2. Why Strategy is changing

Strategy appears primarily concerned with adjusting an organisation to change in its environment and with policy about what is a 'good' approach for organisations to take. Changes have occurred in both the methods and content of business strategy because of:

• changes in the nature of the environment - from being stable and predictable in the decades following WWII, to the emergence of rapid change, and recently turbulent change.
• the need for Western firms to cope with Japanese / East Asian competition. Item 75 in the Review of Strategy Literature indicates briefly some of the differences in such methods.

Techniques used in developing business strategy have evolved as a result (Item 56). For example the Harvard business policy approach (Items 53, 57) dominated until 1970; portfolio analysis (Item 30) and the experience curve (Item 42) were widely used in the 1970s; Porter's ideas about positioning for competitive advantage dominated in the 1980s, and concepts like 'Re-engineering' (Item 88) and 'stretch' (Item 64) have emerged in the 1990s.

Strategy concepts have been increasingly adopted by governments since the 1980s because the need for change has become more important than their traditional emphasis on growth.

3. Some Implications

Significant issues emerging in the attached Brief Introduction to Some Strategy Issues involve:

(a) History of Strategic Planning:

Strategic planning emerged in the 1950s and 1960s to allow firms to adjust themselves to increasingly rapid changes in their environment, rather than continuing to be primarily concerned with (say) efficiency. Strategic planning was extensively used in the 1970s.

Early strategic planning (involving data analysis separate from practice) has been criticised since the late 1970s because:

• 'planning' could only program existing strategies, because creating strategy requires synthesis of soft data to see new relationships, rather than analysis of hard data
• formal processes for strategic planning interfered with strategic thinking by others
• historical data (eg trends, SWOT analyses) could not anticipate the future
• comprehensive planning seemed only of value in a fairly stable environment

Given the need for rapid industrial adjustment while responding to their environment, strategic management became critical to many firms, and new methods then evolved.

Issues emerging in recent years include:

• the role of an ability to change in creating tomorrow's competitive advantages
• shifting strategy management from a convergent approach (providing answers) to a divergent approach (asking questions)
• how to deal with the unknowable - which requires entrepreneurship
• development of capabilities to deal with a changing environment, rather than developing responses to specific changes
• competing in terms of core competencies, rather than cost cutting
• the limited gains from 'downsizing' and the need: for 'stretch' to achieve goals well beyond an organisation's resources, by leveraging other resources; or for 'creating' the future by having a unique viewpoint about it based on deep understanding.
• the importance of increasing flexibility - through process re-engineering
• the contributions of different schools of economics to business, and the apparent limited relevance of classical microeconomics (which it is important as it is such microeconomics which is the basis of many economic reform efforts in Australia)
• strategy as revolution - and thus likely to be seen as subversive - because of the fundamental changes needing to be made
• the need for leading firms to be multinational, or global (requiring multiculturalism)
• the infrastructure for innovation - which successful strategic planning can initiate
• the limitations on benchmarking in developing organisations
• the role of strategy itself in further accelerating the rate of change
• knowing the pressures which cause customers to change - not just their existing needs.

Japan introduced techniques which differed to those of the West because they did not just solve problems, but improved on what already worked. This created techniques such as 'lean' production as an alternative to 'mass' production - and may be leading to techniques such as 'management by creation'. However Japan may be experiencing difficulties (though there are contrary views)

Issues arising in the development of strategic approaches in Government include:

• strategic planning creates a context for other decisions, and helps resolve conflicts
• strategic planning differs from long range planning by addressing issues rather than programs and budgets; and by assuming environmental change, rather than stability
• strategic planning works best in government's more business-like agencies
• success requires: top level support; environmental scanning; stable management; an ability to manage conflicts; strategy development through the main management processes; close links with operational realities; and recognition of resource constraints
• methods have been developed after 20 years experience to link overall strategic planning with the annual corporate planning cycle (Item 28).
• There can be uncertainty about whether the goal of strategy would be the political survival of governments, or the effective performance of public sector functions

Many factors can be identified which traditionally required a different approach to strategy in government compared with business, such as: orientation to political rather than economic goals; multiple, inconsistent and unclear goals; greater difficulty in implementation; shorter time horizon; restraint on innovation through legislation; lack of linkage between performance and budgets; dependence of resourcing on lobbying rather than on customers; focus of senior managers on policy not on administration; emphasis on collaboration rather than competition; the existence of programs intended to be purely symbolic; lack of a single leader / concentrated power; unclear performance criteria; and denial of problems (strategic issues) by the political system.

