A brief Introduction to Some strategy issues

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In the following, the (number) refers to the sequence in the supporting Strategy Literature Review which provides a more detailed summary of each source.

A. History of Strategy

Strategic planning (ie to scan the environment, evaluate purpose, and identify crucial success factors) started in the US military, and moved to US companies in the 1950s. (46)

Planning is [in 1965] an analytical process to assess the future, determine objectives, develop alternatives and make selections. Planning is needed because of changes in the environment (31)

Corporate strategic planning emerged in 1960 because of the increased complexity of organisations, but this was realised in the 1970s to be inadequate. Successful strategic planning [in 1977] requires: general manager ownership; decision making by line managers not planners; and helping line managers to work together to make decisions (54)

GE developed the portfolio approach to corporate strategy in 1969 - which involved creating strategic business units and a matrix approach to resource allocation (in terms of their growth potential and cash usage). This method has been seen as contributing to US industrial decline. The learning curve (which recognised that firms become more efficient in time and thus need to retain market share) was also influential. The portfolio approach is useful for deciding what areas a company should be in but not for deciding what type of company it is to be, or what competitive strategy to use (30)

Strategic planning is made harder and more necessary by turbulent change. Because of increased hostility to multinationals [in 1976] planning will need to be more politically oriented, and less market oriented, in future (67)

Strategic planning is [in 1979] part of the task of management, not something separate. Previously management was only concerned with efficient use of resources, but now must adapt to a rapidly changing environment - because the best tactics are useless without correct strategy. Strategic planning has been common for 25 years because of the view that it allowed firms to make trends, not just to follow them  (24)

Strategic planning is [in 1982] a means to recognise changes in the environment, so as to direct resources appropriately. Good planning involves: an emphasis on process not just on product; clear identification of goals; understanding of existing capabilities; and identification of priority issues, strategies and action programs. It requires CEO commitment, with line managers responsible - helped by the planning officer. Qualitative aspects are more important than quantitative. Need to link strategic / operational plans, budgets etc. This system takes time to establish, and needs to be started simply. (43)

Lines between strategy formulation and implementation are constantly blurring - as signals of the need for change seldom come through formal environmental scanning. There have to be people in organisations who see the world from different points of view.(36)

Strategic management is [in 1987] the process whereby an organisation makes decisions about a complex changing environment. It involves making and implementing decisions. Strategic decisions are made at all levels. Top managers decide corporate philosophy and mission while each business unit undertakes its own strategic planning. Requirements for objective setting, strategy selection and implementation are suggested (49)

There are 10 schools of thought on strategy formulation. The first three focus on how strategy ought to be formed: by design; by strategic planning; and by taking account of a firm's positioning. Others deal with aspects of the strategy process ie with: how people's ability to think affects strategy; that strategy is too complex to be planned, and must emerge as an organisation learns; that strategy reflects political power; that it reflects culture; and that it is purely a response to the environment. Strengths and weaknesses of these various approaches are outlined in detail (57)

Business strategy involves many components - product markets, investment, competitive advantage etc. General strategies can involve either low low costs or high quality. Strategy development systems have evolved from: budgetary control (in early 1900s); long range planning (in 1950s) to anticipate effects of growth; and strategic planning (in 1960s) to anticipate capabilities required for discontinuities. This is usually an annual process linked to resource allocation. But strategic issues do not only arise annually. Thus emphasis has shifted to strategic management, which involves a continuous 'issues oriented' focus on external influences, with a pro-active orientation. (72)

B. Criticism of Conventional Strategic Planning

Strategy is not the same as planning (42)

Since the 1950s the strategic problem was to eliminate the mismatch between an organisation and its environment. But strategic planning was only part of the solution - because it focuses on external linkages and assumed that internal arrangements were unchanged. Now [in 1976] strategic management deals with both aspects of the problem (51)

Traditional strategic planners analysed historical data to make predictions. This is inadequate in a rapidly changing world. The Futuring method used by Shell to anticipate the effect of the energy crisis in the 1970s was significant  (13)

Problem solving through disjointed incrementalism has been proposed - as better than systematic attempts at planning because the complexity of social systems defeats any attempts to optimise outcomes. (70)

