company does not imply that the management or the organization are weak.
“Emergent strategy itself implies learning what works—taking one action at a time in a search for
that viable pattern or consistency. It is important to remember that emergent strategy means, not
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chaos, but, in essence, unintended order.” In early stage companies and industries, strategies tend to
be dominated by emergent forces. Many strategies which writers describe subsequently as
“intended” were in fact emergent strategies whose success was later recognized and understood, and
then formalized by an organization. Emergent elements in a strategy development process can be

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infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.
 The Processes of Strategy Definition and Implementation 399-179

thought of as a feedback loop to adjust organizational direction on an ongoing basis. “Openness to

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emergent strategy enables management to act before everything is fully understood—to respond to

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an evolving reality rather than having to focus on a stable fantasy.”

Endnotes

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1
Mintzberg, Henry and James Waters. “Of Strategies, Deliberate and Emergent,” Strategic
Management Journal, Vol. 6, 1985, p. 257.
2
Ibid., p. 258
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Ibid., p. 257.

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4
Grove, Andrew. Only the Paranoid Survive. (Doubleday: New York, 1996), p. 146.
5
Christensen, Clayton M. The Innovator’s Dilemma: When New Technologies Cause Great Firms to
Fail. (Harvard Business School Press: Boston, 1997), p.153-156.
6
Bower, Joseph L. Managing the Resource Allocation Process. (Harvard Business School Press:
Boston, 1986)
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Burgelman, Robert A. and Leonard Sayles. Inside Corporate Innovation, (The Free Press: New
York, 1986)
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Bower, Managing the Resource Allocation Process.
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Ibid., p. 68.
10
Mintzberg and Waters, “Of Strategies,” p. 271
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11
Ibid.
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