The Many Faces of Strategy
How is strategy made? Is it even made or does it emerge and surprise the unsuspecting strategist? What does it mean to develop an informed strategy?
In this edition:
What I Think You Need To Know: Various schools of thought of strategy formulation
This Should Make You Smarter: What do you need to know when making strategies or leveraging strategic thinking?
Through The Systems Thinker’s Lens: What are some behavioral structures at play in the complex world of strategy making?
What is strategy, really? And what is strategic management amid the wild worlds in which organizations run to meet their goals?
In this comprehensive and, in my view, timeless read, strategy theorist Mintzberg and his colleagues — the McGill Gang, as I label them amiably — focus on presenting strategy making across ten schools of thought they've identified through extensive research and literature review. The key question they are after is: how is strategy formed? Is there a right way? How complex is this interdisciplinary field of strategic management? What should the practitioner keep in mind, after all?
Let's explore the key takeaways of Strategy Safari through a few photos I snapped while on this exciting trip.
What I Think You Need To Know
"What makes strategic management an exciting field," argue the authors, "is that practitioners and researchers alike are constantly confronted with a rich and nuanced world, full of surprises, a world that favors imaginative action." While strategy-making is about change, strategy (whether deliberate or emergent, as we shall see) is about continuity. A strategist, then, is successful if they spot such nuances and details, while also focusing on "strategic choice: how and where to find it, or else create it when it can't be found, and then how to exploit it" in an attempt to institute positive change (p. 299).
Indeed, strategy is a whole that gets distorted when described analytically in parts. Systems thinking is thus required although for the life of me I don't know why the authors never referenced that important complex skill in their book.
The authors acknowledge such distortion to strategy as whole in order to discuss 10 aspects — or, schools — of how strategy is formulated and/ or formed. As described below, formulation is deliberate, whereas formation can have emergent elements. After all, nuances and complexities warrant for emergence beyond deliberation.
I've sketched the 10 schools below, grouped by the nature of the majority of the work involved:
Prescriptive schools appeal to our rationality and analytical foray into problems: we design and plan, but we also position for success. Thus, "we should do this or that".
Descriptive schools add a flavor of philosophy, psychology, and art to the mix. Thus, "how do we make strategies?"
The Configuration school turns up and invites the prescriptive and descriptive aspects to integrate into a powerful strategy-making machine that inherits the strengths of the other schools.
The very grouping of strategy-making aspects into prescriptive vs. descriptive aspects provides for the following normative assumptions:
Prescriptive schools focus on the top-down, analytical approaches
Descriptive schools resort to bottom-up, spontaneous approaches with bounded rationality, given the complex, chaotic nature of the environment in which organizations function.
A key message in the book is that "effective strategy-making connects acting to thinking, which in turn connects implementation to formulation" (p. 71). Thus, the two should not be viewed as distinct, discrete phases, but should be integrated for success, which is where the authors' Configuration School enters the play.
Because strategy is a complex whole, it is arguably hard to define, although many such definitions (accurate or confused) exist out there, including what Richard Rumelt has wittingly labeled buzzes or "verbal tics". Thus, the authors provide a five-part working definition of strategy to help the reader join the entertaining safari with intentionality.
Here are their 5 P's, which when integrated give a semblance of strategy:
Strategy as a plan: what do we intend to do?
Strategy as a pattern: what did we do anyways? If what we did was what we planned so deliberately, did anything we didn't plan emerge, from which we can learn? At tis point, the authors provide their first strong argument on the matter: strategies act as high-level umbrellas (think in systems!), and the many details that go under the umbrella shall have to emerge. They are too complex or elusive to plan deliberately.
Strategy as a position: what are some market opportunities and particular products in markets we can pursue?
Strategy as a perspective: what are our ways of doing things?
Strategy as a ploy: how do we maneuver to outwit competition?
The 5 P's allude to an important truth: strategies are about tackling change while instituting stability, as ironic as it may sound. Another ironic factoid is that "strategies are to organizations what blinders are to horses: their presence can be vital, but so can their absence" (p. 18).
