3. Learning objectives
• Understand the approach to strategy as management by objectives
and goals
• Appreciate the antecedents of business strategy in warcraft and
statecraft
• Identify key landmarks in the development of thought about strategy,
including the work of Chandler, Ansoff, Penrose, Porter, Coase and
Williamson
• Identify the key concerns regarding the contemporary practice of
strategy
• Appreciate some of the limits of conventional views of strategy,
including how they handle contradictory interests, surprises and the
‘Red Queen’ effect
3
4. What is strategy?
• Strategy = Knowledge + Capability
(or the power to accomplish things)
4
5. Antecedents of strategy
• Ancient Greeks and strategy
• Sun-Tzu
• Machiavelli
• Policy follows power
• Political realism
• Clausewitz
• The role of the ‘passions’ in strategy
5
6. The classical age of strategy
• Strategy taught at West Point
was very influential in the post-
war era
• Military strategy influenced
business strategy
• In the 20th century, the
importance of the long-term
planning of the Normandy
Landings was considerable
6
7. The emergence of strategy as a discipline
• The reports of the Carnegie and Ford commissions, both published in
1959, brought business education into the mainstream of social science
disciplines
• Strategy began to emerge as an autonomous discipline, underpinned
especially by economics
7
8. Strategy in theory: The classical age of
strategy
• Alfred Chandler
• Igor Ansoff
• Edith Penrose
• Michael Porter
• Ronald Coase and Oliver Williamson
8
9. Chandler
• Changes in the environment create a need for new strategies
• As new strategies develop, they require a new organizational structure to
house them
• Strategy drives structure
• Attention should be focused on the strategic plan driving
organizational structure
9
10. Ansoff
• In his book, Corporate Strategy (1965), Ansoff identified three
different levels of action:
• Operational: the direct production processes
• Administrative: the maximization of efficiency of the direct production
processes
• Strategic: the top executive’s concern with the organization’s relation with its
environment – the ‘big picture’ steering the organization
10
11. Ansoff on strategic decisions
• Ansoff (1965) argued that there are five strategic decisions that a
company should make:
• Scope of the product market
• Growth vector (the direction in which the scope is changing)
• Competitive advantage (unique product or market opportunities)
• Internal synergy generated by a combination of capabilities and
competencies
• Make or buy decisions
11
12. Penrose
• Penrose wrote The Theory of the Growth of the Firm (2009):
• The firm is an object of economic analysis separate from the market
• The firm is a bundle of resources representing strengths and weaknesses that
determine firm performance
• Strategists develop, exploit and renew firm resources
• Penrose viewed unique resources, which are not easily copied by
competitor organizations, as the real source of innovation and value
for a firm – influencing the so-called resource-based view (RBV) of
strategy
12
13. Porter
• Porter proposes that:
• firm profitability is dependent on industry structure (e.g. the number of
competitors and intensity of rivalry between them)
• industry structure matters more than the firm’s capabilities
• Porter proposed that the environment determines strategic success,
not the resources controlled
13
14. Coase and Williamson
• The centrality of transactions
• Markets are more efficient than hierarchies (firms) but hierarchies
emerge where transaction costs are too high
14
15. Strategy research today
• Nag, Hambrick and Chen (2007) developed a definition of strategy by
analysing articles in academic journals over a 20-year period:
• Strategy involves major intended and emergent initiatives such as innovation,
acquisitions and diversification.
• Strategy is an activity undertaken by general managers on behalf of owners
concerned with central issues of governance and management.
• Strategy involves the utilization of resources such as the firm’s assets,
capabilities and competencies.
15
16. Strategy research today
• Strategy should enhance the performance of an organization in terms of
issues such as growth, return on investment and competitive advantage.
• Strategy, as represented by the literature covered in this survey, is
overwhelmingly something that is done by firms – although some do
consider strategy by other organizations that are not-for-profit.
• Strategy involves understanding the organization’s relationship with the
external environment such as the industry, competitors and markets.
16
17. Strategy research today
• Nag, Hambrick and Chen (2007) conclude the following:
• Strategic management involves the ‘major intended and emergent initiatives
taken by general managers on behalf of owners involving utilization of
resources to enhance the performance of firms in their external
environments’ (Nag et al., 2007: 942–943)
17
18. Strategy research today: key terms
• Furrer, Thomas and Goussevskaia (2008) analysed all papers on
strategy in four journals over a 25-year period
• The key terms in strategy papers were:
• Performance
• Environmental modelling
• Capabilities
• Organization
18
19. Strategy research today: key terms
• Cummings and Daellenbach (2009) analysed all articles published up
to 2006 in Long Range Planning – the first dedicated strategy journal,
identifying the following key terms:
• Corporate
• Organization
• Mergers and acquisitions, divestments and joint ventures
• Technology
• Change
• Creativity
• Innovation
19
20. Strategy as practice
• Reacting against the economics orthodoxy of much of the strategy
field, the strategy as practice approach seeks to investigate strategy
and strategists anthropologically and sociologically:
• The focus of this perspective is on cultural contexts, discursive habits and the
ways in which managers construct networks of action when doing
‘strategizing’ (note the verb not the noun)
• Follow the actors, study their texts, capture their discourse, so as to observe
how strategy is made and describe what strategists do
20
22. The limits of strategy
• Complexity
• Contradictory interests
• Surprises
• The Red Queen effect
22
23. Complexity: wicked problems
• A wicked problem is a problem that is hard to describe, has many
interrelated causes, no criteria for evaluating potential solutions,
where actions to address the problem tend to cause more
unanticipated problems and where defining the problem itself is as
difficult as identifying potential solutions
23
24. Wicked problems
• Global warming, terrorism and poverty can all be considered as
wicked problems.
