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STRATEGIC THINKING
Thoughts and abstracts from various writers on Strategic Management
GroupNicola Barry
Donal Morgan
Jerry Devane
Iqtidar Syed
Philip Howlin
7th October
Introduction to Strategic Thinking
¡§Without achieving the kind of detailed understanding of strategic thinking that we have today of strategic planning, we risk introducing yet another appealing concept to the strategy lexicon that has little relevance to practicing managers¡¨. (Liedtka, 18)
There is a lack of clear understanding of what is meant by the term strategic thinking and this has led to a lot of confusion in the strategic management area. There exists a clear need to precisely define strategic thinking so that it can be emaced and appropriately situated within the strategic management context.
Ian Wilson (14) suggests that strategic thinking is merely thinking about strategy. According to him, ¡§ The need for strategic thinking has never been greater ¡K this means continuing improvement has profoundly changed the character of strategic planning so that it is now more appropriate to as strategic management or strategic thinking¡¨. Putting forward this idea it attempts to define strategic thinking as a new and improved version of strategic management.
Mintzberg on the other hand feels that strategic management is a particular way of thinking with specific and discernable characteristics. In explaining the difference between the two, he argues that strategic planning is the systematic programming of pre ¡V identified strategies from which an action plan is developed. Strategic thinking on the other hand is a synthesizing process utilizing intuition and creativity whose outcome is ¡§an integrated perspective of the enterprise¡¨. The problem is he sees it , is that traditional planning approaches tend to undermine, rather than integrate strategic thinking and this tends to against successful organizational adaptation.
In general it can be argued that strategic thinking involves thinking and acting within a certain set of assumptions and potential action alternatives as well as challenging existing assumptions and action alternatives, potentially leading to new and more appropriate ones.
Strategic Thinking - Background
¡P In 170 & 180 Gluck and Kaufman refered to the evolution of the strategy model observing the strategic planning phase & the strategic management phase.
¡P In 10s Stacey and Heracleous both note that there is a view in the literature that the model has now moved on to Strategic Thinking phase.
¡P The introduction of the term strategic thinking to the strategy literature created confusion & thus it opened a wide area for a strong debate of what actually constitute strategic thinking? Is it a science or an art? (i-e rational or creative).
Strategic Thinking/Management ¡V Some Basic Definitions
Strategy the formulation of basic organisational missions, purposes & objectives, policies and programme strategies to achieve them and the methods needed to assure that strategies are implemented to achieve organisational goals. (Schendel & Hatten 17)
Strategy is the creation of a unique & valuable position, involving a different set of activities. (Porter 185)
A planning process that stimulates enterpreneurial thinking. (Gluk Kaufmann)
There is a view in the field that strategic planning & strategic thinking are quite different modes of thought & that strategic thinking should precede strategic planning.l (Heracleous, 18)
Generally speaking we can define strategic thinking as The mode of thinking used by strategists when facing strategic problem.
There are two schools of thoughts
1. Rational Thinking (Using logical step-by-step approach through models)
. Generative Thinking (Based on traditional believes & creativity)
Strategy often involves comprehensive flow charts with many subparts (Appendix 1). Rather than explain these in detail let us first distil the process into four main areas of rational thinking
1. Strategic analysis.
. Strategic choice.
. Strategic implementation.
4. Strategic Controls & Review.
1. Strategic analysis
Essentially a business will address the following questions
¡P Where do we want to go?
¡P What constraints exist on our resources?
¡P What are the key threats from the external environment?
Where do we want to go?
The answer to this question is influenced by many factors. Key influencers are often the owners (e.g., shareholders) who may have a particular expectation for the organisation.
However, one also needs to take into account other stakeholder influences which could include the government, employees and the general underlying culture of the organisation. These views are very often consolidated into a corporate vision or mission statement.
What constraints exist on our resources? (Internal Analysis)
Resources needed would include finance, plant and machinery and human resources. However, to make it easy I would recommend that we think 6Ms. 6Ms can be summarsed as
¡P Money;
¡P Machinery;
¡P Manpower;
¡P Markets;
¡P Materials;
¡P Make-up.
Example(Internal Analysis) in late 180s TOYOTA in Japan introduced (Kanban System) JIT for the first time in practice. The same year in their quarterly internal management reporting they showed their PBT figure increased by almost 60% & surprised the other competitors.