Next, let's go to school and learn some more.
The Design School: Establishing Fit
This must be familiar to many: think, then do. First, diagnose. Next, prescribe. Last, act.
This school focuses on strengths, weaknesses, opportunities, and threats (SWOT) and organizational values to create strategy. Then, to evaluate its creation, it examines feasibility, advantage, and consistency.
The immediate problem with this school — and as researchers and practitioners learned — is that it ignores change, which is constant. It separates implementation from formulation, while the two are really a golden braid. It also requires a central strategist of sorts, who is ipso facto isolated from the rest of the environment that often matters more than SWOT.
On the other hand, it is thanks to this school of thought that we started talking about formal notions of strategy, particularly at a time over 80 years ago dominated by an aggressive dearth of knowledge on strategic management.
The Planning School: Formalizing Blueprints
This school extends the rational schemas of design by creating implementable checklists, goals, and budgetary elements, thus focusing on strategic objectives and not merely value.
Besides scenario analyses, this school incorporates many quantitative techniques to pick winning options and discard others. It does so by decomposing (formulating) objectives in the short-, medium-, and long-term, and then scheduling the entire process for implementation. Thus, it analyzes the parts, and then synthesizes the blueprint.
While plans (and their planners) can be of great service when reviewing strategies, "plans by their very nature are designed to promote inflexibility," argue the authors (p. 64), adding that making strategy should not stop at planning where they remain deliberate, but should consider perspectives that go beyond. After all, we are aware of the fallacy of predetermination, according to which you can't really predict much.
There is also another fallacy at play, that of formalization: how can we claim to recreate whatever thinking process was behind some strategy, given the "sophisticated, subtle, ..., subconscious of human cognitive and social processes?" (p. 73)
The Positioning School: Analytical Fun
This is the school that gave birth to a large litter of strategy boutiques — from famous firms to individual strategy consultants.
The key tenet here is using data and analysis to select key market positions (i.e. strategies), thus formulating a course of action. In this sense, we find similar approaches in history, many of which were recorded as early as on Sun Zi's "Art of War," where we even find "first-mover advantage" lessons. Or, more recently, von Clausewitz's "On War," who asserted that "in strategy, everything has to be guessed at and presumed" (p. 89).
Because the positioning school takes in consideration external factors in addition to internal design and uses procedures from the planning school, it represents the prescriptive approach par excellence. Michael Porter's "Competitive Strategy" focused on "systematic approaches based on empirical tests" to contextualize strategy-making to the market structure (p. 100).
The content of strategy, therefore, is the highlight in this school, which redirects focus to single factors in static conditions, rather than the complicated clusters of factors in dynamic conditions. (In an upcoming edition, I will introduce game theory, which concerns single-factor dynamic conditions.)
Enticing as the positioning schools is — after all, the many strategy boutiques and buzzwords, such as market share are its children — it leaves out socio-political variables from its quantification processes. They are hard to quantity, if at all, and introduce bias and tricky assumptions. For instance, this school does not encourage its students "to get out there and learn, but to stay home and calculate" (p. 115). Thus, "managers become codifiers of the past rather than inventors of the future" (p. 117).
While this school puts an emphasis on strategic analysis, which is an important exercise in support of strategy, it cannot be equated with strategy formulation.
The Entrepreneurial School: Envisioning
We hear stories of the inspirational leader centered around a key theme: direction stemming from visionary thinking, without any particular appreciation, inclination, or patience for analytical results. The entrepreneurial school prefers to act quickly, thus allowing for details to emerge, "so that these can be adopted en route" toward strategy making (p. 125). The authors define the entrepreneur — the protagonist of this school — "less broadly as visionary leadership at the helm of the organization" (p. 131).
This visionary leadership, however, tends to centralize strategy as they move toward a niche sheltered from competitive market forces. Although their "forceful leadership and rich vision" help in the early stages of an organization (a startup), "it is better to build a visionary organization than to rely on a leader with mere vision" (quoted on p. 145 from Built To Last by Collins and Porras).
