695:(1999). He recognized that strategy is partially deliberate and partially unplanned, though whether the resulting performance is better for being planned or not is unclear. The unplanned element comes from two sources : “emergent strategies” result from the emergence of opportunities and threats in the environment and “Strategies in action” are ad hoc actions by many people from all parts of the organization. These multitudes of small actions are typically not intentional, not teleological, not formal, and not even recognized as strategic. They are emergent from within the organization, in much the same way as “emergent strategies” are emergent from the environment. However, it is again not clear whether, or under what circumstances, strategies would be better if more planned.
235:
the resource-based view, though with one modification. RBV asserts that any resource which is clearly identifiable, and can easily be acquired or built, cannot be a source of competitive advantage, so only resources or capabilities that are valuable, rare, hard to imitate or buy, and embedded in the organization can be relevant to explaining performance, for example reputation or product development capability. Yet day-to-day performance must reflect the simple, tangible resources such as customers, capacity and cash. VRIO resources may be important also, but it is not possible to trace a causal path from reputation or product development capability to performance outcomes without going via the tangible resources of customers and cash.
170:
fine-grained guidance on strategy to help raise performance. For example, an investigation that identifies an attractive opportunity to serve a specific market segment with specific products or services, delivered in a particular way is unlikely to yield fundamentally different answers from one year to the next. Yet strategic management has much to do from month to month to ensure the business system develops strongly so as to take that opportunity quickly and safely. What is needed, is a set of tools that explain how performance changes over time, and how to improve its future trajectory – i.e. a dynamic model of strategy and performance.
703:
diagram). This learning comprises feedback into internal processes, the environment, and strategic intentions. Thus the complete system amounts to a triad of continuously self-regulating feedback loops. Actually, quasi self-regulating is a more appropriate term since the feedback loops can be ignored by the organization. The system is self-adjusting only to the extent that the organization is prepared to learn from the strategic outcomes it creates. This requires effective leadership and an agile, questioning, corporate culture. In this model, the distinction between strategy formation and strategy implementation disappears.
187:
share = our sales divided by total market size” are relationships that are true. Static strategy tools seek to solve the strategy problem by extending this set of stable relationships, e.g. “profitability = some complex function of product development capability”. Since a company’s sales clearly change over time, there must be something further back up the causal chain that makes this happen. One such item is ‘customers’ – if the firm has more customers now than last month, then (everything else being equal), it will have more sales and profits.
116:(1991) was amongst the first to challenge this presumption of the power of ‘industry forces’, and it has since become well understood that business factors are more important drivers of performance than are industry factors – in essence, this means you can do well in difficult industries, and struggle in industries where others do well. Although the relative importance of industry factors and firm-specific factors continues to be researched, the debate is now essentially over – management of strategy matters.
191:
lost”. This is not a theory or statistical observation, but is axiomatic of the way the world works. Other examples include cash (changed by cash-in and cash-out-flows), staff (changed by hiring and attrition), capacity, product range and dealers. Many intangible factors behave in the same way, e.g. reputation and staff skills. Dierickx and Cool (1989) point out that this causes serious problems for explaining performance over time:
664:(1978) made a distinction between deliberate strategy and emergent strategy. Emergent strategy originates not in the mind of the strategist, but in the interaction of the organization with its environment. He claims that emergent strategies tend to exhibit a type of convergence in which ideas and actions from multiple sources integrate into a pattern. This is a form of
151:(1959) pointed out that superior profitability (e.g. return on sales or return on assets) was neither interesting to investors – who value the prospect of increasing future cash flows – nor sustainable over time. Profitability is not entirely unimportant – it does after all provide the investment in new resources to enable growth to occur. More recently,
22:
647:(1978) developed an approach that he called "logical incrementalism". He claimed that strategic management involves guiding actions and events towards a conscious strategy in a step-by-step process. Managers nurture and promote strategies that are themselves changing. In regard to the nature of strategic management he says: "
698:
In this model, strategy is both planned and emergent, dynamic, and interactive. Five general processes interact. They are strategic intention, the organization's response to emergent environmental issues, the dynamics of the actions of individuals within the organization, the alignment of action with
234:
