Strategic Management
Chapter 15 Notes
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Strategy is not just about having a good strategy, but it has to be made by
the right people doing the right things in the right way
Pyramid of Strategy Practice (pg. 559) highlights three key questions:
who to include in strategy making; what to do in carrying out strategising
activity; and which strategising methodologies to use in organising the
activity
The Strategists
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Different types of people involved in strategy
Key issue: how middle managers can increase their influence in strategy
making
Top managers and directors
 Conventional view of strategy is that it’s the job of top management
o In this view, top management does not get involved with
operational activities so they can focus on overall strategy and not
get distracted
o In the private sector at least, company directors set direction,
managers manage
 In reality, top management role involves more than just setting direction
and a number of different roles are given:
o CEO: often seen as the ‘chief strategist’ and ultimately responsible
for all strategic decisions. Porter states the importance of a
strategic leader that can determine what fits and what doesn’t in
the overall strategy. Limitations: centralising the responsibility to
one individual can lead to excessive personalisation. Successful
CEOs can also become overconfident and can lead to failure; ‘great’
American companies found to outperform rivals over the longterm with CEOs that were typically modest, steady and long
serving (Collins)
o Top Management Team: often comprised of executive directors
also shares the responsibility of overall strategy; bring additional
experience and insight to the CEO and should theoretically
stimulate strategic debate. Limitations: top management team
constrained in three ways: 1) often carry operational
responsibilities except in large corporations that distract/bias
strategic thinking 2) frequently appointed by the CEO and
consequently may lack independence for real challenge 3) where
members have similar backgrounds and face strong leadership,
often suffer from ‘groupthink’
o Non-executive Directors: no management responsibility within
the organisation and theoretically should be able to offer external
and objective views on the strategy. Depending on national
corporate governance systems, chairman/woman typically nonexecutive and have key role of consulting the CEO or liaising with
investors. Must be authoritative and experienced because they
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must ensure that the organisation has a rigorous system in place
for making and renewing strategy. Limitations: ability to
contribute substantially to strategy can be limited and typically
part-time
Top management usually appointed because of their success in
operational activities, which does not always prepare them for analytical
and managerial tasks involved with making strategy
Managers need three important qualities to effectively contribute to highlevel strategy making:
i)
Mastery of analytical concepts and techniques
ii)
Social and influencing skills
iii)
Group acceptance as a player
Strategic Planners
 Sometimes referred to as corporate development managers
 Managers with a formal responsibility for contributing to strategy process
 Strategist is not only making strategy but helping other departments to
develop their own capabilities in strategy
 Strategic planners do not take strategic decisions themselves but have at
least three important tasks:
i)
Information and analysis: they have the time, skills and
resources to provide information and analysis for key decision
makers
ii)
Managers of the strategy process: can assist and guide other
managers through strategic planning cycles and help CEOs design
strategy processes
iii)
Special projects: can support top management on acquisitions or
organisational change
Middle Managers
 Middle managers seen to lack the objective and long-term perspective
needed for strategy and are too involved in operations
o In this view middle managers just implement strategy
 But middle managers can lead to better strategic decisions because they
have direct, up-to-date experience of the actual activities of the
organisation and the market
 Middle managers can also improve implementation when involved in the
original strategic formulation; they can interpret intentions into action,
have stronger personal commitment to strategic goals and communicate
strategy better to their teams
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Three trends leading to increasing middle management involvement:
i)
ii)
Decentralisation of organisational structures to increase
accountability and responsiveness in volatile and competitive
environments; responsibility in result is moved down the
hierarchical ladder
Rise of business education means that middle managers better
trained and confident in their domain, thus more eager to
participate
iii)
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Shift away from traditional manufacturing economy to one
with based more on professional services, meaning sources of
competitive advantage are no longer resources such as capital but
knowledge of knowledge of people involved in the operations of
the business (knowledge middle managers have)
Middle managers have informal influence:
o Key organisational positions: middle managers strategically
responsible for important parts and have critical knowledge; those
responsible for larger departments or business units; manager
with outward facing roles (marketing).
