Mapping Strategic Diversity

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Mapping Strategic Diversity

In his influential work Strategy Safari, Henry Mintzberg and his colleaguespresented ten schools of strategic thought. In this impressive book, Dany Jacobs

demonstrates that the real world of strategic management is much wider and

richer.

In Mapping Strategic Diversity, Jacobs distinguishes between cockpit theories of

strategy, which bring rational analysis to the forefront, and process-orientated

social science approaches, which bring in a wider array of influences to the theory

and practice of business planning. Presenting 22 different approaches to strategy

making, this book:

provides a comprehensive overview of the field

guides the reader in developing theoretical and practical skills

helps develop both high and low level strategic thinking.

This textbook is a useful analysis for practising managers, but really comes into

its own as an advanced introduction to the field of strategic management; having

read this book, students are fully armed to enter the strategy jungle!

Dany Jacobs is Professor of Industrial Dynamics and Innovation Policy at theUniversity of Amsterdam and Professor of Art, Culture and Economy at the

Universities of Applied Science ArtEZ and HAN in Arnhem, The Netherlands.

He has been active in the field of innovation for more than 20 years.


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Dany Jacobs provides us with one of the most innovative and exciting strategy

texts in a long while. The book provides a considerably broadened view of the

phenomena of strategic management and will create much new debate. A superb

text for students and managers alike.

John Hassard, University of Manchester, UK

Dany Jacobs Mapping Strategic Diversity presents an enlightening overview of

some of the most important schools of strategic thought, coupled with some fas-

cinating insights and case accounts that are sure to be of real interest to managers

and students of strategy alike.Danny Miller, Research Professor, HEC Montreal and Chair in Strategy and

Family Enterprise, University of Alberta, Canada

Dany Jacobs Mapping Strategic Diversity is a provocative and enlightening take

on strategy. It is also a fun read. Jacobs chapter titled 30 Ps for Perspectives on

Strategywith its rhetorical question, how many Ps can you think of?is

itself worth the price of admission.

Robert Keidel, Visiting Associate Professor of Management,Drexel University, USA

Dany Jacobs has written a book about strategy, Mapping Strategic Diversity, that

manages both to demystify and de-economize the strategy discourse and make

this most fascinating area of organizational politics engaging for the student.

Stewart Clegg, Research Director of Centre for Management and OrganizationStudies, University of Technology, Sydney, Australia


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Mapping Strategic DiversityStrategic thinking from a variety

of perspectives

Dany Jacobs


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First published 2010by Routledge2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN

Simultaneously published in the USA and Canadaby Routledge270 Madison Ave, New York, NY 10016

Routledge is an imprint of the Taylor & Francis Group, an informa business

2010 Dany Jacobs

All rights reserved. No part of this book may be reprinted or reproduced or

utilised in any form or by any electronic, mechanical, or other means, nowknown or hereafter invented, including photocopying and recording, or in anyinformation storage or retrieval system, without permission in writing from thepublishers.

British Library Cataloguing in Publication DataA catalogue record for this book is availablefrom the British Library

Library of Congress Cataloguing in Publication DataJacobs, D. (Dany)Mapping strategic diversity : strategic thinking from a variety of perspectives /Dany Jacobs.

p. cm.Includes bibliographical references.1. Strategic planning. 2. Management. I. Title.HD30.28.J327 2009658.4'012--dc222009013654

ISBN10: 0-415-55023-8 (hbk)

ISBN10: 0-415-55024-6 (pbk)ISBN10: 0-203-86956-7 (ebk)

ISBN13: 978-0-415-55023-9 (hbk)ISBN13: 978-0-415-55024-6 (pbk)ISBN13: 978-0-203-86956-7 (ebk)

This edition published in the Taylor & Francis e-Library, 2009.

To purchase your own copy of this or any of Taylor & Francis or Routledgescollection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.

ISBN 0-203-86956-7Master e-book ISBN


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Lost causes are the only ones worth fighting for.

Richard Farson,Management of the Absurd


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List of figures and tables x

Preface xii

1 The essence of strategy: key components 1

1.1 What do you know about strategy? What do you think

about it? 1

1.2 What are we talking about when we discuss strategy? 2

1.3 How important is strategy? 6

1.4 Basic components of strategy 101.5 Strategy and organizational levels 15

1.6 Prescriptive and descriptive strategy approaches 17

1.7 Tame and wicked problems 24

1.8 The score so far 29

2 Some traditional strategy typologies 30

2.1 Introduction 30

2.2 Porter: cost versus added value 302.3 Innovativeness: Miles and Snow 35

2.4 Ansoff and others: development trajectories for large

corporations 36

2.5 Miller and Friesen: archetypes of strategy-making 38

2.6 Strategy: long live diversity! 40

3 30 Ps for perspectives on strategy: toward

strategic-style flexibility 41

3.1 How many Ps can you think of? 41

3.2 Perspectives and the case for style flexibility 42

3.3 Strategy as a Plan or Programme 44

Contents
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3.4 Strategy as a Pattern or Path 44

