The Emporer's New Clothes - Strategy

How many times in your career have you wondered what exactly your leadership was talking about when they discuss alignment with "Strategy". What is strategy? Why are executive leaders somehow mysteriously aware of a skill that is opaque to the rest of the organization. Well, there is a dirty little secret. A lot of times when leaders talk about strategy it is quite likely that they know very little more about it than you do. This article may help you get a leg up on others who use the word strategy without having a depth of knowledge about the research or academic literature on the topic.

Mintzberg (1972) identifies three theoretical modes from the published literature at the time on the subject of strategy. The "planning mode" depicts strategy as a systematic and neatly integrated process. The planning mode receives the largest share of academic attention. The "adaptive mode" on the other hand depicts strategy as a series of incremental, disjointed reactionary steps executed in reaction to external pressures. Other researchers discuss the "entrepreneurial mode" which is characterized by a powerful strategy-maker who takes bold positive steps in the face of uncertainty.

Prior attempts to define strategy may have impaired the ability to study strategy-making in the abstract. Game theorists defined it as the set of rules that governs all moves, and economists defined strategy as a conscious plan to achieve specific ends. But these definitions present strategy as a set of guidelines developed in advance prior to decision making. Unfortunately, this narrows the field of study and prevents fully understanding how strategy-making happens. Mintzberg (1972) suggests an alternate definition in which strategy is defined as a pattern in the stream of significant decisions. This redefinition opens the door to understanding strategy not only as an a-priori set of guidelines for decision making, but also studying strategy as it evolves.

Mintzberg & McHugh (1985) studied a project organization over a period of 40 years of decision making. They show that based on detailed tracking over time of the decisions of this single project organization the best description of its strategy making process might be an "adhocracy".

Some of the characteristics of organizations that benefit from this "adhocracy" or project structure are that they 1) operate in a dynamic, complex environment that demands innovation of a sophisticated nature 2) the production of complex unique outputs demands the engagement of highly trained experts who engage in a multidisciplinary fashion, where each output tends to be unique (e.g. films, prototypes, new products) 3) these experts are housed in specialized units for administrative purposes but are deployed in integrated project teams (matrix organization). 4) the work being highly complex and unpredictable demands semi formal structural parameters and mutual adjustment by the team members in order for the team to succeed.

Such an organization may be said to leverage emergent strategy as opposed to deliberate strategy. Some may balk at the idea that organizations can pursue strategies without intending them. Many who practice "machismo management" (Dill, 1979) associate strategy with volunteerism and free will, and if it were the case that deliberate and emergent strategy are separate things then it would be possible to describe the former as strategy and the latter as something else, but it turns out both deliberate and emergent strategy are part of a continuum and exist within a cycle.

When you read about Wal-marts success you will inevitably read about Sam Walton's brilliant and insightful decision to open up large stores in small towns. But this did not start out as a deliberate strategy. After the success of his first store, Walmart founder Sam Walton chose to open a second one in a small, nearby town due to logistical reasons. Walton’s success continued, more stores were added, often in small towns. Eventually, the company observed that this strategy was the best means of expanding its business, and it became its deliberate strategy. Walmart’s unplanned initiative of building new stores in small communities was an emergent strategy. Eventually as this strategy proved to be successful it transitioned into a thoughtful and organized action a.k.a its deliberate strategy (Stobierski, 2020).

Mirabeau & McGuire (2014) frame strategy making as an iterated process of resource allocation. In their work they develop a model of emergent strategy that shows it's origins in autonomous local problem solving and how it becomes realized strategy via mobilization of organizational support to legitimize such local problem solving by eventually embedding successful patterns into each organizational unit. The traditional capital budgeting model, in which the decision rule of maximizing discounted cash flow is used to choose among competing projects, turns out to be empirically inaccurate.

Often times autonomous projects are not well aligned with stated strategic objectives articulated by top management. Yet very often such autonomous projects can be the most valuable projects an organization has. Organizations whose leadership understands the impact and benefit of emergent strategy will develop processes for identifying such autonomous projects and learning to take an impartial view to assess their benefit. Ultimately successful autonomous projects are then legitimized under the corporate umbrella so to speak and become part of deliberate organizational strategy.

Leadership that focuses on minimizing the political aspects of marshaling support for autonomous projects tend to do better at innovating. Organizations that wish to be adept at benefiting from emergent strategy must foster an environment that allows a mix of emergent strategies to be formulated and carried out in real time. Mozart might characterize the traditional strategy formulation process where every detail of every instrument is carefully planned by the composer, and emergent strategy as improvisational jazz.

When challenged, decades later, to dig deeper into how the company had actually realized high returns after its founding period had passed, leadership discovered that the business’s biggest moneymakers were consistently the result of incremental, close-to-the-customer applications. Many of those value-creating innovations had sprung from learning by doing, improvising, and improving—and getting by on a shoestring. (De.Smet & Gagnon, 2018)

Many companies that desire to be innovative sponsor idea generation initiatives. This model is NOT emergent strategy. Typically in idea generation, suggestions for projects are elicited from the individuals in the organization. No commitment nor decision to support initially flows from these ideas. Idea generation is really nothing more than a tool to enable senior leadership to brainstorm more ideas, as they work out their deliberate strategies. Such tools tend to be political in nature and will inevitably select projects that are already aligned with the stated strategy from senior manaagement.

Organizations leverage several tools to promote idea generation. They may have a website where project proposals can be introduced by anyone and others can vote on them, they may sponsor innovation or hack weeks where senior leadership selects the projects that they like the best from among the competing projects that teams implement. All of these tools can more or less be characterized as "suggestion-boxes".

