Unit 2 Strategic Management: Process & Practice Perspectives

Unit 2 – Strategic Management: Process & Practice Perspectives Strategic Thinking SU 2 pg. 20; par. 2.4 "Ability (with strong foundation of critical thinking) to see total enterprise, to spot trends & understand competitive landscape, to see where business needs to go and lead it into the future." To stretch company thinking about competing, managers can explore approaches such as: - being successfully different - emulating entrepreneurs - being collaborative - finding new opportunities - being future oriented

Associated Characteristics:  Focus on strategic intent  Long-term orientation  Consideration of past & present  Systems perspective  Ability to seize unanticipated opportunities  Scientific Approach

The Process Perspective SU 2 pg. 21-27; par. 2.5 & TB Ch. 4 pg. 64-76; par 4.1, 4.3, 4.4 (& review SU 1; par. 1.3, 1.4, 1.5) Phases & Decisions of the Traditional Process approach to strategic management:

Strategic Planning or Strategy Formulation [SP/SF]: SU 2 pg. 22-26; par 2.5.2 & TB Ch. 4 pg. 64-65; par 4.1, 4.4.1 Three Main Decision Stages: 1) Deciding on organisation's future – setting strategic direction SU 2 par. 2.5.2.1 - Aligns organisations & members efforts in same the direction, cohesive unit, focus towards same goals - Informs internal & external stakeholders of purpose & long-term objectives - Starting point for planned & implemented strategy, guiding decision making - Distinguishes org. from other organisations; ought to remain unchanged for extended period. - Promotes a sense of shared expectations and contributes to synergy among managers & employees - Relevant Elements of Strategic Direction Setting: o VISION Statement: reflects desired future state of org. "What do we want to become?" - Provide direction for members to work towards - Should be persuasive, credible, easily understood, powerful motivational factor - Crisp, clear, unambiguous message to in-&external stakeholders & community aspire to - Form basis for developing relevant mission statements - Often not realistic in literal terms - Guide decision making, yet be flexible enough to allow org. to respond to environmental changes o MISSION Statement: more current, defining purpose & rationale for its existence. "What is our business?" - Broadly framed, enduring, aimed at both internal & external stakeholders - "Unique purpose that sets a company apart from other of its type & identifies the scope of operations in product, market & technology terms" - Other components: commitment to employees & stakeholders, orientation towards survival & growth (economic obj.), organisational values & organisational philosophy. TB Ch.4 pg. 72: Examples in line with the different components mentioned above o LONG-TERM OBJECTIVES: used to operationalise the mission statement, are specific, cover a well-defined time frame & provide guidance on how org. can work towards pursuing mission & vision. - Be SMART: specific, measureable (time/money/units), achievable, realistic, definite timeframe - Determined by nature & level of complexity & rate of change in industry - Hierarchy of objectives from long-term/less specific to short-term, more specific/measurable - Financial objective: targets for org.'s expected financial performance; mostly quantifiable - Strategic objective: relate to market standing in terms of market share & market growth rate TB Table 4.2 pg. 73: Examples of well-formulated vs. poorly formulated strategic goals; SU 2 Table 2.1 pg. 24: e.g. of Financial & Strategic objectives - Balanced scorecard translates strategic direction into strategic goals: TB pg. 74-75

o STRATEGIC INTENT exhibited when org. relentlessly pursues an ambitious strategic objective, concentrating all resources & competitive actions on achieving that objective. - Implies obsession with winning at all levels of organisation