When strategic planning emerged in the 1960s it involved, a scientific management style which separated thinking and doing. This has not worked, because strategic planning is not strategic thinking, and interferes with strategic thinking. Strategic planning has only been programming of existing strategies. Strategy forming [in 1994] requires synthesis of what managers know from all sources. Planning merely re-arranges existing situation, where need to create new. Problems for planning include: its requirements that the world doesn't change so that projections are possible; its exclusion of knowledge available to managers about the situation; and inability of formal systems to understand (as compared with processing) data. Business units (not planners) should be in charge of strategy.(69)

Criticism of strategic planning is widespread - because its focus on analysis leads to an inability to predict crucial market shifts. This leads to long time lags, and to a myopic short term focus by senior managers. Strategic planning ignores creative processes which generate breakthroughs. True vision requires synthesis of data, not analysis It also ignores the role / knowledge of middle managers. While operational plans were supposed to be based on strategic plans this was only nominal. Eventually it was realised that those responsible for implementation had to be involved in planning. But this was only enough in a stable environment. Planning only works if the future is stable / predictable. Now [in 1995] need insights of those on the front lines. Now plans are seen as starting point rather than as end point. Planning is becoming more evolutionary, and bottom up. (60)

Strategy is no longer about optimising plans - as we do not know enough about the future. Different situations can arise where (a) environment is known and stable - when prediction is possible; (b) where environment is changing - where we need to have internal generative arrangements to respond to unpredictable changes in environment; and (c) where environment is complex - where the organisation itself is one influence on the environment - making the environment hard to describe objectively (8)

C. Strategy Debate in the 1990s

After its popularity in the 1970s strategic planning lost support in 1980. Firms like GE applied strategic planning first in business units, and only years later at corporate level to cope with complex business environment. Problems included: growth of planning staff; loss of credibility; and separation of strategic and operational planning. New developments are occurring [in 1990] in strategic planning because of great need. Strategic management is much more than strategic planning. GE used new approach involving de-emphasis of role of planners, and increased role for line managers. Some lessons from experience are suggested (82)

Conventional strategic management is often seen as a separate type of management concerned with big issues. Many entrepreneurially oriented persons object to this. But though flexibility has been introduced, the core approach remains [in 1990] unchanged. However conventional strategic planning is unrealistic and static. It proposes better ways to deploy resources - but the real problem is to handle the unknowable. The months taken in producing formal strategic plans are wasted. Strategic planning can raise important issues, but as a means for control it is dangerous because it assumes the future can be understood in terms of past experience. Successful firms deal with uncertain situations by a focus on issues at many levels, making experimental changes. An innovative, entrepreneurial approach is not an alternative to strategic planning in dealing with uncertain situations, but the only option. Firms using strategic planning will be much less successful (55)

Strategic management is [in 1991] a means to match the skills / resources of a company with its environment. It is the means for implementing a strategic plan. Without a good relationship with the environment, internal efficiency is useless. Strategy addresses: what business a firm is in; how to compete in that business; and operational issues. It involves: strategic analysis; choice; and implementation. Benefits include: providing concept of what an organisation tries to achieve; understanding environment; organisational unity; guiding resource allocation; and enabling pro-activity. It can involve either formal planning; or an incremental approach. Strategic thinking is more important than having a formal strategic plan - ie by encouraging employees to think about the big picture (45)

Traditional concept where managers form strategies before implementation is unrealistic as can not separate thinking and action. Purpose of strategic planning is to match a firm's capabilities and its environment. After WWII the environment was seen as unchanging - so business needed only accounting and simple information systems. Rapid change in 1960s forced strategic planning to match an organisation to its environment - using an analytical process. Porter in 1980s developed industrial economics concepts to allow firms to focus on immediate economic environment. Now [in 1993] recognise the importance of innovation - ie that marginal gains are not enough. Ability to change is major competitive advantage. Strategy aims to create value. Porter's model allowed this to be analysed in structural terms. Now change to create tomorrow's competitive capabilities is the key source of competitive advantage (32)

In the 1980s most concern was with strategy content - with ensuring that an organisation `fits' with its environment. There is now [in 1996] uncertainty about finding any such single answer - and strategy is seen as a 'divergent' rather than 'convergent' problem. Shell's planning systems were an important learning process. Complexity theories have come to our aid in understanding environments as dynamic systems of complex relationships. Strategy can deal with internal governance, internal learning, and creating the future. (9)