• There is no immediate and no ultimate test of a solution to a wicked
problem: unexpected consequences of solutions make evaluations a
tricky task.
• Evaluation of solutions is tricky as there is no absolute right or wrong
– only more or less workable compromises.
• Every solution to a wicked problem is a ‘one-shot operation’: because
each intervention changes the situation and time cannot be ‘wound
back’ to try again.
24
25. Wicked problems
• Every wicked problem is essentially unique: this means past
experience does not help you to cope with it.
• Every wicked problem can be considered to be a symptom of another
problem: wicked problems are entangled and related to each other,
with no single root cause.
25
26. Dealing with wicked problems
• Camillus (2008) defines four principles for managing wicked
problems:
• A stakeholder involvement is crucial. Making sense of the situation and
agreeing the nature of the problem are paramount. Strategic conversations
are a communication platform for these discussions.
• While the strategic plans for coping with problems will change, the
organization’s sense of purpose and identity should not. ‘Who we are and
what is our purpose’ should be clarified before strategic plans are crafted. In
this sense, identity precedes strategy.
26
27. Dealing with wicked problems
• Focus on action. Because wicked problems are complex, we cannot think
them through and then act on the results of our reasoning. Trial and error,
learning, carrying out experiments, adopting pilot programmes and creating
prototypes seem to be better ways forward than following grand plans.
• Feedback is not the best way to learn; as the name suggests, it feeds back
into something from the past. A ‘feed-forward’ orientation would scan the
environment for weak signals.
27
28. Contradictory interests
• Strategists must respond to different demands from actors with
different and potentially contradictory interests, meaning the act of
managing these interests creates tensions:
• By defining what to do, strategy defines what not to do, creating
performative tensions between, for instance, the global versus the local, or
efficiency versus innovation.
• By defining how to operate, it triggers organizing tensions, such as
decentralized versus centralized designs.
28
29. Contradictory interests
• By defining who does what, belonging tensions emerge, such as sharing
power versus expressing authority, reflecting contradictions of identity, roles
and values.
• Finally, there are tensions between present and future in learning from
differences that unfold as cognition apprehends the familiar differently and
confronts novelty (Smith and Lewis, 2011).
29
30. Surprises
• The Global Financial Crisis is a major example of strategy gone wrong
• Did strategy predict it? No
• Did strategy contribute to producing it? Yes
• Where did these strategies come from?
• Business elites and top management teams trained in the most elite business
schools
30
31. Surprises as serendipity
• Serendipity starts accidentally, when someone is looking for a
solution to a given problem (Problem A) and in the process notices
something that will lead to the solution of a different problem
(Problem B) that may be of even greater value
• Capturing serendipity – rather than letting it pass unnoticed – is
essential to emergent strategy but hard to measure or predict
scientifically
• The ‘discovery’ of Viagra and Post-it Notes are examples of serendipity
captured
• Serendipity, luck and chance are excluded from rational planning
views of strategy
31
32. The Red Queen effect
• This occurs when competitors constantly evolve together to reach
what is only ever a provisional and uneasy balance in an ever-
changing environment
• For example, the fracking industry in the USA has been hampered by
Saudi Arabia flooding cheap oil into the market, but governments
may react to state-support these industries to reduce the
dependency on foreign suppliers
32
33. Strategy: Theory and practice overview of
book structure
• Strategy questions
• What is strategy?
• What strategy should we follow?
• Where should we go?
• What should we do?
• Which activities should we be
doing?
• Who should do these activities?
• Chapters
• Chapter 1
• Chapters 2, 3, 4
• Chapters 2, 3, 4
• Chapters 2, 3, 4
• Chapters 5, 6, 7
• Chapters 5, 6, 7
• Chapters 5, 6, 7
33
34. Strategy: Theory and practice overview of
book structure
• Strategy questions
• Where should we operate?
• How do strategies get formed?
• How do strategies get
implemented?
• What is the future of strategy?
• Chapters
• Chapters 8, 9, 10, 11
• Chapters 8, 9, 10, 11
• Chapter 12
34
35. Conclusion
• You should now know about:
• Antecedents of strategy
• Classical and contemporary perspectives on
strategy
• The reality of strategy in practice
35
36. References
• Ansoff, H.I. (1965) Corporate Strategy: An Analytic Approach to
Business Policy for Growth and Expansion. New York: McGraw-Hill.
• Camillus, J.C. (2008) ‘Strategy as a wicked problem’, Harvard Business
Review, 86(5): 98–106.
• Cummings, S. and Daellenbach, U. (2009) ‘A guide to the future of
strategy? The history of long range planning’, Long Range Planning,
42: 234–263.
36
37. References
• Furrer, O., Thomas, H. and Goussevskaia, A. (2008) ‘The structure and
evolution of the strategic management field: A content analysis of 26
years of strategic management’, Research International Journal of
Management Reviews, 10(1): 1–23.
• Nag, R., Hambrick, D.C. and Chen, M.J. (2007) ‘What is strategic
management, really? Empirical induction of a consensus definition of
the field’, Strategic Management Journal, 28(9): 935–955.
37
38. References
• Penrose, E.T. (2009) The Theory of the Growth of the Firm, with an
introduction by C.N. Pitelis. New York: John Wiley and Sons.
• Smith, W.K. and Lewis, M.W. (2011) ‘Toward a theory of paradox: A
dynamic equilibrium model of organizing’, Academy of Management
Review, 36: 381–403.
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