Slide 1
STRATEGIC MANAGEMENT
Lesson 2
Approaches to strategy development
Welcome to lesson 2 of your module, Strategic management. In this lesson, we will be
looking at approaches to strategy development.
Slide 2
Lesson 2 Contents
SECTION 1 Planned strategy
SECTION 2 Emergent strategy
SECTION 3 Incremental strategy
SECTION 4 Three key strategic planning perspectives
SECTION 5 Mintzberg and Lampel’s Ten Schools of Strategy formulation
Specifically, we will be looking at planned strategy, emergent strategy, incremental strategy
and the three key strategic planning perspectives before finally considering Mintzberg and
Lampel’s Ten Schools of Strategy formulation.
Slide 3
Introduction
Some reality about strategic planning:
• Strategy is important and scary – you have to confront the future.
• Choosing a strategy requires making a choice – what if you get it wrong?
• Executives find it less daunting if there are tools which can assist – helps
to justify decisions made.
• How frequently and when should strategy be planned?
• How far ahead?
• In a changing environment, can strategy be planned?
Lesson 2 considers the types of strategic plans and approaches to strategy
development an organisation might take
Firstly, some reality about strategic planning. Planning strategy is important because it’s
about the future of the organisation. Equally, it is very scary because you have to confront
the future and confronting the unknown and trying to anticipate what’s likely to happen is
scary because it’s important for the organisation and it requires you to make a choice. What
if you make the wrong choice? Executives tend to find it less daunting, however, if there are
tools which can help some to justify the decisions that are being made, it is not just all being
based on gut instinct for example. But how frequently and when should strategy be
planned? How far ahead should one look especially in today’s ever-changing environment?
Can strategy even be planned? In lesson two, we consider the types of strategic plans and
approaches to strategy development an organisation might take.
Slide 4
Planned strategy
• Top down deliberate approach to
planning
• Frequently detailing 5-10 years
(more stable environment)
• Senior executives decide future
and objectives
• Also known as ‘deliberate
planning’, ‘rational approach’ and
‘intended strategy’
Planned strategy is a top-down deliberate approach to planning. Frequently, it is looking 5 to
10 years ahead, especially within a more stable environment. Here, senior executives decide
the future direction and set objectives for each function and different layers within the
organisation, which if achieved should help the organisation achieve its overall aim. You
might also hear of this as being called ‘deliberate planning’, the ‘rational approach’ to
planning and strategy or ‘intended strategy’.
Slide 5
Emergent strategy
Strategy emerges through actions and behaviour over time.
Mintzberg – emergent strategies are not necessarily bad and deliberate ones
are good, they frequently need to pursue an umbrella strategy – broad outlines
of strategy and the details emerge within them.
Emergent strategies are where strategy emerges through actions and behaviours over time.
Mintzberg suggests that it’s not a case that emergent strategies are bad and deliberate ones
are good, but frequently organisations need to have an umbrella strategy that gives an
outline as to what they want to achieve and then the details emerge. Some of this could be
planned and some of which can be emergent strategy, it develops as the environment
changes and the organisation takes advantage of those changes.
Slide 6
Incremental strategy
Here analysis, choice and implementation are undertaken together in an
iterative process.
Quinn’s Incremental Model – strategy emerges through a step-by-step
series of incremental decisions rather than formal determination.
Managers have a view of future position and move towards it incrementally.
Incremental strategy is where organisations undertake an analysis, make a choice and
implement that choice, but it’s in an iterative process so these choices and evaluations are
undertaken on a regular basis. In Quinn’s Incremental Model, strategy emerges through a
step-by-step series of incremental decisions rather than through formal determination so it
could be a case of each month the organisation looking at the environment and thinking
about their next game plan. Managers have an overall view of the future position that they
want to achieve and move towards it incrementally. That element is similar to Mintzberg’s
umbrella position which we’ve just mentioned.
Slide 7
Three key strategic planning perspectives
1. Resource-based view of strategy – what do we do well?
2. Dynamic capabilities – can we stay one step ahead of everyone else?
3. Market-based view – what does the market want / need?
There are three key strategic planning perspectives.
The first one is the resource-based view of strategy - what we do well.
The second is dynamic capabilities - can we keep reinventing ourselves to stay one step
ahead of everybody else?
And the final perspective is that of the market-based view - what does the market want or
need?
And the perspective of the organisation will depend on the approach to strategy which they
take. The resource-based view is where they will look at what they can do well based upon
the resources that they have. Dynamic capabilities is where they will look to stay one step
ahead and reinvent themselves, innovate ‒ research and development are probably key
activities which the organisation is good at. And the market-based view is where they are
continuously assessing the market and what the market wants and needs (whether they
actually know that they want or need these items if you look at organisations such as Apple)
and then seek to determine their strategy based upon those answers.
Slide 8
Resource-based view
Organisations determine strategy based upon resources they have –
competencies and capabilities.
