The Strategic Manager

Understanding Strategy in Practice

Harry Sminia

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000412727
• Edition: 3
• Topic: Business
• Subtopic: Strategia di business
• Index: Business

The Strategic Manager provides a comprehensive, logical, and applied insight in strategic management. Unlike some more theory-heavy texts, this book focuses on how strategy works in everyday practice, taking readers' expectations and understanding beyond that of strategy as a matter of planning only. It enables the reader to learn and reflect upon their practical skills and knowledge, and critically evaluate the strategy process and their own strategic decision-making.

The book is based around six different strategy theories, individually presented and supplemented with useful lists of questions that encourage readers to become competent strategic thinkers. This third edition has been fully updated throughout, including fresh case studies and examples from across Asia, Africa, and South America that bridge theory with practice, new strategy practice boxes considering the importance of cooperation and strategic alliances, and reflective questions to aid understanding.

Essential reading for postgraduate students of strategic management, MBA students, and those in executive education, this text will also be a useful tool for reflective managers trying to develop a better understanding.

Online resources include chapter-by-chapter PowerPoint slides.

chapter 1

Strategic management basics

Strategic management is about making a firm or an organization perform and about maintaining the organization’s or the firm’s ability to perform (Sminia & de Rond, 2012). This book explains how to use strategy theory to evaluate whether the firm or organization will be performing, whether the firm or organization will maintain the ability to perform, and what a strategist can do about it.

Strategic management as wayfinding

Mintzberg (1987), very conveniently, came up with the five Ps of strategy. These Ps refer to the most commonly found definitions or usages of the term ‘strategy’ within management and organization speak. Strategy very often is seen as a plan: “some sort of consciously intended course of action” (p. 11). In some instances, strategy refers to a ploy: “a specific ‘manoeuvre’ intended to outwit an opponent or competitor” (p. 12). Describing what the strategic plan is about, strategy also is seen as a position: “a means of locating an organization in what organization theorists like to call an ‘environment’ ” (p. 15). On occasion, the actual content of a plan reflects a particular and favoured way in which the organization’s circumstances are interpreted rather than an impartial assessment of the situation. Others have advocated that the way forward should be expressed in terms of a vision. In either case, strategy has taken on the meaning of a perspective: “an ingrained way of perceiving the world” (p. 16). Another often found meaning of strategy beyond Mintzberg (1987) is strategy as a panacea: a solution to everything. To get you out of a tricky situation, you need a strategy. All of these definitions have in common that they look at strategy as just an intention, effectively downplaying the fact that a strategy should be realized to generate performance.

Practicing strategists very often see intentions never being realized. Most of what firms and organizations eventually achieve is due to interferences, happenings, and circumstances that have emerged, despite carefully formulated plans, as illustrated in Figure 1.1. This book focuses therefore on strategy as a pattern “in a stream of actions” and as “consistency in behaviour, whether or not intended” (Mintzberg, 1987, p. 12; Mintzberg & Waters, 1985). It takes strategy to be a process: as something that strategists do, rather than what an organization has (Jarzabkowski, Balogun, & Seidl, 2007).

Figure 1.1 The strategy process

The emphasis in this book is less on doing a strategic analysis to formulate a plan or an intended strategy to then implement it. This is an overly stylized representation of the strategy process – found in many contemporary strategic management textbooks – and maybe something of a mirage. It has some – but limited – relevance for the actual practice of strategic management. Instead, the focus is more on realizing strategy and how to understand and manage the process by which this takes place. The starting point is how strategy is being practised – how it actually is being done.

In the real world, circumstances change constantly. Realizing performance, as well as maintaining the ability to perform, can be hampered or enhanced by what emerges all the time. Strategic management therefore requires to be done in a continuous fashion. It requires instant evaluation about what is going on and of the consequences this might have for the performance and viability of the firm or organization. It requires strategists to be able to act to move the firm or organization along, whenever this is required. You often cannot afford to sit down and carefully write down your strategic plan. This book explains how these instant judgements can be made using currently available strategy theories. It indicates what strategists can do to affect the course of the process by which performance is realized.

All of this does not necessarily mean that formulating an intended strategy and drafting a strategic plan is meaningless. It means that this should be seen as part of a larger process by which a strategy – as this pattern in a stream of activities – is realized. All in all, strategy as a process is elaborated here as wayfinding: a continuous questioning, analyzing, and problem-solving (Chia & Holt, 2009).

The practicality of strategy theory

Nothing is so practical as a good theory.

(Lewin, 1945; cited in: Van de Ven, 1989, p. 486)

Strategy theory provides two things. First, theory supplies a vocabulary to describe what is going on. Second, theory offers explanatory logics by which we can evaluate what is going on. A vocabulary to describe what is going on is useful because it provides a means to make sense of situations. Making sense of a situation by describing it in terms of a specific strategy theory is the first step in doing a strategic analysis. Strategy scholars have formulated theory to distinguish the wheat from the chaff; to see the wood for the trees; to focus on those things that need focusing on. This book provides an introduction to six strategy theories, with each theory providing a particular understanding of how firms and organizations can be made to perform.

Anyone who provides a description of a situation essentially engages in theorizing. Sense is made of a situation by abstracting from all the day-to-day experiences and observations and focusing on those parts that are seen as essential; maybe simplifying it into a short concise statement (Weick, 1989). Such a description is an interpretation of a situation, and the words chosen to communicate this interpretation are an act of abstraction, focus, and simplification. At the outset, anyone’s interpretation can be just as valid as anybody else’s. Strategy scholars engage in research to find out what theories might be the most worthwhile. These theories allow a strategist to construct an alternative interpretation that is bound to be different from the more intuitive first impression that everybody can come up with. In that way, strategy theory provides alternative points of view from what strategists might see by using their own instincts and presuppositions.