What their strategy was is to cut down their internal cost (which they did by almost 5%) which would mean more cash & more profits for investment to enter into markets which they never explored before.
What are the key threats from the external environment? (External Analysis)
Once we have established constraints on our internal resources, the next factor is to look at is the external environment.
The two famous models that I will be using are
1. Porter¡¦s five forces;
. PEST analysis.
Porter¡¦s five forces
The American management writer Michael Porter describes the main external competitive threats to be summarised by his five forces model. Essentially this model determines the level of competition an organisation is facing by assessing the extent to which the five forces are relevant. The five forces are summarised as follows
1. The threat from new entrants.
. The bargaining power of buyers.
. The bargaining power of suppliers.
4. The threat from substitute products.
5. The extent of competitive rivalry.
1. The threat from new entrants
This is a problem because if competitors can easily enter your business sector they will be able to put a ceiling on your profits. Therefore the greater the threat from new entrants entering the sector the higher the levels of competition. The ease which new entrants can enter the business segment is largely determined by the extent of the barriers to entry.
The following summarises the main barriers to entry.
¡P Capital cost of entry.
¡P Economies of scale.
¡P Differentiation. ( e.g., Concorde)
¡P Switching costs. (For example, when the compact disc was invented consumers had to incur a cost of a CD player, as the new compact discs would not work on a conventional record player - PS the main reason of its huge success is not only as a game console but as a CD & DVD player as well with the option of being provided with a remote control.
¡P Expected retaliation.
¡P Legislation. e.g., Nuclear Power.
¡P Access to distribution channels.
PEST factors
The other framework, which should be applied when surveying the external environment, is PEST factors
„h Political;
„h Economic;
„h Social;
„h Technological.
. Strategic choice
Johnson and Scholeseak down the issue of strategic choice into three distinct subheadings which are
¡P On what basis do we decide to compete? (How to Compete)
¡P Which direction should we choose? (Direction of Growth)
¡P How are we going to achieve the chosen direction? (Method of Growth)
On what basis do we decide to compete?
A useful framework to use here is Porter¡¦s Generic Strategies. Michael Porter stated that a firm, which is wishing to obtain competitive advantage over its rivals, is faced with two choices
1. lower costs ¡V Cost Leadership
. differentiate itself - Differentiation
. specific niche ¡V Being Focused
1. Cost leadership
e.g Ryanair ¡V always believe in low cost (that¡¦s why post September 11, all the airline companies suffered loss except Ryanair)
. Differentiation (e.g Concord)
Ways of achieving differentiation
¡P Image differentiation. e.g., perfume ¡V colour, size, packaging. e.g Ferrari
¡P Support differentiation. This may have to do with selling, e.g.0% finance or 4 hour delivery.
¡P Quality differentiation. - greater initial reliability; long-term durability superior performance. (Dell)
Design differentiation. (e.g., Apple¡¦s iMac computer)
. Focus e.g BMW ¡V Being focused. Recently, BMW has gained control of luxury carmaker Rolls Royce and is revamping the Mini, a tiny city car it acquired with Rover and has kept. By 004, the company also has plans to add a new BMW model that will be smaller and less expensive than the Series, the current entry-level BMW. The companys strategy now is to stay focused on using theseands to build a full range of premium products. Despite the consolidation of the world auto industry into a few giant players, BMW execs are adamant that the company can remain independent and still thrive.
¡P Cost focus
¡P Differentiation focus
Alternative Strategies
1. Do nothing.
. Withdrawal.
. Market penetration.
4. Product development.
5. Market development.
6. Diversification.
¡P Do nothing Basically if an organisation is exposed to some form of competitive threat its short-term objective is to not react and hence get involved in what could be an expensive decision.
¡P Sell out/withdraw from the market (e.g., Richardanson¡¦s decision to sell his original business i-e Virgin Records, to concentrate on the airlines business)
¡P Market penetration (Champion Sports Shops ¡V opened shops in every shopping street of dublin)
¡P Product development (e.g., Mars ice cream)
¡P Market development (e.g., McDonald¡¦s and its geographic market development (they have introduced theirand on flights as well)
¡P Diversification (i.e Richardanson diversifying his business horizons into airline, music & transport sectors)
Ansoff represented the last four choices in his product/market matrix.
