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					Strategy
Is it a plan, a plot, a learning curve? No – its strategy!
The Organization in its Environment



                     ENVIRONMENT

                        ORG
            Inputs                 Outputs
Environment affect the strategy


    • So what is strategy…?
Strategy
 ”Strategy is a rule for making decisions under conditions of partial ignorance,
 whereas policy is a contingent decision. Business strategy is the broad collection of
  decision rules and guidelines that define a business’ scope and growth direction.”

                                                                          – Ansoff 1965

   “Strategy formulation involves the interpretation of the environment and the
      development of consistent patterns in streams of organizational decisions”

                                                                       – Mintzberg 1979

 “Strategy is a broad based formula for how business is going to compete, what its
  goals should be, and what policies will be needed to carry out those goals.
                  The essence of formulating competitive strategy is
                       relating a company to its environment.“

                                                                           – Porter 1991

 “Strategy concerns creating a vision of the future and the means and policies which
                  will enable the organization to reach that vision”

                                                                   - Edwards et al 1991
                                                                                           4
My simple take on strategy

       Strategy = Desired future – Current status

   So strategy is all that happens between the offset
   and at the point we decide that we are at the goal

                       Is it a plan?
                    A learning curve?

 Lets lets take a look at how we plan a (strategy) project
  and see how that concurs with our level of knowledge
                                                             5
Strategy Safari (Mintzberg et al.)




                                     6
THE ENTREPRENEURIAL
SCHOOL




                          42501 - Organizations and IT
Strategy Formation as a
VISIONARY PROCESS
What is describing the
Entrepreneurial School?

• The strategy formation process is focused on   the single leader




                                                                     42501 - Organizations and IT
• Strategic vision is a central aspect
Strategic thinking as “seeing”

• Seeing ahead     • Seeing beside

• Seeing behind    • Seeing beyond

• Seeing down      • Seeing it through

• Seeing below
                                         42
                                         50
                                         1-
                                         Or
Difference in making decision
        Entrepreneur                     Administrator

• What recourse do I control?   • Where is the opportunity?
• How can I minimize the        • How do I capitalized on it?
 impact of others on my         • What recourses do I need?
 ability to perform?            • How do I gain control over
• What opportunity is            them?
 appropriate?
                                                                42
                                                                50
                                                                1-
                                                                Or
Characteristics of the
entrepreneur
• Strategy making is dominated by the active search for new opportunities

• Power is centralized in the hands of the chief executive - bold courses of




                                                                               42501 - Organizations and IT
  action

• The chief executive thrives in conditions of uncertainty, where the
  organization can make dramatic gains

• Growth is the dominant goal of the entrepreneurial organization – the
  need of achievement
Visionary leadership
• True vision is something you can see in your mind‘s eye

• A vision has to distinguish an organization

• Vision articulates a view of a realistic, credible future for the




                                                                         42501 - Organizations and IT
  organization

• A vision should be simple, easily understood, clearly desirable, and
  energizing
Contribution, Critique &
Context of the
Entrepreneurship School
  • Aspects of strategy formation:
    • Analysing the consequences of vision is important because




                                                                         42501 - Organizations and IT
      problems do occur frequently in entrepreneurial situations.

    • The role of the leader to catalyze a clear shared vision for the
      organization which can be accomplished through a wide variety of
      management styles.

    • Leadership and rich vision in usually needed in an organization,
      since direction must be set and niches secured.
THE DESIGN
SCHOOL




                                                                    42501 - Organizations and IT
Strategy Formation as a
PROCESS OF CONCEPTION




                          "Gentlemen, let us pool our expertise."
Introduction to the Design
School
• The most influential view of the strategy-formation process.

• “Establish fit” is the motto of the Design School.




                                                                 42501 - Organizations and IT
• General Management group at the Harvard Business School
  • Business Policy: Text and Cases, 1965
Basic Design School model
                  • Appraisals of the
                    external and internal
                    situations.




                                               42501 - Organizations and IT
                  • SWOT model as
                    centerpiece.

