Critically analyse the proposition that strategic management is a creative process through which business strategy emerges over time
Critically analyse the proposition that strategic management is a creative process through which business strategy emerges over time
All organizations are faced with the challenges of strategic decisions: some to overcome issues, others to grasp new opportunities. In a fast changing environment, there is an increase need to understand how do strategies form in organizations and how strategy evolves over time. Many perspectives on strategic management have emerged the last twenty years. There are two main schools of thought: some strategists recommend an approach to strategy that is planned (also called deliberate or prescriptive), while others argue that it is better to include incremental strategy (emergent strategy). Deliberate strategy put a slant on control whereas emergent strategy focuses on learning. This essay critically explores the claim that strategic management is a creative process through which business strategy emerges over time. The essay begins by defining strategic management and explains to what extent it is a creative process. It then reviews in detail the deliberate and the emergent strategy. Finally, the benefits of combining both strategies will be discussed.
There are many definitions of strategic management, but one of the most basic and complete might be the following: “Strategic management consists of the analysis, decisions and actions an organization undertakes in order to create and sustain competitive advantages” (Dess et al 2005 p.9). Another goal of strategic management is to ensure the long term survival of the organization (Goldman and Nieuwenhuizen 2006; Pettinger 2004) and to achieve the company's objective (Pearce and Robinson 2007). There are three main elements of strategic management: understanding the strategic position of an organization, strategic choices for the future and implementation of strategy (Dess et al 2005, Johnson et al 2009, Thompson and Martin 2005, Enz 2010). The strategic position is the analysis of the external environment, the internal capability (resources and competence) and the expectations of stakeholders. Strategic choices are the formulation of a future strategy and the methods by which the strategy could be pursued. Finally, implementation of strategy is making sure that the chosen strategies work in practice (development of control systems).
Strategic management is an ongoing process, not an event that once done can be forgotten for a while (Thompson and Strickland 2004; Stettinius et al 2005, Goldman and Nieuwenhuizen 2006). The firm will need to adapt its strategy according to the reaction of competitors. Thompson and Strickland (2004) indicate that the firm is obliged to reevaluate strategy as often as needed in order to match the changing internal and external environment of the organization. Managers have ever present responsibilities to detect issues, track progress, monitor customer change and make necessary adjustments. Johnson et al (2009) confirm that the term strategic management underlines the importance of managers regarding the strategy. A successful implementation of the strategic management process allows the growth and development of an organization. Strategic management is thus crucial for the future.
People usually think that strategy and creativity are opposite. However, they are much more similar than expected. “Creativity, among other things, is the ability to challenge assumptions, recognize patterns, see in new ways, make connections, take risks, and seize upon chance.” (Herrmann 1996, cited in Vidal 2004, p.408). In other words, creativity requires knowledge, imagination and permits to establish, as Grant (2010) explains, a meaningful connection between concepts that had not previously been related. The basic idea is that something is creative if it is novel and useful (Bilton and Cummings 2010, Vidal 2004). Torrance, also known as the “father of creativity”, saw creativity as a process and he believed that each person is creative (Kyung Hee Kim, 2006). The creative process is not a mechanical and rational rule for solving a problem but it is an intuitive approach that can lead to a new idea, product, or process (Vidal 2004). This requires that an individual (or a group) dares to go into the unknown and change. The creative process can be the source of small creative leaps as well as huge changes.
Plsek (1996) asserts that one of the first models of the creative process comes from Graham Wallas. His model includes four phases: Preparation (observation, definition of problem, and study), Incubation (do not think about the problem for a while), Illumination (a new idea finally emerges) and Verification. This creative process is reminiscent of the components of the strategic management process described in the first part of this essay. Indeed, the strategic management and the creative process are consisting of the same four major phases: observation and analysis phase; creation of objectives; a moment of pure creativity where ideas arise; to finish with a phase of control. To this extent, we can say that strategic management is a creative process where “creativity and analytical thinking are complementary” (Plsek 1996). Indeed, as Vidal (2004) argues, security and good management of an organization cannot be based on creativity alone.
