Enterprise Strategy:

Strategic Management

Ten Major Strategic Management Schools

A Comparative Analysis

By: Vadim Kotelnikov

Founder, Ten3 Business e-Coach – Inspiration and Innovation Unlimited!

 

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Instead of Introduction

Ten deeply embedded, though narrow, concepts typically dominate current thinking on strategy. These range from the early Design and Planning schools to the more recent Learning, Cultural and Environmental Schools.1

 

While academics and consultants keep focusing on these narrow perspectives, business managers will be better served if they strive to see the wider picture.2 Some of strategic management's greatest failings, in fact, occurred when one of these concepts was taken too seriously.

Recall the story of the blind men measuring an elephant - to one, the elephant seemed "very much like a wall", and to another, grasping the elephant's trunk, it felt very much like a snake. "We are all like the blind men and the strategy process is our elephant", say Mintzberg, Ahlstrand and Lampel.3 "Everyone has seized some part or other of the animal and ignored the rest. Consultants have generally gone for the tusks, while academics have preferred to take photo safaris, reducing the animal to a static two dimensions. As a consequence, managers have been encouraged to embrace one narrow perspective or another, like the glories of planning or the wonders of core competences. Unfortunately, the process will only work for them when they deal with the entire beast, as a living organism".

The lesson in all this is that there is a need for a wider systemic perspective and a better practice, not neater, but narrow technique or theory.

Corporate Strategy: 2 Logics

Competitive Strategies: 2 Types

3 Strategies of Market Leaders

Sustainable Competitive Advantage

Differentiation Strategies

 

Schools

Source

Base Discipline

Champions

Intended Messages

Realized Messages

School Category

Associated Homily

Some

Shortfalls

Design

P.Selznick

None (Architecture as metaphor).

Case study teachers (especially at or from Harvard University), leadership aficionados, especially in the United States

Fit

Think (strategy making as case study)

Prescriptive

"Look before you leap"

Neither analytical, nor intuitive. Too static for the era of rapid change.

Planning

I.Ansoff

Some links to urban planning, system theory, & cybernetics

"Professional" managers, MBAs, staff experts (especially in finance), consultants, & government controllers - especially in France and the US

Formalize

Program (rather than formulate)

Prescriptive

"A stitch in time saves nine"

Neither supports real-time strategy making nor encourages creative accidents.

Positioning

Sun Tzu's 'The Art of War'

Michael Porter

Purdue University

Economics (industrial organization) & military history

As in planning school, particularly analytical staff types, consulting boutiques", & writers, especially in the US

Analyze

Calculate (rather than create or commit)

Prescriptive

"Nothing but the facts, madam"

Strategy is reduced to generic positions selected through formalized analysis of industry situations.

Entrepreneurial

J.A.Schumpeter, A.H.Cole & others in economics

None (although early writings come from economics)

Popular business press, individualists, small business people everywhere but most decidedly in Latin America & among overseas Chinese

Envision

Centralize (then hope)

Descriptive (some prescriptive)

"Take us to your leader"

Vague vision; strategies are designed manly based on the leader's intuition.

Cognitive

H.A.Simon & J.March

Psychology (cognitive)

Those with psychological bent - pessimists in one wing, optimists in the other

Cope or create

Worry (being unable to cope in either case)

Descriptive

"I'll see it when I believe it"

Too subjective approach to strategy formulation - it is just in the head of the strategist.

Learning

C.E.Lindbiom, M.Cyert, J.G.March, K.E.Weick, J.B.Quinn & C.K.Prahlad & G.Hamel

None (perhaps some peripheral links to learning theory in psychology & education). Chaos theory in mathematics.

People inclined to experimentation, ambiguity, adaptability - especially in Japan and Scandinavia

Learn

Play (rather than pursue)

Descriptive

"If at first you don't succeed, try, try again"

Strategy development process is rather chaotic, unpredictable and process- rather than result-oriented

Power

G.T.Alison (micro), J.Pfeffer & G.R.Salancik, & W.G.Astley (macro)

Political science

People who like power, politics, & conspiracy, especially in France

Promote

Hard (rather than share)

Descriptive

"Look out for number one"

Focuses mainly on the clash of self-interests of stakeholders during the process of strategy development

Culture

E.Rhenman & R.Normann in Sweden

Anthropology

People who like the social, the spiritual, the collective - especially in Scandinavia and Japan

Coalesce

Perpetuate (rather than change)

Descriptive

"An apple never falls far from the tree"

Not well suited for radical change projects.