. How? (Method of Growth)
The final problem that must be overcome is to decide how the chosen strategic option should be undertaken.
The options available are
¡P internal development;
¡P external development/acquisition(HP &Compaq - Glanbia & Waterford Food)
To summarise then we can use the following diagram
Once all the alternative options have been generated we need to evaluate their appropriateness before making a choice. A useful framework to apply when considering the appropriateness of an option is
¡P Suitability.
¡P Feasibility.
¡P Acceptability.
. Strategic implementation
However as with strategic analysis and strategic choice it is possible to simplify the issues in to a number of key sub-headings
¡P Resource management.
¡P Organisational structure.
¡P Management of change.
A useful model of change to is Kurt Lewins three-step model, which involved
¡P Unfreeze.
¡P Change.
¡P Refreeze.
4. Strategic Control & Review
Controls & review is mainly carried out through the following
1. Gap Analysis
. Variance Analysis
Criticism of Rational Thinking/Model (Why Rational model is not used?)
w Mintzberg ¡V Its programmic nature is said to be at fault because of its focus on analysis/qualification leads to inflexibiulity & an inability to predict crucial market shifts or to encourage timely adaptation.
w Hamel & Prahlad ¡V its fails to take account of creative process & discoveries that generateeakthroughs.(It suppresses creativity & eliminates true vision & synthesis)
w Mostly rational analysis repeats the past or copies activities of others.
w Strategic formulation process is inappropriate to drill down into compartmentalized blocks. This argument is based on the role of flair & Inspiration in the creation of strategy. (Flair & inspiration being outside the formal strategic planning process & explains divergence from the formal plan).
w Strategic Planning department should not be separated from the implementation department, as it may include impractical elements facing operational management to improvise modification.
w Strategic formulation is a learning process in which strength & weaknesses are explored. Such an approach implies a less formal, more responsive approach to strategy (Mintzberg¡¦s idea of emergent strategy ¡V Honda 50cc motorcycles)
w The model assumes that the future can be forecast & controlled, which is clearly not the case.
w Various forecasting techniques may offer sensible suggestions but they cannot predict sudden, discontinuance developments. (Natural disasters, wars, & political uncertainty etc).
Generative Thinking
The generative thinking perspective is based on the assumption that strategic problems cannot be easily and objectively defined and that they are open to interpretation from a limitless number of approaches.
Generative thinkers believe that ¡§strategic problems are wicked(Rittel 17, Mason and Mitroff 181)
The belief is that strategic problems are multi dimensional and that there are multiple solutions for a strategist to choose from.
Generative thinking strategists agree that while logic i.e. the rational thinking perspective is important, logical reasoning can often suppress creativity and sometimes can be more of a hindrance than a help. They believe it entraps strategists and logical reasoning can sometimes be an ¡§intellectual straight jacket¡¨.
Advocates of Generative Thinking believe that the defining and solving strategic problems should be a creative activity.
Example of Creative Thinking and Problem Solving
In his book Richardanson tells the story of a Mike Oldfield concert that was to take place at Queen Elizabeth Hall. Oldfield had decided that he did not want to do it. This was a major promotional event designed toing visibility to Virgin Records inaugural shining star. Tickets had been sold and the concert was all set to go, however Oldfield was determined not to perform.
anson¡¦s creative problem solving saved the day. anson and Oldfield went for a drive that morning inanson¡¦s Bentley. After the driveanson asked Mike if he would like the car as a present. Mike said sure he would. anson said he would get out of the car there and then let Mike drive off. The car had been a present toanson for his wedding and Mike was reluctant to take it. anson agreed with Mike that all he would have to do is play in the concert tonight and it was his. Mike agreed and Tubular Bells eventually sold over 1 million copies and became one of the best selling albums ever released initain.
De Bono (170) refers to such generative and innovative thinking as ¡§lateral thinking¡¨.
Generative Thinking Methods
The following are an example of methods to use for creative thinking
ainstorming sessions, Experimentation, openness to intuition, use of metaphors, contradictions and paradoxes.
The Mind of a Strategist
- Kenichi Ohmae
The writer studied the art of Japanese Business and found that Japanese strategists often had not received formal business education or training but had an intuitive understanding of the elements of strategy.