                  • A “Creative act”

                  • Evaluate alternative
                    strategies: consistency,
                    consonance, advantage,
                    feasibility.
Critique of the Design School
• Narrow perspectives to particular contexts.

• Assessment of strengths and weaknesses: bypassing learning.
  ▫ How does an organization know its strengths and weaknesses?




                                                                      42501 - Organizations and IT
• Structure follows strategy... as the left foot follows the right.
  ▫ Yet what ongoing organization can ever wipe the slate clean
     when it changes its strategy?

• Making strategy explicit: promoting inflexibility.
  ▫ How can a company come "to grips with a changing
    environment" when its "strategy is [already] known" ?
Contexts and contributions
4 conditions to tild toward the design school model :

1.   One brain can handle all of the information relevant for strategy
     formation




                                                                              42501 - Organizations and IT
2.    That brain is able to have full, detailed, intimate knowledge of the
     situation in question.

3.   The relevant knowledge must be established before a new intended
     strategy has to be implemented.

4.   The organization must be prepared to cope with a controlly articulated
     srategy.
The Planning School
                      19
The strategic Planning:
Definition
• It’s projecting where your organisation expects to be in 5, 10
  or 15 years and how your association will get there.
• Strategies result decomposed into distinct steps.
• Responsibility for that overall process rests with the chief
  executive in principle; responsibility for its execution rests
  with staff planners in practice.
• Strategies appear from this process full blown, then they can
  be implemented through detailed attention to objectives,
  budgets, programs, and operating plans of various kinds.



                                                                   20
The strategic Planning: The
Basic Model
“…take the SWOT model, divide it into neatly delineated steps, articulate
each of these with lots of checklists and techniques, and give special
attention to the setting of objectives on the front end and the
elaboration of budgets and operating plans on the back end”




 1.   The objectives-Setting
 2.   The external Audit
 3.   The internal Audit
 4.   The strategy Evaluation
 5.   The strategy Operationalization
 6.   Scheduling the whole Process
                                                                            21
Recent Developement:
Scenario Planning
• If you cannot predict the future, then by speculating upon a
  variety of assumptions, perhaps, hit upon the right one.




                                                                 22
Recent Developement:
Strategic Control
• Is a means to review and accept proposed strategies
• Robert Simons’ four levers of control:
  •   Belief Systems
  •   Boundary Systems
  •   Diagnostic Control Systems
  •   Interactive Control Systems




                                                        23
 The fallacy of
 Predetermination
  • Strategic Planning relies on:
    • Predicting the course of the environment
    • Controlling it
    • Or Assuming its stability



« I think there is a world market for about 5 computers »
        (Thomas J.Watson President of IBM, 1948)




                                                            24
The fallacy of Detachement
• Strategists are detached from the objects of their strategies
• The data upon which strategists rely can be flawed due to
  excessive aggregation/missing contextual information




                                                                  25
The fallacy of Formalization
• The process of making strategy is too complex to be
  formalized
• Based on the notion that formal system outperforms human
  systems in terms of information processing and decision
  making
• Hinders new strategies and new interpretations




                                                             26
  Conclusion


                   Black Box
Strategy                         Strategy
Analyst                of        Programmer
               Strategy Making


                   Strategy
                   Catalyst


                                       27
Porter on strategy
• Strategy is (also) about trying to establish a perceived difference
  that the company can preserve – it must:
• Deliver greater value to customers
• Create comparable value at lower cost
• Or do both

• A strategy should also provide a future direction for the
  company and actions to reach the goal.




