Strategy Process: Volume 22

Enduring scholarly interest in the process of strategy-making stems from an abiding assumption that some ways of strategizing are more efficacious than others, and thus lead to higher firm performance in the long run; higher than luck alone would bring. Expressions of interest in and endorsements of the strategy process are abundant in the academic literature. As Pettigrew (1992) points out, Hofer and Schendel's pioneering definition of strategic management is processual in character emphasizing the development and utilization of strategy. Rumelt, Schendel, and Teece (1994) list the policy process question – how does policy process matter? – as a fundamental question of the strategic management field. Porter (1996) expresses preoccupation with the leadership and organizational challenges of managing the process. And, Hamel (1988) exhorts the field to devote as much attention to the conduct of strategy, i.e., the task of strategy making, as they have to its content. For senior managers and leaders, the question of how to make effective strategies stands usually at the top of their agenda. Not surprisingly then, the quest to uncover stable principles of good strategy making has attracted much support and interest over the years.

This paper challenges the dominantly pessimistic view of emotion held by many strategy scholars and elaborates on the various ways in which emotion can help organizations achieve renewal and growth. I discuss how appropriate emotion management can increase the ability of organizations to realize continuous or radical change to exploit the shifting conditions of their environments. This ability is rooted in developing emotion-based dynamic capabilities that facilitate organizational innovation and change. These emotion-based dynamic capabilities express or arouse distinct emotional states such as authenticity, sympathy, hope, fun, and attachment to achieve specific organizational goals important to strategic renewal, such as receptivity to change, the sharing of knowledge, collective action, creativity, and retention of key personnel.

Macro- and microorganizational perspectives on strategy processes are typically treated as distinct lines of inquiry. This paper proposes an attention-based theory (March & Olsen, 1976; Ocasio, 1997) of strategy formulation processes to bridge both perspectives. In particular, it links evolutionary perspectives on strategy (Burgelman, 1991, 2002) and strategic choice (Child, 1972) perspectives on organizational and strategic decision making (Bower, 1970; Carter, 1971; Cyert & March, 1963; Frederickson, 1986). Our treatment of the strategy process extends theory by viewing strategy processes as assemblages of tightly and loosely coupled networks of operational and governance channels (Allison & Zelikow, 1999; Ocasio, 1997), strategy formulation as a fluid and distributed process, and environmental, organizational level and individual level forces as consequential. Like Lovas and Ghoshal (2000), we view strategy formulation as a process of guided evolution. Unlike Lovas and Ghoshal who view strategic intent as the objective function that guides evolution, we view strategy formulation processes as more fragmented and contested, with multiple foci of attention, rather than an explicit objective function, and both top-down and bottoms-up processes capable of generating changes in the strategic direction of the firm.

In our framework, we examine the influence of both reactive and proactive cognitive variables on strategic change. Reactive sources that impact strategic change are perceptions and attributions – cognitions that determine the “what” and the “why” of performance. Perceptions are first-order cognitions that assess what is the performance feedback: positive or negative? After performance feedback is perceived, attributions are second-order cognitions that attempt to establish why the performance is positive or negative.

This paper examines the emergent and deliberate views in strategy making through, what we develop as, a sequence of thinking and acting. Combining the features of thinking and acting may enhance the organization's ability to achieve change, an ability that remains untapped unless it is accompanied by a change in mental models. Both action thinking emergent issues as well as thinking–acting deliberate issues may constitute triggering events, when contrasted with a previously agreed frame of reference. We develop a framework to show how thinking co-evolves with action in a succession of strategic activities, and within an agreed upon frame of reference. Our aim is to shed light on the circumstances under which deliberate or emergent modes take place throughout the strategy-making process. We claim that changes in strategic activities are determined by attention-triggering events, driven by both thinking and acting.

Researchers have traditionally investigated aspects of the interorganizational monitoring process in piecemeal fashion. This conceptual piece argues that juxtaposing the categorization process with interorganizational emulation, imitation, and competition, brings focus to organizations’ attempts to acquire information from other organizations, signal internal and external constituencies, and ultimately change. We argue that the depth or intensity with which the monitoring process is pursued as well as the breadth or degree of overlap in the sets of organizations chosen to monitor, determines the volume and diversity of information acquired, the strength of the signal sent to constituent groups, and the amount and type of change likely to emerge from the process. All of these factors will ultimately affect the firm's future performance.