Insight is the key to this Japanese success. The creative element to their strategies and the desire and will of the mind that conceived them is the secret to the success of their competitive strategies.
In strategic thinking the humanain must be used to it fullest possible potential as it is the ultimate thinking tool.
Ohmae believes that while the best possible solution to a strategic problem can only come from a combination of the rational and generative thinking perspectives and the use of humanainpower is the most effective approach to devising such strategies.
The Art of Strategic Thinking
As Thomas Edison said of his inventive genius it is ¡§One percent inspiration and percent perspiration¡¨.
This suggests that creativity is within everyone and just needs to be nurtured.
¡§Creativity cannot be taught but it can be learned¡¨
Ohmae suggests that there are major constraints to creative thinking ¡V also known as the R¡¦s they are
1. Reality ¡V Strategists need to be aware of the stakeholders in their business when devising strategies.
. Ripeness ¡V this refers to the timing of introducing a strategy. If this is not correct the strategy is sure to fail.
. Resources ¡V strategists need to be aware of the resources available to them and in particular the limitations of those resources.
Awareness of these three constraints is necessary for successful creative insight.
The writer believes that there are also three conditions that need to be nurtured for strategic success and they are
1. Initial Charge ¡V The vision and drive must be within the strategist for a creative insight into strategic options to ensue.
. Directional Antennae ¡V Directional Antennae and Creative Insight are essential in recognising opportunities that would not otherwise have been recognised.
. Capacity to tolerate Static ¡V Creative ideas can have a destructive effect as they can shatter any traditional beliefs and they can disrupt the status quo. Creative strategists often have to put up with criticism, hostility and ridicule and therefore while the capacity to tolerate static may not be a condition of creativity it is most certainly an important attribute of a successful strategist.
Example of a Creative Leader
Sam Walton opened his first Wal-Mart ¡§Discount Citystore in 16. Sam or Mr Sam as he became known by was an effective and visionary leader. His folksy manner and talent for motivating people combined with a very hands on management style (MBWA ¡V Management By Walking Around) produced a culture and a set of values and beliefs that kept Wal-Mart on a path of continuous innovation and rapid expansion.
The hallmarks of Wal-Mart¡¦s strategy were low prices, wide selection, low operation costs, customer friendly stores, innovative merchandising and customer satisfaction guarantees. Sam Walton ¡V the patriarch and spiritual leader of Wal-Mart had four key core values to achieve strategic success
1. Treat Employees are partners, sharing both the good and the bad with them so they will strive to excel and participate in the rewards. Sam referred to his employees as his associates.
. Build for the future rather than just immediate gains and always experiment with new ideas and be willing to change.
. Recognise that the road to success includes failing and use this failing as a learning process and not take it as a personal or corporate defect. Always challenge the obvious.
4. Involve associates at all levels in the total decision making process
One of Sam¡¦s ideas was to hold Friday Morning Store Meetings ¡V all ¡§associatesattended to ask questions and could expect to get straightforward answers from management. This was also a meeting to appreciate associates who have done well and this would often include a pat on the back from all other associates. It also included aainstorming session to explore new ways to improve the way they did business. Sam Walton always solicited ideas from his associates as they were the ones who worked on the front lines, the ones who actually spoke to the customer and knew what was going on.
It was about forcing responsibility down through the organisation so that good ideas could bubble up within it. An example of this is when one assistant store manager accidentally ordered four times as many Moon Pies for a promotion the store was running that week was challenged and told to come up with an idea to sell the extra inventory. The solution was to have a World Championship Moon Pie eating contest in the car park of the store. It attracted thousands of spectators and has since become an annual event at this store.
Another example of Sam¡¦s unique approach to business is when he visited his stores, he asked the associates to make a pledge I want you to promise that whenever you come within 10 feet of a customer, you will look him in the eye, greet him and ask if you can help him.
This pledge is now called the 10-foot attitude. Sam learned the power of this attitude in college while campaigning for class president. I learned that one of the secrets to leadership was the simplest thing of all Speak to people coming down the sidewalk before they speak to you.... I would always look ahead and speak to the person coming toward me. Sam not only won that election, but he also became a leader in other campus organizations and carried his leadership and friendly smile wherever he went.