                                                                        28
                      Resource-based view
S                     Competences              Products

                     Financials
W                                            Business processes



      Strategic                         Strategic            Strategic
         idea                           process                plan


O                                      Socio-cultural
                          Political
                                            Technical
T                         Environmental    Business models
                                      Competitors
By Niels Bjørn-Andersen                                                  29
                                                                         29
SWOT analysis




                30
Elaborate SWOT analysis - example




                                    31
Introduction to the
”Positioning School”
• Strategy formation as an analytical process

• Focuses on the selection of strategic positions

• Also called “Strategic Management”




                                                               Positioning School
• Only a few key strategies should be used in any industry -
  Generic strategies
The First Wave
• Sun Tzu, 400 B.C
  • The Art of War (1971)

    “Generally, he who occupies




                                                                       Position School
    the field of battle first and

    awaits his enemy is at ease; he who comes later to the scene and
    rushes into the fight is weary.” ( The first mover advantage)
The First Wave
• Von Clausewitz
  • On War (1989)

    “To make strategy happen,




                                                                     Position School
    it is necessary to put together

    an organization with a formal chain of command in which orders
    are executed without question.”
The Second Wave
• BCG and the “Growth –Share Table”




                                      Position School
The Second Wave
• BCG and the “Experience Curve”
  • firms learn from experience—at a constant rate.




                                                                    Position School
• PIMS (Profit Impact of Market Strategies)
  • Data base for sale

  • Indentifies a number of strategy variables

    “…a trained strategist can usefully function in any business”

    “Product characteristics don't matter“ (S. Schoeffler)
The Third wave - Michael Porter

• Bargaining Power of Firm's
  Suppliers – Power struggle, less to
  loose wins
• Bargaining Power of Firm's
  Customers - depends on how
  much they buy, how well




                                                                                 Position School
  informed they are with
  alternatives
• Threat of New Entrants -
  "barriers to entry” economies of
  scale, basic capital requirements,    Porter's Model of Competitive Analysis
  and customer loyalty                             ”The five forces”
• Threat of Substitute Products –
  No one is irreplaceable
• Rivalry - Factors colide, War or
  peaceful diplomacy
   Porter's Generic Strategies




                                                                                             Position School
"three generic strategies for achieving above-average performance in an industry:
cost leadership, differentiation, and focus”

•Cost Leadership gaining experience, large-scale production facilities, economies of scale,
•carefully monitoring overall operating costs
•Differentiation. This strategy involves the development of unique products or services, relying
on brand/customer loyalty.
•Focus. This strategy seeks to serve narrow market segments. A firm can "focus" on particular
customer groups, product lines, or geographic markets.
Porter's Value Chain




                                                                                Position School
   Primary activities
   - Inbound logistics (receiving, storing, etc.)
   - Operations (or transformation)
   - Outbound logistics (order processing, physical distribution, etc.)
   - Marketing and sales
   - Service (installation, repair, etc.)

   Support activities exist to support primary activities
   - infrastructure (including finance, accounting, general management, etc.)
Summary
• Limited set of strategies existing
• Few positions for advantage in market place
• Positions can be defended
• Low defence needed means high profit
•




                                                                         Position School
  Strategies are generic and identifiable positions in the marketplace
• Strategy formation process is selecting position based on analytical
  calculation
• Top manager has control over choices
           Options for Evolving Strategy
                    Enhance              Expand              Extend              Exit

Product             Improve quality,     Add new products    N/A                 Drop a feature, a
                    lower costs, >       or services                             service or a
                    ease-of-use, add                                             product
                    feature

Market              Attract new          Expand into new     N/A                 Exit a market,
                    customers within     markets,                                segment, or
                    existing market      segments, or                            geographic region
                                         geographies

Channel             Improve quality,     Add a new           N/A                 Exit a channel
                    cost, or capacity    channel
                    of current channel

Value/chain         Improve relations    Add new suppliers   N/A                 Stop doing
                    with current         or partners,                            business with a
Network             partners,            outsource an                            supplier or
                    suppliers            activity                                partner, insource

Business            Improve the align-   Add new revenue     Extend into a new   Exit a business or
                    ment or              streams             business or adopt   business model
Model               economics of                             a new Bus Mod
                    current Bus Mod

   By Niels Bjørn-Andersen                                                                            41
 Mission

Mintzberg defines a
   mission as follows:
   “A mission describes
   the organization's
   basic function in
   society, in terms of the
   products and services
   it produces for its
   customers”.