Change has [in 1993] become a source of competitive advantage, but can not be achieved by the structural means of first deciding what to do followed by implementation (35)

In the 1980s companies discoverd time as a basis for competitive advantage, but those who succeeded on this basis had other strengths. Now [in 1992] corporate strategy is based on capabilities - as demonstrated by Wal-Mart's success against Kmart. This was based on dealing with hard to manage arrangements, and strategic investments beyond normal ROI, because of a focus on overall capabilities - where Kmart's approach involved conventional emphasis on value added in each business stage (77)

Firms can not shrink to greatness - they must anticipate the future and adapt. The former involves few persons, the latter many.(10)

Given the competitive position, firms now [in 1994] require not only a strategic approach, but also 'stretch' to achieve a competitive position (22)

Over the past 20 years [in 1993] many dominant companies were displaced by competitors with less resources but greater aspirations. The problem is that competitive structural analysis allows problems to be analysed but not prevented. Competition is now between mind sets. For managers in large Western firms strategy means fitting into the environment, and optimising resource allocation. A better alternative involves the concept of stretch which involves having over-ambitious goals, and leveraging available resources with those from other sources (64)

Strategies based on ensuring fit with the environment are not [in 1993] those used by the best companies. Rather their approach has always involved strategic intent well out of scope of their existing resources, requiring that those resources be leveraged.(33)

Strategic management is concerned with enhancing the value of business by addressing: sources of economic rents; limits to size for innovation; role of contracting; capabilities required; managing knowledge strategically; nature of business; and what is needed for clever strategies. Until the 1970s the dominant approach was 'business policy' using Harvard methods. The 1970s were the age of strategic planning, using portfolio analysis and the experience curve. In the 1980s Porter's theories based on industrial economic dominated. There are many schools of economics with different potential contributions. Classical micro-economics is the main school taught by academics, but is useless to business. But there are alternatives. Strategy works better in Japan where different aspects of a planning processes are undertaken in parallel rather than in sequence .(56)

Major shift in strategic planning since the 1970s has been making it the responsibility of line managers, rather than staff. More sophisticated techniques - like scenarios, TQM and organisational culture are also more important [in 1994] (37)

Peters argued that 'excellent' companies focused on the basics and got close to customers. Then in 1987 (when 'excellent' companies had problems) he suggested delegation, delayering to make change feasible. Now he argues that it is not sufficient to listen to customers - because change is too fast. It is now necessary to rely less on organisation (71)

An incremental approach is not good enough when others re-invent industries. To survive strategy must create revolution. Key to success is recognising that strategic planning is not strategic - being ritualistic, assuming the future like the the past. Strategy must be subversive - ie be seen as subversive by the establishment. Key bottleneck will be at the top. Change is no problem if people are involved in causing it. It is impossible to tell who will produce the best options. Change is not traditionally driven from the top. It is impossible to predict outcomes, when dealing with discontinuities (61)

The essence of strategy is to create tomorrows competitive advantages faster than others. This requires building infrastructure for consistent innovation. A business strategy based on a 'steady as she goes' approach is [in 1996] a recipe for oblivion (59)

Just adapting to the environment can be dangerous. It is essential to have both managers and leaders. Strategic planning involves organisational self examination, and making difficult choices. Strategic success requires: value; clear mission; rallying cry; perseverance; empowering all people; rewarding risk taking; innovation; and market focus. This is quite different to long range planning which projects business trends. Rather than concern for customer requirements, firms must consider why customer requirements change (52)

In the 1980s firms were judged on their ability to restructure and downsize. In the 1990s, they will be judged in terms of creating the core competencies needed for success. Firms which see themselves as group of business units will not succeed, as those business units cut across competencies (34)

Many firms are now emphasising their core competence as a basis for competitive strategy. Mechanisms are available to assess the value of such core competencies, to determine whether they are sufficiently valuable to be the basis for competitive strategy (94)

Firms need clear and unique understanding of their industry in future. However most are merely concerned with re-engineering. Downsizing has emerged because of firms' inability to cope with declining business and high overheads. So they emphasise cost cutting. However this merely trades market share for profitability. Re-engineering offers more hope to get ahead, but the best option [ in 1994] is to create the future from a point of view about it, which must be based on deep understanding (88)

