Broad summary of the course Strategy and Decision-making 2019. This summary contains all lectures, including guest lectures and related literature, consisting of Bob de Wit's book Strategy and the relevant articles.
This summary contains all the lectures, including the guest lectures and the ac...
Summary Strategy and Decision-Making
Lecture 1
Literature: Chapter 1: introduction
The nature of strategy
There is no widespread definition of strategy, but it agrees upon definitions, rules, matrices and flow
charts because of several opinions and disagreements on key concept of strategy. (043, 2019)
Abraham Maslow analogy of the hammer and nail: ‘If the only tool you have is a hammer, you treat
everything like a nail. In other words, do not only view strategic issues (nails) with only one theory
(hammer).
Identifying the strategy issues
There are two approaches while looking at issues:
1. Tools driven – studying the characteristics and functioning of all tools individually and only then
to apply each where appropriate.
2. Problem driven – understanding problems comes first, while searching for the appropriate
tools is based on the type of problem.
This book adopts the problem driven approach. Each chapter discusses a large strategy issue led by
different paradoxes. In the book, strategy tensions are presented as strategy paradoxes.
Strategists are rational actors who identify, determine, evaluate, translate and carry out, based on
rigorous logic and extensive knowledge of all-important factors. This is called the cognitive process.
However, writers still argue that the true nature of strategic thinking is more intuitive and creative
(imagination and judgement) than rational (analysis and logic).
Making a strategy is a means for reaching particular objectives, and thus not end in itself. Organizations
exist to fulfil a purpose and strategies are employed to ensure that the organizational mission and
vision is realized. The purpose of existence for organizations is not universal even though this purpose
might see self-evident. For example, make money (serve shareholders) versus fulfill interests of
stakeholders (serve stakeholders.
There are three distinguishable dimensions of strategy that can be recognized in every real-life
strategic problem situation:
• Strategy content = The combined
decisions and choices that lead a
company into the future. This is
concerned with the what of strategy.
• Strategy process = The manner in which
strategies come about. This is concerned
with the how, who and when of strategy.
• Strategy context = The set of
circumstances under which both the
strategy content and the strategy
process are determined. Concerned with the where of strategy.
According to the figure is that the three dimensions interact with each other. In order for a strategist
to have a real depth of comprehension, understanding of all three dimensions is needed. It is possible
to focus on one dimension whilst keeping the other two in mind (e.g. to have a focused discussion).
,Summary Strategy and Decision-Making
Most strategy research is atomistic (><
holistic); focusing on just a few variables at
once. An example is focussing on one
dimension of strategy.
Each strategy is essentially and unique. Most
common levels of aggregation distinguished
in the strategic management literature are
functional, business, network and corporate.
• Functional: this refers to questions
regarding specific functional aspects
of a company. For example,
marketing, finance and operations.
• Business: this requires integration
of functional level strategies for a
distinct set of products and/or
services intended for a specific
group of customers and is most
often until this level.
o Should organizations be
market-driven (outside-in)
or resource-driven (inside-
out)?
• Network: a logical extension of the
functional-business-corporate
distinction is to explicitly reorganize
the level of aggregation higher than
the individual organizations. Firms often cluster together into groups of two or more
collaborating organizations. These clusters could be a strategic alliance, joing venture, value-
adding partnerships.
o Should organizations develop long-term collaborative relationship with other firms or
remain essentially independent?
• Corporate: This aligns the various business level strategies. Only when there are many
companies within two or more businesses.
o Should organizations run as federations of autonomous business units or as highly
integrated organizations?
In real life these levels of strategy do not exist, they are more interrelated and overlapping each other.
The strategy process is usually portrayed as a linear process. Usually, a split is made between the
analysis stage, strategy formulation stage, and strategy implementation phases. But this distinction
has received much criticism as the process is messier, and not simple. In their view, strategies are
usually formed incrementally letting strategies emerge as they think and act in small iterative steps.
Also, strategies should not be seen as made for the entire organization and that it can be changes
radically all at once.
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,Summary Strategy and Decision-Making
The alternative to the strategy process consists of
strategy formation, strategic change, and strategic
innovation, as shown in the figure. These are NOT
phases/elements/steps/etc. but rather are different
aspects of the strategy process that are strongly linked
and partially overlapping.
Every strategy context is unique. There should be a fit
between the strategy content, process, and the specific
circumstances in the strategy context. But the context is
dynamic and cannot be influenced by strategists, and thus,
should not be driven by context (debate).
