This first chapter argues that turbulent environments require adaptive strategy for survival and continued prosperity and thereby introduces the attempts to determine effective response capabilities in contemporary firms, which are presented in the ensuing chapters. The background in prior strategy research is outlined to position the various contributions within a proper backdrop as potential extensions to prior insights generated in the strategic management field. It suggests a need for multiple methodological approaches to gain new diverse and relevant knowledge from rich qualitative field studies as well as quantitative data probes and computational analyses. Finally, the ensuing chapters are briefly presented to provide a coherent view of the contributions made by this specific collection of chapters that the authors hope will inspire and fuel ongoing work in this important area.
Introduction
The global business environment that exposes contemporary firms constitutes a nonlinear dynamic complex system in constant flux where extreme events can happen abruptly and in many cases with outcomes that are impossible to predict based on prior trends. The noticeable consequence of this setting is displayed in extreme corporate performance outcomes that follow power distributions rather than the neat features of commonly assumed Gaussian trajectories. This questions conventional ways of thinking about the strategic management challenges and the way we approach empirical studies to inform these challenges. We cannot solely rely on analytical methodologies that make stringent assumptions about normality in the data, and we need to think creatively about how to complement quantitative and qualitative research approaches to gain new important insights about how effective responsive strategies arise in real organizations.
The turbulent business environment requires that firms be able to take immediate responsive actions that allow the organization to experiment and learn about what works under new circumstances and use these insights to adapt the corporate business operations to obtain a better fit with the changing conditions. The emerging environmental context is characterized by increasingly specialized, but interrelated and co-evolving business activities where corporate response capabilities must satisfy the need for requisite variety across available solutions. This may need delegation of authority allowing more autonomy to experiment with new ventures throughout the organization in search for better future solutions. The extant strategy literature is cognizant about this and provides both anecdotal and empirical evidence in support. However, there is also a realization that strategy-making processes need guidance by rational forward-looking analyses to be effective, which uncovers seemingly contradictory requirements for decentralized exploratory responses and central analytical planning processes. The reconciliation of these opposing perspectives is obviously that they (must) interact in an ongoing manner, although there is no clear evidence as to how exactly that should be carried out to be effective and gain a sustainable adaptation of the strategy.
In short, corporate success and longevity seem to depend on abilities to sense new developments in the environment as they emerge and respond to them in proactive, timely, and guided ways. Besides delegation, this calls for enhanced sharing of updated information among people across different levels and functions in the organization including employees with deep business insights and executive decision makers with long-term strategic responsibilities. That is, the ability to integrate experiential knowledge from current actions and initiatives that try out new ways of responding into the forward-looking strategy considerations seems to be an essential feature of effective strategic responses capabilities. However, organizational agents also need to be motivated to pursue the proposed behaviors, which raise other subtle concerns about broader governance issues like corporate values and executive leadership traits as very important antecedents for effective strategy adaptation.
However, the reality is that we do not know much about how these intricate elements and processes are enacted effectively in today’s organizations. Hence, there is an apparent need to theorize about, analyze, identify, and model effective strategic response systems in contemporary firms as a way to gain new useful and urgently needed insights for academia as well as management practice.
The various chapters in this book represent wholehearted attempts to uncover essential elements of the larger enigma of outlining the contours of effective strategic response capabilities and understanding how they should be led and managed in contemporary organizations.