captures both the math of asset-stock accumulation (i.e. resource- and capability-building), and the interdependence between these components (Forrester, 1961; Sterman, 2000). The asset-stocks relevant to strategy performance are resources and capabilities . This makes it possible to connect back to
226:
The consequences of these features is that relationships in a business system are highly non-linear. Statistical analysis will not, then, be able meaningfully to confirm any causal explanation for the number of customers at any moment in time. If that is true then statistical analysis also cannot say
104:
The static assessment of strategy and performance, and its tools and frameworks dominate research, textbooks and practice in the field. They stem from a presumption dating back to before the 1980s that market and industry conditions determine how firms in a sector perform on average, and the scope
186:
To develop a dynamic model of strategy and performance requires components that explain how factors change over time. Most of the relationships on which business analysis are based describe relationships that are static and stable over time. For example, “profits = revenue minus costs”, or “market
702:
The alignment of action with strategic intent (the top line in the diagram), is the blending of strategic intent, emergent strategies, and strategies in action, to produce strategic outcomes. The continuous monitoring of these strategic outcomes produces strategic learning (the bottom line in the
190:
The number of ‘Customers’ at any time, however, cannot be calculated from anything else. It is one example of a factor with a unique characteristic, known as an ‘asset-stock’. This critical feature is that it accumulates over time, so “customers today = customers yesterday +/- customers won and
169:
This is not just of theoretical concern, but matters to executives too – efforts by the management of firm B to match A’s profitability could well destroy its ability to grow profits, for example. A further practical problem is that many of the static frameworks do not provide sufficiently
715:
Also, there are some implementation decisions that do not fit a dynamic model. They include specific project implementations. In these cases implementation is exclusively tactical and often routinized. Strategic intent and dynamic interactions influence the decision only indirectly.
626:
Several theorists have recognized a problem with this static model of the strategy process: it is not how strategy is developed in real life. Strategy is actually a dynamic and interactive process. Some of the earliest challenges to the planned strategy approach came from
658:(1980) took this one step further. Not only are strategic decisions made incrementally rather than as part of a grand unified vision, but according to them, this multitude of small decisions are made by numerous people in all sections and levels of the organization.
543:
This set of relationships gives rise to an ‘architecture’ that depicts, both graphically and mathematically, the core of how a business or other organization develops and performs over time. To this can be added other important extensions, including :
139:
The debate about the relative influence of industry and business factors on performance, and the RBV-based explanations for superior performance both, however, pass over a more serious problem. This concerns exactly what the ‘performance’
711:
Some detractors claim that these models are too complex to teach. No one will understand the model until they see it in action. Accordingly, the two part linear categorization scheme is probably more valuable in textbooks and lectures.
612:
Managing the process. This includes monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and efficiency of the process, controlling for variances, and making adjustments to the process as
569:
According to many introductory strategy textbooks, strategic thinking can be divided into two segments : strategy formulation and strategy implementation. Strategy formulation is done first, followed by implementation.
95:
A literature search shows the first of these senses to be both the earliest and most widely used meaning of ‘strategy dynamics’, though that is not to diminish the importance of the dynamic view of the strategy process.
238:
Warren (2002, 2007) brought together the specification of resources and capabilities with the math of system dynamics to assemble a framework for strategy dynamics and performance with the following elements:
616:
When implementing specific programs, this involves acquiring the requisite resources, developing the process, training, process testing, documentation, and integration with (and/or conversion from) legacy
580:
Concurrent with this assessment, objectives are set. This involves crafting vision statements (long term), mission statements (medium term), overall corporate objectives (both financial and strategic),
163:(2007) has again raised the importance of making progress with the issue of strategy dynamics, describing it as still ‘the next frontier … underresearched, underwritten about, and underunderstood’.
166:
The essential problem is that tools explaining why firm A performs better than firm B at a point in time are unlikely to explain why firm B is growing its performance more rapidly than firm A.
144:
that management seeks to improve. Would you prefer, for example, (A) to make $ 15m per year indefinitely, or (B) $ 12m this year, increasing by 20% a year, starting with the same resources?
641:(1959) claimed that strategy is a fragmented process of serial and incremental decisions. He viewed strategy as an informal process of mutual adjustment with little apparent coordination.
81:
concerns the ‘content’ of strategy – initiatives, choices, policies and decisions adopted in an attempt to improve performance, and the results that arise from these managerial behaviors.