The Cognitive School: The Strategist's Mind
This is a fascinating way to look at strategy making, for it uses the "mind's eye" to map strategy to direct experiences of the individuals developing it. It alludes to the cognitive construction of strategy, whereby the strategist's "mind imposes some interpretation of the environment" (p. 165). The resulting mental model, or cognitive map of the environment outlining factors relevant to the organization, is the actual strategy formation.
While the individual has a cognitive map of the world, a group of individuals introduce the complexity of relationships into the picture. The former is a schema of what the individual sees or believes, whereas the latter is a frame that capture group dynamics with the intent of resolving any ambiguity that results in coordination and communication. The idea of frames is why the SWOT technique of the prescriptive group of schools "is relegated to a minor role, since cognitive construction promotes beliefs of managers, which construct environments within their organizations" (p. 168).
In my view, the cognitive school is more a friend of metaphors and riddles, since it often digresses onto what's perceived and what's enacted, versus what's objective (as in the case of the three prescriptive schools).
The Learning School: What's Emerging
The enticing idea of this school is that the more we learn as time goes by, the more we are in a position to take effective action and the more will strategy formation materialize and converge toward what we need.
Strategies, therefore, emerge as we look back at the repository of behaviors to identify patterns that we can then register in our knowledge base for future reference. This is why this school dismisses strategy formulation in favor of strategy formation, thus not separating thinking from acting while inviting literally everyone to partake in forming strategy.
Having removed the need for a centralized strategy office, as it were, the learning school bets on incremental learning to gradually develop the strategic vision and also by manifesting a vision "already in the strategist's mind, with which the strategist maneuvers tactically and politically" (p. 181).
What, then, are some sources of learning? This is where an organization's knowledge management capabilities and resources take the lead: business processes and activities act as the core learning artifacts, since they "impart stability to the organization," while also creating change through their interactions (e.g., a process of onboarding a new hire). Another source of learning is the formal retrospectives business conducts regularly to examine past behaviors and lessons learned, so that future deliberate strategies can be formulated more intelligently. This implies a simple truth: strategies depend on organizational capabilities and competencies, but also on the challenging complexity and nonlinearity that governs organizations.
Many of us have experienced this process of strategy formation when acting as innovators, or intrapreneurs, for internal organizational ventures, in the perspective of which "strategic initiatives develop deep in the hierarchy and are championed by mid-managers who seek authority from senior executives" (p. 186). The risk of internal ventures is the lack of guarantee for coordinated effort, thus leading to disconnected forms of strategy that could wreak havoc. One such havoc is the insidious strategic drift, which lures the unsuspecting organization into unwanted strategic states.
The Power School: Negotiating Strategies
This school might produce the best movie scripts around the use of power — or, "influence beyond the purely economic" — and politics to negotiate strategy. The addition of the political dimension in strategy making brings in behavior that is "alegitimate", i.e., not expressly legitimate or sanctioned by the organization. After all, "the line between economic goals (the key argument of the positioning school) and political intent is fine and subtle" (p. 235).
There are two kinds of power at play: micro (politics within the organization) and macro (the use of power by the organization with other players). Because an organization consists of individuals with diverse needs, aspirations, and apprehensions, power gaps will arise invariably. Thus, the power school views strategy making as "a process of bargaining and compromise among conflicting individuals, groups, and coalitions" (p. 236). The resulting strategies will meet the needs of the powerful factions, which color strategy via their political maneuverings, more so than the optimal state of fulfilling organizational needs.
While power and politics are frowned upon, they can be of great assistance, such as pinpointing not only those individuals with leadership potential, but other channels of information governing the organizational network often beyond formally established lines. The diversity of viewpoints politics allow to emerge do encourage "many voices to be heard on any issues" (p. 243). And, more delicately, power and politics may serve the weapons required to institute change in alegitimate ways when the legitimate means are proving to be progress killers.
