Strategic view of performance
Strategic view of performance

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Strategic view of performance

4 Strategy as rational planning

4.1 Emergent strategy

In many organisations, strategic choices are made through a strategic planning process. A typical strategic planning process that draws on both markets and resource-based perspectives is sketched out in Figure 6.

Figure 6
Figure 6 A strategic planning process

This strategic planning process may be the preserve of a top team or a specialist strategic planning department. In smaller organisations the whole process may go on in the mind of one individual. In some organisations managers throughout the organisation will be involved in the strategic planning cycle.

While not denying that formal analysis and planning has a role, some writers on strategy have emphasised another view of strategy processes.

A number of writers on strategy (most notably Henry Mintzberg) have argued that the strategy process is often less ordered and planned than assumed above (Mintzberg, 1994). Mintzberg argued that strategy often emerges as a cumulative pattern of actions that is only retrospectively rationalised and organised as a plan. Especially where organisations face a turbulent, fast-changing environment, they may need to respond to events and information more quickly than a formal strategic planning cycle allows.

Burgelman (1994) carried out an in-depth case study of Intel's withdrawal from the memory chip (DRAM) market. His findings emphasised that this became a strategic plan only in retrospect. The decision to withdraw came about as an aggregation of many smaller decisions by managers as they moved resources away from this product group in response to market conditions. Burgelman emphasised the role of middle managers in making these decisions:

While Intel is widely regarded as one of the most innovative and adroitly managed high-technology firms, the DRAM exit story suggests that even extraordinarily capable and technically sophisticated top managers, such as Gordon Moore and Andy Grove, do not always have the foresight of the mythical Olympian CEO making strategy. Rational justification, emotional attachment, and bounded rationality, mixed with valid concerns about protecting a core technology of the firm, made it very difficult for Intel's top management to exit from DRAMs. At the same time, actions by some middle-level managers responding to external and internal selection pressures had already begun to dissolve the strategic context of DRAMs and undermine the reality of Intel, the memory company. Incremental shifts in the allocation of scarce manufacturing resources from DRAMs to microprocessors and technological trade-offs favouring microprocessors over DRAMs happened before the official corporate strategy was restated. The study of strategic business exit thus confirms that strategic actions often diverge from statements of strategy, that resource allocation and official strategy are not necessarily tightly linked, and that strategic actions of complex firms involve multiple levels of management simultaneously.

(Burgelman, 1994, pp. 48–9)

An important point here is that emergent strategy should not be equated with lack of management. It may reflect organisational systems and routines that enable the organisation to respond quickly and flexibly to threats and opportunities. Planned and emergent strategy may also co-exist, as illustrated in Figure 7. Emergent strategy and intended strategy both affect the organisational resource allocation process. The pattern of actions that emerges is the actual strategy of the organisation.

Figure 7
Figure 7 Processes of strategy formulation and implementation (Source: based on Christensen and Dann, 1999)

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