Strategy practice 1.1 What makes a SWOT analysis useful?

The SWOT (strengths, weaknesses, opportunities, and threats) analysis is arguably the most used and most popular analytical tool in the strategy field (Hodgkinson, Whittington, Johnson, & Schwarz, 2006). It is meant to provide an assessment of the environment in terms of opportunities and threats as well as an appreciation of the strengths and weaknesses of the firm. Its origin is credited to Albert Humphrey, who devised this 4×4 matrix while working for the Stanford Research institute in the 1960s. But on its own, it can be very misleading.

The problem is this. By itself there is little indication of when and why something needs to be qualified as a threat or an opportunity, or as a weakness or strength. Assigning something to either of these categories is purely arbitrary, unless …

The ‘unless’ is where additional theory has to come in. This should be theory allowing for an evaluation of the situation; telling the analyst when something has to be qualified as a threat, opportunity, weakness, or strength. It is only with the aid of strategy theory that employs a performance logic that a meaningful and sound SWOT analysis can be done. The theoretical approaches featuring in this book can serve this purpose.

A description is not an evaluation yet. For this, you need a reasoning by which a conclusion can be attached to the described situation. Some – but not all – theories allow the strategist to draw conclusions. This is the case when theory not only describes but also explains. Strategy theory is strategy theory because it attempts to explain performance. An explanation of performance indicates how a strategist can intervene in the course of events by which performance is realized. Two explanatory logics are common to all strategy theories. One of these logics is the process logic. It provides a particular take on how firms and organizations function in the wider environment and suggests what strategists can do to affect this. The other logic is the performance logic. It takes firm or organization performance as that what needs to be explained to suggest causes or reasons that provide an explanation for this success or failure.

The process logic

The way by which a firm or organization performs is a process. The way in which strategy theories understand this process allows us to distinguish between three process spheres (see Figure 1.2).

The sphere in which the other two spheres are embedded is the ‘environmental survival process’. This refers to what takes place in the environment. The organization or firm participates in this sphere to function and survive. In a manner of speaking, you can zoom into the environmental survival process and focus on this smaller sphere that is the organization itself. The ‘organizational strategy process’ then comes into view. It is the process within the firm or organization that generates strategic intentions, deals with emerging issues, and realizes performance. What happens in this sphere determines how well a firm or organization is capable of dealing with what the environment throws at it. A strategist, in turn, has to function within this organizational strategy process. The ‘actions of the individual strategist’ refer to the individuals within the firm or organization – and more specifically, to what they do. This in turn affects how capable a firm or organization is and whether the firm or organization realizes its potential. Zooming into this third process sphere reveals the detailed activities of the individual strategists who are taking part in the organizational strategy process.

Figure 1.2 The process logic: three zoom levels

Every strategy theory has a specific take on who these strategists are and what they are expected to do. Ideally, whatever a strategist does should contribute to an organizational strategy process by which the firm or organization becomes a viable entity that can take part in the environmental survival process. You could say that the process logic refers to the management part in strategic management.

The earliest strategy theorists advocated an organizational strategy process that became known as strategic planning. The first strategy textbook portrayed the strategy process as consisting of two stages (Learned, Christensen, Andrews, & Guth, 1965). First, you formulate a strategy, and then you implement it. This quickly evolved into the idea that an organization should do strategic planning. Strategic planning, simply, is an organizational procedure that follows this formulation-implementation process logic. It is a framework by which a whole firm can engage in a basic strategic analysis. It is often set out as a carefully managed method by which a firm has to go through a number of successive steps. Ansoff (1965) was probably the first to develop a strategic planning methodology (see Figure 1.3). Many have followed in his footsteps; the vast majority of strategy textbooks are written around it, and they all incorporate the same basic template.

Following this basic template, strategic planning is supposed to start with top management deciding on a set of broad goals or objectives for the firm; maybe formulating a vision and a mission. These objectives are cast in terms of the kind of business the firm wants to be in and explicate which performance levels are expected. This is accompanied by an internal appraisal and an external appraisal – others would refer to this as the internal analysis and the external analysis. These appraisals intend to assess what the firm is capable off and what the environment looks like. Findings in one step will inform the other two. For instance, the business definition can be derived from the markets the firm intends to operate in.

Figure 1.3 Strategic planning

All this information feeds into a strategic plan. The plan is formulated by stating what strategy the firm is going to pursue. It is also supposed to contain detailed statements about how resources will be allocated – normally by deciding on budgets, how the execution of the plan will be financed, and how everything will be organized. As soon this is decided on, it needs to be communicated to those who have to implement it. As soon as people have been told what to do, they then must be monitored by using something like a balanced scorecard (Kaplan & Norton, 1992). Many firms go through regular strategic planning or business planning cycles. Larger firms tend to have departments devoted to generating such a plan on an annual basis. Many people working in an organization find themselves monitored to determine whether what they do contributes to the organization’s explicitly formulated strategy.

Strategic planning has its use, but its universal applicability is heavily disputed. For instance, Mintzberg and Ansoff entered into an intense debate about whether strategic planning has anything to do with strategic management at all (Ansoff, 1991, 1994; Mintzberg, 1990, 1991, 1994a, 1994b). As can be expected, Ansoff sees it as the cornerstone of strategic management. To Mintzberg, strategic planning is an oxymoron – a term that denies itself – because the flexibility inherent in strategy as dealing with an unknown future contradicts with the inflexibility of mapping the future out in a plan. This book sides more with Mintzberg than with Ansoff. Strategic planning can be useful, but its limitations need to be acknowledged, as well. The emergent nature of strategic management means that more often than not, a firm or organization cannot afford the luxury of limiting its strategic management to only going thro...