o Access to organisational networks: which can help provide
integrated perspective on what is happening in the org as a whole, and
can gives the manager more influence to raise issues and support
proposals.
o Access to the organisation’s ‘strategic conversation’: which
needs an open strategic culture, requires managers to maximise
opportunities to mix formally and informally with top
management, become at ease with particular language used to
discuss strategy, familiarise with strategic issues and develop their
own contribution to these issues.
Strategy consultants
Bain, the Boston consulting group, Monitor and McKinsey & Co. The different
roles:
1. Analysing, prioritising, and generating options
2. Transferring knowledge
3. Promoting strategic choices
4. Implementing strategic change
There are three key measures that client organisations can undertake to improve
outcomes in strategy consultants.
 Professionalised purchasing of consulting services: which helps ensure
clear project briefs, a wide search for consulting suppliers, appropriate
pricing, complementarily between different consulting projects and a
proper review at project end. Siemens established a shortlist of just 10
preferred mgt consultant suppliers.
 Developing supervisory skills: in order to manage portfolios of consulting
projects; Deutsche Bahn and DaimlerChrysler both have central project
offices that control and coordinate all consulting projects throughout
their companies.
 Partnering effectively with consultants: can improves effectiveness in
carrying out the project and knowledge transfer at the end of it.
Who to include in strategy? According to McKinsey, people involved should vary
according to nature of issues:
Highly urgent issues and those implying high strategic discontinuity (i.e
acquisition) are often best approached by small special project teams of senior
managers and planners and consultants. Issues with more time (ie. Growth)
should involve broader group of managers. For more routine issues only limited
participation is required, involving relevant marketing and operations managers.
Strategy analysis
Strategy is not the outcome of simple rational analysis; analysis is frequently
done in ad hoc and incomplete fashion and not always followed through.
Analysis may serve many functions and may be rough and ready, i.e. SWOT
which tends to produce unmanageable long lists of factors. The result is these
factors are rarely probed or refined. SWOT should be more focused and lead to
concrete actions on prioritised factors. Managers can often add value by more
rigorous use of strategy’s analytical tools.
Analysis is both costly and timely; ‘paralysis analysis’ where managers spend too
long perfecting their analysis, not enough time taking decisions and then acting
upon them. There may be different purposes for analysis:
 Procrastination: it may be deliberate, aimed at putting of decisions
 Symbolic: to rationalise a decision after it has already effectively been
made
 Buy in: managers are asked to analyse an issue to get them in to decision,
without which they might have been resistant to.
 Political: to forward the agenda of a particular manager or part of the
organisation.
The two implications of the purposes:
 Design the analysis to the real purpose: the range and quality of people
involved, the time and budget allowed and the subsequent communication of
analysis result should all depend on underlying purpose.
 Invest appropriately in technical quality: improving the quality of the technical
analysis will make a valuable addition to strategic decisions of projects.
Strategic issue selling: is the process of winning the attention and support of
top mgt and other important stakeholders for strategic issues. Since senior
managers rarely have time to deal with all issues, strategic issues compete for
top management attention. What gets to the top is not necessarily the most
important issue though. Four aspects need to be considered in seeking attention:
1. Issue packaging: strategic importance of the issues needs to be
underlined, particularly by linking it to critical strategic goals or
performance metrics for the organisation. Presentation of issue should be
consistent with the cultural norms and clear and packaged with a
potential solution.
2. Formal or informal channels: formal channels such as annual business
reviews that CEO carious out with divisional heads, annual strategy
workshops of top teams, line interaction with operational mangers. They
are not enough to sell strategic issues; informal are crucial and include ad
hoc conversations with influential managers in corridors, journeys over
meals..etc
3. Sell alone or in coalitions: a coalition of influential supporters adds
credibility, validity and weight to the issues. If other managers are unpersuaded then the CEO is unlikely to be persuaded either.