3.5 Strategy as a Position 45

3.6 Strategy as a Perspective, Personality, Profile, Paradigm

and Perception 46

3.7 Strategy as a Ploy and a Principle 473.8 From 15 to more than 30 Ps 50

3.9 Summary and synthesis of the first three chapters 52

Appendix: avoid the frontal attack! What managers can learn

from the military 53

4 The strategy forest 59

4.1 What do you know about it? What do you think of it? 59

4.2 The (bounded) rationality of strategy 60

4.3 Splitters and lumpers 63

4.4 Four groups of strategy schools 65

4.5 The first maps of the strategy forest 70

5 Where theres a will, theres a way: all-powerful optimists 72

5.1 Eight schools 72

5.2 The design school 735.3 The entrepreneurial or vision school 76

5.4 The planning school 78

5.5 The positioning or IO school 84

5.6 The portfolio approach 87

5.7 The resource-based and competence-based approaches 91

5.8 The resource-dependence or stakeholder approach 97

5.9 The configuration school 100

5.10 Many roads to excellence 103

6 The entrepreneur deliberates, the market decides:

cautious optimists 106

6.1 Four schools 106

6.2 The transaction-cost approach (and related economic

theories) 107

6.3 Game theory 114

6.4 The evolutionary school 1216.5 The guerrilla approach 129

6.6 Theyre big and were small and thats not fair 131

viii Contents
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Contents ix

7 Thats the way we see it, thats the way we do it:

framed rationality 134

7.1 Four schools 134

7.2 The critical school 135

7.3 Postmodernism 137

7.4 The cognitive school 139

7.5 The cultural school 142

7.6 Strong thoughts and routines 145

8 Everything flows: interactive players 147

8.1 Six schools 147

8.2 The learning school 149

8.3 The political school 153

8.4 The identity approach 157

8.5 Systems dynamics 161

8.6 Social constructivism 164

8.7 Complexity and co-evolution 173

8.8 Strategy never ends 183

9 The second atlas of the forest 186

9.1 Back to the bigger picture 186

9.2 All the perspectives in one map 186

9.3 Strategy in practice: the strategic prayer wheel revisited 191

9.4 On to the paradoxes 196

10 Gusts at the top of the Pico Paradox 197

10.1 Why are paradoxes strategically important? 197

10.2 What is a paradox? 198

10.3 The danger of denying paradoxes 199

10.4 Dealing with ambiguity 201

10.5 Steering and self-organization 201

10.6 Hybrid solutions 204

10.7 Paradoxes relating to the internal context 206

10.8 Paradoxes relating to the external context 208

10.9 Paradoxes relating to the strategy-making process 210

10.10 Paradoxes relating to content 211

Notes 214

Bibliography 221

Index 230
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Figures

1.1 Strategy in relation to an organizations primary processes 51.2 Static contingency and precise fit versus dynamic

contingency in unclear situations 10

1.3 Strategy: content, context, process 11

1.4 Main elements of strategy according to the traditional

design approach 12

1.5 Modified model of strategy-making 13

1.6 Second modified model of strategy-making 15

1.7 Levels of strategy-making 17

1.8 Rational versus emergent strategy 232.1 Porters generic strategies 32

2.2 Mapping cost and differentiation strategies 34

2.3 Ansoffs vision on possible development trajectories

for companies 37

2.4 Linking Ansoffs development matrix to other strategy

typologies 38

3.1 Strategic thinking between various theatres 47

4.1 Whittingtons matrix of strategy perspectives 64

4.2 Four forms of cockpit thinking 704.3 Approaches with a stronger social-science orientation 70

5.1 Methods for dealing with an uncertain future 83

5.2 The organization and its external environment 84

5.3 Porters Five Forces 85

5.4 Boston Consulting Group growth/share matrix 87

5.5 The categories of the BCG growth/share matrix

in relation to the life cycle 87

5.6 The system of production and knowledge exchange in Dutch

horticulture 995.7 Geoffrey Moores stages of the product or technology life cycle 102

Figures and Tables


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Figures and Tables xi

6.1 Dependency of X in relation to Y 111

6.2 Holland Sweeteners strategic options, and the probable

reactions of Monsanto 118

7.1 The risk of strategic drift as a result of a mental model

of reality that is no longer adequate 1408.1 The Balanced Scorecard 151

8.2 The interest and power of stakeholders 154

8.3 The development of skills and identity 157

8.4 Identity as a strategic compass 158

8.5 The dynamics of symptomatic solutions 163

8.6 Social construction, deconstruction and reconstruction 167

8.7 The social construction of an innovation 168

8.8 The linking of strategic projects 170

8.9 The possible development of a strategic process 1728.10 Clustered networks linked by connectors 176

8.11 Linear and non-linear developments 177

9.1 The second map of the strategy forest 191

9.2 The strategic prayer wheel 193

9.3 Redefining the strategic profile 195

10.1 The McKinsey 7-S model 203

Tables1.1 Tame versus wicked problems 25

2.1 Cost competition versus differentiation 31

5.1 The eight voluntaristic cockpit approaches 72

6.1 The four deterministic cockpit approaches 107

6.2 Pay-offs in the classic Prisoners Dilemma 115

6.3 The Mafia solution to the Prisoners Dilemma 117

6.4 The ten largest industrial enterprises in the United States

(by book value/assets), 1917, 1948 (Chandler 1999: 638657)

and 2008 (own calculations from Forbes, 04-02-08) 1287.1 The four deterministic social-scientific approaches 134

8.1 The six approaches with a stronger voluntaristic and

social-science orientation 148

10.1 Relationship between steering and self-organization 202

10.2 The 7 Ss as zones of constructive tension 203


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As the subtitle of this book indicates, this is an introduction to strategic think-

ing from a multitude of perspectives. Our discipline is usually known as strategicmanagement, but this book is more about strategic thinking than about strategic

management or planning. Thinking is perhaps even too strong a word, because

this book also deals with strategic intuition, strategicfeeling. In my experience,we develop this feeling for strategy mainly by learning to shift between per-

spectives.