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Moreover, Bilton and Cummings (2010) demonstrate that creativity and strategy require the same set of approaches and cognitive skills. They go further by saying that all creativity is potentially strategic and all strategy should be creative. The use of strategic and creative thinking in any organization can allow more effective innovation, leadership and entrepreneurship. Nowadays, creativity is necessary to find new opportunities or to deal with persistent problems. A Nobel prize study shows that creativity is, for the majority, at the heart of the organization' success (Hodgkinson and Sparrow 2002). The problem is that few organizations understand how to support and apply creativity effectively (Bilton and Cummings 2010).
The predominant view of the past fifty years is that strategies, led by senior managers, are developed through analytical and rational processes. Strategies are intended, in other words the product of deliberate choices.
The design school is the most influential view of the strategy process since the 1960s (Faulkner and Campbell 2003; Mintzberg et al 1998; Sloan 2006). The two strategists Selznick and Chandler are at the heart of this school. As explained by Sloan (2006), the famous notion of SWOT is born within this school: assessment of Strengths and Weaknesses of the company and the Opportunities and Threats that this company faced in this environment. The design school claims that the strategy formation is a “fit” between internal capabilities (strenghts and weaknesses) and external possibilities (opportunities and threats) - (Mintzberg et al 1998; Sloan 2006). In the design school, diagnosis (SWOT) is followed by prescription and then action which shows that this school separates thinking and action (Mintzberg et al 1998). Moreover, only the top manager can be the strategist. He formulates simple, clear strategies and monitors them thanks to budgeting, elaborated planning and systems of control.
Ansoff observes that strategic decisions are made under conditions of uncertainty. In his view, it was essential for a firm to anticipate future environmental changes in order to respond to these challenges (Floyd and Wooldridge 2000). Moreover, senior executives like Grant (2010) explains that difficulty in managing companies grew significantly in size and complexity throughout the 1950s and 1960s. In order to provide long term guidance to companies and help executives in making strategic decisions, corporate planning was developed. The document (normally a five year plan) aimed at setting long term goals and objectives as well as prioritizing key products and business areas. Forecasting economic trends like market demand, revenue, costs of productions in relation to margins and the company's share were also included (Grant 2010). The planned strategy, headed by Ansoff, actually grew simultaneous with the design school.
Planning suggests clear and articulated objectives, followed by formal controls. Thanks to a systematic planning, strategies are explicit, specific goals are established, activities often complex are organized and the degree of control increases, which can positively affect the employees’ performance (Grant 2010, Floyd and Wooldridge 2000). Leaders, like in Design school, have a central position in planning strategy. Mintzberg and Waters (1985) explain that the employees, outside the planning process, may act, but are not allowed to make decisions. From Ansoff's viewpoint, strategic decisions have to be made at the top. Indeed, given partial ignorance and uncertainty in the environment, last minute managerial decisions are required but cannot be delegated below (Floyd and Wooldridge 2000).
One of the largest companies in the world, as explained by Enz (2010), has a systematic strategic planning process. Each year, a two day meeting is organized with all the company managers and the corporate executives to whom they report. They present the detailed objectives to be achieved over the coming years, and specific strategies that will be pursued in order to reach these goals. In order that the presentations of each company contain the same elements, a strict format is followed. Company managers do not dare to implement innovative ideas by fear of failing to achieve goals. In addition, the organization does not especially reward unconventional thinking. Because of this high rigidity, the company has many problems of performance and low shareholder returns for several years now.