4. Timing: managers should time their issue selling carefully, i.e if the
organisation is facing a short term performance crisis then it is clearly not
a good time.
Strategic decision-making:
Champion’s bias: is the likelihood that people will exaggerate the case in favour of
their particular proposal.
Sunflower syndrome: the tendency to follow the lead of the most senior person
in the decision-making process to try to anticipate their view even before they
have expressed it.
Danger in decision makers either being over-optimistic, or risk averse (being
overly deterred by substantial downwards even where there is little chances of
such outcomes). Four guidelines for managers by Eisenhard:
1. Build multiple, simultaneous alternatives: helps to encourage critical
debate. This can help counter champion’s bias and sunflower syndrome. It
is also faster then taking proposals sequentially. Barclays bank put a rule
that proposals should have at least two other alternatives.
2. Track real-time information: managers in dynamic environments prefer
immediate information form current operations rather then statistical
trends and forecasts. Here a quick decision is better then a delayed one,
and trend data is liable to be rapidly outdated anyway.
3. Seek the views of trusted advisors: experienced managers can provide fast
feedback on what is likely to work or not because of their deep knowledge
form the past. Their instincts are faster and often both faster and reliable
and more credible. Older managers can be good people to listen to
because of their experience and usually they have less self-interest at
stake.
4. Aim for consensus, but not at any cost: consensus can be too slow and often
leads to mediocre choices. Fast decision makers know that debates cannot
always be resolved so CEO or other senior person should have the
courage at a point to simply decide.
In decision making, intuition and conflict is not always a bad thing; this gut-feel
can provide the basis for inspired hunches where there is little reliable date to be
analysed anyway, and conflict can challenge optimistic self assessments of
managerial competence.
Communicating the strategy:
Strategic decisions need to be communicated and managers have to consider
which stakeholders to inform and to tailor their message to each. Employee
communications are typically vital to ensure that the strategy is carried out in
the first place. Example: Volvo group’s target is that 90% of the employees must
know the company’s strategic goals. Four elements need to be considered:
1. Focus: communications should be focused on the key components of the
strategy.
2. Impact: communications should be impactful with powerful, memorable
words and visual. For example: UK’s new community service s strategy is
title ‘ our health, our case, our say’; medical centre in New Mexico uses a
strong story line ‘ the raiders of the lost art’; amazon.com uses vidual
devices where they sketch a virtuous circle to express their growth
strategy.
3. Media: choosing appropriate media coverage (emails, voicemails,
newsletters, videos, intranets, blogs can all ensure that all staff receive the
same message promptly. Yet face-to-face communication demonstrates
personnel commitment of managers and allow for interaction with
concerned staff.
4. Employee engagement: so that they can see what it means for them
personally and how their role will change.
Communication is not just an end point of strategy making but also feeds into the
identification of new strategic issues for next strategising round.
Strategy workshops: usually involve groups of executive working intensively
for one or two days, often away from the office, an organisational strategy. They
are used to formulate or reconsider strategy and also to address strategy
implementation issues and to communicate strategic decisions to larger
audience. As well as facilitating strategy making, they have additional roles in
team building and the personnel development of individual participants. Prone
to two problems: 1) they are liable to reinforce managers; existing
preconceptions. 2) They can become detached from subsequent action; precisely
because they are separated from the ordinary routines of the organisation.
They need to be: purposeful and clear. In designing workshops managers should:
 Insist on prior preparation: because workshops are short, it is helpful for
participants to bring key issues analysis or data to the workshop and
present on them briefly as input to the workshop.
 Involving participants from outside the senior executive team: since they
bring external challenging views and involving middle managers could be
valuable for career development and management succession.