The better part of this book is therefore an introduction to and an overview of

different strategic approaches or schools. In the past 50 years, the field of strate-

gic management has developed in a quite fascinating way. Nevertheless, most

introductions to this field have not progressed much beyond the initial approachof 50 years ago, i.e. the design approach. No matter how important this approach

still is, this is obviously rather a shame. I can only suspect that most of my fellow

authors reason that the design approach is the least difficult to explain, for as far

as I know, they keep track of all new developments in the field. For many years

now, I aim in my lectures to go beyond this rather simple representation, and

I know how difficult it is. When students (including experienced managers on

MBA courses) have already encountered strategic subjects at some point in time,

these are usually design-based introductions. For these students, strategic man-

agement tends to equate with this approach, and confronting them with moreperspectives generally leads to confusion. In a sense, this is no bad thing, because

it means they are confronted with the most typical strategic situation that most

managers abhor namely confusion.

My aim in writing this introductory book is to break through the closed,

design-oriented circle. Strategic management actually involves much more (and

is more fun) than anything that has emerged from the design school. Given my

experience, I cannot but expect that this book will lead not only to more trans-

parency, but also (initially, at least) to a degree of confusion. I am also aware that

this confusion might ultimately lead to a form of liberation that stimulates realstrategic thinking, as I see it. One of the main goals of this book is therefore to

initiate a discussion about strategy with readers whom I take seriously, and who

themselves like to be taken seriously. If an introductory book is written only for

the strategically ignorant, then we should not complain if the result is no more

Preface


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Preface xiii

than that. However, this does not mean that I have attempted to make this book

as difficult as possible quite the opposite.

What sets this book apart from others?

What can I promise you as a reader? What sets this book apart from other books?

What is its added value? These are all typical strategic questions, are they not?

One of the main premises of this book is that the variety of strategic

approaches does not constitute a weakness, but provides a rich source of

insights and perspectives. Existing introductory books do not address this diver-

sity sufficiently. With this book, I therefore intend to present the overview of

strategic variety that I myself have sought for many years. Ten approaches have

already been presented in the best book on strategic variety to date Strategy

Safari by Henry Mintzberg (whom I greatly admire) and his colleagues(Mintzberg et al. 1998a and 2009). However, several very interesting andimportant approaches are missing in that book, and others are categorized in a

way that is incomprehensible to me. I will come back to this in Section 4.3.

The purpose of this book is to fill that gap, whilst helping you to distinguish the

wood from the trees.

In addition, this book will place greater emphasis than other introductions on

the continuing process of strategy-making and strategic interaction. Perhaps you

are wondering: surely strategic management is interactive by definition? Arent

strategies always related to the environment, i.e. competitors, colleagues, interestgroups, authorities and last but not least customers? And isnt it a fact that, as

a rule, all of these groups respond to your initiatives? Indeed, I couldnt agree

more. To put it even more strongly, within your own organization too, there is

continuous strategic interaction, for the simple reason that ideas usually outnum-

ber resources. An organization cannot do everything at once. This is why there

are often different views about strategic and other priorities in each organization.

Who decides on these priorities, and how? Is there one boss who makes all deci-

sions or who thinks he does? When reading certain books on the subject, one

could almost believe this. And supposing that only one person is responsible,would everyone readily agree with him? Strategy without interaction is therefore

an empty shell and wouldnt even be necessary. It is nevertheless striking how

many books on strategic management hardly mention the strategies of competi-

tors and interest groups, or those of colleagues who have plans that diverge from

the plans of others within the organization.

To some extent, this book draws upon the strategy-as-practice approach which

has emerged in the last decade. Strategy-as-practice researchers try to study as

closely as possible how strategies concretely come about, formally and informally

(Whittington 1996, 2003, 2006; Johnson et al. 2007). But this book does morethan present real-life strategy cases. Its ambition is to show how different theories

interpret strategic realities and how they can help practitioners to improve their

strategic performance. As many theoreticians before have said, there is nothing

so practical as a good theory.


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This is an introductory book, which means that I am attempting to write for a

broader audience. Strategy-making is never easy, because it is an attempt to out-

smart ones competitors. But we shouldnt make it more complicated than

necessary, of course. People who know me are aware that I attach great value to

readability. Although our discipline can sometimes be tough, I will neverthelessalso try to show that it is exciting and fun. Strategy involves getting to know both

ourselves and the organizations of which we are a part, as well as trying to devise

clever ways to get the better of competitors and other opponents. Wisdom is more

important than size, as they say. Given the fact that only a few people and orga-

nizations operate on a large scale, for most of us it is important to be clever. As

large organizations become smarter, it is even more important for the smaller ones

to do the same!