o VALUE STATEMENT: reflect values org. intends to pursue in terms of conducting operations & behaviour expected from personnel & ORGANISATIONAL VALUES: beliefs, traits, behavioural norms that guide org. in pursuing vision & mission - Factors Incl.: fair treatment, integrity, ethical behaviour, loyalty, innovativeness, teamwork, pursuing excellent quality & superior customer service, social responsibility & citizenship. - Involve ethical behaviour, respect for others, opportunities for staff to reach full potential, passion for excellence, being socially & ecologically responsible. - More powerful if ingrained in org.'s leadership & culture. 2) Analysing organisation's external & internal environments (Basis for SWOT analysis) SU 2 par. 2.5.2.2 - Allow org.'s to match/capitalise on opportunities & strengths; to counter threats; improve weaknesses - External Environment for actual or potential opportunities & threats (O and T): o Microenvironment; industry environment; market environment. - Internal Environment to assess strengths & weaknesses (S and W): o Resources; capabilities; competencies. 3) Selecting appropriate competitive strategies – strategic choice SU 2 par. 2.5.2.3 - After setting strategic direction & analysing info, senior management considers various strategic options & chooses those strategies with most suitable fit with opportunities. o MULTI-BUSINESS company with subsidiaries: - Select corporate level strategy for parent company - Competitive business level strategies for respective subsidiaries o SINGLE BUSINESS: pick optimal competitive business level strategy to compete in specific industry environ. Strategic Implementation: SU 2 pg. 26; par 2.5.3 & TB Ch. 4 pg. 66-67; par 4.1.2 & 4.5.3 Translates strategic plans into action. Necessary whether process or practice approach is adopted. Involving all managerial levels in strategy formulation orientates & timeously prepares middle & lower management levels for implementation task. Implementation involves everyone in the organisation Align internal environment with chosen strategy. Required drivers of effective implementation include: - Leadership & management (communicate & guide) - organisational culture - all-round understanding & buy-in of overarching obj.'s - motivate, enable, empower - rewards systems aligned with overall strategic direction - organisational systems - policy & procedures (organisational architecture) - organisational structure - resource allocation Operationalising strategies: translate long-term & strategic objectives into specific short-term tasks & activities. Overseen by middle & lower management; responsible for making members aware of role in org.'s success. Short-term goals that are SMART. Functional tactics provide more detail; supports short-term/daily goals Guided by policies: providing specific guidelines, rules, framework for activities; communicate to all stakeholders. Balanced scorecard assists each business unit with strategy implementation see diagram above; SG Activity 2.2 & Strategy Review and Control: SU 2 pg. 27; par 2.5.4 & TB Ch. 4 pg. 67 & 78-79; par 4.1.3, 4.6 Monitoring extent to which strategy is achieving desired long-term objectives; taking corrective action if necessary. Continuous feedback process not just as "third phase"/at the end. Applies to process and practice approaches. Continued strategy review & control revisits strategic assumptions, requires special managerial attention. Operational control has short-term focus, fewer financial implications & generally easier to correct. Some review methods: - Continuous environmental scanning/Strategic Surveillance - Balanced scorecard - Implementation Control (identify & address deviations as occurs) - Premise Control Criticising the Process Perspective SU 2 pg. 28; par. 2.6 & TB Ch. 4 pg. 68; par 4.2 Major Criticism of the process approach that led to theory/process divide:  Rational, linear process comprising consecutive phases that ineffectively embraces new competitive realities  Linear process that doesn't fully consider complex & dynamic nature of external environment  Notion that only top/senior managers/teams develop strategy, ignoring potentially valuable contributions from all levels of staff  Strategy formulation & strategy implementation seen as separate phases  Ignores strategy development by dialogue, conversation, inputs from other levels & external expertise Develop emergent strategies & strategy-as-practice to cope & manage new realities, not replace process perspec. Deliberate and Emergent Strategies SU 2 pg. 28-29; par. 2.7 & TB Ch. 5 pg. 86-88; par 5.3 In dynamic & complex real world of business strategies have come to be configured in the following ways:  Planned strategies termed intended strategies – when realised termed deliberate strategies  Intended strategies, fall by wayside & not realised termed unrealised / abandoned strategies  Strategies not explicitly intended, are unplanned & emerge over time often due to changing environments / competitive circumstances, are termed emergent strategies  If intended & emergent strategies are realised they are both termed deliberate strategies. Deliberate strategies still have definite place in organisational context. Tend to emphasise central direction & hierarchy. Implemented & realised under 3 conditions:  Management team knows precisely what they wish to achieve & intend for org.'s future before taking action  Organisation = collective action. All members must believe in strategy & work towards it  Realise strategy exactly as intended with no external interference (difficult given pace of change) Planned/intended strategies work well in stable business environs. Environs are today becoming increasingly dynamic, turbulent & unpredictable leading to an increase of unplanned & emergent strategies: Emergent strategies: order in absence of intention; suddenly rationalising a strategy to mean something very different from original intention; - Typically actions taken by middle managers (strategic initiative arise without awareness of senior managers) - Imply learning tactics that work. - Emergent strategising often precedes full understanding of situations. - Allows middle managers to shape realistic strategies as senior managers don't necessarily have current info - Opens the way for collective action and convergent behaviour. - Can influence intended strategies during their implementation. - Managers' at all organisational levels and employees have specific roles to fulfil. Process versus Practice Perspective SU 2 pg. 29-30; par. 2.8 & TB Ch. 5 pg. 83-86; par 5.1 Practice Perspective offers broader view of strategic management, considering wider range of strategists (board of directors, top- & middle managers, consultants) but also allows for the messy realities of doing strategy in practice. Strategy-as-practice: non-linear/-sequential process enabling org.'s to cope with new competitive realities. Integrates activities & forces with strategising. That strategy is done by people and influenced by their context. Interaction between strategy praxis (the work), strategy practitioners (workers), strategy practices (tools of strategy) Org.'s will customise strategising practices to suit own unique circumstances Strategy no longer a mainly deliberate, top-down process but all levels of management & employees deemed strategic actors especially when coping with emergent strategies TB Fig. 5.1 below:

