Strategy Is Destiny

How Strategy-Making Shapes a Company's Future

Robert A. Burgelman

• Publisher: Free Press
• Year: 2020
• ISBN:
  9780743226035
• Topic: Business
• Subtopic: Decision Making
• Index: Business

How did a pioneering company in the semiconductor industry not only survive but thrive in the face of the explosive change and upheavals that forced it to transform itself twice in the course of its thirty-year history? The answer lies in the quality of its strategy-making process, contends leading strategic management scholar Robert A. Burgelman in this extraordinary book based on an exhaustive twelve-year study he conducted inside Intel Corporation.At once a history of strategy-making at Intel as well as a strategy-making field manual that any high-technology manager will need to consult frequently, Strategy Is Destiny truly describes strategy-in-action as the way of life of senior executives in the corporation of the future.

1 STRATEGY IS DESTINY

Caveat

A famous painting by Belgian surrealist René Magritte shows a huge briar pipe covering almost the entire canvas. Perplexing the viewer is the neatly painted text underneath the image: This is not a pipe. Beyond the facetious truth that this is a painting not a pipe, the incongruence makes some viewers look more carefully at the image: If not a pipe then what is it? It also gets some viewers to think harder about the meaning of “pipe.” A mental search for the essence.¹ In some ways, this book is similar to Magritte’s painting. Intel Corporation is writ all over its pages, but: This is not Intel. No single account could capture Intel’s multifaceted reality. The longitudinal study of Intel’s evolution, however, illuminates the essence of strategy-making as adaptive organizational capability.

Strategy

Strategy is destiny is the theme of this book. Destiny is an archaic idea of a fixed and inevitable future. Strategy, in contrast, is a modern idea, of an open-ended future to be determined by it.² In reality the two ideas exist in perpetual tension. Successful and unsuccessful strategies shape a company’s destiny. But if strategy shapes destiny, destiny has ways of asserting itself and constraining strategy. New sources of strategy create the possibility of future destiny, and help the company evolve. Strategy as the means to gaining and maintaining control of a company’s present and future destiny is the common thread running through the study of Intel’s evolution.³

Strategy in the narrow sense involves planning the use of resources and the deployment of capabilities to achieve objectives and prevail in competition. In the broader sense, strategy also concerns the rational determination of a company’s vital interests, the purposes that are essential to its continued survival as an institution and define it in relation to other organizations, and its objectives. Strategy is therefore concerned with the external and internal forces that have the potential to materially affect the company’s destiny.⁴

Strategy has a strong thinking component. Strategic thinking is forward-looking and concerned with exploring multiple scenarios, alternatives, and options. It is externally focused and tries to anticipate states of nature and the behavior of the relevant actors in a situation. Incisive strategic thinking at its best requires considerable intellectual effort. But senior executives sometimes view strategy with skepticism, because great strategies are just that—great strategies. From the perspective of key players, strategy becomes real when significant resources are committed, when strategy is turned into action.⁵ Strategic action is consequential; it involves resource commitments that cannot easily be undone and moves the company in a direction that is not easily reversible. This view provides a criterion for distinguishing between tactics and strategy: Actions are tactical if their outcome does not significantly affect subsequent degrees of freedom to act.

Strategy-Making

Strategy in large, established companies like Intel takes the form of strategy-making, a complex process involving the thinking and action of key actors throughout the company.⁶ This implies that strategy-making processes can be usefully characterized in two dimensions. The first dimension concerns the degree of concentration of strategic decision-making. At one extreme strategic decision-making is highly concentrated in top management. At the other extreme it is widely distributed throughout the organization. The second dimension concerns the degree of simultaneity in strategic action to implement strategic decisions. At one extreme all organizational units act simultaneously. At the other extreme, organizational units all act in some sequence. These two dimensions give rise to four strategy-making processes.