This relationship between large and small brings me to yet another issue.

Those who are aware that they are merely pawns in a bigger game may be moremodest, strategically speaking. Of course, there is nothing wrong with ambition,

quite the contrary this book will top the bestseller lists, for example. Modesty,

however, helps us to understand the possible resistance and obstacles to our

plans. In this way, it guards us from the arrogance that often deals a fatal blow to

all manner of fantastic plans. Modesty challenges strategic thinking because it

makes us aware that we wont get our ambitions for free. In a way, the 20082009

crisis has made it easier to deliver this message, as more than previous recessions

this crisis has exposed the vulnerability of the strongest organizations. So, wis-

dom is more important than size. This awareness makes strategy more exciting,more challenging and for those who like this more fun. By definition, there

are no easy strategic solutions. That which is easy does not require strategy.

That which is strategic is not easy, as a rule. I will return to this point frequently

in the book.

I therefore promise you no unambiguous answers or easy procedures, because

strategic management usually deals with unclear, uncertain and ambiguous situa-

tions that are changing all the time. This is what makes our discipline so

exciting. It is also why, in most cases, strategy-making has to be participative. It

wont succeed if it is confined to an individual or a small group. Other peoplewithin and outside the organization (customers, for example) may know more

than you do. And others may simply not allow you to get your own way so easily.

At the same time, strategic thinking must lead to action, and vice versa.

This book will ultimately bring us to the question of how to deal with para-

doxes, fields of tension for which an ideal balance does not exist (e.g. action

versus reflection, innovation versus the preservation of essential strong routines).

However, I promise to provide you with some tools theoretical as well as prac-

tical to ensure that you are better equipped to deal with paradoxical situations.

Each of the different approaches I present, for example, is accompanied by ashort list of questions raised by that approach. The questions relate not only to

you and your organization but also to your competitors (or co-opetitors1), inside

as well as outside the organization. I cannot tell you, however, which questions to

ask in which situation. To do this you will have to develop your own strategic

xiv Preface


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skills. I can only put you on the right path, and hope that you will actually start

to enjoy the process.

The fact that my style deviates somewhat from that of other books on strategy

is perhaps the result of the paradoxes I have just mentioned. I dont feel the need

to beat the big drum. Strategy is an interesting and exciting discipline, and yes, itis vitally important. At the same time, however, it can be amusing to see how

companies actually deal with strategy. Sometimes a strategic plan is like a red

herring, not much more than an instrument to satisfy the Board, a department or

a sponsor (If they want a strategic plan, thats what well give them). On the one

hand, therefore, my aim is to assist you in producing well-thought-out plans and

gaining support for them. On the other hand, however, I also want to help you to

understand how organizations actually function, including the potential role of

strategic plans in this respect.

Within organizations, strategy is not infrequently about power and status, onall levels. Who gets the best office? How can I justify a large bonus for myself?

Why is my department entitled to a higher budget than another department?

You may be thinking: So thats what its all about! No, of course it isnt, but you

would be surprised if you knew how many great plans are intended for not much

more than this kind of triviality. This is why strategies are an important instru-

ment whereby organizations are continuously recreated and redefined.

For this reason, too, strategy is both as hard as nails and as soft as butter. Every

now and then, we need to underpin large investment decisions with hard data.

I will help you to find these. At the same time, however, you will see that allthese hard data are obtained with the help of models that merely approximate

reality and, from sheer necessity, are a simplified representation of it. We use this

hardness of facts to deny and/or smooth-over the strategic uncertainty and

ambiguity we encounter. Moreover, there are always interests at play that cause

us to see only what we want to see. That is why this book is about both the front

and back of strategy-making. The ultimate goal is strategic learning, i.e. under-

standing what we are good at and consolidating, expanding and improving this,

both in the context of competition and co-operation with others.

For whom have I written this book?

Almost everyone who is socially or economically active has to deal with strategy

and strategic interaction. When you want to achieve a certain goal, you have to

mobilize allies and aids. Of course, not everyone will start reading strategy books for

that purpose. To a large extent, such processes take place spontaneously, in a natu-

ral way. In a sense, it is strange that strategy is something that has to be taught,

since human beings are by nature social creatures, and strategic and tactical behav-

iour is part of their behaviour. Many people are subconsciously expertstrategists. Within families, too, it is about deciding who gets the best room, and

allocating scarce resources. Every day, as I sit in the train, I hear girls thinking up

arguments to persuade their fathers or boyfriends to fetch them in the car. By the

way, this is interactive strategy sometimes only the third argument does the trick.

Preface xv


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At the very least, a strategy book should ensure that people do not lose this

basic skill. It will do no harm, however, to think about ones personal style and,

in the process, acquire more flexibility strategy, long live diversity! When deal-

ing with something on a grander scale, it helps to know more about strategy as a

discipline, if only because others know a great deal about it or because it isexpected of you. Could you put on paper how you would deal with this matter?

