AN EMPIRICAL ANALYSIS OF STRATEGIC
ISSUE MANAGEMENT PERFORMANCE
Strategizing in the Global Economy
The 2nd Annual Copenhagen Conference on Strategic Management
Markus Kajanto, Nokia Corporation
Matti Keijola, Helsinki University of Technology
Peter Kunnas, Nokia Corporation
Tomi Laamanen, Helsinki University of Technology
Markku Maula, Helsinki University of Technology
Strategic issue management performance
Introduction and motivation
Methodology and approach
Empirical analysis
Discussion and conclusions
FAILING TO ANTICIPATE AND RESPOND TO EMERGING
STRATEGIC ISSUES CAN BE DETRIMENTAL TO A COMPANY…
[Compaq] won its spurs (---) as
an IBM-killer, but then its sales
fell after it failed to react quickly
to a (---) changing market
Pope et al., 1993
AT&T (---) understood that the
convergence of telecommunications
and computing would transform (---)
much of business life. (---) But the
company failed to see (---) that the
internet was the specific vehicle through
which the vision would be realized
Financial Times, 1999
…WHEREAS A CORRECT INTERPRETATION AND
RESPONSE CAN PROVIDE MARKED RESULTS
What we thought would be a complete threat, a destroyer of
value, resulted in being a value creator. You should never come
to conclusions about competition, partnerships, [or] alliances
before really looking into them. When this issue came up we
thought we knew what it was all about. As people monitored its
progress and researched additional issues surrounding it, we
began to see other aspects that led to our implementation
strategy and in the long-term served us well.
VP, Regulatory Issues, BellSouth Corporation
in CSB, 1999
THE PRESENT UNDERSTANDING OF THE TOPIC IS LIMITED
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Research on issue management has addressed multiple viewpoints
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Organisational decision-making and information processing (e.g. Cohen et al., 1972;
Cyert and March, 1963/1992; March and Simon, 1958/1993; Eisenhardt, 1989, 1990;
Eisenhardt et al., 1992; Miller et al., 1999; Nutt, 1993; Rajagopalan, Rasheed and Datta,
1993; Schweiger et al., 1986)
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Strategic issue management and interpretation (e.g., Ansoff, 1980; Bansal, 2003; Barr et
al., 2004; Dutton, 1986, 1993; Dutton et al., 1993; Dutton et al., 2002; Dutton et al., 2001;
Dutton et al., 1987a; Dutton et al., 1983; Dutton et al., 1987b; Dutton et al., 1987c; Dutton
et al., 1989; Dutton et al., 1988; Schneider et al., 1991; Thomas et al., 1990)
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Organisational attention allocation (Ocasio, 1997)
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However, there has been scarcity of empirical research on strategic
issue management practices and performance, due to the lack of
sufficient quality company-internal issue management data available.
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This paper contributes to this emerging research area by
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Examining the effects of different issue characteristics on issue processing
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Examining the effects of different issue processing means to performance
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Examining the joint effects of issue characteristics and processing approaches
Strategic issue management performance
Introduction and motivation
Methodology and approach
Empirical analysis
Discussion and conclusions
METHODOLOGY AND APPROACH
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We examined all the 92 corporate level strategic issues of a world-leading
technology company over a three-year period.
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We defined strategic issues on the basis of the company’s own sensemaking.
Thus, we included all the strategic issues that were named as such and dealt with
by the corporate strategy board of the company.
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Our analysis covered
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How the issue was interpreted at first and how this interpretation changed over time
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Which persons participated in the process and what was done to process the issue
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How the issue progressed in the decision-making and attention allocation system of the company
In addition, the analyses produced a coding of each issue with
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A number of descriptive statistics on issue and issue processing characteristics
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An analysis of the networked decision-making structures for processing the issues
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A quantitative analysis of the results of individual decisions made
To externally validate our analyses, we interviewed representatives of other firms
as benchmarks and studied the secondary material that is publicly available on
the strategic planning practices of Hewlett-Packard, Shell, and IBM
THE WHOLE PROCESS RELIES ON THE WIDERANGING PARTICIPATION OF THE ORGANISATION
• Much of the activity
focuses around a few
key individuals
• Both members and
visiting (internal) experts
have played a significant
role
Strategic issue management performance
Introduction and motivation
Methodology and approach
Empirical analysis
Discussion and conclusions
HYPOTHESES FOR THE EMPIRICAL ANALYSIS
Hypothesis 1
The higher the perceived value at stake of a strategic issue the more likely it is to
(a) receive higher total resource investment in managing the strategic issue
(b) be resourced with a team possessing higher organizational power
(c) leverage the knowledge of visiting experts
(d) be coordinated by the most central people
(e) lead a significant decision impact.