From a macro-power perspective, an organization can either reduce its dependency on other market players, or opt for some form of strategic alliance. Some players will necessarily become instruments of others (e.g., a small retail chain in an alliance with Walmart), some will isolate (e.g., King Arthur Flower), and some will experience a division in power system (a crown agency in Canada with strong union presence). To play this game strategically, an organization employs several techniques:
stakeholder analysis to capture salient political forces,
strategic maneuvering to communicate or signal intent to threat other players,
collective strategy development to cooperate for mutual benefit, or
opting for strategic alliances for economic and political reasons.
The Cultural School: Strategizing Collectively
It is a fact that organizations are social networks involving a multiplicity of social interactions. As such, cultural artifacts unique to the organization emerge: shared beliefs, norms, practices, symbols, stories, anecdotes, certain traditions, etc. When a new hire joins the organization, for instance, they begin not only a process of onboarding business activities, but one of tacit acculturation, arguably as important. These cultural artifacts are encoded in a collective organizational cognition we loosely call the organizational culture.
Culture enables a collective way of strategy making, one that cannot be individually deliberate, but rather collectively so, "reflected in the patterns by which organizational capabilities are protected and used for competitive advantage" (p. 268). Such strategy making is unique to the organization, for members of another organization would interpret the same conditions differently, thus leading to different strategies.
An organization with a rich culture exhibits a certain "strategic posture" or tendency toward strategy development. Ironically, such rich culture comes equipped with a higher incidence of resistance points, since the posture, or "dominant logic", is more mature. Thus, "radical changes in strategy have to be based on fundamental changes in culture," starting with cultural audits as the preliminary assessment tool (p. 271). To effectuate change, however, the good strategist should leverage organizational resources, since "a firm is but a bundle of resources" (p. 278). In particular, it is those resources that provide competitive advantage: those that are valuable, rare, inimitable, and irreplaceable to the organization. So, strategy making in this school focuses on the resource-based view of strategy.
A critical issue with the resource-based view of strategy is that undesired behaviors, such as arrogance or indifference, may arise due to the fact that culture may resist necessary change. Hence, despite the invaluable resources that inform strategy formation, the organization has to tackle resistance points, which could prevent a good strategy from taking off.
The Environmental School: React To Contingencies
So far, we have focused on an organization and its competitors as the key actors in strategy formation. According to the environmental school, there is another important actor to factor into the picture: the environment in which the firm operates. "The organization must respond to the environment (defined as a set of general forces acting on the organization), or else be 'selected out'" (p. 288).
This school is reminiscent of evolutionary theories in that regard, but one in particular — the contingency theory — holds that the environment is responsible for the actual variations among organizations, whether they are simple or complex, stable or dynamic.
A peculiar model adopted in this school is that of population ecology, which investigate factors that increase or decrease an organization's survival chances. But to subscribe to such a view would require a sufficiently large (really large) amount of time, which nobody can afford to invest for the sake of formulating strategies.
Another interesting theory — the institutional model — "sees the organization as a repository of economic and symbolic resources," where the latter includes non-economic variables, such as reputation, prestige, happiness, cultural performance, etc. Here, the question becomes how to leverage such resources to protect against the many uncertainties the environment and its actors (suppliers, customers, government, etc.) will bestow upon the organization.
This view is strange and is not widely adopted or recognized, given the rhetorical question: "Do environments really 'select' the organizations, or do organizations 'enact' environments?" (p. 297)
The Configuration School: Transformation
Having outlined the strengths and weaknesses of the prescriptive and descriptive schools, the authors finally suggest an integrative school of thought that combines all preceding strengths with the stipulation that neither of those schools is to be dismissed. Instead, each of the nine schools "has its own time, in its own place," thus offering "the possibility of reconciliation" (p. 302).
