Strategy-Making as a Complex, Double-Loop Process of Knowledge Creation: Four Cases of Established Banks Reinventing the Industry by Means of the Internet

Abstract

We blend knowledge creation and complexity perspectives in a model of strategy-making that explains how top managers in organizations that are reinventing their industries in high-velocity environments conceptualize the strategy-formation process. The model is grounded in four in-depth case studies of Internet banks that are part of different established financial groups in Spain. The main findings suggest that strategy-making seems to emerge out of the interplay of the following interrelated constructs: action, reflection-on-action, imagination, and simple guiding principles. The study of such constructs from the perspectives of knowledge creation and complexity theory suggests interesting implications. Action and reflection-on-action seem to form a first SECI (Socialization–Externalization–Combination–Internalization) spiral of knowledge creation. Out of the interaction of action and reflection-on-action, imagination may emerge when the system has reached a “critical state”. Imagination forms a second SECI spiral of knowledge creation. The interaction between imagination and action on a higher level results from the emergence and application of simple guiding principles, which provide the organization with coherence between what is imagined and what is done, and guide the actions taken throughout the organization with flexible planning. We conclude by proposing that strategy-making may be understood as a complex, double-loop process of knowledge creation.

Citation

Salmador, M.P. and Bueno, E. (2005), "Strategy-Making as a Complex, Double-Loop Process of Knowledge Creation: Four Cases of Established Banks Reinventing the Industry by Means of the Internet", Szulanski, G., Porac, J. and Doz, Y. (Ed.) Strategy Process (Advances in Strategic Management, Vol. 22), Emerald Group Publishing Limited, Leeds, pp. 267-318. https://doi.org/10.1016/S0742-3322(05)22010-7