What is your business plan? Within organizations, more and more people are

involved, in one way or another, in devising major or minor strategies. People at

the top are sometimes authorized to decide on important investments or restruc-

turing programmes, but these decisions are influenced by many others. Many

people try to stand out within an organization through their own success and

that of their teams (department, business unit). Also those who are relatively

unselfish and put the organizations interests first will often have to fight for the

scarce resources that are allocated to different purposes within the organization.To a certain extent, every organization is a pyramid of smaller or larger plans,

which may or may not be laid down in writing and sanctioned. Money that is put

aside for one plan might be used for something entirely different. One may

approve or disapprove of this, but it happens.

Strategic management, then, is not the exclusive domain of the senior man-

agement of an organization, possibly complemented by strategic staff or a number

of hired advisers. The fact that many people are either explicitly or inexplicitly

engaged in strategy does not, of course, mean that they need to be trained in that

discipline. However, more and more people are expected to be. An increasingnumber of team leaders, department heads, managing directors of subsidiaries

and leading executives of public-sector and private-sector bodies are required to

give strategic substantiation to their proposals, or to indicate by means of strate-

gic plans the future vision for their team, unit or department, and how they

think they can accomplish this. As a rule, new entrepreneurs in search of finan-

cial support from banks or investors also have to draw up a business plan, of

which strategy will be an important part. In order to be strategically effective, it

is therefore useful, at the very least, to be acquainted with the well-known strat-

egy jargon and, if necessary, be aware of other perspectives than the simplisticones that other people sometimes present with great aplomb as the only appro-

priate perspectives.

This book offers a helping hand to all those who need support in the context of

their role in strategic processes. This support consists not only of a framework,

some useful questions where appropriate, and tips for reflecting on a strategic plan,

but also of questions and perspectives for assessing the plans of others and raising

them for discussion. In addition, this book is especially about reflecting on ones

own position and operating methods in strategically relevant processes. I have

therefore written this book primarily for anyone who is involved in such processes,to a greater or lesser extent, and wants to be better equipped to deal with them

executives in private and public organizations, for example. The book is also of

interest to the employees or advisers of these executives who are seeking more con-

sciously to exert influence on policy-making within or outside their organizations.

xvi Preface


18/26

It may also be relevant for new entrepreneurs or people who want to form an inter-

est group. The target group therefore also includes students from universities and

polytechnics, as well as their lecturers, because an increasing number of graduates

will eventually find themselves in the aforementioned positions.

What do I aim to teach you with this book? To put it simply, I want to teachyou something about strategic thinking and management and make you more

familiar with and, it is hoped, more appreciative of the plurality of the disci-

pline, in this way enabling you to apply this in strategic trajectories. As is the

case with all books, you learn the most when you actively apply the knowledge

and information, but this is obviously something over which I, as a writer, have

no control. The only thing I can do is try to activate you by posing a number of

questions to reflect upon initially with more emphasis, later in a more subtle

way. If you formulate answers to these questions preferably on paper it is more

likely that you will become aware that my particular approach is slightly differentto yours. As you probably know, one learns more through confrontation . . .

If you are a lecturer who wishes to use this book for teaching purposes, you

will share most of my enjoyment and frustration if you also share my objective to

impart to students a certain amount of intellectual flexibility (and hence the

ability to put things into perspective). Although I intend to be practical, I aim to

offer more than a simple recipe-book approach. In educational terms, this book

is on the level of universities and polytechnics.

The general structure of this book

I will lay the foundation in Chapter 1, in which I seek to define the essence of

strategy. In doing so, I will start from the traditional model of the design school,

which I will then supplement with elements from other approaches. In addition,

I make a distinction between prescriptive and descriptive approaches to strategy-

making. In Chapter 2, I bring together a number of relatively well-known and

frequently used classifications of strategies. For example, do you compete on

price (and, it is hoped, cost), or on the basis of a particular added value for your

customers? Are you a pioneer, or more of a follower who learns quickly from theexperiments of others? Chapter 3 presents a kind of party game, in which I use

the letter P to bring together as many different Perspectives on strategy-making

as possible. I would very much like you to join in. In the meantime, therefore,

I suggest that you start making a list of strategic Ps.

Chapter 4 lays the foundation for the subsequent four chapters. It presents

four main categories of strategic approach, i.e. the topographic map of the great

strategy forest. Chapters 5 to 8 give a detailed description of the different trees in

the forest, including their mutual relationships. I will use examples to show the

relevance of each perspective. Each time you will see the same landscape, butfrom a different angle. It will also become clear that each viewpoint leads to dif-

ferent strategic questions.

Chapter 9 brings everything together again. With the help of a second map,

I will indicate how each school focuses on a certain aspect of strategy-making.

Preface xvii


19/26

In addition, I return to the strategic prayer wheel presented in my previous strat-

egy book Spel en Discipline (Play and Discipline) (Jacobs 1999a), a schematicrepresentation of the various necessary elements in the strategy process. On the

basis of the arguments I have developed in the book, I can elaborate and refine this

further.Finally, in Chapter 10, at the end of our long and bumpy journey, we reach the

summit of strategic thinking, i.e. thinking in terms of paradoxes for which there

are no easy solutions. Sometimes we place too much emphasis on decisiveness, at

other times we lose ourselves in too much reflection. Sometimes we are perhaps

too autocratic, at other times too participatory. Strategy, just like housework,

never ends. This book does end, however. At this point I will let you go, I will saygoodbye at the summit, where all these opposing forces continually pull us in all

directions. Contrary to what is sometimes claimed, however, it doesnt have to be

lonely at the top. That is entirely up to you.