Rational actor model. Many view the rational actor model as the ideal. A comprehensively rational leader is responsible for strategic decision-making and is able to get all the participants in the organization to simultaneously take action to implement his decisions.⁷ In this model, there is strong alignment between strategy and action. This model is probably most effective to respond to environmental dynamics that can be reasonably well anticipated and influenced.

Bureaucratic model. The rational actor model turns into the bureaucratic model if participants take action sequentially.⁸ In slow-moving environments this model may have advantages because it allows each part of the organization to optimize its operations in light of the overall strategy. In rapidly changing environments, however, this model will cause sluggish implementation of the overall strategy.

Internal ecology model. Distributed strategic decision-making and simultaneous strategic action define the internal ecology model.⁹ Strategy-making is shaped by strategic initiatives of differentially positioned participants, who all act simultaneously to try to commit the organization. This is a highly dynamic view of strategy-making in which coherence depends on the characteristics of the internal selection processes operating on the strategic initiatives. It may be most effective in highly uncertain, opportunity-rich environments.

Garbage can model. The internal ecology model turns into the garbage can model if the simultaneity of strategic action becomes sequential.¹⁰ In that case, organizational participants’ strategic actions depend on the sequence in which problems, solutions, and decision opportunities arise. The coherence of strategy-making in this model depends to a great extent on chance.

Organizational and strategic management researchers have long highlighted the difficulties leaders encounter in aligning organizational action in the pursuit of deliberate strategic intent. The cumulative evidence suggests relatively modest prospects for the rational actor model to apply. Studying the rare cases in which leaders achieve this improbable state of affairs may, however, produce insight that is useful for augmenting knowledge about strategy-making and strategic leadership. Viewing strategy-making in terms of the internal ecology model, on the other hand, is somewhat novel for strategy researchers, who find it difficult to see its potential normative implications.

Both the internal ecology and rational actor models informed the study of Intel’s evolution. Strategy-making during Intel’s first epoch resembled the internal ecology model, as multiple new business opportunities emerged from the company’s competencies in the new semiconductor technologies and competed for its resources, transforming the company. During the second epoch, Intel’s strategy-making resembled the rational actor model. This was a rare case in which a company leader successfully set strategic intent and created a process for its relentless and successful pursuit. At the start of its third epoch, Intel was struggling to combine the discipline of the rational actor model with the strategic renewal capacity of the internal ecology model.

Strategic Interaction

Complex organizations such as Intel usually face other complex organizations in the external environment. The study of strategic interaction involving such organizations is somewhat different from the study of strategic interaction in well-structured situations.¹¹ Well-structured situations have clearly defined, if sometimes probabilistic, payoffs associated with particular combinations of the players’ strategic moves that are drawn from a predetermined set of options. Such strategic interaction situations lend themselves well to the quantitative methods of decision theory and game theory. In complex organizations, however, the strategic interaction situations are usually not well structured, the strategies of different actors in the organization may not be well aligned, payoffs in competitive interaction are not always given, and strategic action is not limited to a predetermined set of options. The study of strategic interaction involving complex organizations is therefore likely to be relatively untidy, raising questions that supersede those addressed in more structured approaches.

STRATEGY-MAKING AND EVOLUTIONARY ORGANIZATION THEORY

Evolutionary Perspective

How strategy comes about and how strategy-making helps companies to gain and maintain control of their destiny are fundamental questions for scholars interested in the study of complex business organizations and for reflective practitioners interested in improving their company’s chances of success. To begin answering these questions, it is useful to dissect strategy-making into its key parts and their interrelationships, and to identify the forces that determine how it functions. To do so, this book adopts the perspective of evolutionary organization theory.¹² Evolutionary organization theory uses four generic processes—variation, selection, retention, and competition—to explain how organizations emerge and evolve.¹³ Dissecting strategy-making in terms of these key processes serves two purposes: First, it facilitates integrating strategy-making as adaptive organizational capability into evolutionary organization theory. Second, it illuminates facets of strategy-making that other theoretical perspectives do not contemplate.¹⁴