Various authors have brought forth the idea that the increase in context turbulence and the relentless change in today's economic and competitive environments have rendered it essential for an effective firm strategy to combine both value appropriation and value creation (Porter, 1996; Moran & Ghoshal, 1999; Venkataraman & Sarasvathy, 2001; Hitt, Ireland, Camp, & Sexton, 2001b). Nonetheless, the methodological bases and the assumptions that characterize contributions concerning value appropriation and value creation are notably different and in many respects opposite to one another. These profound methodological differences hinder the possibility of a combined consideration of value appropriation and value creation issues within a coherent interpretative framework. By reinterpreting more conventional strategy studies in the light of the Austrian process view, this article builds a process framework which is able to consider and render mutually compatible both value appropriation and value creation within the unitary process of firm development. In addition, the use of the Austrian approach as an interpretative lens enables an evolution and extension of the resource-based theory that consents it, not only to grasp the mechanisms behind value appropriation, but also to suggest new ways of viewing post-industrial firm behavior that help to interpret its dynamic and proactive role in the value creation process.

Strategic management theory has failed to explain the underlying principles of strategy processes and the relationships between strategy process and strategy content. There seems to be no theory of strategy logic, i. e. the general process and management characteristics generating a certain strategy outcome. Strategy content research has presented a systematic analysis on the basis of competitive advantage, and strategy process research has provided careful in-depth descriptions and examinations of strategy making. However, the basic strategy logic, including the underlying procedures, activities and reasoning that generate a particular type of strategy, has been less commonly evaluated. In particular, principles and details of strategy making in complex situations seem less clear.

Research on multinational corporations (MNCs) shows that they have tried various structural solutions to solve the dilemma of trying to “balance” global control and efficiency with local country-specific sensitivity, autonomy, and innovation, with the Transnational form preferred. Failings of the strategy-structure sequence lend credence to the emerging strategy-process perspective. To date, the best lesson for MNC strategy-process concerns pertaining to the global vs. country dilemma comes from March's classic paper on “balancing” exploitation vs. exploration. 21st century MNCs exist in a more rapidly changing world, however, where static “balance” solutions may be insufficient. The tradition of “circular organizing” is one alternative to the failing “balance” solution; it offers a dynamic strategy-process approach to MNC management. Another is Dupuy's concept of “tangled hierarchies” where top-down and bottom-up influence forces are interwoven such that global exploitation or country-specific exploration dominates in timely fashion. It calls for clearly defined control and autonomy regimes, with space given for emergent rules governing the rotation rate. Key questions are: What is the optimal rate at which they should rotate supremacy, and how to get this to happen and persist? Since normal quantitative methods can’t track complex, nonlinear, emergent phenomena, an in-depth longitudinal case analysis was conducted of a global MNC in the cosmetics industry, as it progressed through its early years of formation. Our case covers twelve years, during which the MNC goes through several kinds of tangled hierarchies. The dynamics in our case are rich enough to illustrate many aspects of the “tangled hierarchy” approach, while also offering new clues about oscillation rates. A number of implications for managers are discussed. Principal among these is the “edge of chaos” idea, in which managers have to avoid too-fast or too-slow oscillation rates. Very fast rates can degenerate into chaos and then collapse into the exploitation or exploration “traps.” Firms also fall into the traps simply because managers don’t understand or can’t tolerate the idea of oscillation dynamics.

Individual interactions between partners are recognized today as playing a central role in the evolution of cooperative interorganizational relationships. Most theoretical treatments of interactions have been made at a macro-level, with reference to constructs such as trust, outcome expectations, process and outcome discrepancies, and communication. Relationships are analyzed at the level of organizations seen as collective actors, and their international aspects are reduced to the comparative analysis of macro-level dimensions of culture. In the past two decades, research in social science has progressively revealed the complex and multiple natures of culture and identity in organizations. Surprisingly, the monolithic vision of organizational and national cultures is still dominant in the strategy field and has tended to use organization-wide or nationwide classifications (one organization – one culture/one country – one culture) and seeing top managers as the most reliable source of information on the topic. The paper suggests substantial modifications in our approach to culture and argues that the mapping and codifying of different management styles and cultural dimensions may not be enough to understand the dynamics of international business encounters. The main issue is not the existence of differences per se, but rather the way behavioral differences are perceived and interpreted by members of other managerial/organizational/national cultures, and particularly how the interactions – the “contact” across these cultures – are socially constructed and managed. We propose a research agenda putting perceptions and communication processes at center stage and introduce the concepts of Communication and Cultural Dissonance – rooted in the field of cross-cultural management and intercultural communication – as an important factor in the development of cooperative processes. Perceptions of cultural differences and problematic behaviors are grounded in the different cultural interpretations of a proper way to communicate intent, relations and business strategies to be implemented. These respective and often divergent interpretations will be fundamental in the way individuals assess the quality of the cooperation process, the reliability of their partners and of the knowledge they want to transfer and the trustworthiness of the partner. We use data from a longitudinal study of several post-merger integration processes to illustrate some of our theoretical conjectures.