                              42
Vision
To succeed in the long term, businesses need a vision of how
  they will change and improve in the future.
The components of an effective business vision – six key
  requirements:
• Provides future direction
• Expresses a consumer benefit
• Is realistic
• Is motivating
• Must be fully communicated
• Consistently followed and measured

                                                               43
THE COGNITIVE SCHOOL
The Cognitive School
• Strategy formation as a mental process
• Terra Incognita (Unknown land)
Biases and distortion
TYPE
• Search for supportive evidence
• Illusory correlation
• Selective perception
• Wishful thinking
• Underestimating uncertainty

EFFECT
• Reasoning by analogy
• Illusion of control
• Escalating committment
Cognition as Mapping
• “Framed Construction” = Map: Navigation through confusing
  terrain with some kind of representative model.

• When you are lost, any map will do.
  • A wrong mental representation is
    better than no representation at all,
    at least it gives encouragement, and
    so can stimulate action.
Cognition as Mapping (2)
• In management: different kinds of maps, all with its own uses.
• One example: schemas.
  • Representing knowledge on different levels – allows people to
    create the full picture by filling in the blanks.
  • Implicit assumptions go with a schema.
  • Oil crisis example.
Psychological Frames and
schemata.
Personal Schemata                                            Group Frames




                A group needs many frames to avoid Group think
Frames
• Exclusive
  • Include certain messages, and exclude others
• Inclusive
  • Exclude certain messages and include others
Environments
• The Objective Environment
  • "organization“ is embedded within an "environment" that has an external and
    independent existence
• The Perceived Environment
  • Strategists are permanently trapped by bounded rationality
• The Enacted Environment
  • Organizations and environments are convenient labels for patterns of activity
Strategy Safary,
The Learning School
                 Group 5
Introduction:

    “Strategic management becomes "no longer just the
    management of change but management by change“
                       (Lapierre in Mintzberg)



  Only 10% of formulated strategies
      actually get implemented
         (Kiechel in Mintzberg)
Collaboration between different levels:


•Not only top and middle managers
should work the strategy up, line
managers and employees as well               Top
                                             man.
•There has to be a direct communication
between all the organization levels         Middle
•Feedback
                                            man.

•Google´s way of working: Every single    Line man. &
employee is given the chance
to create strategies.                      employees
Learning Strategy:

• Strategy is a non-linear process

• Incorporating “lessons learned” in to future plan on
  all levels and result in common learning

• No “hidden strategists”
Key strategic issues:
Base model of strategy formation:
• 1. Let the strategy emerge (it cannot be forced)

• 2. Anywhere and anyone

• 3. Strategies become organizational when they
  become collective

• 4. Proliferation not necessarily managed

• 5. New strategies tend to pervade the organization during period of
  change
Learning from Diversifying:
• Develop small business that are closely tied to the traditional
  ones

• Relate similarities between traditional and new business

• Experiment in order to learn

• Accurate knowledge comes up with experience
Critique of The Learning School:
• Can lead to having no strategy

• Planning ahead is difficult

• Not good in crisis (chaos theory) and not good in stable
  environments

• Many small sensible steps does not
  necessarily lead to one good strategy
Join two other groups and Camilla, Zakia or me

PRESENTATION TIME!
Strategy formation as a process of negotiation.

THE POWER SCHOOL
The Power School
• Characterizes strategy formation as an overt process of
  influence, emphasizing the use of power and politics to
  negotiate strategies favorable to particular interests.