For 200 years firms have been organised to allow task specialisation for efficiency in mass production. This is [in 1993] no longer appropriate because there is no mass market, and change is constant. Re-engineering involves starting from scratch and completely re-arranging tasks; and also question why tasks are being done (89)

Firms must [in 1995] deal with both market and non market aspects of their environments (16)

There are 10 factors in the competitiveness of firms, but only one of these will be the one which drives any firm's strategy (93)

Competition existed before strategy (eg in nature). Now strategy alters the competitive balance and speeds up the rate of change. The goal of strategy should be to increase competitive advantage - and develop the market (not market share - because no two entities can share the same market) (83)

D. East Asian Competition

From the 1940s to 1960s Western management was based on problem solving - 'if it isn't broke don't fix it'. However the Japanese approach (based on improving on existing strengths) was successful, and now requires a different method (74)

Foresight needs both prediction and creation of the future. The former is the normal Western approach, while the latter is the East Asian approach (7)

US manufacturers have not kept pace with their international competitors, and many blame the environment, but some are now [in 1991] examining the way they are managed. Japan's methods were suggested in The Machine that Changed the World. Rather than being based on mass production, this involved 'lean' production - which requires a different attitude to workers / customers / environment, and different assumptions about how technology improves. The key is a new set of organisational relationships (75)

The concept of management by creation has emerged in Japan - where the goal is to create conditions in the environment which provides firms with their reason for being (11)

Japanese companies will have to learn strategy to escape from mutually destructive battles (79)

Japanese firms in chemical industry are not doing well - and are adapting very poorly to changing requirements (58)

E. Introducing Strategy in Government

Strategic planning is [in 1979] part of the task of management, not something separate. Previously management was only concerned with efficient use of resources, but now must adapt to a rapidly changing environment - because the best tactics are useless without correct strategy. Strategic planning has been common in business for 25 years because of the view that it allowed firms to make trends, not just follow them. Public sector can learn from this - but must recognise differences ie that: politics rather than economic considerations dominate; there are many different goals; goals are not clearly defined; decision criteria are less definite; implementation is harder; and time horizon is shorter. Strategic planning has been used through PPBS. It works best for business-like agencies. Many pitfalls exist (24)

Strategy is not the same as planning. In the private sector planning has [in 1982] little to do with strategy. There has been shift from business policy to strategy over 15 years. Strategy is harder in the public sector due to multiple stakeholders and goals. Private sector strategic planning literature is unrealistic (ie assumes rational approach). Most organisations do not explore all options - but accept only options consistent with their culture. Boston Consulting developed the experience curve in 1968 - which showed continuous cost reduction possible, and thus that managing for short term profits could be inconsistent with long term success - and thus the need to value market share not just profitability. Firms in strategic planning for any time have no large staffs, but force the task back on line managers to get away from ritualistic planning (42)

Turbulent change increases for public organisations, which thus [in 1988] require strategic planning to shape what an organisation is, and what it does. If this involves functions across organisational boundaries, it is hard to get coherent decisions. Strategic planning differs from long range planning because it focuses on issues, not objectives / budgets; and because it assumes that the environment changes rather than being fixed. Different approaches exist to forming strategy: Harvard policy model (eg SWOT); decision systems approach; and stakeholder management. Different approaches to what strategy should be are: portfolio model; competitive analysis; and strategic issues management. Successful strategic planning will create a framework for innovation (53)

Rapid change has replaced stability for the public sector - now do not just increase services, but change whole operations. Planning based on past trends is inadequate. Officials must now [in 1990] be proactive not reactive (47)

Strategic management is [in 1991] a means to match the skills / resources of company with its environment. It is the means for implementing a strategic plan. Without a good relationship with the environment, internal efficiency is useless. Strategy addresses what business firms are in; how to compete in that; and operational issues. It involves strategic analysis; choice; and implementation. In public sector special features are: lack of close link between performance and budget; resources from lobbying not customers (thus reducing lower level involvement); legislation prevents innovation; and political agenda prevents efficiency / effectiveness. Strategic management is needed because of environmental turbulence, but can be undertaken in different ways. Benefits include: providing concept of what organisation tries to achieve; understanding environment; organisational unity; guide to resource allocation; and enable pro-activity. It can involve either formal planning; or incremental approach. Strategic thinking is more important than having formal strategic plan - ie by encouraging employees to think about the big picture (45)