The Concept of Strategising SU 2 pg. 31; par. 2.9 & TB Ch. 1, 5 pg. 14, 86; par 1.5.2, 5.2 Strategising: "essentially what strategists do; described as devising or influencing strategies." Action performed by strategists (people) who guide strategic planning & management process. Fuelled by individual's quest for personal power. Can involve external role players (consultants). Increasingly occurs at all levels of organisations therefore: - Everyone in org. has to know what the strategy is (requires visionary leadership, effective communication & receptive organisation culture) - Depends on extent to which organisation become a learning organisation Managers at Different Levels & Consultants as Strategists SU 2 pg. 31-34; par. 2.10 & TB Ch. 5 pg. 88-94; par 5.4 Strategists: SU 2 pg. 32; par 2.10.2 & TB Ch. 5 pg. 88-89; par 5.4 Strategists' & strategising activities are fundamental to strategic management. Individual/group/object in org. that controls key/precedent-setting actions, or external role players can be regarded as strategists ('doer' of strategy). TB TABLE 5.1 TYPE OF STRATEGY WORKER DESCRIPTION Highly analytic; driven by minutiae of available data; little or no regard Detail-Conscious for intuition. Tendency to approach problems in step-by-step, systematic fashion. Can become preoccupied with gaining overview of problem at expense Big Picture-Conscious of details. Highly intuitive in orientation; little or no regard for analytic approaches Non-Discerning Minimal cognitive resources when deriving strategic insight; disinclined to process detail/extract a bigger picture from such detail. Rely on opinion & wisdom received from others, relieving themselves of burdens of analytic & intuitive processing Equal abundance of inclination to attend to analytical detail & cut Cognitively Versatile through detail. Able to switch more readily between analytic & intuitive processing strategies.

Top Managers as Strategists: SU 2 pg. 32; par 2.10.3 & TB Ch. 5 pg. 89-90; par 5.4.1 Strategic responsibilities of top managers/top management teams: - setting overall strategic direction - conducting analyses - allocating resources - formulating & choosing appropriate strategies to attain competitive advantage - ensuring implementation as well as review and control of the implemented strategies. - effectively communicating strategies to middle & lower organisational levels "Strategic planning champion'' (SPC): strategist responsible for guiding strategic planning; expert in strategic thinking with specific analytical & technical skills (ability & knowledge to apply strategic management concepts, use management tools & planning models for strategic practices). Three critical roles to work effectively:  Social craftsperson: integrate expectations from groups & individuals to ensure buy-in, creating positive & common ground to plan strategic future. Deals with tensions & conflict, change volatile situations to positive  Artful interpreter adjusts general strategic planning practices to align with local routines & norms. Contextualises strategy that other can identify own roles in it.  Known stranger ensures balance between distance & closeness in interaction between strategists & other parties to maintain objectivity while cultivating trust. Board of Directors as Strategists: SU 2 pg. 32-33; par 2.10.4 & TB Ch. 5 pg. 90; par 5.4.2 Focal point & custodians for corporate governance thus influences strategising & overall strategic direction. Monitors relationship between management & stakeholders to ensure org.'s long-term sustainability. SA's King III Report on Corporate Governance offers principles to oversee functions & role of the board: The board has to ensure that the strategies are aligned with the purpose of the organisation. Appoints chief executive officer & provides leadership by endorsing CEO to lead the process of strategy crafting Role of board more aligned to monitoring & reviewing strategies than crafting them. Middle Managers as Strategists: SU 2 pg. 33; par 2.10.5 & TB Ch. 5 pg. 91-93; par 5.4.3 Value of middle- & lower-level managers as strategists has increased due to: 1) Rapidly changing external & competitive environments in recent decades, requiring new approaches to strategising (emergent strategies complementing deliberate & intended strategies) 2) Evolvement of strategy-as-practice which accommodates emergent strategies occurring anywhere in org. Developments have led to revised strategic roles of middle management to include:

Consultants as Strategists: SU 2 pg. 33-34; par 2.10.6 & TB Ch. 5 pg. 93; par 5.4.4 Consulting industry, a valuable source of expertise, available to organisations in need of specialised info & guidance. Considered knowledgeable about business environment & organisations; wealth of industry contacts & good reputation based on experience. Authoritative forces in advising on best practices. Generally used when organisations do not have in-house expertise/need new perspectives in terms of strategies or management approaches. Cultivate in-house expertise through training whenever possible; not always enough when urgent strategic decisions need to be made, hence the need to use consultants as strategists (at a cost). Concept of a learning organisation once again becomes relevant. Learning Outcomes SU 2 pg. 18-19  Assess the importance of strategic thinking as the starting point for strategy, strategy formulation and hence strategic management  Evaluate the strategic direction setting of an organisation

 Assess the traditional process perspective on strategic management  Analyse an organisation's strategy and strategic management process  Criticise the traditional process perspective of strategic management  Differentiate meaningfully between deliberate and emergent strategies as a basis for strategic decision making and strategizing  Justify strategy-as-practice as an effective approach to managing new strategic realities  Critically assess the role of strategists and managers in dealing with new realities in the context of strategy-as-practice