Environment

M.T.Hannan & J.Freeman. Contingency theorists (eg D.S.Pugh et al)

Biology

Population ecologists, some organization theorists, splitters, & positivists in general - especially in the Anglo-Saxon countries

React

Capitulate (rather than confront)

Descriptive

"It all depended"

Severe limits to strategic choice.

Configuration

A.D.Chandler, McGill University group, R.E.Milles & C.C.Snow

History

Lumpers & integrators in general, as well as change agents. Configuration perhaps most popular in the Netherlands. Transformation most popular in the US

Integrate, transform

Lump (rather than split, adapt)

Descriptive & prescriptive

"The everything there is a season"

Polarized between two approaches favoring either radical or incremental change

Based on the Sloan Management Review1

Features of the Ten Major Strategy Schools

Based on "Strategy  Safari: A Guided Tour Trough the Wilds of Strategic Management", Henry Mintzberg, Bruce Ahlstrand, and Joseph Lampel

The Design School

The original view sees strategy formation as achieving the essential fit between internal strengths and weaknesses and external threats and opportunities (see SWOT analysis). Senior management formulates clear and simple strategies in a deliberate process of conscious thought - which is neither formally analytical nor informally intuitive - and communicates them to the staff so that everyone can implement the strategies. This was the dominant view of the strategy process at least into the 1970s given its implicit influence on most teaching and practice.

The Planning School

This school grew in parallel with the design school. But the planning school predominated by the mid-1970's and though it faltered in the 1980's it continues to be an important influence today. The planning school reflects most of the design school's assumptions except a rather significant one: that the process was not just cerebral but formal, decomposable into distinct steps, delineated by checklists, and supported by techniques (especially with regard to objectives, budgets, programs, and operating plans). This meant that staff planners replaced senior managers, de facto, as the key players in the process. Today, many companies get little value from their annual strategic-planning process. To meet the new challenges, this process should be redesigned to support real-time strategy making and to encourage 'creative accidents'.

The Positioning School

 

This prescriptive school was the dominant view of strategy formulation in the 1980's. It was given impetus especially by Harvard professor Michael Porter in 1980, following earlier work on strategic positioning in academe and in consulting, all preceded by a long literature on military strategy, dating back to 500 BC and that of Sun Tzu, author of The Art of War. In this view, strategy reduces to generic positions selected through formalized analysis of industry situations. Hence, planners became analysts.  This proved especially lucrative to consultants and academics alike, who could sink their teeth into hard data and so promote their "scientific truths" to companies and journals alike. This literature grew in all directions to include strategic groups, value chains, game theories, and other ideas - but always with this analytical bent.

The Entrepreneurial School

Much like the design school, the entrepreneurial school centered the process on the chief executive, but unlike the design school, and in contrast to the planning school, it rooted that process in the mysteries of intuition. That shifted the strategies from precise designs, plans, or positions to vague visions, or perspectives, typically to be seen through metaphor. The idea was applied to particular contexts – start-ups, niche players, privately owned companies and "turnaround" situations, although the case was certainly put forward that every organization needs the discernment of a visionary leader,

The Cognitive School

On the academic front, there was interest in the origin of strategies. If strategies developed in people's mind as frames, models, or maps, what could be understood about those mental processes? Particularly in the 1980's, and continuing today, research has grown steadily on cognitive biases in strategy making and on cognition as information processing. Meanwhile, another, newer branch of this school adopted a more subjective interpretative or constructivist view of the strategy process: that cognition is used to construct strategies as creative interpretations, rather than simply to map reality in some more or less objective way.

The Learning School

Of all the described schools, the learning school became a veritable wave and challenged the omnipresent prescriptive schools. Dating back to early work on "incrementalism", as well as conceptions like "venturing", "emerging strategy", (or the growing out of individual decisions rather than being immaculately conceived) and "retrospective sense making", (that we act in order to think as much as we think in order to act), a model of strategy making as a learning developed that different from the earlier schools. In this view, strategies are emergent, strategists can be found throughout the organization, and so-called formulation and implementation intertwine.

The Power School

This comparatively small, but quite different school has focused on strategy making rooted in power, in two senses. Micro power sees the development of strategies within the organization as essentially political, a process involving bargaining, persuasion, and confrontation among inside actors. Macro power takes the organization as an entity that uses its power over others and among its partners in alliances, joint ventures, and other network relationships to negotiate "collective" strategies in its interests.

The Cultural School

As opposite to the power school that focuses on self-interest and fragmentation, the cultural school focuses on common interest and integration. Strategy formation is viewed as a social process rooted in culture. The theory concentrates on the influence of culture in discouraging significant strategic change. Culture became a big issue in the United States and Europe after the impact of Japanese management (see Kaizen and Competitive Advantage: US versus Japan)  was fully realized in the 1980's and it became clear that strategic advantage can be the product of unique and difficult-to-imitate cultural factors.