• Power = The exercise of influence beyond the purely
  economic. (and the use of economic power beyond “normal”
  usage)
Micro power
• The play of politics within an organisation
  • Here specifically within the process of strategic management

• Always present
• It is in times of difficult change, when power gets realigned
  that political arenas arise in otherwise healthy organizations.
Strategy Making as a Political
Process
• Workers are not simply compliant and loyal ”labor inputs”.
• Organisations consist of individuals with dreams, hopes,
  jealousies, interests and fears.
• Accordingly, proponents of the Power School argue that:
  • Theres no optimal strategy as competing goals of individuals and
    coalitions will disturb and distord.
• Coalitions within an Organization can play Political games.
Strategy Making as a Political
Process
Bolman and Deal (1997)

 The world of organizational politics:
1) Organizations are Coalitions of various individuals and
    interest groups.
2) There are endureing differences among coalition members.
3) Most important decisions involve the allocation of sacre
    resources.
4) Sacre resources and enduring differences give conflict a
    central role in organizational dynamics. Thus Power is the
    most important ressource.
5) Goals and decisions emerge from bargaining and
    negotiations among stakeholders.
Benefits of Politics
• Seems like everyone fights for power within an organization
• Theres three systems within almost all organizations whose
  means are legitimate (power is officially acknowledged):
• Formal Authority.
• Established culture.
• Certified expertise.
Macro power
• Here strategy development is seen to be a process of negotiation
  between the company and external stakeholders.
Organisations deal with
•   Suppliers
•   Buyers
•   Unions
•   Competitors
•   Investment bankers
•   Government regulators
An organisation can ..
• Simply deal with demand as it arises
• Strategically withhold and disclose information
• Play one group against the other
Strategic Manoeuvring
from Porter on strategic manoeuvring
 • Use superior resources and capabilities
 • Moves that does not threaten competitors goals.
 • Predicting and influencing retaliation
 • Soft impressions, quick actions, and gut feel
Joint process
 • Cooperative relationships
 • Strategic formations
 • Collective strategy
Networks
 • Complex web of interaction
 • Challenged the “lone pioneer” model
Types of strategic alliances
•   Collaborative advertising
•   R&D partnerships
•   Shared distribution
•   Technology transfer
•   Cooperative bidding
•   Cross manufacturing
•   Resource venturing
•   Government and industrial partnering
•   Internal spinoffs
•   Cross-licensing
Premises of the power of
school
Strategy formation is shaped by power and politics

Micro power: strategy making is an interplay between
 persuasion, bargaining and direct confrontation

Macro power: organization promotes its own welfare by
 cooperating with other organizations
Critiques
Strategy formation is not only about power =>
 integration of leadership and culture

Possibility to miss patterns by concentrating attention on
 diviveness and fractioning

Political dimension:
 Positive role on organizations
 Source of a deal of wastage and distortion in
   organizations
   THE CULTURAL SCHOOL




STRATEGY FORMATION AS A
COLLECTIVE PROCESS
                          76
Introduction

                 Culture is all around us – in
                the food we drink, the music
                   we listen , the way we
                communicate and how we do
                        those things

•   Culture was “discovered” in management in the 1980 by analyzing Japanese
    corporations
•   Group of Swedish writers started to pioneer concepts of interpretive side of   77
    culture in 1970s
The Nature of Culture

• Interpretations of the world in activities and
  artefacts.

• A large part of culture is below the conscious
  level.

• Difference between national culture and
  organizational culture.

                                                   78
Resources as the Basis of Competitive
             Advantage
Automobile industry analogy

• Europe - luxury machine


• America - standardized machine

• Japan - LEAN




                                        79
Resources as the Basis of Competitive
Advantage
• Identifying strategic resources, meaning that they offer the
  greatest sustained benefits

  •   Valuability
  •   Rarity
  •   Inimitability
  •   Substitutability




                                                                 80
Critique of the cultural school

• Vague terms

• Discouraging change

   • Emphasises on tradition, roots, connections
   • Makes change look complex and difficult

• Equates strategic advantage with organisational uniqueness


                                                               81
The Environmental
School
The Describing Perspective
(Mintzberg et al, 98)
Basics
• The environment
  • as THE actor
  • sets the direction of the organisation

• Derives from the “contingency theory”
  • No best way to organize, to lead or to make decisions
  • Balance between internal and external situations

