Literature Review On Crafting Strategy

Recent business environments require quicker and more adequate decision-making by firms than ever before. Because the environmental changes are extremely large, the decision makers may confront difficulties in predicting their futures. The concept of a strategy based on a purpose-oriented approach provides original strategic alternatives. Because the concept of strategy is generally abstract, there exist many perspectives with respect to its formation and implementation. In fact, scholars and practitioners comment on the diverse aspects of strategy, such as, “there is no single, universally accepted definition of corporate strategy” by Pettigrew (1987a). However Mintzberg’s has done a serious number of researches backing up his theory on Crafting Strategy as a potential strategy progress with loads of valid conclusions.

Introduction:

The present Critical Literature Review sets to explore the challenging task of envisaging, conceiving, and realizing crafting strategies by proposing a deep critical evaluation of the subject. Along the way the essay will compare and contrast different authors’ views on an issue, criticise aspects of methodology, note areas in which authors are in disagreement, highlight exemplary studies, highlight gaps in research, show how Mintzberg’s study relates to previous studies, show how his study relates to the literature in general and conclude by summarising what the literature says.

History

Literature on strategy emergence has a long history (Bower, 1970; Bower and Doz, 1979; Burgelman, 1983; Quinn, 1978, 1980, 1982; Nelson and Winter, 1982; Mintzberg, 1978, 1987; Mintzberg and Waters, 1984, 1985, 1990; Prahalad and Hamel, 1990; Pettigrew, 1985). The process view of strategy has been revived in the Eighties by Mintzberg work on “Crafting strategy” (1987), and later by the work of Hamel and Prahalad on ‘Strategic Intent (1996). Many of them share a common view on the theory and practice of ‘strategy’ as they generally agreed, strategy is a plan to be executed in the future to achieve specific objectives. However, this view of strategy is limited and potentially dangerous because it obscures the rich and paradoxical nature of the wider concept of strategy, and it can result in significant opportunities and danger signs being overlooked. (Mintzberg, 1987)

Overall strategic observation:

Mintzberg, Alilstrand and Lampel (1998, p.9) have even encapsulated the paradox of strategy with the following observation: Most people, managers and as above mentioned academics define strategy as a plan, or something equivalent a direction, a guide or course of action into the future, a path to get from here to there. However as it has been stated above this is potentially dangerous. Strategy, therefore, according to Mintzberg should be viewed as a combination of the actions that are intended to result in anticipated business outcomes; and the actions that emerge as a result of the many complex activities that are undertaken within an organization. Thereby strategy become a process itself, one that involves the co-evolution of discourse nature individual and society.

Drawbacks of certain strategic approach – uncertain future

How to create and develop the perfect strategy has been the question of managers, business owners, military commanders and even individuals for ages. This simple question seems to be fundamental for strategic management, but there are still surprisingly few answers in strategy research. Numerous academics and managers states that the optimal way to approach the perfect strategy is by attempting to predict a foreseeable future, making decisions in advance, and controlling the realization of strategic plans (e.g. Rumelt, Schendel, and Teece, 1991, 1994). However as there are as many potential futures as companies a single formal strategy plan cannot be used especially when it is based on prediction. Although any company that cannot imagine the future is unlikely to be around to enjoy it. Strategic managers living in the here and now, and only concerned about the next quarter, will fail at the task of imagining the future (Hamel and Prahalad, 1996: 242).

Diverse benefits

In recent years there has been a growing body of opinion amongst scholars in the field of strategic business management that some of the central tenets of classical strategic theory are no longer as appropriate as they might once have been (Thompson, 1967; Westley and Mintzberg, 1989; Whittington, 1993; Mintzberg, 1994; Hamel and Prahalad, 1995; Camillus, 1996; Hamel, 1996; Kouzmin et al., 1997; Mainwaring, 1997; Mintzberg et al., 1998; Kouzmin and Jarman, 1999; Parker, 2002).

Several studies have confirmed that managerial choice and design of strategy in terms of planning and analysis activities are beneficial in decision and strategy making (e.g. Dean and Sharfman, 1996; Miller and Cardinal, 1994) and other studies have identified beneficial supplemental strategic planning practices, such as programmed conflict approaches (Schweiger, Sandberg and Rechner, 1989) and implementation tactics (Nutt, 1987). However, there are conflicting evidence regarding the benefits of strategic planning (Boyd, 1987; Mintzberg, 1994; Pearce et al, 1987) and strategy goal and method consensus (Dess, 1987). Moreover, in practice, strategy-making sometimes seems to differ from the normative managerial choice, design and planning ideal. These differences are most evident under more complicated circumstances, in uncertain strategic decisions (Mintzberg et al 1976; Nutt, 1984), in firms with diverse and conflicting goals (Quinn, 1980; Pettigrew, 1973; Eisenhardt and Bourgeois, 1988b), in unstable (Mintzberg, 1973; Fredrickson and Mitchell, 1984; Fredrickson, 1984) or fast changing environments (Bourgeois and Eisenhardt, 1988a) and in large and complex firms (Bower and Doz, 1979; Burgelman, 1983b). The fundamental divergence in these strategy process perspectives, compared to the traditional design view, is that under these conditions strategy process and action involve organizational learning (Mintzberg, 1990). Strategists learn from, and strategies are informed by implementation and experience, and interactions between various organizational levels (Burgelman, 1983a, b; Mintzberg, 1978; 1987; Mintzberg and McHugh, 1985; Pettigrew and Whipp, 1991; Quinn, 1980).