Acknowledgements

This last remark boomerangs on myself, as my greatest debt of acknowledgement

is to Aad Vijverberg. He was the person with whom I embarked upon this jour-

ney. He fed me with pieces of text, interesting literature and cases, remarks and

criticism. Eventually, however, we went our separate ways. This was partly due to

me and partly due to Aad a typical form of co-evolutionary dynamics we will

encounter more often in the course of this book.In addition, the comments (and additional literature suggestions) made by

Ritzo ten Cate, Marjanne Dirksen, Otto Lapphn and Theo Postma on early ver-

sions of this text have been of great value to me. I am also grateful to everyone

who, in recent years, has fed me, either in a strategic or non-strategic sense. But

thats another story

For more than 90 per cent, this book is a translation of the book I published in

Dutch (Strategie: Leve de diversiteit) in 2005. Here and there small changes havebeen made: by using another case or updating an existing one, or by integrating

some new literature.

Dany JacobsZutphen, The Netherlands, 2009

xviii Preface


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In order to identify the many different approaches to strategy, we must first estab-

lish a theoretical framework with a number of basic concepts and components.That is what this chapter aims to do, by discussing the essence of strategy. What

is strategic management about? When we talk about strategy, which themes do

we include or leave out? You will notice that occasionally I will mention some of

the strategic approaches and schools of thought that we will discuss later on. This

is inevitable. In fact, I hope to familiarize you with some of them.

1.1 What do you know about strategy? What do you thinkabout it?

As I mentioned in the preface, each chapter will begin with a number of ques-

tions designed to activate your knowledge of and views on strategic

management. In the earlier chapters of the book I will place more emphasis on

this. I would suggest that you answer the questions below for yourself, preferably

on paper, and check them again after you have worked through this chapter to

see whether your answers have remained the same. If they have not, why is this?

In your view, what is the essence of strategy? Think of five words that you

associate with strategy. When did you last use the terms strategy or strategic at work, or in another

setting? What precisely did you mean by that? Have you recently heard

someone else use these words? With the same meaning?

You are probably a member or employee of an organization. Do you think

that the organization has a strategy? Does it matter whether it has a strategy?

Who is involved with strategy?

Do you think that an organizations strategy must be clear? Should it be clear

for the management? For the staff? For potential competitors?

What do you think of an organization that manifestly deviates from its strategy? Is strategic management a matter for top management alone, or should other

levels of the hierarchy also be involved? Would you like to be involved?

Why, or why not?

What distinguishes strategic management from normal management?

1 The essence of strategy

Key components


21/26

What is your view of the statement strategy is about the past?

Are you already familiar with some existing strategic schools of thought?

If so, what are their distinguishing features?

1.2 What are we talking about when we discuss strategy?

Strategy is important

When we talk about strategy, we are talking about important matters. Your reac-

tion may well be of course you would say that, its your profession. No, I mean it

literally. Look around you. In many situations, strategy is synonymous with

important. If you want something to be taken seriously, label it as strategic.

Having an action plan is all well and good, but a strategic plan really has an

impact! A statement about personnel policy is fine, but one about strategic HRMcarries real weight! Managers who are involved in formulating the strategy of an

organization must be important people. Compare this with how production man-

agers are perceived. Surely production is just as important, even essential? Yet it

is unlikely that production managers will be regarded as more important than

strategists.

Actually, strategy is important in practice. Decisions are clearly strategic if

they are crucial to the development of the organization, have a broad scope,

create added value, and have consequences for many jobs and activities within

the organization. Decisions are also strategic if they are difficult to undo, forexample because they lay claim to considerable resources (human resources,

financial resources, machines, buildings, energy) in the longer term. They there-

fore represent a strategic commitment by the organization. They can also serve

as a signal to other parties, for example to discourage them from doing the same

thing. Such decisions are, therefore, often the motivation for organizing strategic

processes or formulating strategic plans.

The following are examples of decisions that are clearly strategic:

Starting a business. Investing in a new large location.

Uniting with your team to oppose a planned reorganization.

Entering a new market (e.g. the Far East or Eastern Europe).

Investing in new technologies and innovations in products and production

processes.

Formulating a business plan for a new department.

Appointing key staff with unique skills.

Initiating a merger, acquisition or partnership.

Strategies differ in their importance and visibility. To be more precise, the strat-

egy followed in practice is not necessarily the strategy that is set down on paper.

Certain difficult decisions are never implemented. Many actions are not the

result of formal decisions. That brings us to the first important concept: emergent



22/26

strategy, i.e. strategy that emerges spontaneously. Strategy is often a form of pattern

recognition. As the philosopher Kierkegaard observed, We live life forward but

understand it backward. Ask yourself to what extent your career choices were

conscious decisions. Did you really make them logically and rationally?

Sometimes it is also a question of luck or chance. Or did you seize an opportunitythat turned out to be just the right one for you? In many cases, you understand

the rationality (i.e. the pattern) better with hindsight than beforehand.