This example confirms that the rigidity of planned strategy prevents the creative and thinking processes. Thus, in being over prescriptive, some business opportunities can be missed (Mintzberg et al 1998 and Campbell et al 2002). According to a study, more than 80% of global organizations use strategic planning (Enz 2010). However, Mintzberg suggests that only 10-30% of planned strategies are realized (cited in Grant 2010, p.21). Another limit of planned strategy, raised by NetMBA Business Knowledge Center (2002), is the lack of responsiveness in a rapid change competitive environment.
Enz (2010) argue that in order to sustain a competitive advantage, companies should implement innovative ideas rather than limit their actions to what is already known. Successful strategies can emerge in changing times from employees at lower levels of the organization. A strategy is emergent in absence of intentions (Segal-Horn 2004). It is a more intuitive process. Letting strategies emerge means that strategies must evolve incrementally over time, allowing flexibility in the organization, ensuring they are not forced in to specific preset action (De Wit and Meyer 2005). “The Science of Muddling Through” written by Lindblom (1959) initiated this train of thought, suggesting that government policies are not written in a controlled or orderly manner. Further implying policymakers attempt to cope with issues out with their ability.
Mintzberg describes strategy as a “pattern in a stream of actions and decisions” (Mintzberg and Waters 1998, p.1). He uses the word "pattern" to explain the fact that strategies do not always follow a chosen plan but may emerge, as a result of the strategists’ intuition and insight. Furthermore individuals throughout the organization are involved in the emergence of strategy indicating that within the strategic process there are multiple contributors. A lot of emergent theorists argue that strategy does not come from the top. Mintzberg found that the strategy is formed informally, when employees interact with each other (at the coffee machine for example) about the needs of clients. Over time, patterns of behavior can be created in various parts of the organization and will be formalized later (Sloan 2006). Employees, whatever their rank in a business can contribute to strategy process. For example, a group of saleswomen who decide to sell one product in particular can change the firm's market position (Segal-Horn 2004).
Spender and Strong (2010) also argue that most great ideas for the corporate growth come from the persons who serve the customers and daily fight for the company's success: the employees. Companies that have managed in making innovation part of their strategy did so by using the knowledge and ideas of their employees, whatever the ranks. They did that through what Spender and Strong (2010) call ‘innovation communities’. Innovation communities grow from an idea, a desire (for a new product, market and so on) from top management and then a forum of employees work together to implement the project. Many writers, as Spender and Strong (2000) or Thompson and Strickland (2004), believe that it is essential to involve as many people as possible of different ranks and positions, in order to aid adherence for future projects. For example, Eisai Co, the Japanese pharmaceutical company, has organized many innovation communities to consider a new structure of medicine for Alzheimer's disease (jelly-like substance, easier to swallow) and devise social programs for the families of Alzheimer's victims. All employees participated in this project and spent time with patients because the company believes that it can inspire employees and be at the origin of creative ideas. But the most important and difficult thing is to establish a dialogue where everyone says freely what he thinks, without concerns about hierarchy or fear of being judged. That is why certain measures are taken; for example, ensure that group leaders do not have direct control over wage and promotions of the participants (Spender and Strong 2000). In short, collaborative efforts are very helpful to the implementation of emergent strategy. Peng (2009) also argues that emergent strategy is based on a flow of small decisions from the “bottom up”.
Enz (2010) and Mintzberg et al (1998) believe that top managers need to consider and learn from past mistakes to implement a strategy. This way, the company can avoid making the same mistakes than in the past. Stettinius et al (2005) argue that a strategy, in every organization, should evolve over time in responses to events and learning from experiences. It is a crafting process where lessons are learned from the past which influence the new decisions. Mintzberg (1987) used the metaphor of the “potter working the clay” to illustrate the process of strategy. In his metaphor, managers are craftsmen and strategy is their clay. The crafting image allows a better understanding of how effective strategies are developed. The potter (and so, the manager) feels things rather than analyze them. Indeed, according to Mintzberg, the potter works the clay to discover new opportunities and has an intimate knowledge of her work. The work of the mind and hands cannot be separated: there is a vital link between think and act (which is different from the design school). Creative strategies evolve through a process of learning (Mintzberg 1987).