An even more recent research supports Fredrickson and Mitchell above mentioned statement that the business landscape is neither stable nor predictable, making prediction and control very difficult (e.g. Burgelman, 2002; Hamel, 2000; Müller-Stewens and Lechner, 2001; Leibold, Probst, and Gibbert, 2002) and by this statement and research they highly disagrees with (e.g. Rumelt, Schendel, and Teece, 1991, 1994) declaration. The actual strategy activities that form these strategic positions essentially remain unclear in strategy content research (Cockburn, Henderson and Stern, 2000). Conversely, strategy process views (e.g. Mintzberg, 1978; Johnson, 1987, 1988; Mintzberg and McHugh, 1985; Mintzberg and Waters, 1985; Pettigrew, 1977; 1985a, 1987a; Quinn, 1980) provide rich and systematic descriptions showing that strategy making involves a variety of factors and contextual influences, besides analytical exercises by managers in the centre as it has been identified in previous paragraphs. Strategy-making activities have also partially been specified, such as routines in decision processes (Mintzberg, Raisinghani, and Théoret, 1976).

Example:

The business world is changing fast as it has been mentioned above. Lewis E. Piatt, former Hewlett-Packard chief executive officer (CEO), argues, “Anyone who tells you they have a 5 or 10 year plan is probably crazy.” With rapid change comes uncertainty. And with uncertainty comes risk and great opportunities. If the business bet big today, for example, they may fundamentally reshape an emerging market to their advantage. Or they may suffer losses that throw their company into bankruptcy. If they wait for the uncertainty surrounding a possible opportunity to disappear, on the other hand, they may avoid making some foolhardy mistakes or they may lose their first mover advantages to a more aggressive competitor. In choosing strategies under uncertainty, there are no easy answers. Yet many business strategists make it harder than it has to be, simply by relying on outdated strategic-planning and decision-making approaches states Lewis E. Piatt. These “tried and true” approaches, designed to optimize strategic decision making in predictable environments, systematically fail in times of high uncertainty, as it can be experienced today.

On the other hand

Foresight an accurate view of the future is essential in generating the best forecasts and making the right strategy choices like Rumelt, Schendel, and Teece argued. The typical process assumes that the strategists possess the foresight to translate their knowledge of the future into point forecasts of key value drivers. These point forecasts allow for precise estimates of net present value (NPV) and other financial measures, which, in turn, determine which strategy will deliver the highest return. In addition, the typical process assumes that a deep, analytical understanding of today’s market environment and today’s company capability ties is the key to developing foresight about the future. For example, industry analysis frameworks, like Porter’s Five Forces, are at the heart of most prototypical processes because it is implicitly assumed that understanding the microeconomic drivers of today’s market environment is essential to understanding the strategies that will win in tomorrow’s market.

Welch sad it’s more important to imaginative than to be predictive. Imagination is one of the biggest corporate challenge of the last century. It’s about developing a clear idea of what is going on around the company and taking advantage of that” (Welch, personal communication, April 2002). Similarly to Welch, Mintzberg after carrying out over 20 fairly reliable researches clearly states that knowing the organization capabilities well enough to think deeply enough about its strategic directions is highly important, but knowing the strategic direction does not mean having a strategic plan or trying to predict the future and make decisions in advance to get to that goal rather it means that strategic plan will informally shape as a reflection of the environmental effects as they go on like Welch stated strategy is taking advantage of what is going on around the business. Kaplan highly supports Mintzberg theory and after carrying out valid and reliable researches over 30 businesses with Beinhocker he belives that successful companies only generate strategic plans to prepare their management team but real strategic decisions made in real time.