792:
Burgelman, R. (1980). Managing
Innovating systems: A study in the process of internal corporate venturing, Graduate school of business (PhD dissertation), Columbia University, 1980.
592:
This three-step strategy formation process is sometimes referred to as determining where you are now, determining where you want to go, and then determining how to get there.
486:
396:
789:
Bower, J. (1970). Managing the resource allocation process : A study of planning and investment, Graduate school of business (papers), Harvard
University, Boston, 1970.
112:, (1980) in his seminal book ‘Competitive Strategy’, the ideas of which still form the basis of strategy analysis in many consulting firms and investment companies.
105:
for any firm to do better or worse than that average. E.g. the airline industry is notoriously unprofitable, but some firms are spectacularly profitable exceptions.
649:
Constantly integrating the simultaneous incremental process of strategy formulation and implementation is the central art of effective strategic management
175:
588:
These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to obtain these goals.
651:." (page 145). Whereas Lindblom saw strategy as a disjointed process without conscious direction, Quinn saw the process as fluid but controllable.
131:, 1991), which seeks to discover the firm-specific sources of superior performance – an interest that has increasingly come to dominate research.
74:
The word ‘dynamics’ appears frequently in discussions and writing about strategy, and is used in two distinct, though equally important senses.
684:(1999) describes strategy formation and implementation as an ongoing, never-ending, integrated process requiring continuous reassessment and
92:
is dynamic, that is, strategy-making involves a complex pattern of actions and reactions. It is partially planned and partially unplanned.
32:
43:
61:
227:
anything useful about any performance that depends on customers or on other accumulating asset-stocks – which is always the case.
222:.. it can be hard to work out, even for the firm who owns a resource, why exactly it accumulates and depletes at the rate it does.
940:
888:
Rugman, A. and
Verbeke, A. (2002). The contribution of Edith Penrose to the resource-based view of strategic management.
119:
The increasing interest in how some businesses in an industry perform better than others led to the emergence of the ‘
216:.. tangible and intangible assets alike deteriorate unless effort and expenditure are committed to maintaining them
809:
Grant, R. (1991). The resource-based theory of competitive advantage: implications for strategy formulation.
668:, in fact, on this view, organizational learning is one of the core functions of any business enterprise (See
665:
582:
760:
740:
577:
Doing a situation analysis: both internal and external; both micro-environmental and macro-environmental.
795:
Dierickx, I. and Cool, K. (1989). Asset stock accumulation and sustainability of competitive advantage.
681:
603:
174:
36:
that states a
Knowledge (XXG) editor's personal feelings or presents an original argument about a topic.
655:
745:
730:
674:
595:
The next phase, according to this linear model is the implementation of the strategy. This involves:
471:
381:
128:
735:
120:
692:
945:
750:
89:
823:
Lovallo, D. and
Mendonca, L. (2007). Strategy’s Strategist: An interview with Richard Rumelt.
644:
632:
124:
638:
628:
152:
851:
755:
661:
231:
609:
Assigning responsibility of specific tasks or processes to specific individuals or groups
599:
Allocation of sufficient resources (financial, personnel, time, computer system support)
871:
160:
113:
109:
934:
861:
770:
148:
159:(2002) have reviewed the implications of this observation for research in strategy.
669:
725:
548:
the consequence of resources varying in one or more qualities or ‘attributes’
88:
is a way of understanding how strategic actions occur. It recognizes that
691:
A particularly insightful model of strategy process dynamics comes from
782:
Barney, J. (1991). Firm resources and sustained competitive advantage.
602:
Establishing a chain of command or some alternative structure (such as
156:
904:
Business
Dynamics: Systems thinking and modeling for a complex world.
685:
210:.. building one resource depends on other resources already in place.
585:
objectives (both financial and strategic), and tactical objectives.
765:
108:
The ‘industry forces’ paradigm was established most firmly by
15:
344:
plus or minus any resource-flows that have occurred between
33:
personal reflection, personal essay, or argumentative essay
923:
Wernerfelt, B. (1984). A Resource-Based View of the Firm.
135:
The need for a dynamic model of strategy and performance
844:
Moncrieff, J. (1999). Is strategy making a difference?
39:
816:
Lindblom, C. (1959). The science of muddling through,
474:
384:
182:
A possible dynamic model of strategy and performance
895:Rumelt, R. (1991). How Much Does Industry Matter?,
480:
390:
204:‘the more you have, the faster you can get more’..