Some strategic literature concentrates on important, strategic subjects about

which an important decision must be taken: a new direction, a merger, the estab-

lishment or closing of branches or departments. But many strategies are the result

of a series of smaller actions or decisions that initially seem unimportant.

Strategy-forming, then, is more a case of identifying a pattern in our actions after

the event. Moreover, it may be that, in the case of an important decision that is

expected to generate opposition, tactics are deliberately employed to implementthe decision through a series of apparently minor actions. This is known as

salami tactics. The salami is not served whole, but in slices. Salami tactics can

be used not only for top-down decisions, but also for bottom-up decisions.

Therefore, the real strategy is important. But this is formed not only through

important, well-considered rational decisions. Remember emergent, sponta-

neous strategy. I will return to it in Section 1.6.

The air we breathe is free, strategy isnt

In the past decade we have learned to our cost that linking strategy and impor-

tance also has a downside. We often associate strategic with costly or too costly.

Strategic consultancy costs more than normal consultancy. When a takeover is

labelled as strategic, it often means we have to pay a lot, but . . . (Kay 1998).

Literally one of the most expensive concepts in strategic management literature

is the concept of synergy: the idea that elements interact and their combined

effect is greater than the sum of their individual effects. Not infrequently, this is

the justification for paying a relatively large sum for a takeover, because the inte-

gration of the new organization will supposedly yield even more! A nice idea, butunfortunately thats usually all it is. In 2002, the merged American Internet and

media group AOL Time Warner announced losses of EUR 108 billion, an almost

inconceivable amount. To give you some idea, the losses made by a single com-

pany within the space of one year were approximately 80 per cent of the Dutch

governments budget in 2005. So remember, next time someone in your organi-

zation starts to talk about synergy benefits, dont let them near the company

coffers!

Strangely enough, this shows that some people dont take strategy very seriously.

After all, if strategy is simply a synonym for important, or even very important,then there is no need to pursue the subject. The association with too expensive

(value destruction in economic terms) is possibly even more damaging because in

such cases it just means stupid. It is the exclusive playing field of top management,

where there apparently has to be room for the occasional expensive hunting trip.

The essence of strategy 3


23/26

As we know, the true hunter doesnt rest until he has bagged his quarry. But then

he loses interest . . . It is all well and good if strategy is associated with importance,

but this book will serve little purpose if it means no more than that.

Strategic versus normal operational decisions

As I said previously, strategy often arises spontaneously from a pattern of appar-

ently minor decisions. But more deliberate strategies do take the normal

operational level seriously. Although research has repeatedly shown that, on

average, businesses with an explicit strategy perform better than those that do

not, the difference is usually not very large (see for example Waalewijn and

Segaar 1993). Healthy business operations are just as important. Research con-

ducted by Jim Collins into the few companies that made a successful transition,

the results of which were sustained in the long term,1

revealed that a strong strat-egy was not developed until the process was in its fourth phase, after an ambitious

but modest top manager had been appointed and a good management team had

been formed, and after the company confronted the hard facts (Collins 2001).

How can you make good decisions (strategic and otherwise) without an effective

management-information system that keeps you informed about the companys

real situation? What are the real costs? Which departments perform best, and

why? What really generates our revenues?

That brings us to the next important component of strategy. Strategy is always

built on knowledge of the actual strengths and weaknesses of an organization.Does the organization, in its own way, create added value, or not really? The feed-

back between the strategic and operational levels will therefore be a constant in

this book. If the organizations strategic core competences are not anchored in its

basic processes and skills, then surely we are building on sand? That connection

is the essence of strategic learning, however difficult that may be. What activity is

the organization involved in, and which opportunities and problems do they cre-

ate? How can we improve and/or change the way we do things?

The relationship between strategy and primary processes can involve two

forms of feedback and learning: improving what exists and/or creating somethingcompletely new. In the literature about learning organizations, a distinction is

made between single-loop learningand double-loop learning. When an organization

is confronted with a particular problem (or a unique market opportunity), this

can be dealt with as effectively as possible using the existing business model. But

new ideas may also evolve with regard to dealing with this in a more original and

fundamental way, for example by developing new approaches, restructuring the

organization, developing new skills, or integrating organizational units. Here we

see a relationship between strategy and radical innovation, an increasingly

important theme that will be explored later in this book. This is illustrated inFigure 1.1 (based on Jacobs 1999a: 24).

Organizations have material assets (machines, buildings, raw materials and

resources) and intangible assets (knowledge and skills) that are used in primary

processes. This results in products and services of a certain quality, i.e. added



24/26

value. Customers compare the products and services with those of the competi-

tors, and are either satisfied or dissatisfied, which has a direct impact on the

result (in terms of profit or market share). The outcome of this and/or other fac-tors triggers new ideas for improvements. Those improvements may involve

simple operational modifications, which may or may not have a strategic com-

ponent (O/S in Figure 1.1). But a more fundamental new strategic vision may

evolve (S/V in the figure) with regard to radically improving the product or

service for the customer, and may require new material and immaterial assets.