Millard (2015) discusses 9 reasons why organization suggestion boxes fail. Among these reasons are 1) No follow up, 2) only a small number of ideas are implemented, 3) No way to promote engagement, 4) Difficult to submit ideas, 5) Lack of recognition and reward. Suggestion boxes are a bad way to promote a great concept "engaging employees in continuous improvement". Millard suggests leveraging continuous improvement software instead.

When the wrong tools are used to promote employee engagement in strategy formulation it has a chilling effect on the level of innovation that a company is able to foster. Garrad & Chamorro-Premuzic (2016) discuss the negative impacts of an excessive emphasis on the wrong things when seeking employee engagement. From negative impacts on the benefits of organizational diversity by favoring certain personality types over others, to employee burnout. Organizations that focus excessively on positive personality types and getting along tend to fall in to status quo modalities that undermine the organizations capacity to innovate.

Employees who are naturally more optimistic, positive, emotionally stable, agreeable, and extraverted, tend to be more engaged – regardless of the circumstances. Hiring naturally happy people to (artificially) inflate engagement scores does not result in improved productivity or performance; but it does involve unfairly excluding people who are more pessimistic, introverted, demanding, or moody.? Positive mindsets bring openness and creativity. More critical ones tend to bring focus and attention. People who are put under moderate amounts of stress tend to become very focused and target-driven which can help to drive positive performance outcomes.

According to Mackie and Worth (1991), being in a positive mood causes people to bring more information to mind than does being in a negative mood (cf. Isen, Daubman, & Nowicki, 1987; Isen, Johnson, Mertz, & Robinson, 1985). In this crowded cognitive environment, people may attend to many different aspects of the material active in working memory, thus broadening and diffusing their attentional focus. One implication of this diffuse attention is that people in positive moods may process information less efficiently than may people in negative moods. (Derryberry & Reed, 1998).?

This is not to say that if you want to improve information processing by your employees you should strive to put them in a bad mood. The key to understanding why affect impacts information processing is to examine how the person experiencing the affect interprets the affect.

Attainment of goals places people in a positive affect, non attainment of goals places people in a negative affect. Conversely people with a naturally positive affect are more likely to perceive that they have attained or made progress toward their goals than those with a negative affect. Such an interpretation impacts the stop behavior and determines when a person will cease to strive toward a goal. On the other hand if a person has a negative affect because "they do not enjoy the task", then the negative affect is unlikely to have a positive effect on performance.

Positive personalities are more likely to use the suggestion box, but critical personalities are more likely to put their head down and come up with solutions to problems that vex them. People experiencing negative moods are often more persistent than those who are in more positive mindsets (Martin, et al. 1993). Such persistence can tend to result in solutions being implemented that work. If further challenged by initial lack of support by senior leadership these solutions often need to get by on a shoe string budget. As they saying goes "Good wine comes from tortured grapes." As previously discussed, such solutions tend to be a companies best assets. Organizations that encourage the revelation of such solutions without political overtones will be able to measure and evaluate which solutions help realize the overall organizational goals. These organizations will be "learning organizations" which are able efficiently identify autonomous problem solutions that have characteristics that can be leveraged as realized strategy (Gavin et al., 2020).

This suggests that organizations who practice leader humility and understand that perhaps the best strategic ideas do not come from the top, are the ones best positioned to survive in a dynamic and rapidly changing world.

References

Derryberry, D., & Reed, M. A. (1998). Anxiety and attentional focusing: trait, state and hemispheric influences.?Personality and Individual Differences,?25(4), 745–761. https://doi.org/10.1016/s0191-8869(98)00117-2

De Smet, A., & Gagnon, C. (2018, February 16).?Organizing for the age of urgency. McKinsey & Company. https://www.mckinsey.com/business-functions/organization/our-insights/organizing-for-the-age-of-urgency#

Dill, W. R. 1979 "Commentary." In D. E. Schendel and C. W. Hofer (eds.), Strategic Management: 47-51. Boston: Little, Brown.

Garrad, L., & Chamorro-Premuzic, T. (2016, August 16).?The Dark Side of High Employee Engagement. Harvard Business Review. https://hbr.org/2016/08/the-dark-side-of-high-employee-engagement

Gavin, D., Edmondson, A., & Gino, F. (2020, October 1).?Is Yours a Learning Organization??Harvard Business Review. https://hbr.org/2008/03/is-yours-a-learning-organization

Martin, L. L., Ward, D. W., Achee, J. W., & Wyer, R. S. (1993). Mood as input: People have to interpret the motivational implications of their moods.?Journal of Personality and Social Psychology, 64(3), 317–326.?https://doi.org/10.1037/0022-3514.64.3.317

Millard, M. (2015, April 20).?9 Reasons Your Suggestion Box Failed. Blog.Kainexus.Com. https://blog.kainexus.com/improvement-disciplines/suggestion-box/9-reasons-your-suggestion-box-failed

Mintzberg, H. (1972). RESEARCH ON STRATEGY-MAKING.?Academy of Management Proceedings,?1972(1), 90–94. https://doi.org/10.5465/ambpp.1972.4981316

Mintzberg, H., & McHugh, A. (1985). Strategy Formation in an Adhocracy.?Administrative Science Quarterly,?30(2), 160-197. doi:10.2307/2393104

Mirabeau, L., & Maguire, S. (2014). From autonomous strategic behavior to emergent strategy.?Southern Medical Journal, 35, 1202-1229.

Stobierski, T. (2020, November 19).?Emergent vs. Deliberate Strategy: How & When to Use Each. Business Insights - Blog. https://online.hbs.edu/blog/post/emergent-vs-deliberate-strategy