Internal Ecology of Strategy-Making

Each company is an ecology within which strategic initiatives emerge in patterned ways. Top management drives most initiatives but leaders throughout the organization also drive initiatives. These initiatives compete for limited organizational resources to increase their relative importance.¹⁵ Variation comes about as individuals (or small groups) seek expression of their special skills and career advancement through different strategic initiatives. These initiatives draw on existing and/or new competencies and routines and take shape if they are able to draw the company’s resources to their development. Selection works through administrative and cultural mechanisms that regulate the allocation of resources and attention to different strategic initiatives. Retention concerns the initiatives that survive in the external environment and grow to become important within the company. It also takes the form of organizational-level learning about the factors that account for the company’s success. Internal competition arises from different strategic initiatives struggling to obtain resources necessary to grow and increase in importance in the company. Internal competition between strategic initiatives can be more or less tightly linked to the external competition that these initiatives encounter.

Evolutionary Research Lens: Three Conceptual Frameworks

At the pure theoretical level, the processes of variation, selection, retention, and competition are general, abstract, and nonexperiential. At the level of pure practice, on the other hand, common language describing strategy-making is particular, concrete, and experiential. Business leaders do not use the terminology of pure theory to think and talk about strategy-making and find it difficult to relate to the abstract mathematical and statistical models ideally constructed by such theory. Scholars, on the other hand, find it difficult to gain deeper insight when limited to common language and like to do more than produce a coherent and complete narrative of strategy-making practice. Conceptual frameworks help bridge the gap between pure theory and pure practice.¹⁶ They are specific, substantive, and suggestive. The boxes-and-arrows charts used to represent them (such as figure 1.1 in this chapter) can be more readily understood and related to by both business leaders and scholars. The three approaches are summarized on the following page.

This book uses three conceptual frameworks as tools for studying the role of strategy-making in Intel’s evolution. These three different but related tools form the evolutionary research lens and give it strong “zooming” capability. The zooming capability is useful to examine variation, selection, retention, and competition processes at different levels of analysis and to study the interplay between the different levels. The evolutionary research lens is shown in figure 1.1.

Evolutionary Organization	Conceptual Frameworks	Strategy-Making Theory Practice
General Abstract Nonexperiential Mathematical and statistical models	Specific Substantive Suggestive Boxes-and-arrows charts	Particular Concrete Experiential Narratives

Think of the evolutionary research lens in terms of video recording. Tool I shows the big panoramic scenes, which contain everything, but it does not focus on the details. Tool II zooms in on key parts of the scenes, showing how actors move in relation to each other. Tool III zooms in further on the specific actions of the protagonists and on details of the environment that shape action.

TOOL I: DYNAMIC FORCES DRIVING COMPANY EVOLUTION

Tool I in figure 1.1 focuses on the big picture. It helps examine strategy-making at the industry-company interface level of analysis, and the coevolution of industry-level and company-level forces.¹⁷

Basis of Competitive Advantage in the Industry

Most industries contain several viable positions that companies can occupy. External forces determine the basis of competition in each of these positions. Consistent with the tenets of traditional industry structural analysis, these forces encompass customers, competitors, suppliers, new entrants, and substitution. In high-technology industries, however, additional forces also play an important role and merit separate and distinct consideration. Nonmarket forces, such as government regulation, are also potentially important.

Distinctive Competencies

Distinctive competencies concern the differentiated skills, complementary assets and routines that a company possesses to meet the basis of competitive advantage in the industry. They form the basis of the capabilities that a company can deploy. Distinctive competencies are intrinsic to a company’s identity and character. For instance, they very much determine the generic corporate strategy—differentiation or cost leadership—that a company will pursue. Taken seriously, they are not easy to change. Deep competencies, on the other hand, are also likely to be a wellspring of new opportunities.

Figure 1.1. An Evolutionary Lens on Strategy-Making. (SOURC...