830:Markides, C. (1999). A dynamic view of strategy.
554:rivalry for any resource that may be contested
883:Strategies for Change: Logical Incrementalism
707:Criticisms of Dynamic Strategy Process Models
8:
551:the development of resources through stages
837:Markides, C. (1997). Strategic innovation.
431:is a function of the quantity of resources
251:is a function of the quantity of resources
198:i.e. it takes time to accumulate resources.
854:. (1978). Patterns in Strategy Formation,
699:strategic intent, and strategic learning.
892:, 2002, Vol. 23, No. 8, pp. 769–780.
622:The Dynamic Model of the Strategy Process
473:
383:
100:Static models of strategy and performance
62:Learn how and when to remove this message
565:The Static Model of the Strategy Process
329:The current quantity of each resource
86:dynamic model of the strategy process
7:
866:The Theory of the Growth of the Firm
265:, discretionary management choices,
79:dynamics of strategy and performance
868:, Oxford University Press: Oxford.
786:, Vol. 17, No. 1, pp. 99–120.
208:Interconnectedness of Asset Stocks
14:
858:, Vol 24, No 9, 1978, pp 934–948.
820:, Vol. 19, No. 2, 1959, pp 79–81.
841:, vol 38, spring 1997, pp 31–42.
834:, vol 40, spring 1999, pp 55–63.
173:
20:
573:Strategy formulation involves:
481:{\displaystyle \bigtriangleup }
456:itself, on management choices,
391:{\displaystyle \bigtriangleup }
230:Fortunately, a method known as
799:, Vol. 35, pp. 1504–1511.
1:
918:Strategic Management Dynamics
911:Competitive Strategy Dynamics
827:, 2007 No. 4, pp. 56–67.
449:, including that of resource
196:Time compression diseconomies
925:Strategic Management Journal
897:Strategic Management Journal
890:Strategic Management Journal
885:, Irwin, Homewood Ill, 1980.
818:Public Administration Review
811:California Management Review
273:, at that time (Equation 1).
927:, Vol. 5, pp. 171–180.
848:, vol 32, no 2, pp 273–276.
813:(Spring), pp. 119–135.
460:, and on exogenous factors
147:Nearly half a century ago,
962:
846:Long Range Planning Review
806:. MIT Press, Cambridge MA.
464:at that time (Equation 3).
416:The change in quantity of
269:, and exogenous factors,
654:Joseph Bower (1970) and
878:, Free Press, New York.
839:Sloan Management Review
832:Sloan Management Review
666:organizational learning
583:strategic business unit
202:Asset Mass Efficiencies
127:, 1984; Barney, 1991;
906:McGraw-Hill, New York.
825:The McKinsey Quarterly
802:Forrester, J. (1961).
761:Real options valuation
604:cross-functional teams
482:
392:
42:by rewriting it in an
899:, Vol 12, pp 167–185.
784:Journal of Management
682:Constantinos Markides
483:
393:
340:is its level at time
123:’ (RBV) of strategy (
941:Strategic management
920:. Wiley, Chichester.
913:. Wiley, Chichester.
902:Sterman, J. (2000).
876:Competitive Strategy
746:strategic management
741:strategic innovation
731:marketing strategies
675:The Fifth Discipline
472:
382:
916:Warren, K. (2007).
909:Warren, K. (2002).
804:Industrial Dynamics
736:resource based view
557:intangible factors
121:resource based view
881:Quinn, B. (1980).
856:Management Science
797:Management Science
751:strategic planning
478:
388:
90:strategic planning
44:encyclopedic style
31:is written like a
645:James Brian Quinn
631:in the 1960s and
72:
71:
64:
953:
656:Robert Burgelman
639:Charles Lindblom
487:
485:
484:
479:
397:
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389:
220:Causal ambiguity
177:
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23:
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961:
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756:system dynamics
722:
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624:
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443:
436:
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380:
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232:system dynamics
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40:help improve it
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635:in the 1980s.
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161:Richard Rumelt
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114:Richard Rumelt
110:Michael Porter
101:
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771:SWOT Analysis
769:
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560:capabilities
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243:Performance,
242:
241:
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214:Asset erosion
212:
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149:Edith Penrose
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693:J. Moncrieff
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