Sam Walton changed the landscape of American retailing. How did he do it? By building a culture based on one simple principle making the customer No. 1 through innovation and creative thinking.
Sams establishment of the Walton culture throughout the company was the key to the whole thing. Its just incomparable. He is the greatest businessman of this century.
- Harry Cunningham, founder of Kmart Stores
Although Sam died in 1, his innovative dream for this company has lived on and Today, Wal-Mart Stores, Inc. employs more than 1. million associates worldwide. The company has more than ,000 stores and offices across the United States and more than 1,000 stores internationally. It has also expanded online with Walmart.com, which is dedicated toinging Sam Waltons dream to the Internet.
In conclusion, we can see that generative or creative thinking is important in devising strategies in order to compete in a rapidly changing and fiercely competitive environment.
Cognition and Reasoning
Much of the debate on the Rational and Generative streams of thought centres on aspects of Cognition and Reasoning.
Cognition is the human ability to know. The knowledge we store in our minds is in the form of cognitive maps or schemata. This is our view of the world and the relationships that exist within it. These maps are formed over time and may be subjective to begin with and become more objective as they are transmitted to and received by others.
The cognitive abilities of humans are limited in a number of ways, most noticeably by limited information processing and storage capacity and by limited information sensing ability. To offset our limited information processing abilities, we develop mental short cuts (rules of thumb), otherwise known as cognitive heuristics (Janis 18). In this scenario focus is given to key variables. These rules of thumb are also at play to counter poor memory. Information is stored selectively and retrieved with greater ease. Much of reality is unobservable to humans despite our senses - we can¡¦t be everywhere at once. A map can be seen as an ¡¥interpretive filter¡¦ to aid the senses.
Cognitive heuristics are useful given the shortcomings of the human mind. However they are imprecise, often forcing people to jump to conclusions. They are at odds with logical rational analysis and are inherently biased. While these cognitive biases may help speed up decision making and avoid paralysis by analysis, the quest for managerial strategists must be to balance rational analysis and intuitive judgement.
Cognitive rigidities refer to people¡¦s unwillingness to change their minds. Once a person¡¦s map is formed, ambiguity presented by contradicting data is unwelcome. People often overestimate the content of their own map ¡V this can be detrimental in the world of business.
A map that is a faithful representation of reality and not overly rigid is said to have ¡¥objective knowledge¡¦ of reality. This can then be used as a start point on which to build logical rational analysis. Maps that are highly coloured representations of reality and overly rigid are deemed to have a ¡¥subjective knowledge¡¦ of the world. As people develop their maps by interacting with others this view is then shared by a social group. The shared assumptions of reality by this group leads to a paradigm, where everything within is logical. Contradicting a paradigm is viewed as illogical from those within. Therefore to change this subjective map would necessitate a leap of faith. Strategists choosing to remain rational would become prisoners of their own maps.
Mapping and remapping is a fundamental process for a manager facing ambiguity and change. All maps differ in degree of clarity and reliability ¡V not to mention completeness. Too many divergent maps in a group can lead to problems ¡V communication and coordination become complicated. As we are impatient with suspense and have a lust for immediate action, we often settle for something second best. Satisfice as opposed to optimise. The term ¡¥little-dying¡¦ has been coined for the process of relinquishing part of or all of a map. The process can be seen as initial shock, then retreat, then acknowledgement and finally adaptation and change. We are all guilty of hanging on to something ¡¥familiar¡¦ and ¡¥known¡¦.
If maps are weak, numerous solutions abound. From moving in small uncoordinated steps to, act first think later. Others include ¡¥negative thinking¡¦ ¡V refute errors rather than conclusively prove something. Alternatively, one could use groups to analyse a problem using opposite assumptions. The groups then meet and argue their position to prevent ¡¥premature compromise¡¦.
Reasoning is the thought process leading to knowing. Where strategy is concerned, reasoning is the process of defining and solving strategic problems. Proponents of both Generative and Rational streams of thought are in agreement as to 4oad categories of mental activity. These are identifying, diagnosing, conceiving and realising. What strategists do not agree on however is, the order and the form that these activities take.