That brings us to another principle. In contrast to many other people, I believe

that strategy is not developed at the beginning of a process, but is always based on

experience. Many other books present a sequence other than the one shown in

Figure 1.1, beginning with missionvisionstrategy on the left. In my view, how-ever, visions relating to strategy and mission evolve duringthe process (halfway,

as it were), not at the beginning. People who set up a new organization do so on

the basis of past experience, as in Figure 1.1, but in a different place.

Provisional conclusions

A couple of matters may have become clear with these opening remarks:

Strategy is about important decisions or a profile that develops from a seriesof smaller actions that initially seem less important.

Strategy should be about learning processes: learning about the strengths

and weaknesses of an organization (does it really create added value?), and

building on these.


competencesresources processes

processes

customersatisfaction

positionson

markets

financial

resultsO/S S/V O/S S/V

qual.

qual.

qual.

customerspartnersinput

single-loop learning

double-loop learning

learning processes

output

primary

processes

translation of S/V into

products & services

O/S =operational/strategicS/V =strategy/vision

processes

Figure 1.1 Strategy in relation to an organizations primary processes.


25/26

But our search has only started. Lets return to the question that has been asked

several times and has to be central to an introductory book such as this: just how

important is strategy?

1.3 How important is strategy?

We can approach this question from various perspectives, and I will discuss five

of them. The first is purely economic: how will strategy benefit the organization?

The second perspective relates to timing: taking timely action gives an organiza-

tion more room to manoeuvre. The third perspective is identity, or driving

force. The fourth perspective is commitment and consistency. Finally, in the

fifth perspective, I introduce an important concept: contingency.

What does strategy yield?

For many people, the economic perspective is the most obvious one. What ben-

efits does strategic management bring? Does it lead to improved performance?

Does it create added value for its environment and/or for the organization itself

(Kay 1993: 192218)? This question has been the subject of a great deal of

research. The general answer is: yes, to a certain extent. On average, companies

that employ strategic management techniques are slightly more profitable. This

is easiest to assess in small companies because they do not all focus on strategy to

the same extent (Robinson and Pearce 1984). But we do not know for surewhether the improved results are due to strategy. Perhaps companies that place

greater importance on strategy also manage their other processes more carefully.

Some small companies undergo a learning process whereby they gradually profes-

sionalize their management style. This begins with financial planning. Based on

their experience, these companies increasingly analyse their markets in terms of

growth potential for different scenarios. Over time, this integrated strategic man-

agement gradually takes account of more aspects (Waalewijn and Segaar 1993).

Large companies all employ strategic management techniques to some extent.

We can only assess the result of this by looking at the quality of those manage-ment techniques. As we have seen above, certain strategies in the past have

resulted in enormous value destruction. But we shouldnt throw out our beautiful

baby with the bathwater, so lets keep to the traditional circular argument: good

strategic management leads to better results! The question then remains: how do

we achievegood strategic management?

Timing and room to manoeuvre

If we consider strategy from a management perspective, an important function ofgood strategic management is that it encourages organizations to start thinking at

an earlier stage about strategic issues, choices, and their consequences. Research by

the German consultancy organization Roland Berger has shown that many

companies do not carry out necessary restructuring until a relatively late stage.2 In



26/26

57 per cent of cases, restructuring is not carried out until there is a problem with

profits, and 23 per cent of companies even wait until they are faced with liquidity

problems. Only 20 per cent of the companies studied identified and analysed

strategic issues at an early stage. By anticipating issues early on, an organization has

more room for thinking about different possible scenarios and related decisions.

Identity, meaning, adventure

A third perspective from which we can assess the importance of strategy relates

to identity, driving force and sense-making. This brings us closer to the more

cognitive or socio-psychological approaches to strategy-making. Strategy is often

related to what drives people individually and collectively, to identities, and to

how they interpret the world. We are continually interpreting the world in

which we live, and our place within it. Strategy should set out a general course; aperspective for the longer term. This helps us to structure information. In this

sense, strategy serves as a sort of compass, a tool for sense-making in the longer

term. We notice this especially when someone a new senior manager tries to

alter the identity of an organization in a way that is unpopular. An identity can

be very powerful, even in a negative sense. In such situations it is difficult to deny

that strategy is important.

As I have mentioned, strategy is often associated with important. People like

to be involved in important things. Strategic sense-making facilitates this. Were

not just muddling on; no, were doing important things! A directional strategicconcept must therefore have something appealing or exciting. Russell Ackoff illus-

trates this in the following story.


Transistors

Russell Ackoff has long been an inspiring business author. He clarifies

management issues using short fables. One of his fables is about a small

company that made woodworking tools. The company had three owners,who were also involved in other activities. They didnt need to devote

much time or energy to the company, because it was doing well, albeit in a

stagnating market that was not very challenging or exciting. They hired a

consultant to look into potential markets for diversification. The consul-

tant came up with the usual suggestions, such as tools for plumbers and

other tradesmen. The owners were not very enthusiastic, and asked the

consultant to look into better, more challenging opportunities. The con-

sultants next idea was tools for aircraft maintenance. Thats better, the

owners said, but carry on looking. The consultant gradually ran out of

ideas. One day he heard something on the radio about the importance of

transistors, which were just being developed at the time. He suggested to

Documents

Mapping Strategic Diversity