The Environmental School

Perhaps not strictly strategic management, if one takes that term as concerned with how organizations use their degrees of freedom to create strategy, the environmental school nevertheless deserves attention for the light it throws on the demands of the environment. Among its most noticeable theories is the "contingency theory", that considers what responses are expected of organizations that face particular environmental conditions, and "population ecology", writings that claim severe limits to strategic choice.

The Configuration School

This school enjoys the most extensive and integrative literature and practice at present. One side of this school, more academic and descriptive, sees organization as configuration - coherent clusters of characteristics and behaviors - and so serves as one way to integrate the claims of the other schools: each configuration, in effect, in its own place, planning for example, in machine-type organizations under conditions of relative stability, entrepreneurship under more dynamic configurations of start-up and turnaround. But if organizations can be described by such states, then change must be described as rather dramatic transformation - the leap from one state to another. And so, a literature and practice of transformation - more prescriptive and practitioner oriented (and consultant promoted) – developed as the other side of the coin. These two very different literatures and practices nevertheless complement one another and so belong to the same school.

New Business Systems Approach to Strategy Formulation

Returning to the blind men and the elephant metaphor, "scholars and consultants should certainly continue to probe the important aspects of each school, for the same reasons that biologists need to know more about the tusks, trunks and tails of elephants", say Mintzberg, Ahlstrand and Lampel.3 "But more importantly, we must move beyond the narrowness of each school. We need to ask better questions to allow ourselves to be pulled by concerns out there rather than pushed by concepts in here, whether in consulting or in research... In addition to probing its parts, we must pay more attention to the integral beast of strategy formulation. We shall never find it, never really see the whole. But we can certainly see it better."

 

Think of growing your business as growing a perfect human being – in all his or her complexity and integrity. Think of this human being as a multi-skilled sportsman who is to win various competitions, both individually - a 100 m sprint run, a tennis tournament, and a chess match – and as a team player – a relay-race, safari rally, and football. He is also to live a harmonious family, social and cultural life, grow his children and support his elders... Clearly, narrow strategies aimed at perfecting different functions of this person – body-building, thinking-building, or personality-building – would not create a perfect man. The same is also correct for the business strategy development in the new era of systemic innovation where good in parts is no good at all. The old linear and static approaches might work well for the old era of slow, linear and incremental change. The emerging era of rapid, systemic and radical change requires more flexible, systemic and dynamic  approaches to strategy formulation.

Thus today, corporate strategy formulation should be a combination of different currently practiced approaches described above – judgmental designing, intuitive visioning, and emergent learning; it should be about transformation as well as perpetuation; it has to involve individual cognition and social interaction, co-operative as well as conflictive; it must include analyzing before and programming after as well as negotiating during; and all of this must be in response to what can be a demanding environment.

Certain positive moves in this direction have been  seen recently. Some of the more recent approaches to strategy formulation take a wider perspective and cut across the above ten schools in eclectic and interesting ways, for example Learning and Design in the "Dynamic Capabilities" approach, or the "Dynamic Strategy" one based on knowledge working.

New Paradigm: Resource-Based Theory

The currently dominant view of business strategy – resource-based theory – is based on the concept of economic rent and the view of the company as a collection of capabilities. This view of strategy has a coherence and integrative role that places it well ahead of other mechanisms of strategic decision making.5

Traditional strategy models, such as Michael Porter's five forces model, focus on the company's external competitive environment. Most of them do not attempt to look inside the company. In contrast, the resource-based perspective highlights the need for a fit between the external market context in which a company operates and its internal capabilities. According to this view, a company's competitive advantage derives from its ability to assemble and exploit an appropriate combination of resources. Sustainable competitive advantage is achieved by continuously developing existing and creating new resources and capabilities in response to rapidly changing market conditions...More       

 

 

References:

  1. "Sloan Management Review"

  2. "Strategy  Safari: A Guided Tour Trough the Wilds of Strategic Management", Henry Mintzberg, Bruce Ahlstrand, and Joseph Lampel

  3. "Strategy, Blind Men and the Elephant", Henry Mintzberg, Bruce Ahlstrand, and Joseph Lampel

  4. "Strategic Management - Competitiveness and Globalization", M.A. Hint, R.D. Ireland, and R.E. Hoskisson

  5. "Strategy and the Delusion of Grand Designs", John Kay

  6. Strategic Management, Vadim Kotelnikov

  7. 3 Strategies of Market Leaders, Vadim Kotelnikov

  8. Innovation Strategies, Vadim Kotelnikov

  9. Sustainable Competitive Advantage, Vadim Kotelnikov