The Design School

STRATEGY FORMATION AS A PROCESS OF CONCEPTION

Presented by:

Ayesha Sa Bahria University

"Gentlemen, let us pool our expertise."

SUMMARY OF DESIGN SCHOOL

Source Intended Messages Realized Messages School Category Some Shortfalls Champions P.Selznick FIT/MATCH Think (strategy making as case study) Prescriptive Neither analytical, nor intuitive. Too static for the era of rapid change. Case study teachers (especially at or from Harvard University)

Source: Sloan Management Review, 1999

The Design School

The Design school proposes a

model of strategy making that seeks to attain a match, or fit, between internal capabilities and external possibilities. "Economic strategy will be seen as the match between qualifications and opportunity that positions a

Origins of the Design School

Two influential books written at the

University of California (Berkeley) and at M.I.T (Massachusetts Institute of Technology)

Philip Selznick's Leadership in Administration

of 1957 Alfred D. Chandler's Strategy and Structure of 1962

General Management group at the Harvard

Business School
Business Policy: Text and Cases in 1965 by

Primary emphasis on: Appraisals of the external and

internal situations,
the former uncovering threats and

opportunities in the environment, the latter revealing strengths and weaknesses of the organization.

Managerial Values--the beliefs and

preferences of those who formally lead the organization Social Responsibilities--specifically the ethics of the society in which the organization functions, at least as these are perceived by its managers.

Alternative strategies Choose the

best one

Framework for Evaluation by Richard Rumelt (1997)

Richard Rumelt (1997), from the Harvard

General Management group, the best framework for evaluation

Consistency: The strategy must not present mutually

inconsistent goals and policies. Consonance: The strategy must represent an adaptive response to the external environment and to the critical changes occurring within it. Advantage: The strategy must provide for the creation and/or maintenance of a competitive advantage in the selected area of activity. Feasibility: The strategy must neither overtax available resources nor create unsolvable sub problems.

Example
Consulting firm Kepner-

Tregoe's law of parsimony, was an almost direct quote from Andrews's early work: ". . . Keep strategies clear, simple, and specific"

ENVIRONMENTAL VARIABLES CHECKLIST

1. Societal Changes Changing customer preferencesImpacting

product demand or design Population trendsImpacting distribution, product demand or design 2. Governmental Changes New legislationImpacting product costs New enforcement prioritiesImpacting investments, products, demand 3. Economic Changes Interest ratesImpacting expansion, debt costs Exchange RatesImpacting domestic and overseas demand, profits Real personal income changesImpacting demand

 4. Competitive Changes Adoption of new technologiesImpacting cost position, product quality New CompetitorsImpacting prices, market share, contribution margin Price changesimpacting market share, contribution margin New ProductsImpacting demand, advertising expenditures 5. Supplier Changes
Changes in input costsImpacting prices, demand,

contribution margin Supply ChangesImpacting production processes, investment requirements Changes in number of suppliersImpacting costs, availability

6. Market Changes New uses of productsImpacting demand, capacity utilization

Marketing

Operations

Finance

Control of raw Product quality Financial leverage Number of product materials Operating leverage Production capacity Balance sheet lines Production cost Product ratios structure differentiation Stockholder Facilities and Market share relations equipment Pricing policies Tax situation Inventory control Distribution channels Quality control Energy efficiency Promotional programs Customer service Human Resources morale Employee Marketing research Employee Advertising Employee capabilities development Sales force Personnel systems Employee turnover

STRENGTH AND WEAKNESSES CHECKLIST

Research and Development

Management Management Team Information System

Product R&D capabilities Process R&D

Speed and responsiveness Quality of current information

Skills Value congruence Team spirit

Premises of Design School

Strategy formation should be a

deliberate process of conscious thought.

Strategy making in this sense is an acquired,

not a natural, skill or an intuitive oneit must be learned formally.

Responsibility for that control and

consciousness must rest with the chief executive officer: that person is the strategist
the president as architect of organizational

purpose

 The model of strategy formation must be

kept simple and informal.

"the idea of corporate strategy constitutes a

simple practitioner's theory, a kind of Everyman's conceptual scheme

This distinguishes the design school from the

entrepreneurial school on one side and the planning and especially positioning schools on the other.

Strategies should be one of a kind: the

best ones result from a process of individualized design

Strategies have to be tailored to the

individual case.
Design School concentrates less on the contents of

strategy and emphasize more on the process through which it is developed.

"creative act to build on distinctive

 The design process is complete when

strategies appear fully formulated as perspective.

The big picture must appearthe grand

strategy, an overall concept of the business.

These strategies should be explicit, so they

have to be kept simple

articulated so that others in the organization

can understand them "Simplicity is the essence of good art

Finally, only after these unique, full-

blown, explicit, and simple strategies are fully formulated can they then be

Thomas J. Watson Sr.

Thousands of copies of this picture were distributed in the late 1940s to his employees at IBM.

Critique of the Design School

A strategy that locates an organization in a

niche can narrow its own perspective. Model deny certain important aspects of strategy formation including
Incremental development Emergent strategy The influence of existing structure on strategy Full participation of actors other than the chief

executive

Addressing Criticism:
ASSESSMENT

OF STRENGTHS WEAKNESSES: BY PASSING LEARNING

AND

STRUCTURE FOLLOWS STRATEGY... AS THE LEFT

FOOT FOLLOWS THE RIGHT

MAKING

STRATEGY INFLEXIBILITY

EXPLICIT:

PROMOTING

SEPARATION

OF FORMULATION FROM IMPLEMENTATION: DETACHING THINKING FROM ACTING

Marketing MYOPIA

adapted from Mintzberg

The basic point was that firms should

define themselves in terms of broad industry orientationunderlying generic need. Words on paper do not transform a company. Levitt's intention was to broaden the vision of managers.
Marketing hyperopia where "vision is

better for distant than for near objects

Behind the very distinction between

formulation and implementation lies a set of very ambitious assumptions: that environments can always be understood. In an unstable or complex environment, this distinction has to be collapsed, in one of two ways.
Either the "formulator" has to be the

"implementor," or else the "implementors" have to "formulate."

In other words, thinking and action have

to proceed in tandem, closely

Four conditions encourage an organization to tilt toward the design school model:

1. One brain can, in principle, handle all of

the information relevant for strategy formation 2. That brain is able to have full, detailed, intimate knowledge of the situation in question.

3. The relevant knowledge must be

established before a new intended strategy has to be implementedin other words, the situation has to remain relatively stable or at least

Concluding:
Strategy is a grand design that requires a

grand designer. There is a process of designing that leads to outputs called designs. The design school has focused on the process, not the product.
Over simplified and restricted in

application but has contributed profound as an informing idea