Strategic planning (scan environment, evaluate purpose, and identify crucial success factors) started in US military, and moved to US companies in the 1950s. A comprehensive strategic plan is impossible in government due to politics. Strategy can be developed incremental as well as rationally. It must link to budgets. Organisations deal with change (which organisational development emerged to address. It requires systemic analysis, strategic thinking, and intrepreneurship to mobilise resources. Organisational development was managed by human resource specialists, but now by managers. Some [in 1991] see strategic planning as strategic thinking. (46)

Strategic planning is [in 1994] a new innovation in government - accompanied by moving from traditionally hierarchically managed agencies towards citizen responsiveness, quality services, and employee empowerment. Strategic planning produces decisions on what an organisation is and does. It features: a clear statement of mission; identification of external stakeholders and their assessment of agency; defining agencies strategic 3-5 year goals; and developing strategies to achieve them  (14)

For city managers, strategic planning can provide the context and content for other issues - and so reduce conflict via clearer mutually agreed values. (20)

Strategic planning has benefits in goal setting and planning, and in building cooperative working relations (23)

Successful strategic planning in government requires top level support, stable management, conflict management, consultation with managers, and integration into main management processes (26)

Strategic planning requires environmental scanning, organisational ability to support strategy. It must be based on operational realities, and recognise resource constraints (27)

Strategic and corporate planning are used to align an organisation with its environment. Strategic planning deals with major policy changes, where corporate planning is an annual cycle. Experience over two decades has shown [in 1993] difficulties in relating these processes, and a possible solution (28)

Strategic planning is needed [in 1993] for the public sector to better respond to change, but private sector methods need to be adapted because: goals are ambiguous; there are multiple interests; political constraints on mandates; and collaboration is preferred to competition. Characteristic difficulties include: goal of strategic planning is rational decisions, where programs may be only meant to be symbolic; process can not be based on analysis - but requires stakeholder participation; generally result in proposals for increasing programs, or for vague goals (29)

Strategic planning is a means to position an organisation to achieve specific ends. In government the ability to do this is constrained by politics - so the goal is to maximise output within the budget. To adapt private sector strategic planning in government need to recognise: political determination of goals; lack of competition and of profit motive. Defining strategy requires identification of mission (given externally); operating environment; culture; and selection of targets based on comparisons, rather than competition. (40)

Public sector reform using private sector methods often fails. Strategic planning was proposed - but a major problem is that senior managers focus on policy, rather than administration of operations. Incrementalism is the alternative to strategic planning. The latter merely raises unreal expectations. Public sector is like private sector in respect of outputs, but much more constrained in inputs (41)

There can be strong elements of strategy in the public sector, which must have an opportunistic element and be oriented mainly to political survival of government. There is no point in whole of government strategy - but value in strategy in separate policy areas. (44)

10 factors may be identified as key to success in strategic management by government (48)

New public administration started in the 1970s to emphasise equity, efficiency and responsiveness. Private sector strategic planning can help - through introducing rational / technocratic approach to an otherwise political process. Strategic management is more than strategic planning, as it also include strategic thinking. It seeks to align an organisation's capabilities with its environment. Public sector's main role is service delivery - and agencies need Ministerial approval for strategic plans. A stakeholder matrix can clarify other's interest and influence (62)

Strategic management might be seen as a process for forming and achieving objectives. But this assumes a single objective which Lindbloom suggests that organisations can only make successive approximations to. Only one of the 10 approaches to strategy which Mintzberg suggested is sensitive to learning, political and cultural factors. Key differences in strategic planning in public sector are: lack of single CEO (where different levels of government involved) ; lack of unified direction or of concentrated power; and unclear performance criteria. Need process to develop understanding of shared interest (80)

Planning is so complex that planers can not keep up with it. Planning fails everywhere it is tried. To succeed need to be able to determine causal relationships, and exert control. This is not feasible. (81)

The public sector has difficulty taking a long term view, because the political process denies that problems exist - and allows small issues to become large problems (84)

