Approaches to Sense the Future Directions of the Organization

Future direction- How we decide vision, mission, goals and objectives and how to achieve those.

Nature of the business environment

Strategic Management links with the environment. We should understand the environment. it should be considered the environmental changes. Understanding the environment is very important because it is turbulent and the changes are happening always. Different environment conditions can be seen.

·         Simple environment- it is predictable

·         Complex environment- it is unpredictable

Before 1960s, it was considered that the organizations are in simple, stable condition. But today it is in a complex, turbulent position. Today the technology, weather, customer… etc. such factors are changing fast. Workforce complexity has been increased. We can see a high speed of changes.

We should know which kind of environment our organization is operating?

1.      Stable

2.      Changing

3.      Volatile

4.      Turbulent

2.1. Approaches towards Sensing the Future

Strategic planning- Based on the historical data we forecast, predict. Analyze the historical data. Much more focus is on analyzing historical data and we formulate strategies.

Strategic thinking- It is not about historical data. It is about knowledge, experiences, intuition, creative thinking… etc. This is difficult and advances than the strategic planning. Strategic thinking cannot be practiced in a classroom. It is more practical.

Validity Approaches in Different Environment Conditions

Today the environment is too much turbulent. It is really challenging to the strategy makers.

The greatest challenge the strategic managers faces today is to combat or cope with uncertainty coupled with dynamism and complexity in the environment.

In simple and static environmental conditions- It is possible to predict and forecast. Hence, strategic planning approach would be mostly succeeded.

In complex and dynamic environment conditions- Managers tend to make sense of the future intuitively, imaginatively, creatively. Hence, strategic thinking approach would be mostly succeeded.

2.2. Strategic Planning

v  This approach can be applied in a stable, slightly changing environment.

v  In 1970s it was most popular.

v  The organizations hired specialists. The strategic planning is done by specialists. Therefore planning was separated from implementation. Planning is done by specialists and the implementation is done by the organizational members.

v  Strategic planning is very analytical and depends on data. How we understand the environment? How we analyze it? It is collected historical data, analyzes those data and based on the analyses they make the strategic plans.

v  It is focused on preservation and rearrangement of established categories. In Strategic planning they try to preserve the established strategies because they formulate the strategies based on a particular model. Therefore new strategies are not formulated. They rearrange their existing/ established strategies and implement.

v  It is expected to formulate best strategies. It is similar to rational decision making process. Firstly analyze the environment, identify the need of strategies, develop alternative strategies, select the best strategy, implemented the best strategy and evaluate the success of strategies. Apply something like a model or step by step process in strategic planning.

v  Strategic planning is outlined by step by step instructions.

v  It is based on the manipulation of numbers.

v  This is the around the strategy making rather than inside it. We are not going to understand it with a huge mental effort. Just analyze data and make strategies.

v  Strategic programming = Strategic planning

Strategic programming is equaled as strategic planning because we assist the models in strategic planning. Shorter models and detailed models are assisted as well. If we apply the step by step model we can make a schedule. It is something like a program. By applying a predetermined process, they prepare the corporate plan.

v  This is traditional.

v  Strategic planning, as it has been practiced, has really been strategic programming, the articulation and elaboration of strategic or vision that already exist (Mintzburg, 1994).

v  Strategic planning is very suitable for a static environment. But in a turbulent environment it is not suitable because the models, programs are something that is stable.

2.2.1. Fallacies of Strategic Planning

Prediction- The world is supposed to stay the same while a plan is being developed and implemented. They think that the world is existed in same and stable. Therefore they predict the future by considering same environmental conditions will exist in future also.

Detachment- Strategist can be detached from the subjects of their strategies. The planning and implementation is done as separately. Planning is done by the experts and implementation is done by organizational members. Two distinct parties are performed and considered as two distinct functions.

Formalization- Formalization of strategy making process. We use step by step process and models when making strategies. Those models are not suitable for each and every situation.

2.2.2. Danger of formalization

It is badly affected and limits our creative activities. We use the model and apply. Our creativity is restricted.

Systems do not think when they are used for more than the facilitation of human thinking, they can suppress creative thinking. Here it is applied very traditional methods. Always tend to be believed the models. Systems do not allow creative thinking.