HYPOTHESES FOR THE EMPIRICAL ANALYSIS
Hypothesis 2
The higher the perceived uncertainty of a strategic issue the more likely it is to
(a) receive lower total resource investment in managing the strategic issue
(b) be resourced with a team possessing lower organizational power
(c) leverage the knowledge of visiting experts
(d) be coordinated by the most central people
(e) be negatively related to decision quality.
HYPOTHESES FOR THE EMPIRICAL ANALYSIS
Hypothesis 3
Hypothesis 3
The higher the
The higher the
(a) total resources
(e) total resources
(b) combined task force power
(f) combined task force power
(c) proportion of visitors
(g) proportion of visitors
(d) network centrality
(h) network centrality
the greater the decision impact.
the greater the decision quality.
Total resources
invested
Value at stake
Uncertainty
Combined task
force power
Proportion of
visitors
Network centrality
Decision
impact
Decision
quality
0.36***
R2=0.09
Total resources
invested
0.24**
R2=0.27
0.31***
0.09
Value at stake
-0.15
-0.10
Combined task
force power
R2=0.02
0.01
-0.02
Uncertainty
0.07
R2=0.01
0.08
-0.15
-0.10
R2=0.20
Proportion of
visitors
-0.16*
Decision
quality
0.06
-0.04
R2=0.01
Network centrality
-0.35***
Decision
impact
0.04
0.14
Strategic issue management performance
Introduction and motivation
Methodology and approach
Empirical analysis
Discussion and conclusions
DISCUSSION AND CONCLUSIONS
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This paper represents one of the first longitudinal, in-depth analyses of
strategic issue management processes based on unique data. Even though
Dutton and Duncan (1987a) called for empirical research on strategic issue
management processes already nearly 20 years ago, empirical evidence has
remained scarce due to the lack of data.
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While earlier research has emphasized the effect of categorizing an issue into
a opportunity or a threat, our analysis shows that in particular the perceived
value at stake and the perceived uncertainty play significant roles in
determining the quality and impact of decisions regarding strategic issues.
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Contrary to what one would have expected based on literature, the different
issue characteristics seem to have quite little explanatory power with regard
to the different issue management process characteristics.
DISCUSSION AND CONCLUSIONS
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Some of the most significant relationships would seem to be between the
perceived value at stake, resources invested in managing the issue, and
issue impact.
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Resource investment alone is a rather blunt instrument in managing a
strategic issue. Large amounts of resources invested may ensure high
impact already due to its escalation of commitment effect (Brockner et al.,
1986; Conlon, 1999; Staw et al., 1995) without yet ensuring decision quality.
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The strongest determinant of the decision quality would seem to be the
perceived uncertainty. -- Interestingly, however, uncertainty would not seem
to be compensated by the different issue management process
characteristics. -- One practical reason for this may be that uncertain issues
are handled more lightly, almost as options with a small investment into the
issue while the issues with a high value at stake tend to be already on a
higher level of certainty and represent more of the exploitation dimension
than the exploration dimension (Levinthal et al., 1993; March, 1991).
SOME DIRECTION FOR FUTURE RESEARCH
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A finer-grained distinction between the different ways to process issues
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An analysis of the determinants of the issue management system saturation
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Differences between the corporate level and division level strategic issues
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A longitudinal analysis of re-occurring issues in the issue management system
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Organizational transitioning from strategic issues to strategic initiatives
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Extension of the analyses to different types of companies
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An analysis of the role of (ex-post) errors in issue processing
THANK YOU
DISCUSSANT’S COMMENTS: GORDON WALKER
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Good, unique data.
Why do you use structural equation analysis in your analyses?
You could also have equally used normal, linear regressions.
Aren’t some of the variables conceptually related to each other, e.g.
resources and power and some of the other mechanisms. Does that
have an effect on the disappearance of your results?
How do you do measurement? How confident are you yourself in your
variables? It is unclear which of the variables had absolute values that
are then made into ordinal and how reliable are the ordinal value
assignments.
What do you measure with network centrality? Is it in-degree or outdegree network centrality measure and of which people? Is it a
measure over the three-year time period? What does it tell us?
What is the resource consumption of the system over time? How even
is the resourcing of the system or does the overall resourcing of the
system change somehow?
http://www.cox.smu.edu/academic/professor.do/gwalker