As rational strategists are logical by nature, they see this process as a linear, phase by phase approach. Problems are identified by performing a SWOT analysis, before the next phase of diagnosing the actual problem, after detailed analysis and refining of data. By evaluating all available options, the optimal strategy is formulated. Finally the proposed solution is executed by planning and controlling its implementation. The rational thinking strategist is therefore recognising, analysing, formulating and implementing in that order.
Those proponents of the generative thinking perspective, creative and innovative by nature, disagree with the idea of a phased approach. To them reasoning is a series of complex interactions taking place simultaneously. The approach is non-linear and far less mechanical than the process undertaken by the rational thinking strategist. Where the rational thinkers recognise, the generative thinking strategist interprets. Therefore no all strengths, weaknesses, opportunities and threats make the strategic agenda. When reflecting on problems, a great deal of intuition is applied ¡V an attempt to understand problems through unconscious and synthetic reasoning. Conceiving strategic solutions may involveainstorming and fantasising ¡V with judgement and not calculation determining the optimal solution. To test the solution assumptions are made and experiments are undertaken. This generative thinkers reasoning involves the intermingling of sense-making, reflecting, envisioning and acting.
The whole area of human cognition and reasoning, and aspects of judgemental heuristics and biases, plays a key role in strategic decision making. Choice behaviour is crucially affected by the form in which decision alternatives are presented, rather than being the product of a systematic analysis of alternatives. There is a growing body of psychological research concerned with the nature and impact of cognition and emotion in strategic management. This research points to potential sources of error and bias that can lead to catastrophic outcomes.
As strategic thinking is hypothesis driven, it circumvents the analytical-intuitive dichotomy dominant in strategic planning. Strategic thinking is both creative and critical, although accomplishing both types of thinking simultaneously is difficult, because of the requirement to suspend critical judgement in order to think more creatively.
As was stated at the outset, aspects of cognition and reasoning are at the crux of the Rational V Generative debate. McCaskey asks the question ¡¥Is altering ones worldview a logical or a creative process?¡¦ Trying to find the right balance is the overriding issue.
Review of Rational Versus Generative Strategic Thinking
The paradoxical issue of Rational versus Generative Thinking continues to be a debate amongst contemporary Strategists and Theorists. These perspectives are referred to by de Wit & Meyer et al as partially contradictory and they summarise the elements of these extremes on the below outlined table.
In order to understand differing views the approaches of rational and generative will be further reviewed and presented on using different perspectives from the outlined table along with some
of the contrasting literature of strategists and theorists in the field of strategic management.
Rational Thinking Perspective Generative Thinking Perspective
Emphasis on Logic over creativity Creativity over logic
Cognitive Style Analytical Intuitive
Reasoning follows Formal, fixed rules Informal, variable rules
Nature of reasoning Computational Imaginative
Direction of reasoning Vertical Lateral
Value placed on Consistency and rigor Unorthodoxy and vision
Reasoning hindered by Incomplete information Adherence to current ideas
Assumption about reality Objective, (partially) knowable Subjective, (partially) creatable
Decisions based on Calculation Judgement
Methaphor Strategy as science Strategy as art
Table .1, Pg 75, de Wit B. & Meyer R.. et al
Rational Thinking Perspective Generative Thinking Perspective
Emphasis on Logic over creativity Creativity over logic
Cognitive style Analytical Intuitive
The above table highlights the contradictions present, but to what degree do they coincide. Mintzberg¡¦s argument is as follows strategic planning is about analysis (i.e.,eaking down a goal into steps, designing how the steps may be implemented, and estimating the anticipated consequences of each step). Strategic thinking is about synthesis, about using intuition and creativity to formulate an integrated perspective, a vision of where the organisation should be heading. The problem is that strategic planning proponents believe that analysis encompasses synthesis; that in the best practice, strategic planning, strategic thinking, and strategic making are synonymous. The belief, in turn, rests on the assumptions that prediction is possible and that the strategy-making process can be formalised.
The above view outlines that both logic and creativity may be used together along with analysis and intuition. Mintzberg also refers to the essence of strategy making as a process of learning as we act, whereby he says that formal systems can never internalise, comprehend, or synthesise hard information. Thus planning cannot ¡§learn¡¨. Mintzberg says, Strategies can develop inadvertently, without the conscious intention of senior management, often through a process of learning¡K.Learning inevitably plays a, if not the, crucial role in the development of novel strategies (Mintzberg, H., Harvard Business Review, 14).