• Biological basis
  • Org. would naturally find its “place” in the environment
  • Natural order and selection
  • New organizations bring variety to the population
Strategies
• The environment can vary in its degree of stability, complexity,
  diversity, and hostility
• Strategies will therefore vary accordingly
• Organic and adaptive
  • selection, carrying capacity, variation, and punctuated
    equilibrium, etc
Critiques
• No strategic choice
• No capability of choosing direction / position


• Mutual relationship between organisation and environment
• Merging of and unclear boundaries between the two
Strategies from a Moderate
Perspective
• Acquiescence - fully accepting
• Compromise - partially acceding
• Avoidance - avoiding the need to accept
• Defiance - actively resisting
• Manipulation - attempting to change
The configuration school:

strategy formation as a process
of transformation



(Adapted from Mintzberg et al., 1998:p. 304-347)
Remember the 5P’s:


    As a consequence, the resulting strategies can take the form of
    plans or patterns, positions or perspectives, or even ploys.
    Whatever the form, the strategy must be applied at its own time
    and in its own context.
Mintzberg’s Map of Change Methods
Strategy, tactic and operations
•   What is strategy?
•   What is tactics?
•   What is operation?
•   So what distinct strategy from tactics and operations – and so
    forth?




                                                                     90
My take on strategy, tactics...
• Strategy is more about why we do things
• Tactics is more about what we will do
• Operations is about how we do it

• Keywords: why, what, how and do!




                                            91
    McKinsey 7S strategy instrument
• Strategy          • Contribution to organizations’ strategy
• Structure         • Modification of org. structure to support e-
                      business
•   Systems         • Processes, procedures, information systems
•   Staff           • Break-down of staff
•   Style           • Managerial/ staff style
•   Skills          • Skill-sets of team members
•   Superordinate   • Values & cultures
    goals



                                                                 92
Operational effectiveness vs. strategy
• Michael Porter, professor at Harvard Business School: There is a need
  for distinguishing between operational effectiveness and strategy.

• Operational effectiveness
     • Total Quality Management
     • Benchmarking
     • Outsourcing
     • Partnering
     • Reengineering
     • Change management

      • Operational improvements have often been dramatic, but
        companies do not have the ability to translate gains into
        sustainable profitability.
                                                                          93
A generic strategy process model
                  Strategic analysis
  External                 Internal resources
  environment

               Strategic objective
  Vision and mission    Objectives
                  Strategic definition
  Option            Option           Option
  generation        evaluation       selection
               Strategic implementation
  Planning          Execution        Control
                                                 94
Elements of strategic situation analysis
                   Strategic analysis
  External environment       Internal resources


  Techniques:                      Techniques:
  •Social                          •Resource analysis
  •Legal / Ethical                 •Portfolio analysis
  •Economical                      •SWOT analysis
  •Political                       •Demand analysis
  •Technological                   •Competitor analysis

  IT and environment specific techniques:
  •Stage models of IT development
  •Assessing network opportunities and threats
                                                          95
Objective setting
                         Objectives should be SMART:
          Specific, Measurable, Achievable, Realistic, Time-constraint

Objectives              Strategies to achieve        Key Performance
                        goals                        Indicators
1. Develop revenue      1. Create e-commerce         1. Achieve combined
   from new                facility for standard        revenue of £1m by year-
   geographical            products and assign          end online revenue
   markets                 agents to these markets      contribution of 70%
2. Increase revenue     2. Create e-commerce         2. Increase sales through
   from smaller-scale      facility for standard        retailers from 15% to 25%
   purchases from          products                     of total by year 2. Online
   retailers                                            revenue contribution of
                                                        30%
3. Improve efficiency   3. Develop e-procurement     3. Reduce cost of
   of sourcing raw         systems                      procurement by 5% by
   materials                                            year-end, 10% by year 2.
                                                        Achieve 80% of           96

                                                        purchasing online
End of day
• Use the knowledge you get from the book and
  forthcomming chapters, to develop you idea
  further
• Think, reflect, be open to new ideas and
  perspectives

				
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