Ian Watson |
1544 words | 8 minutes
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Management
MBA
Strategic management is often compared with warfare. Humans have had, and sadly still appear to have, a profoundly disturbing need to settle conflict using armed warfare. While stories of the battle abound in prose, poem, song and cinema, there is usually only a glib allusion to the thought and preparation made before the slaughter itself. Though premeditation before the wholesale murder is an unsavoury concept, it is from this conscious anticipation of brutality that the art of strategy was born; to save oneself and one's friends at the expense of foes.
Sun Tzu and Strategy
An often translated and studied treatise on strategy is that of a Chinese General from around 2600 years ago named Sun Tzu.1 Though this is one of the earliest known documented manuals on the topic of strategy, it is likely that military strategy pre-dated Sun Tzu. Initially, mainly when applied to the military, the desired outcome of a well-executed strategy was to gain an advantage over others at their expense. As applied to business in the modern era, strategy is becoming more often used to gain competitive advantage while benefiting all involved in the value chain. A positive outcome may also be obtained for one's competitors as long as a sustainable competitive advantage is maintained for oneself.
A single definition of strategy simply doesn't exist. With each commentator on the topic of strategy, there appears to be an accompanying definition. An excellent definition described by Colin White (2004) and de Wit and Meyer (1998) is any course of action for achieving an organisation's purpose(s).2 This is an all-encompassing definition that includes all of a businesses' productive activity, and it is this definition that will be used for this essay.
Having provided the general purpose and definition of strategy, this essay will describe four approaches that may be taken to making strategy. Additionally, it will be argued that without a healthy workplace culture, elements of the four approaches are likely to be used within a single organisation.
Approaches to Strategic Management
Developing a strategy is described most commonly in literature as being based on the way in which the process of strategy is developed and the desired outcome of that strategy. The process of strategy development is either deliberate or emergent (or adaptive) while the desired outcome is to maximise profit or to achieve multiple purposes (plural).3
These form a matrix of four basic approaches to strategic management that may be taken to make a strategy. The four approaches to strategic management are Classical, Evolutionary, Systemic and Processual, each of which is described in detail below.
Classical
The classical approach to strategy making is the deliberate process of developing a strategy to maximise profit. This approach, though described as classical, was mainly developed and propounded by management strategists in the 1960s such as Igor Ansoff and Alfred Sloan. Sloan, the former chief of General Motors, was credited with much of the organisation's early success predominantly due to his approach of thoughtful examination of the internal and external environment and then developing a strategy to direct resources to meet the company's long-term goals. The long-term aim of the classical approach to strategy is precisely to make a profit, and this is best summed up in Sloan's words from his biography;
The strategic aim of a business is to earn a return on capital, and if in any particular case the return in the long run is not satisfactory, the deficiency should be corrected or the activity abandoned. (Richard Whittington, 2001).
This very rational approach has advantages where a change in markets and the industry move relatively slowly and where reasonable confidence can be achieved in long-term financial modelling. The classical approach relies on the strategic capability being concentrated in the organisational leader and his or her ability to suitably commanding the organisation. For this reason, particularly due to cognitive limitations in decision making by individuals, many organisations are adopting an approach that, while focusing on business profitability, acknowledges the dynamic processes acting upon and within the organisation.
Evolutionary
The evolutionary approach to strategy is based on the view that the organisation is operating within an economic environment that is ever changing. The role of strategy, in this case, is to respond to the environment for survival and profit. The main reason that this process is known as evolutionary is that it is similar to Darwinian theory in biology where only those individuals, or in this case strategies, best equipped to survive environmental or economic pressures do so (Colin White, 2004). An example of this is the strategy of Sony during the 1980s where they released well over 100 different versions of their portable cassette player, the Walkman, and allowed the market to decide which would survive and which would be removed from the market through failure.
Processual
The processual view is that the business environment is messy and largely unpredictable (Richard Whittington, 2001). Additionally, with this approach, there is an acknowledgement that decision-makers cannot act with pure reason and that only a few factors affecting a decision can be dealt with. This limitation of human cognition is known as bounded rationality (Simon, 1982).
To make sense of the chaos of the world in which the organisation operates, managers develop models, or processes, to help make decisions. These models are known to be imperfect representations of the complicated world but the help the strategist to identify and quickly respond to forces acting upon the organisation. The models that are used for decision-making may be explicit and documented or cognitive.
Ultimately, because there is an acceptance that the world is messy and unpredictable, it is accepted that maximising profit is not within the control of the strategist and sufficient profit becomes the goal. To achieve this, there is also a prevalence of satisficing in environments which are tolerant of under-performance (Colin White, 2004) where the decision maker looks for a satisfactory, rather than an optimal, alternative.4
Systemic
The systemic approach is taken by those that understand the need to play by the local rules (Richard Whittington, 2001). The cultural context is key to the development of the strategy. This may be a function of the way that a family culture influences a business or may also be influenced by the local cultures with different levels of uncertainty avoidance, power distance, collectivism, masculinity (Hofstede, 1983) and long-term vs short-term orientation. The systemic approach toward strategy is the deliberate development of a strategy to meet cultural and societal needs while maintaining sufficient profit.
Inevitable co-existence of multiple approaches
In determining which approach to strategy-making will be taken within an organisation, it is important first to understand who the strategist or strategists are within the organisation. The classical approach commonly has the organisational leader as the source of strategy development and the driver of strategy implementation. The more modern approach is notonly the acceptance but the goal of engaging everybody in an organisation as a strategist.
An organisation is not a single entity but is instead made up of numerous individuals that hold different views of labour, economics, planning and the organisation's goals. Though it is the role of the strategists within an organisation to align their activities to achieve the organisation's goals, even under optimal conditions, this will be incomplete.
It may also be possible that this may not be in the best interests of the organisation to have all of the strategists of one mind. While a managing director or president or chief executive may propound to deliberately and methodically plan a long-term strategy to deliver profits to the organisation, it is the line managers that will usually develop decision-making models that will help respond to the changing environment. It may also be the case that a work-group is operating within a different society or culture and though they do deliberately plan but also understand that they need to play by local rules. Throughout this, each strategy that develops either succeeds or fails and the strategy of the organisation evolves.
Conclusion
It is because an organisation has many working within it that opinions and approaches will differ towards strategy. Co-existence of multiple approaches to strategic management is inevitable without the development of either a powerful organisational culture, a human resource monoculture or extremely prescriptive management, such as in the armed forces. For this reason, it is likely that a single approach will never occur, but within an organisation, it is likely that more than one approach to strategy will be represented.
Regardless of the approach taken, the judgement of the success of a strategy is measured by whether the desired outcomes have been achieved. In examining and using strategy within the business, we may consider ourselves fortunate that these outcomes require no bloodshed; the original reason that strategy was first developed.
Notes
1
Wing, R.L. (1997) The Art of Strategy: The Leading Modern Translation of Sun Tzu's Classic The Art of War. Thorsons.
2
White, C (2004) Strategic Management. Palgrave Macmillan;De Wit, B. and Meyer, R. (1994) Strategy: Process, Content, Context, West Publishing, New York.
3
Whittington, R (2001) What is Strategy and Does it Matter Cengage Learning.
4
Simon, H. A. (1982) Models of Bounded Rationality. The MIT Press, Cambridge, MA.
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