On the other hand, the rational model focuses on thoroughness of analysis (Chaffee, 185; Nonaka, 188) and evaluation of all possible courses of action (Mintzberg, 187).
Criticism of strategic planning is widespread. Its essentially ¡¥programmic¡¦ nature is said to be at fault (Mintzberg) ¡V because its focus on analysis / quantification leads to inflexibility and an inability to predict crucial market shifts or to encourage timely adaptation. Hamel and Prahlad point out that strategic planning fails to take account of creative processes and discoveries that generateeakthroughs. It is said to stifle creativity and eliminate true vision and synthesis. Rational analysis either repeats the past, or copies activities of others (Wall et al, 15).
Rational Thinking Perspective Generative Thinking Perspective
Reasoning follows Formal, fixed rules Informal, variable rules
Nature of reasoning Computational Imaginative
Schwartz et al 10 refers to traditional strategic planners as those who analyse sound historical data to make projections on whether or not current trends are likely to continue. This is inadequate in a world of rapid change. Scenarios are a way to deal with this. This technique was used by Shell to anticipate the effect of the energy crises in the 170s, and position it to become a major company.
The notion of bottom up planning is cited by Wall et al as the norm in the 10s. Advantages of evolutionary approaches to strategy making are customer focus, flexibility and responsiveness. Low level tactics become key ingredients of strategy (e.g. pursuing options which lacked top level support, creates key strategic opportunities when the situation changes).
Rational Thinking Perspective Generative Thinking Perspective
Direction of reasoning Vertical Lateral
Value Placed on Consistency and rigor Unorthodoxy and vision
Bourgeois &odwin et al, 184 refer to this vertical structure in organisations where the top manager is the dictator of organisational direction, and the workers in the organisation are responsible for carrying out the functional strategies as prepared by top management.
Drucker et al gives examples of leaders who have used an autocratic approach in designing strategy. These include Henry Ford (Ford Motor Company), Tom Watson (IBM), Steven Jobs (Apple). In each case a strong leader successfully imposed a comprehensive business strategy throughout an organisation. Employees acted as executors of strategy, carrying out orders as requested (Drucker, 174; Nutt, 184).
However, Bourgeois et al also points out that employees in a transformational strategy-making approach play the role of team players, exerting effort to do their part in attaining the articulated vision. Although employees do not take a large part in the forming of goals or organisational mission, they may play an active role in developing creative processes for attaining these ends (Bourgeois &odwin; Mintzberg & Waters, 185; Bass 10).
Mintzberg et al refers to the notion of a learning approach to strategy making, continual learning and interaction (Fiol & Lyles, 185), with heavy reliance on flexibility (Mintzberg, 178; Ansoff, 187) and adaptation (Chaff, 185; Mintzberg, 17), rather than pre-determined and specifically
outlined plan of action. Synergising the strategy-making and strategy implementation process
takes place due to bounded rationality (March & Simon, 158) and environmental uncertainty (Lyles & Mitroff, 180; Deming, 186). Strategy formulation and implementation require on-going dialogue (Shrivastava & Grant, 185) between organisation and its key stakeholders - customers, employees, stockholders, suppliers, and regulators ¡V consistent with a TQM framework (Deming, 186). In this case top managers are concerned with ongoing communication; they continually seek to understand and better meet the needs of key stakeholders (Grandori, 184). This learning approach to strategy making is evident in m,any companies to foster employee involvement, customer focus, organisational learning (Fiol & Lyles, 185) and continuous improvement (TQM) (Deming, 186; Lawler, 186).
The traditional planning approach is tackled by Wall et al where he describes it as involving hierarchical values, linear systems, elite planning function, vertical time bound processes producing formal document. Implementation was considered separate. Planning (by the CEO) was separate from doing. Things were always on hold waiting for the strategy to be announced. There was a clear distinction between strategy and tactics; and between strategic and operational plans. Operational plans were supposed to be based on strategic plans but only did so nominally.