Background
A conventional strategic management process as portrayed in many textbooks follows a rational analytical approach starting with environmental scanning and analysis of internal and external conditions, followed by formulation of a strategic path for the best way forward to accomplish objectives, implementation of the proposed strategic actions, and subsequent evaluation of outcomes. While this can be a useful conceptual framing for formal strategic thinking, the representation of these sequential process elements as what is actually happening has been challenged in various ways. Joseph Bower (1982, 2005, chapter 2) long ago observed that many capital expenditure decisions are taken deep inside the organization and form important capabilities despite the existence of a formal capital budgeting process. Accordingly, Henry Mintzberg (1978, 1994) defined strategy as a pattern of resource-committing decisions (or actions) taken over time. Thus, what the organization de facto executes, or does, constitutes its strategy – not what it intended to do, but never realized. This gave rise to the well-known distinction between emergent and intended strategies (Mintzberg & Waters, 1985) and ideas about multiple and co-existing strategy-making modes the simultaneous mastery of which could create beneficial flexibility (Hart, 1992; Hart & Banbury, 1994). Robert Burgelman (e.g., 1983, 1996, 2005, chapter 3) studied dispersed corporate venture initiatives and demonstrated how they can evolve to become part of the official corporate strategy supported by top management’s induced strategy. The effectiveness of dual strategy-making approaches in slightly different forms has been reported in several studies (e.g., Andersen, 2000, 2004; Brews & Hunt, 1999; Burgelman & Grove, 1996, 2007). The duality theme was also captured in conceptualizations of the ambidextrous organization that gives simultaneous attention to exploitation for current economic efficiencies and exploration for future opportunities (Birkinshaw & Gibson, 2004; O’Reilly & Tushman, 2004; Raisch, Birkinshaw, Probst, & Tushman, 2009; Tushman & O’Reilly, 1996).
These perspectives devoted to uncover the intricacies of the more complex strategy-making processes have evolved in slightly different directions. One set of ideas emphasize strategic responsiveness as an artifact of interactive processes between decentralized autonomous actions and central analytical planning activities (Andersen, 2013, 2015; Andersen, Denrell, & Bettis, 2007; Andersen & Nielsen, 2009). The autonomous actions provide the basis for search and learning that can be simultaneously (or subsequently) scrutinized in the analytical planning activities to create economies in the updated corporate strategy as a dynamic interplay between fast local and slow central information processing systems. This approach has the potential to provide both empirical evidence and model-based insights about effective strategic response dynamics for superior outcomes; for example, higher returns and lower risk on returns. However, it does not provide detailed insights about the finer mechanics and influences of governance, organizational practices and personal characteristics as things actually take place in organizations. To this end, a view of strategy as something that organizations do emerged, commonly referred to as strategy as practice (SAP), and has provided fine qualitative studies of what different organizations do when they develop strategy (e.g., Chia & MacKay, 2007; Gomez, 2010; Jarzabkowski, 2004, 2005; Johnson, Langley, Melin, & Whittington, 2007; Whittington, 2006). One challenge and potential downside of this qualitative case-based approach is generalizability, that is, purely inductive approaches may end up with few commonalities, which thereby defeat the ability to generate simpler, but effective strategy models for guidance and analysis. A further extension of the qualitative research approach has been fostered by the recent emphasis on open systems where strategies evolve through the influences of both internal and external actors depicted in so-called open strategy processes (e.g., Chesbrough & Appleyard, 2007; Doz & Kosonen, 2008; Whittington, 2015; Whittington, Cailluet, & Seidl, 2011). This particular lens provides new insights with the usual advantages and disadvantages associated with purely qualitative research methods.
While real management is full of specific strategy practices promoted by advisors and consultants, these approaches are often dismissed in strategy as being without value because they do not show any unique inimitable features required to support sustainable competitive advantage according to a resource-based view of strategy. Yet, it has recently been proposed that potential effects may have been overlooked and that standard practices properly applied to the firm may in fact be able to enhance management effectiveness (Bromiley & Rau, 2014). These effects may derive from improved decisions or management conduct suggesting that proposed effects can be assessed by examining the relationships between adherence to specific observed practices and subsequent performance outcomes. This provides a potential bridge to test general findings from SAP studies and thereby use quantitative empirics to assess potential effects of observed practices. In short, it seems possible, maybe even warranted, to merge aspects of the qualitative and quantitative approaches as a way to advance research insights from complex strategy process studies.
Add to this the seemingly intricate influences of corporate culture, values, and executive support for entrepreneurial behaviors as necessary antecedents to responsive entrepreneurial initiatives among autonomous actors (e.g., Burgelman, 1983; Kuratko et al., 2005; Zahra, 2008). Top management’s application of control systems under uncertainty can also decisively influence responsiveness to emergent developments (Simons, 1991, 1994) as well as executives can encourage autonomous behaviors for risk-taking search and experimentation (e.g., Lumpkin et al., 2009). Together, this amalgam of potential leadership influences must also enter into the equation. The following chapters constitute genuine attempts to uncover this varied context.
