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StrategyLecture one: Introduction
Strategy is about dilemmas and paradoxes
Identifying strategy issues
- Two ways of viewing strategic questions:
- Tools-driven (e.g. SWOT, PESTL, BCG)
- Problem-driven
- The problem-driven approach was used. Key strategy issues are identified and examined from
the perspective of the most appropriate theories
- Strategizing: cognitive processes of individual strategists
- Missioning and visioning: purpose as the impetus for strategy activities
- Strategy process: the manner in which strategies come about
- Strategy content: combined decisions and choices that lead a company into the future
- Strategy context: a set of circumstances under which the strategy content and the strategy
process are determined
Managing strategy paradoxes
- A paradox has no answer or set of answers: six different ways of dealing with a paradox
- Navigating: focus on one contrary element at a time (e.g. seeking synergies, then looking
for responsiveness)
- Parallel processing: separate the contrary demands in different internal or external
organizational units (e.g. improving existing products, meanwhile developing a new
generation of products)
- Balancing: tradeoff elements of the opposing demands (e.g. following industry rules vs
changing others)
- Juxtaposing: manage opposite demands (e.g. competing and collaborating (Apple vs
Samsung)
- Resolving: develop a new synthesis between competing demands ((e.g. shareholder vs
societal value)
- Embracing: embrace and actively use the tension as a source of creativity and opportunity
(e.g. assigning opposite personalities in management team)
, Lecture two:
Introduction
- Strategists: are engaged in the process of dealing with strategic problems
- Strategic problem: a set of circumstances requiring a reconsideration of the current course of
action, either to profit from observed opportunities or to respond to perceived threats
- To deal with these strategic problems, managers go through a strategic reasoning
process, searching for ways to define and resolve the challenges at hand
- Managers must structure their individual thinking steps into a reasoning
process that will result in effective strategic behaviour
The issue of strategic reasoning
- Cognition: the human ability to know
- As strategists want to know about the strategic problems facing their organizations,
they need to engage in cognitive activities
- Hot cognition: a person's thinking is influenced by their emotional state
- Put simply, hot cognition is cognition coloured by emotion
- Cold cognition: cognitive processing of information that is independent of emotional
involvement
- Cognitive maps: to deal with its inherent physical shortcomings, the human brain copes by
building simplified models of the world
The cognitive abilities of our brains: hardware-level question
The cognitive activities carried out by our brains: application-level question
The cognitive maps used by our brains: operating system-level question
Cognitive activities
A general distinction can be made between cognitive activities directed towards defining a strategic
problem and cognitive activities directed at solving a strategic problem
General elements of a strategic reasoning process:
- Identifying: before strategists can benefit from opportunities or counter threats, they must be aware
of these challenges and acknowledge their importance
- This part of reasoning process is also referred to as recognizing, sense-making or sensing
- Diagnosing: to grapple with a problem, strategists must try to understand the structure of the
problem and its underlying causes
- This part of reasoning process is also referred to as analysing, reflecting or shaping
- Conceiving: to deal with a strategic problem, strategists must come up with a potential solution
(choose the most promising one)
- This part of reasoning process is also referred to as formulating, imagining or seizing
- Realizing: a strategic problem is only really solved once concrete actions are undertaken that
achieve results
- This part of reasoning process is also referred to as implementing, acting or reconfiguring
Cognitive abilities
Limitation to humans’ cognitive abilities is largely due to three factors:
- Limited information sensing ability: people’s limited ability to register the structure of reality is
due to the inherent superficiality of the senses and the complexity of reality.
, - The mental representations of the world that individuals build up in their minds are
necessarily based on circumstantial evidence.
- Limited information processing capacity: humans hardly think through a problem with full use of
all available data, but necessarily make extensive use of mental shortcuts (cognitive heuristics)
- Cognitive heuristics: mental rules of thumb that simplify a problem so that it can be more
quickly understood and solved
- Cognitive heuristics focus a person’s attention on a number of key variables that are
believed to be most important
- Limited information storage capacity: people must store information very selectively and organize
this information in a way that it can be easily retrieved when necessary
Cognitive maps
- Also known as cognitive schemata, mental models, knowledge structures or construed reality
- Cognitive maps: representations in a person’s mind of how the world works
- Cognitive map of a certain situation: reflects a person’s beliefs about the importance of
the issues and about the cause and effect relationships between them
- Exhibit a high level of rigidity
- Dominant logic: a resulting shared cognitive map of a group → can also be seen as common
knowledge
- Downside of cognitive maps: they exhibit a high level of rigidity, people do not want to change
their minds
- People tend to overestimate the value of information that confirms their cognitive map,
underestimate dis-confirming information and seek out evidence that supports their beliefs
The paradox of logic and intuition
- Intuition: can give a richer assessment of qualitative information, is faster and better at capturing the
big picture than logical thinking
A strategist must be acutely aware of the unfolding opportunities and threats in the environment and the
evolving strengths and weaknesses of the organization:
- This requires rigorous logical thinking: all the key assumptions on which a strategist’s cognitive
map are based need to be reviewed and tested against developments in the firm and its environment
- They must make their tacit beliefs more explicit so they can be evaluated and refined
- Logical thinking can be applied to:
- Identifying and diagnosing: avoids emotional interpretations
- Conceiving and realizing: avoids danger of following outdated habits and routines
and helps to distinguish between fantasy and feasibility
- But also the ability to engage in intuitive thinking: strategists must be able to think beyond their
current mental models
- Opens up the unconscious part of the brain –connects many variables to another into a whole
without a sound explanation of why a correlation is assumed
- Intuitive thinking can be applied to:
- Identifying and diagnosing: old cognitive maps may lock people into old patterns
of thinking
- Conceiving and realizing: new strategies are not analysed into existence but need
to generate
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