This is needed to avoid targeting past goals (which techniques like benchmarking and SWOT are said to do). This requires deep knowledge of what drives change. Current theories of complex adaptive systems provide a better means for understanding the future than do 'machine' metaphors. Scenario methods have been widely used.

Specific techniques emerging include: how best to use intuitive thinkers; the conflict between leadership and management; the use of loosely coupled organisation to allow both continuity and change; 'balanced scorecards' as a means to manage in terms of strategy, rather than in terms of financial criteria alone; and the use of networks as a means for identifying useful innovation. For government some further specific techniques include: participative events; and stakeholder matrices.

4. Some Gaps in this Paper

This review was (generally) limited to the approach to business strategy in the Anglo-American world - and there is reason to suspect that the approach to strategy is different in (say) continental Europe and even more so in Asia.

For example, German strategies appear to place more emphasis than Anglo-American strategies on deployment of skills; and East Asian strategies tend to be based on approaches such as those in Sun Tzu's Art of War (which addresses issues such as deception and 'winning' by preparations before others know anything is happening). However, as the East Asian approach seems to be based on a different theory about knowledge to that which Western societies inherited from classical Greece, cross cultural strategy comparisons involve some very difficult philosophical issues.

This review deals only superficially with many business strategy issues (eg benchmarking, globalisation, strategic alliances, downsizing, technology, innovation), and omits some which were not in the literature sample which was reviewed. Also this paper does not do justice to management issues many of which are related to the organisation of strategy (eg corporate governance, TQM, organisational development, information systems, creativity, leadership).

5. Conclusions

(a) Scope for Learning

Methods apparently being used for strategy development by Queensland's major business and government entities might be improved by a study of international experience with strategy development over the past two decades.

(b) Social and Economic Development Strategy

In forming social and economic development strategies, the Queensland Government is concerned with the development of capabilities in the community and the economy to cope effectively with its environment. Thus, while business strategic planning is not directly applicable, analogies with lessons learned from that experience might be considered. Some implications for a SEDS in particular may be:

• the need for strategy to be based on the anticipated future economic environment, requiring deep understanding of what drives change - rather than projecting the past
• the competitive strategies devised by businesses might (with adjustments) be advantageous to industrial clusters or regional economies in Queensland.
• good strategic capabilities are needed by businesses operating in Queensland

(c) Strategy in Government Traditionally has Special Requirements

Of particular importance are the influence of politics and the broader, less definite goals. In business strategic planning arose to allow organisations to identify the internal capabilities required by their future commercial environment (ie that environment (customers, competitors) is assumed to be more powerful than the organisation). In government strategic planning was traditionally driven by what politics indicate that the community would like the (commercial) environment to be, and sought to make the (commercial) environment respond to those desires.

(d) Strategy for Public Sector Entities which have to Compete

Many changes have been introduced to make government more business-like (eg commercialisation / corporatisation of some activities, introducing competition, a purchaser / provider split). In a competitive situation those government entities which are commercialised, corporatised or service providers would only survive if they are able, like their private competitors, to develop capabilities to suit the needs of their (commercial) environment, rather than capabilities to suit what the political process would like the environment to be. Their ability to do this seems critical to future government revenue - and thus to Queensland's tax rates.

(e) Care is Needed

Any attempt to apply particular ideas indicated in this preliminary paper should be based on: validating that the original source is reliable; identification of the implications of contextual differences; and close attention to practical aspects.