F. Anticipating the Future

The aim of futuring is to allow an aim towards future (rather than present) targets (1)

Futuring can not be based on trend projections, but requires deep knowledge (2)

Scenarios help stimulate future thinking (3)

In a turbulent environment ideas from chaos theory are more useful than machine metaphors in understanding. The key topic is increasingly the organisation's ability to learn (86)

The concept of complex adaptive systems is better than a 'machine' metaphor in understanding the future (4)

Note: Theories of complex adaptive systems involve the idea that 'chaos' in nature can be transformed into 'order', where stabilising feedbacks arise. This 'order' can appear to be deterministic (ie social, economic or ecological systems can appear to be like a 'machine'), but those systems may transform into an entirely new 'order' if driven far from equilibrium and new stabilising feedbacks arise. This leads to ideas about self-organising systems, and to the idea that major changes can be triggered by very small events (the `butterfly wings' effect). It is for this reason (for example) that attempts to predict the future often fail to identify what (in retrospect) turns out to be the key factor.

Our attempts at foresight are coloured by what we want the future to be, yet the future is never what we want it to be (5)

Though it is not easy to foresee the future, managers who try to do so are better placed than those who do not. Scenario method (the basis of Shell's successful 1970s approach) makes it possible to deal with uncertainties about the environment (39)

Futurism does not rely on assuming the future will be like the past, which benchmarking or SWOT analyses do. Good futures scenarios are: consistent; relevant; able to change perceptions; and understandable (85)

G. Some Specific methods

Strategic planning requires a creative approach. This can be achieved more effectively if properly use persons with creative and analytical capabilities. Intuitive persons are better at telling whether an idea will work in the market, but may not be practical. Best approach is to allow intuitive persons to consider a problem first, then allow analytical persons to review ideas (68)

Leadership (involving risk taking) and orderly planning (to reduce risks) are mutually disruptive, yet both necessary (66).

Organisations must be able to deal with both innovation and continuity - which involve inconsistent cultures. This may be achieved by loosely coupled organisational arrangements (87)

An international advisory council is a group of distinguished leaders who meet to advise managements about their environment  (15)

Performance assessment is not usually separate from management processes. TQ approach to performance management involves: developing strategy, assessing performance, revising; and doing the same with respect to business processes; management of individuals; and analysis of 'break points' - fundamental changes which require major adaptation (63)

Companies worldwide are transforming themselves for a world in which knowledge rather than tangible assets is central to competitiveness. The concept of a 'balanced scorecard' was introduced - which included to complement financial measures with those related to customers, business processes and learning (95)

Financial measures report on past performance but are of no relevance in determining future performance. Assessing both financial and non financial performance allows management in terms of the factors important to business strategy (96)

The methods used by individuals and groups for decision making appear to have an effect on the effectiveness of their decisions. Comprehensive strategic planning improves performance in a stable environment, but worsens it when the environment is unstable (65)

Strategy developed by managers will have little impact if implemented through existing organisational structure. Thus need special programs and projects to get change (38)

Strategic planning for information management needs to be related to business strategic planning (50)

Networks are hard to reconcile with traditional theories of strategy based on competition., but networks (which are in between hierarchy and markets) are useful in providing sources of innovation (73)

For success, firms require a narrow focus. Generalists do not do well. Benchmarking is not a tactic used by the best firms because it provides a false sense of security, wastes time and resources, and demotivates (90)

Globalisation (which requires not only locating facilities offshore, but also breaking down barriers to movement and communication by becoming multi-cultural) is the next stage beyond downsizing (91)

Major changes are occurring in the environment in 1990s, with implications for business strategy. Going transnational is essential for a firm seeking a dominant position (92)

Strategic planning was encouraged in government during the 1980s. It involves SWOT analysis (25)

Methods used for strategic planning by Veteran's Affairs are discussed (76)

Australia's Federal government is adopting better risk management mechanisms which will improve its strategic planning  (17)

A UK local government established a 'quality in the community' group which involved hundreds in its corporate planning (18)

A state agency turned an annual management conference into a participative planning, educational and networking event - which increased flexibility and speed of planning (19)

A survey showed [in 1995] that 60 percent of agencies used some form of strategic planning with the Harvard policy model being the most common technique  (21)