When Mintzberg in his article recounts the events of leading players like Volkswagen over a certain period the dangers attaching to the biography apply. There can be little doubt that Mintzberg has accurately recorded events, but the interpretation of these events and the meaning of the actions that the companies took are affected by the author’s personal paradigm. The reader is being invited to note the strategic techniques and to apply them to their own situation. Particular care has to be taken with idiosyncratic accounts, such as Townsend (1970) and Roddick (1991), where the distinctive character and personal style of the writer may make it difficult for ordinary mid or small business managers to apply the adduced lessons and techniques, dispassionate, objective assessment can be difficult when confronted with skilfully compiled accounts of past events. Apart from gathering developed and chronological lists and graphs of the most important actions taken by each organization, he used interviews and in-depth reports to study what appears to be the key point of change in each organizations strategy.

Structured interviews pose specific questions to the interviewee, which suggests that the interviewer has an agenda formed by previous study which could weakened the validity of the source. The unstructured interview, on the other hand, gives freedom to the interviewee to talk about what they thought was important and interesting which could also result one point of view. In practice, interviews tend to be a mixture of both approaches, if only to avoid the risk of the interviewee losing the plot, but the free flow of ideas may reveal more than the subject intended. The more that is known about the period or the company under study, the better able the interviewer is to detect weak “signals” in what has been said and to follow them up. Although the evidence gained is somewhat weakened, it may be necessary to agree to anonymity, but Bower (1970) is an example of a powerful study conducted on an anonymous company and its managers. Evidence, then although often of questionable veracity, is the very stuff of history and the Mintzberg cannot apply purely scientific methodology to its interpretation. Wider knowledge of the period and the actors within it helps to develop a feel for the likely truth before going on craft and interpret the primary evidence.

“I have six honest working men

Who taught me all I know

Their names are: why and what and when

And who and where and how” (Rudyard Kipling).

Kipling’s little verse which is quoted above is a valuable guide to interpretation. These questions enable Mintzberg to press more information out of the assembled evidence. Similarly, when making a deduction, or gaining an insight, it is a good discipline to ask, “What are my reasons for making this assertion?” Analytical interpretation has to be disciplined, and conclusions only drawn when fully supported by evidence. It is at this stage that, the notion of “crafting” is most evident, as Mintzberg engages with the material in the search for insight and revelation, whilst maintaining impartiality and objectivity.

Later on Mintzberg (1995) suggest that Chandler (1962) definition is the first modern definition of business strategy. If this definition were placed in the previous section on planning it would fit perfectly. Andrews (in Learned et al., 1965, p. 15) defines strategy similar to Mintzberg later theories: the pattern of objectives, purposes or goals and the major policies and plans for achieving these goals, stated in such a way to define what business the company is in and the kind of company it is to be. Andrews has defined strategy as a plan, one of the objectives of which should be specifically to define what business the company is in and the kind of company it is to be. This caveat, that at least one task must be achieved, is perhaps the first “generic” strategy! A strategy is the pattern or plan that integrates an organisation’s major goals, policies, and action sequences into a cohesive whole. A well formulated strategy helps to marshal and allocate an organisation’s resources into a unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment, and contingent moves by intelligent opponents (Mintzberg et al., 1995, p. 7). This definition describes strategy as a plan or alternatively as a pattern. The concept of strategy as pattern is an idea that Mintzberg uses often (Mintzberg and Waters, 1985; Mintzberg et al., 1998).

Mintzberg et al. (1998, p. 9) develop the concept of strategy as pattern with further concepts that they describe as the “Five Ps for Strategy; Plan, Pattern, Position, Perspective and Ploy”. Here, it is suggested that strategy is often described as a plan but when managers are asked what they actually did, they describe strategy as a pattern, or repetition of actions taken in previous years, that is subsequently adjusted to meet current criteria. Hence, strategy as a plan is looking forward and strategy as a pattern is looking backward; that is, relating to past behaviour. Both ideas have relevance, because planning would be impossible without looking forward and backward. In addition, Mintzberg et al. (1998, p. 13) suggest that it is also important to look inward and outward and up and down, which they describe, respectively, as strategy as a position and as a perspective, “namely an organisation’s fundamental way of doing things”. Their fifth concept, strategy as a ploy, treats it as a specific action designed to outwit an opponent or competitor. However, it is possible that this concept is more closely related to tactics than to strategy. The five Ps of Mintzberg et al. (1998) provide additional viewpoints for looking at strategy. However, their views add very little to the mainstream ideas of other scholars who believe that, in some significant fashion, strategy is intimately related to planning.

Apart from Mintzberg 1987 article there are other similar approaches both in strategy content and process views (e.g. managers as “architects”, Andrews, 1980; formulating strategy as a “creative act”, Christensen et al., 1982; managers as “craftsmen”, Mintzberg, 1975; or strategy creation as “craft thought and action”, Mintzberg, 1989) Although there are several authors with a different point of view on Craftmen strategy like Rumelt, Schendel, and Teece as they do not consider managers are craftsmen.