 Involving outside consultants or facilitators: can free managers to
concentrate on the discussion itself, help keep it focused on the strategic
issues and support all participants contributing equally to discussion.
 Breaking organisational routines: by setting workshops in off site
locations with clear rules against mobile use helps minimise distraction,
also playful exercises breaks the ice and helps generate creativity and
willingness to challenge orthodoxies.
For workshops to be closely connected to subsequent action managers should:
 Make agreed list of actions at the end such as reviewing workshop output
and agreement on necessary actions to follow up.
 Establishing projects groups: and commissioning those managers top
work together on them and report back either to a regular executive
meeting or to a subsequent workshops.
 Circulating agreed actions: widely in the organisation will increase the
commitment of participants to follow through.
 Making visible commitment by the top management: throughout the event
and afterwards by both statements and actual behaviours.
Strategy projects: involve teams of people assigned to work on particular
strategic issues over a defined period of time. Projects can be instituted to
explore problems or opportunities or they can implement agreed elements of a
strategy. Translating a strategy plan or workshop into a set of projects is a good
means of ensuring that intentions are turned into action. Strategy projects need:
 A clear brief or mandate: project’s objectives should be agreed and
carefully managed.
 Top management commitment
 Milestones and reviews: with an agreed schedule of intermediate
achievements these allow project review and adjustment where
necessary as well as a measure of ongoing success.
 Appropriate resources: the key resource is usually people. The right mix of
skills needs to be invested in team building at the outset.
Strategy projects are often organised as programmes and as portfolios. A
programme contains a group of projects that address interrelated issues. It is
important that both programmes and overall portfolios have clear systems for
governance, reporting, and review. Programme managers should manage
overlaps and redundancies, merging or ending projects that have no longer a
ditanct purpose because of changing circumstances. Senior mgt should have
careful oversight of the whole portfolio.
Hypothesis testing: is a methodology used particularly in strategy projects for
setting priorities in investigating issues and options. Its starts with a preposition
of how things are (the descriptive hypothesis) and then seek to test it with real
world data. Confirmation of this leads to several prescriptive hypotheses about
what a particular organisation should do. These might then be subjects of further
data testing. The aim is to concentrate attention on a very limited set of
promising hypotheses and to find robust and satisfactory solution within time
and resource constraints.
Business cases and strategic plans
Business case: provides the data and argument in support of a particular
strategy proposal, for example investment in new equipment.
A strategic plan: provides the data and argument in support of a particular
strategy for the whole organisation, over a substantial period of time.
A strategic plan: provides the data and argument in support of a particular
strategy for the whole organisation over a substantial period of time.
A project team intending to make a business case should aim to meet the
following criteria:
 Focused and strategic needs: the team should identify the organization’s
overall strategy and relate its case closely to that, not just to any
particular departmental needs. Focus should be on a few key issues, with
clear priority normally given to those strategically important and
relatively easy to address.
 Supported by key data: the team will need to assemble appropriate data,
with financial data demonstrating appropriate returns on any investment
typically essential. Qualitative data is important also.
 Demonstrated solutions and actions: issues attached to solutions are more
favourable. The team should provide careful discussion of how proposals
will be acted on. And who would be responsible.
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Provide clear progress measures: when seeking significant investments
over time, it is reassuring to offer clear measures to allow regular
progress monitoring.
Strategic plans may be used for entrepreneurial start-ups, business units
within a large or for an organisation as a whole. A typical strategic plan has
the following elements:
 Mission, goals, and objectives statement
 Environmental analysis: macro analysis with a focused attention on
customers, suppliers, and competitors include clear statement of
competitive advantage.
 Proposed strategy: should be clearly related to the environmental and
organisational analysis and support the mission, goals and objectives.
 Resources: the team will need to provide a detailed analysis of
resources required with options for acquiring them. Critical resources
are financial so plan should include balance sheets, income
statements, cash flows over the period of the plan. Humans especially
managers or people with strategic skills are essential.