Rational Thinking Perspective Generative Thinking Perspective
Reasoning hindered by Incomplete Information Adherence to current ideas
Assumption about reality Objective, (partially) knowable Subjective, (partially) createable
Hart et al views thoroughness and comprehensiveness of analysis as being the fundamental characteristic of the rational strategy making approach, and research has shown that this is best suited to a predictable and stable environment (Fredrickson, 18; 186). It has been argued that the enormous inputs of information in this rational approach cause managers to become overwhelmed, and therefore this approach would be even more demanding and difficult to operate in dynamic or rapidly changing environments (Hart, 1).
Foresight is inevitably coloured by what we want the future to be. Future is never what we want it to be. Foresight assumes that we can produce desired outcomes ¡V untestable theory (MsDermott, 16 et al).
Rational Thinking Perspective Generative Thinking Perspective
Decisions based on Calculation Judgement
Metaphor Strategy as science Strategy as art
The metaphor of information processor is used by Hart et al as a way of describing those who employ a rigid strategy making process. Formal structured analyses (Shrivastava & Grant, 185; Ansoff, 187), such as environmental scanning, portfolio analysis, and industry analysis (Porter 10), are used in this rational strategy formulation process to define opportunities and threats (Steiner, 17; Grandori, 184). The result of this process is a highly detailed plan of action with alternative courses of action, detailed with financial and resource related information (Chaffee, 185).
Other theorists say that the role of management in the transformational process is to motivate and inspire organisational members (Nonaka, 188) toward organisational goal attainment. The focus is oninging workers together for the common purposes at hand (Grandori; 184; Mintzberg, 187) and developing and maintaining continued efforts toward the shared values (Bourgeois &odwin, 184) and emotionally appealing corporate vision.
Foresight needs to be both predictive and creative. Strategic management requires both commitment and creativity, and analysis and quantification (Raimond et al, 16).
Strategic Thinking in International Perspective
The explicit question that must be added to the debate in the mind of the strategist according to de Wit et al is whether there are discernable national differences in approaches to strategic thinking. The paradox of rational and generative is examined under a number of factors outlined as follows.
Position of Science
Science does not play as big a role in some countries than others. In the countries which science plays a more prominent role and it is thought that education in such nations promotes more formal, explicit, analytical thinking and doesn¡¦t place as much importance on creativity, imagination and intuition. Thus a rational thinking approach would be more pronounced in such nations.
Level of Uncertainty Avoidance
National cultures differ in their tolerance for ambiguity. In such instances they have little room for creative ideas and instead rely on absolute truths, experts and ¡¥black and white¡¦ analysis. These are of the rational school of thinking in contrast to the generative thinking nations who may show a low score in Hofstede¡¦s uncertainty avoidance dimension.
Level of Individualism
It is thought that in more individualistic nations that people find it easier to express their own ideas, independent of their group, organisation or community. Whereas, it may be to the contrary in collectivist culture where strategists wish to be accepted within their group, organisation and community.
Position of Strategists
Countries differ sharply in relation to the hierarchical positions of managers engaged in strategy. In many countries senior management who have worked many years to reach these positions solves strategic problems. However, at such a stage the problem is that they may be set in their ways. The problem is that competent and conformist managers are promoted to strategy positions, while innovative dissidents are selected out along the way. Therefore, in countries where there are less hierarchical organisational structures and relations there will be more generative strategic thinking and vice versa.
Rationale and Generative Thinking Combined
As we all know, no one strategy fits all. In a lot of the cases it is more a combination of both strategies and of them working hand in hand in order to develop the right strategy.
Mercedes-Benz and Swatch teamed up to development a new micro compact car called the smart car. This was a very unlikely strategic alliance but wasought about by the two different forms of strategic thinking.
Nicolas Hayek was the Generative thinker of Swatch. He wished to diversify from the watch industry into the automobile industry. He had a desire to make driving fashionable, in line with environmental constraints and more fun. He was propelled by this vision to development this eco friendly car.
On the other hand Mercedes- Benz was more the rationale thinker. It was a highly rational thinker and a conservative company. It had a narrow product range, limited target audience and few opportunities for growth.
There was a large cultural gap between the rationally inclined managers of Mercedes and the creatively inclined people of swatch. The significant critical capabilities Swatchought to the alliance was in the area of design, miniaturization, sensing the wishes of young people and marketing. Mercedes on the other had their core strengths in car development and production.
Many analysts wondered whether the companies differences would be complementary or contradictory but it seems to be success for a combination of both schools of thinking.
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