The danger with that emergent approach is that the objectives lack clarity, they are not well defined. Thus, it is more difficult to evaluate and measure performance (Campbell et al 2002; Mintzberg et al 1998).
A strategy can be thought of in two different ways (Enz 2010, Grant 2010, Peng 2009, Lynch 2009): As a long term set of goals designed as an organizational plan which are adhered to or a more adaptable strategy where decisions are made over time in or in conjunction with changing circumstances. However, these two views are not mutually exclusive.
The Umbrella Strategy, defined by Mintzberg and Waters (1985), is not only deliberate and emergent but also "deliberately emergent" because the central leadership creates conditions that allow strategies to emerge. Indeed, leaders have only partial control over the members of the organization. General directives for behavior are defined, but the actors in the organization can operate within these limits: strategies can emerge within these boundaries. Thus, the outlines are deliberate (for example to diversify) but the details can emerge afterward (how, when and so on).
The following example, described by Enz (2010) shows how strategic analysis can guide a firm and how emergent strategy leads to creative solutions and new ideas. Starwood Hotels & Resorts (Westin brand) began its strategic process by leading a marketing study (600 business executives who travel often were interviewed). The results mainly showed that over 60% believe the most important service a hotel can provide is a good night's sleep. 84 percent said that a luxurious bed would make the room more attractive. Westin then tested the beds from 35 hotel chains and they finally developed its own prototype: the "Heavenly Bed" (five designed pillows, mattresses and goose down comforter...). The beds, once designed and tested, were introduced with a well-planned marketing strategy. An American daily newspaper published an article on this subject and the same day, 20 "Heavenly Bed" were lined up on Wall Street. The general manager of Starwood Hotels & Resorts invited passersby to try them by proclaiming: "Work like the devil, sleep like an angel”. During the first week of launching, 32 people called Starwood to ask where they could buy the bed. Westin realized that there was an opportunity. They then put catalogs and order cards in each room, and created a website. 5 years after the launching of "Heavenly Bed", 20 000 pillows and 3500 beds ($ 2,965 each) were sold. When Starwood launched this concept the strategy was first deliberate, but the ability to provide retail sales was unexpected. This opportunity led to an emergent strategy and a successful retail strategy. As the example demonstrates, injecting strategic thinking into the strategic planning process is very effective.
Strategies are often a mix of deliberate and emergent strategies (Grant 2010, Enz 2010, Peng 2009, Lynch 2009). As Mintzberg and Waters (1985) argue, the purely emergent strategy is as rare as the purely deliberate one. The merely emergent strategy implies that the strategy is made without any control (which can be really risky for a firm) while no learning would take place in a merely deliberate strategy. In every company, these two simultaneous processes are always operating (Stettinius et al 2005, Campbell et al 2002, Grant 2010, Mintzberg and Waters 1985).
Basically, strategic management is all that is required to position an organization in order to guarantee its long-term survival. The creative process is an intuitive approach that can lead to a new idea, product, and so one. The strategic management and the creative process, contrary to what we might think, are similar. Indeed, they are consisting of the same four major phases: analysis, creation of objectives, a moment of pure creativity where ideas arise, and control. Finally, strategic management is a creative process (where creativity and analytical thinking are complementary) through which strategy can emerge in response to an evolving situation and, at the same time, can be calculated. In the strategy process, systematic analysis is crucial (within deliberate or emergent strategy). Indeed, for stakeholders, it would not be acceptable to say that the strategy simply emerges. On the other hand, theories and analysis tools cannot be substituted to experience and creativity, which are essential to implement a successful strategy (Grant 2010).
However, one strategy could be favored over the other one depending on the market, but both approaches are necessary if an organization wants to succeed: “We shall get nowhere without emergent learning alongside deliberate planning” (Mintzberg 1996, cited in Enz 2010 p.158).
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