Tuesday, 28 October 2008

The process of making strategy (or just gibberish?)

Strategy making in the emergent stage can be viewed as a social learning process in which managerial action and cognition are intrinsically intertwined”, Stanford professor Robert Burgelman once wrote.

And I thought “What…?!”

But the more times I read the sentence, and the more I thought about it, and the more I compared it to the strategy-making processes in the (successful) companies I have seen from up close, it actually started to make sense… (although I acknowledge that I have no confirmation that the interpretation I came up with, of Robert’s gibberish, is actually what he meant with it!)

1) In a strategy-making process “managerial action and cognition are intrinsically intertwined”; what the heck might he mean with that? Well, if I think about the companies I’ve analysed, in pretty much all cases, strategy was not the result of a one-time rational analytical process but there was quite a bit of trail-and-error to it.

The firm, for whatever reason, tries something new – a new product, service or process. Or they simply happen to run it to something by accident. For example, Hornby, when they outsourced production of their model trains to China, added additional detail and quality to their products. That’s the “action”.

Then, the firm receives feedback from the market. In Hornby’s case, for example, sales went up. People in the company then stop, take notice and try to understand what led to the result. People in Hornby, for example, discovered that it was now hobbyists and collectors buying their products, instead of children, and they concluded they were moving out of the toy market into the hobby market; that’s the element of “reflection”.

Subsequently, the decided to deliberately try more of this, and add detail and quality to some of their others products as well, refocus their marketing efforts on adults and see what happened (that’s another action). When they noticed that this campaign was a success, they gradually decided to make this market-shift the basis of their new strategy (another moment of reflection). My guess is that’s what Robert meant, with “action and reflection are intrinsically intertwined”.

2) But what did he mean with it is “a social learning process”…? Well, my guess is that he meant a top manager doesn’t do this all by himself. It involves lots of people in the organisation – which is why it is a social process – and even from outside the firm. Hornby employees debated at length what was causing the surge in their sales, after outsourcing their production to China, and where it came from. They even explicitly involved their retailers in this discussion, to try and understand their view on what had happened to them.

3) Finally, what might Robert have meant with strategy making “in the emergent stage”…? Well, all of this means that strategy isn’t necessarily planned, especially in the beginning; organisations try stuff, some of it fails, other things stick and some of them become big successes. As a result of these processes, strategy happens; it emerges from within a (good and effective) organisation, rather than that it is the result of some 100 percent rational model and process. In later stages, it may become more deliberate and planned, just like Hornby nowadays very carefully taylors its products to hobbyists.

And that’s not only a very realistic view of how strategy really happens, but perhaps also one that a good organisation should aspire to. Because purely rational, planned strategies are seldom the big break-through successes. Simply because life is more complex than that. Just like Robert’s language.

7 comments:

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Anonymous said...

There is a say;
Reflection is the mother of wisdom ...

great post again.
Michael.

Wally Bock said...

Congratulations! This post was selected as one of the five best business blog posts of the week in my Three Star Leadership Midweek Review of the Business Blogs.

http://blog.threestarleadership.com/2008/10/29/102908-a-midweek-look-at-the-business-blogs.aspx

I commented: Guess what? Strategy, like business, is a human process. It's not the neat, linear process laid out in the strategy books. It's much messier, iterative, and human.

Wally Bock

Blue Lamp said...

Not so sure I agree with this. Hornby have always been (to my mind) supplying to a hobbyist market. Its just that they weren't very good at it. Thus poor (inferior?) quality made it look as it it were a childs toy product.

Freek said...

I can imagine, especially given the age of the company, that collectors have been around for quite a while now, just like people collect antique dolls or so. However - at least according to the many people I interviewed at Hornby (some of them who had been there for decades) - their primary market used to be children. The current primary, explicit and specific focus on adults (collectors and hobbyists) is a relatively new thing.

You can also see it in their written documentation over the years (e.g. annual reports); the shift from children to adults, but also in analyst reports; they used to be compared to other toy companies but now they relate them to the hobby market.

The main thing I tried to communicate, however, holds regardless of any of this: Hornby did make a significant strategic shift (opting to invest in higher quality, rather than cost savings, which made them appealing to adults). This strategic shift was the result of quite a protracted process as described in the posting, rather than a one-time decision by top management.

Blue Lamp said...

Thanks - To some extent the story of Hornby provides a counter to the story of Triang (didn't they once own Hornby?) where they couldn't seem to break out of the market of providing cheap and chearful toys against a background of children becomeing more engaged with electronic toys. Here I guess the core strategy stayed with them until the company sank beneith the waves; inspite of some TV help from John Harvey Jones.

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