The configuration school has two facets:
Configuration: states (or, behaviors imbued in the organization) and the organization's surrounding context
Transformation: strategy-making processes, or reconfigurations of states (transitioning from one state to another, introducing new states)
Strategy exhibits stability when in certain states (or configurations), but it may necessitate transformation and potentially structural change at the micro or macro level. As an example, a micro-transformation is simply a reconfiguration of existing structures or business activities (e.g., retraining data stewards in reaction to a declining performance state. On the other hand, a macro-transformation warrants restructuring (e.g., repositioning a data strategy in reaction to a new state of business strategy). But such transformation can play both ways: the configuration school is susceptible to the "Icarus Paradox: the very consistency that promotes success can lead to failure" (p.346). Care must be taken not only to oversee adaptable strategic change, but also to preserve the organizational fabric in times of transformation -- hence the need to adapt the strengths of the other nine schools.
The configuration school brings up an important point: the strategy is a complex whole that cannot be synthesized simply by analyzing its parts. To my dismay, the authors avoid using systems thinking to label the inherent complexity and dynamics of strategic management, in which leaders dabble in some parts and processes of strategy (captured by the nine schools), digressing left and right trying to nail it down. I view it, quite facetiously, as strategy speciesism. Yet, "the complexity issue has hardly been addressed in strategic management: how elaborate, how nuanced, how comprehensible, how general do we want our strategies to be, when and where?" (p. 361)
The good news is that strategy making "is becoming more eclectic, more nuanced. We celebrate its newfound messiness - so much better than its old order," conclude the authors (p. 372).
One More School, SVP
Yes, another one: the boundary school.
In the discussion of macro-power in the power school above, the technique of strategic alliances, which has seen a rise in the recent two decades, has made it hard to identify where one organization ends and the other begins. The boundaries in such complex networks are blurred, thus making strategy development a Sisyphean task.
This Should Make You Smarter
Some important points from Strategy Safari are noteworthy:
You can't really break down strategy into phases or parts without granting that you've distorted the complex whole.
A strategy is not a plan. Plans are a possible deliverable, but strategy is a bigger, nuanced piece that takes into consideration behavioral and structural patterns, power games, and internal and external perspectives, and then some.
Making a strategy has been attempted through prescriptive and descriptive ways, one category focusing on building, the other on discovering (mostly). Strategist Graham Kenny also touches upon this point in this interview: Dr. Graham Kenny - Strategy Expert & Regular Harvard Business Review Author (Full)
There are some useful analytical, top-down prescriptive techniques, such as SWOT, that can assist with strategy making. However, they are by no means the end of the process. Such techniques often narrow focus and dismiss the emergent nature of strategy formation, which is a premise of the descriptive schools of thought.
Besides economic variables, symbolic factors (such as reputation, prestige, trust, culture, etc.) have a strong influence on strategy formation. Thus, the effective strategist must take them into consideration.
The effective strategist will mooch off of the best of all schools, rather than resort to, say, buzzwords and trends that stem from survivorship biases.
Through The Systems Thinker's Lens
My main critique of the book is the avoidance of applied systems thinking as a powerful set of methods and techniques to help strategists tackle the very complexity of strategy making. Unlike the individual analytical or descriptive ways, systems thinking maps complexity and dynamics (within the organization as well as outside, including the environments), which can help analyze patterns of behavior and feedback mechanisms. These are the high-leverage points from which strategy can emerge or "be discovered," in addition to the lower-leverage points that traditional analytical tools address so successfully.
There is one feedback mechanism — a positively reinforcing loop — that the authors briefly describe on p. 323. I've sketched it in the following figure.
In the realm of strategy management we observe that the more entrepreneurial action leadership takes, the higher the incidence of conservation (or settling down to established routines), which increases the incidence of crisis.
In the realm of charismatic leadership, the more crisis there is, the higher the confusion, which increases creative response simulation. In turn, such increased response stimulates more entrepreneurial action, and so forth reinforcing the cycle.
The authors do not discuss any balancing acts in this reinforcing cycle; after all, there are limits to growth. If we put this feedback mechanism into perspective, we can determine some balancing factors, such as cultural performance decreasing in times of confusion, thus prompting increased coaching, which may not translate to increased entrepreneurial action. The key takeaway here is that such mechanisms should be discovered and studied in order to have as much leverage as possible in making good strategies.
Happy Strategizing!