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.

We analyze the role of top managers in the process of improving existing products in large established firms. The results of an inductive study reveal two key arguments. First, we find that the process is an “involved” top-down approach, rather than middle-up-down or bottom-up, discussed in previous studies on new product creation. Top managers actively participate throughout the process, taking on four roles: evaluation of product market performance, selection of products for improvement, initiation of the innovation process through delegation to middle managers of the responsibility to organize bottom-level employees to take actions toward product improvement, and monitoring of progress to ensure improvement (ESIM). Top managers become involved as necessary to reduce the resistance of people at the middle and lower levels to change in current routines. Second, we find that in companies that achieve superior product improvement, managers have well-developed professional absorptive capacity and have routinized frequent interactions to evaluate, select, initiate, and monitor. Other characteristics of managers, such as personal absorptive capacity, incentive system, or mandate from above, are common across both high and low performers.

The field of strategy has long been preoccupied with explaining, and attempting to predict organizational performance. Indeed, the quest to understand how to gain and hold an advantage over competitors is the primary way in which strategy distinguishes itself from other organizational sciences (Meyer, 1991). Strategic choices are made in anticipation of, or in response to, that competitive context and the performance implications that result, are of central interest to strategy researchers.

Using an Internet-based business simulation, we examine emergent strategy processes and their consequences in a competitive environment. We find that the emergent decision processes of management teams vary in the extent to which they entail forward looking, anticipatory thinking and experimentation, and the attention the teams pay to their organizations’ capabilities. In dynamic and uncertain environments, information search activities and decision processes are key determinants of organizational performance. Our results suggest that effective emergent decision processes necessarily include elements of deliberate strategy.

The lack of systematic methods for reducing the complex reality has hampered many of the contributions that processual research might have produced. This paper presents a methodology for processual strategy research that offers a systematic approach for causal explanation across complex sequences of events and enables theorization about underlying causal mechanisms driving the processes. In addition, a comparative analysis of two organizational decline and turnaround processes is presented in order to illuminate how the methodology is able to generate a substantial advancement in knowledge by indicating the causal mechanisms underlying the decline and turnaround processes. The findings show that the turnaround is produced by four causal mechanisms that cumulatively and interdependently work against the mechanism of decline.

This article reflects on the lack of focus on history characterizing the strategic management field. Reasons and consequences of such a peculiar situation need to be pointed out in order to develop a better history-grounded research approach inside the field.

In terms of (the missing) history of thought, a fear of history seems to characterize the field, for a more aware historical understanding of strategic management and practices is likely to question not only notions and concepts, but the very perception of the field as a practically oriented discipline. A lack of historical reflection is usually preferred, wherein strategic management seems to come out of the blue, ignoring its inner evolution over time, and the relationships with previous bodies of knowledge in the business realm, such as for instance administrative sciences and accounting.

In terms of the history of practice the situation is – if possible – even worse, with an obscure understanding of contexts and features of managerial practices in the past. Archival research is called for here, drawing on two research projects on pre-industrial revolution context (the Spanish Royal Tobacco Factory in the XVIII century, and the Venice Arsenal in the turn of the XVI century), in order to examine how prior management practices can influence and inform our present understanding of the discipline of strategic management. A less simplistic view of managing practices in the past emerges, which challenges the commonly held cycle of innovation and discontinuity perpetually alleged in the strategic management field to legitimize its own existence as a research area.

While strategic management tools show a potential contribution to historical understanding in this archival research, a more historically aware understanding of the evolution of the field is thus intended as a way to falsify strategic management theory.

This paper explores the contradictory pressures for standardisation and customisation in reorganisation processes. Taking a ‘practice lens’ (Orlikowski, 2000), it examines eight on-going reorganisations, from both private and non-private sectors, using photography, observation and extensive interviews. This practice lens goes both outside and inside the processes of reorganising. Outside these processes, it highlights the pervasive influence of standard, even banalised practices, from those embedded in the technologies of Microsoft to the frameworks of McKinsey & Co. Inside these processes, it emphasises the detailed improvisation around these standard practices, with customising the norm. The paper concludes by arguing for the effectiveness of the practice lens in negotiating the contradictory pressures between standardisation and customisation, and by offering provisional implications for the teaching of organisation design in business schools.