Competitive advantage gained from having resources which competitors do not
have.
VRIN – the extent to which competitive advantage is sustainable.
So the resource-based view is where organisations determine strategy based upon the
resources that they have and their competencies and their capabilities. Organisations
undertaking a resource-based view to strategy will seek to determine the competitive
advantage from the resources that they have, those competencies and capabilities which
competitors do not have and a model can be used to determine which resources and
capabilities give that organisation a sustainable competitive advantage. Here the pneumonic
VRIN is used. Are the capabilities and resources valuable? Are they rare? Are they difficult to
imitate? And are they non-substitutable? We will look at VRIN in more detail in a later
lesson.
Slide 9
Dynamic capabilities
• Rapid technological
change, changing
customer needs –
organisations need to
continue to develop their
resources and
competencies to stay
ahead of the competition.
• Competitive advantage =
rapid change based
upon capabilities which
are more difficult to
replicate than resources
and the ability to change.
Dynamic capabilities usually relate to technological organisations and where, through rapid
technological change and changing customer needs, organisations seek to develop their
resources and competencies to stay ahead of the competition. This requires organisations
to be learning organisations, to be creators of knowledge, to listen to customers and to
leverage their capabilities and resources to integrate their knowledge to gain dynamic
capability. Competitive advantage equals rapid change based upon capabilities which are
more difficult to replicate than physical resources which also gives the organisations an
ability to change.
Slide 10
Market-based view
• The assumption that organisations are homogenous.
• Distinction is through branding and market positioning of those competing.
• How to compete is a strategic consideration rather than whether the organisation
can compete which is the resource-based view.
The market-based view assumes that organisations are by and large homogenous. They are
distinct only through branding and the market positioning of those competing. How to
compete is the strategic consideration rather than whether the organisation can compete
which is more the resource-based view. So the organisation needs to decide how they want
to compete based upon quality and price, these being the usual two key factors, positioning
themselves and then competing against competitors.
Slide 11
Ten Schools of Strategy formulation
The ten schools look at the
same process every which
way.
Don’t adopt purely deliberate or
emergent strategies.
But Mintzberg and Lampel developed Ten Schools of Strategy formulation and from these
ten schools they look at the same process every which way that strategists can when
developing strategy. It is not a case of purely adopting deliberate or emergent strategies, it’s
about looking at strategy from every perspective.
Slide 12
Ten Schools of Strategy formulation
School Approach
Design school Match sought between organisation and its external environment
Planning school Strategy formulation is machine-like and a process of steps from
analysis of situation to implementation of strategy
Positioning school Analytical – consider the organisation in context and looks at how
its position can be improved
Entrepreneurial school Visionary approach to strategy, strategy based upon intuition,
judgement, wisdom, experience and insight
Cognitive school Strategy emerges as concepts, maps and frames of reality
usually from one individual
Learning school Strategy is emergent – pay attention to what works and doesn’t
work over time and organisation adapts or learns
Power school Strategy is a process of negotiation between organisation and its
stakeholders
Cultural school Strategy is collective and seeks to involve various stakeholders
within the company
Environmental school Strategy is reactive and a response to challenges imposed by the
external environment
Configuration school Strategy is a process of transforming the organisation from one
type of decision-making structure into another
The design school considers the match sought between the organisation and its external
environment. The organisation here considers whether it has the resources and capability
available to develop what is required for the external environment.
The planning school considers strategy formulation as being like a machine and it’s a process of
steps from analysis of situation to implementation of strategy.
The positioning school is more analytical and considers the organisation context and looks at
how its position can be improved, taking more of a market-based view.
The entrepreneurial school is the visionary approach to strategy. Strategies are based more
upon intuition, judgement, wisdom, experience and insight.
The cognitive school suggest that strategy emerges as concept maps and frames of reality,
usually from one individual who decides from their knowledge and their experience what the
strategy should be.
The learning school considers strategy as being emergent. Strategists pay attention to what has
worked and hasn’t worked over a period of time and the organisation adapts and learns from
this.
The power school considers strategy as a process of negotiation between the organisation and
its stakeholders. Negotiation between the owners of the organisation and staff and the unions
for example with regards to what is achievable and what they’re prepared to enable or give.
The cultural school considers that strategies are collective and actually needs to involve those
stakeholders within the company, possibly more likely to take a bottom-up approach to
planning.
The environmental school considers that strategies are reactive and a response to challenges
imposed by the external environment. Here strategy is unlikely to be developed in advance over
the longer term, only over the short term, whilst the configuration school considers that
strategy is a process of transformation. The organisation currently looks like one thing and
strategic managers intend to change it from that into something else. Strategy is the process of
transformation.
Slide 13
THANK YOU
Thank you for listening. You will find more information and links to further reading within
the classroom notes. Do read these and undertake the wider reading as it will assist you with
your understanding of the strategic planning process.
I look forward to seeing you again in lesson 3.