The strategy context can be determined, instead of letting it
determine!
Structuring the strategy debates
There is no universal agreement on how to solve strategic problems. If there would be right or wrong
approaches, the wrong ones will disappear automatically and thus finishing the debate. However, this
doesn’t seem to be the case in the field of strategy. Also, it is difficult if not impossible to identify so
called wrong theories.
It is wise for a problem solver to look at the problem from different angles, each suggesting a different
perspective on how to solve it, to combine the various theories.
Many of the major disagreements within the field of strategic management are rooted in the different
assumptions made about coping with the strategic tensions that strategists are challenged by.
There are two kinds of problems:
• Either/or problems: can be solved
o Puzzles: a challenging problem with an optimal solution, just like a puzzle.
o Dilemmas: a vexing problem with two possible solutions, neither of which is logically
the best, just like the prisoner’s dilemma. Leading to the ‘horns of a dilemma’ of
neither choice being comfortable.
• Both/and problems: can only be ‘managed’
o Trade-offs: a problem situation in which there are many possible solutions, each
striking a different balance between two conflicting pressures.
o Paradoxes: a situation in which two seemingly contradictory, or even mutually
exclusive, factors appear to be true at the same time. Has no real solution.
The chapters with the strategy paradoxes (=strategy tensions) aims for dialectical enquiry; by using
two opposite points of view, the problem solver attempts to arrive at a better understanding of the
issue and a higher level of resolution, integrating elements of both the thesis and anti-thesis. The
advantages of this approach are the range of ideas, points of contention, stimulus for bridging, stimulus
for creativity.
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, Summary Strategy and Decision-Making
Managing strategy paradoxes
Not every solution can fit but will fit when there is no real other optimal solution to the problem.
Solutions fit but not fit all problems, due to differences in situations. The attractiveness of a solutions
depends of the specific company context, for example the industry and culture in the company. But
the options of dealing with paradoxes consists of six different options.
1. Navigating = this is to focus on one contrary demand at a time. In this case the paradox is
managed over time by a series of contrary initiatives, which leads to a development path
comparable with a tacking sailing boot.
2. Parallel processing = this is to separate the contrary demands in different internal or external
organizational units.
3. Balancing = this refers to dynamic equilibrium and is to manage opposite demands by trading
off elements of opposing demands and blending the most appropriate balance.
4. Juxtaposing = this is to simultaneously manage opposite
5. Resolving = this is to develop a new synthesis for a higher equilibrium between competing
demands or by exploiting the tension. This creates a new balance between contrary elements
that will sustain for some time but are eventually replaced by a new one.
6. Embracing = this is to embrace and actively use the tension as a source for creativity and
opportunity.
The above list is not a passive checklist for strategist but rather a menu of available strategizing options
that can be dynamically applied. But note that the goal is not to effectively to manage the paradox!
The capability is a necessary means to manage paradoxes and create competitive advantage (=ultimate
goal).
Developing an international perspective
Strategy is worldwide. Therefore, the international context always needs to be considered when
developing a strategy.
Reading 1.1 complexity: the nature of real-world problems (Mason and Mitroff)
The main argument of this reading is that most strategic problems that facing organizations are not
‘tame’ (they are not simple problems that can be separated and reduced to a few variables and
relationships and quickly be solved). These problems are wicked problems. Wicked problems are
complicated and interconnected. These problems are uncertainty and ambiguity and are dealing with
opposing views and conflicting interests. However, it is also important to find the best resources for a
high standing solution.
‘Basically, every real-world policy problem is related to every other real-world problem’. In order to
solve these problems, it must have a set of comprehensive concepts for dealing with any policy and a
rich set of tools for acquiring the holistic information that is needed to guide policy making.
Complexity means the condition of being tightly woven or entwined together. There are two types of
problems, the problems of simplicity (tame problems) and problems of disorganized compelxity
(wicked problems). Tame problems can be managed and solved, but complex problems can be ‘tamed’
as well by statistical means only when the complexity is ‘disorganized’ – the number of variables is very
large, and the variables are relatively disconnected.
When a problem situation meets the condition for random sampling – many individual elements
exhibiting independent, probabilistic behavior – there is a potential statistical solution to the problem.
The difficulty with connected systems of organized complexity is that deviations in one element van
be transmitted to other elements. The deviations are magnified, modified and reverberated causing
the system to take on an unpredictable life (e.g. insurance companies). Referred to as environmental
connectedness (Emery & Trist) in which the environment is turbulent.
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