Criticism of Formal Planning: Unpredictability of Real World Autonomous Action: Strategy making by lower level managers Serendipity and Strategy
Amity School of Business Strategy Making in an Unpredictable World Environment is uncertain, complex & ambiguous Small changes may have large & unpredictable impact rendering strategic planning useless Premium on being able to respond quickly & alter strategies
Amity School of Business Autonomous Action: Strategy making by lower level managers Too much importance to Top level management Many important strategic decisions are initiated by lower level managers Out of their own initiatives lower level managers come up with newer strategies and then lobby top managers for resources Helpful for established companies in responding to paradigm shifts in industry Top-level management sometimes have inertia
Amity School of Business Autonomous Action: Strategy making by lower level managers
Example Starbucks also sells music CDs at many of its outlets Sales of those outlets with CDs are generally higher Idea came into being when Tim Jones, a stores manager started bring his own music compilations He started getting requests from customers for copies of those CDs Jones suggested the CEO, Howard Schultz that Starbucks should sell its own music Since then, Starbucks has also moved into music downloading, where customers can burn their CDs while in the store
Amity School of Business Serendipity & Strategy
Examples of accidental events abound that help push companies in new & profitable directions
Some companies miss these opportunities because serendipitous discoveries do not fall in line with their prior strategies
Amity School of Business Serendipity & Strategy
Example #1 Richard G. Drew invented one of the most practical items to be found in any home or office: transparent adhesive tape in 3M Initially it had adhesives only along the edges One day, a researcher working with florocarbons in a 3 M lab spilled some liquid on her shoes. Later when she spilled coffee on her shoes, she saw coffee formed into little liquid beads and ran off her shoes without leaving a stain. Thus the idea of scotchgard was born.
Amity School of Business Planned Strategy Unrealized Strategy Emergent Strategy Realized Strategy Deliberate Strategy Serendipity Autonomous Action by Lower Level by Managers Unplanned Shift by Top Level Managers Unpredicted Change Mintzbergs Model of Strategy Development Emergent and Deliberate Strategies Amity School of Business Intended & Emergent Strategies A companys realized strategy is the product Planned strategies that are actually put into action and Any unplanned strategies
Many Planned strategies not implemented because of unpredicted changes in the environment
Emergent strategies are unplanned responses to unforeseen circumstances Arise from: Autonomous action by individual managers, fateful discoveries, unplanned strategic shift by top level managers when environment changes
Sometimes emergent strategies are more successful than the planned ones Amity School of Business Intended & Emergent Strategies Example: Entry of Honda into US motorcycle market in 1959 Honda executives (from Japan) focused on selling 250-cc & 350-cc machines Sales were sluggish Honda executives themselves were using 50-cc bikes & were attracting attention They got a call from Sears & other stores Honda launched those bikes By 1964 one out of two motorcycles sold in US was a Honda
Amity School of Business Intended & Emergent Strategies Example (Contd.) Credit should be given to Honda for recognizing the strength of the emergent strategy & for pursuing it Management need to recognize: Strategies can take root wherever people have the capacity to learn Process of emergence; ability to judge the worth Whether emergent strategies fits companies needs & capabilities Emergent strategies are a function of corporate culture & controls put in place The Risk of Strategic Drift Phase 1 Incremental Change Phase 2 Flux Phase 3 / 4 Transformational Change or Demise 1 2 3 4 5 A m o u n t
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Time Environmental change Strategic change Patters of Strategy Development Incremental
Flux
Transformational
Demise Strategy Development in Environmental Contexts Environmental conditions Simple Complex Static Dynamic Historical Analysis Forecasting Scenario Planning Decentralized Planning Experience & Learning Strategic Planning in Practice For strategic planning to work, managers need to take not of current & future competitive environment
To forecast how the future may look like Scenario Planning can be used
Operating managers can be involved (Decentralized Planning) Involves formulating plans for what if scenarios about the future
Some scenarios are Optimistic & some are Pessimistic
Managers are asked to prepare strategies to cope up with each scenario
A set of indicators is chosen, and the indicators are used as signposts to track trends and identify the probability that any particular scenario will come to pass
As a result of scenario planning, organizations might pursue one dominant strategy, but make investments that will payoff of other scenarios come to fore
Scenario Planning Identify Different Possible Futures Hedge your bets by Preparing for Other scenarios And.. Invest in one Plan, but Formulate Plans to Deal with those Futures Switch strategy if Tracking of signposts Shows alternative Scenarios becoming More likely Scenario Planning Decentralized Planning Strategic planning process is generally top managements responsibility in companies
They may not have understanding of the operating realities