Strategic planning has a greater use without arbitrary formalization and a contribution around the strategy making process. Here, there are not arguments. All the members believe the models. There are no conflicts in ideas of members. There are no debates or brain storming. All agree the strategy which derived from the accepted model and all members accept that strategy to implement the possibility of generating the best and most suitable strategy is very low.

2.3. Strategic Thinking

Strategic thinking is something that thinking actively. We think in a different way.

v  Strategic thinking is all about finding a way forward to the future with intelligent adaptation to the ongoing situations with creative and critical thinking by exploring and evaluating the available and feasible strategic operations and executing the right option with confidence and commitment.

         It is going beyond the critical thinking. Here we bring something creative and different. We use our intelligence than our competitors. How we can become creative and generate a competitive environment? There it is used experience, intuition, creativity, the strategic thinking organizations are highly success with turbulent organization environment.

v  Strategic thinking focuses on being first and fast to capture and build on available business and market opportunities before the existing and potential by being very unique, opportunistic and farsighted.

       How can we become unique? The answer is strategic thinking. Strategic thinking can grab the market opportunities.

v  Strategic thinking is about finding and developing a unique strategy for an organization by exploring all possible organizational features and challenging conventional thinking.

       The conventional thinking is breakdown which totally based on models.

v  Strategic thinking focuses on finding and developing unique opportunities to create value by enabling a creative dialogue among all the members in the organization who can affect a company future direction. 

In strategic thinking we discuss with all organization members top to bottom. Finally it comes out with a very valuable strategy. A unique strategy is figured out rather than competitors.

v  Strategic thinking is more than synthesis- synthesis is combining all strategic planning is wider than a combination. In strategic thinking it includes integration of so many factors and holistic view. Integrate and interact each factor and each person in strategic thinking. It involves relatively more intuition and creativity. Intelligence, knowledge, wisdom… all are required.

v  The outcome of the strategic thinking is an integrated and holistic perspective of the enterprise. It is a holistic view. Not about several parts.

v  It generates the creative act of synthesizing the experiences in to a novel strategy (synthesize of the insight to transform the company). See the organization in a holistic way and finally come in to a new strategy.

Blue Ocean Strategy- presenting a new strategy into a new market.

Red Ocean Strategy- presenting an existing strategy into an existing market.

The strategic thinkers are bringing the strategies like blue ocean strategy.

v  Consider the whole. Not part by part. The holistic view is essential. According to the story of six blind people and elephant, a one blind person touched only one part, other blind person another part of the elephant. They defined the elephant according to the part each person touched. Any blind person could not take the real image of the elephant. So, if we want to take a real picture on something we should consider the whole thing.

v  Strategies evolve through strategic thinking, cannot be emerged on schedule and immaculately conceived.

Under even an uncertainty situation, we can use good strategies by using strategic thinking. It is not in a scheduled way. The environment is not clear and scheduled. They must be free to appear at any time at any place in the organization.

2.3.1. Obstacles of Strategic Thinking

-        Tendencies for rigorous analysis- most of managers are using tendencies for rigorous analysis. Most of times they tend to do serious analyses.

-        Trap to model based normative approaches- managers are prefer to use the models which are made by earlier.

-        Lack of imagination and creativity

-        Industry conventional wisdom leads many companies to follow common practices- one company what they do? Other companies start to follow it. They follow, copy rather than creative thinking or bringing new in to the industry. E.g. In banking industry all the commercial banks are using similar services in Sri Lanka.

-        Short term pressure to please the key stakeholders.

2.4. Strategic Thinking vs. Strategic Planning

Strategic Thinking	Strategic Planning
Very much synthesis oriented	Very much analytic oriented
Use more right brain and creative thinking	Use more left brain and analytical thinking
More likely to generate emergent strategies	More likely to generate intended strategies
Bottom up is possible	Mostly top down
Do not depend on idealistic or normative models	Highly depend on idealistic and normative models
Adopts more irrational decision making	Adopts more rational decision making
Appropriate in highly turbulent and volatile business environments	Appropriate in a stable and changing business environment
How to be different from competitors? How to make competition irrelevant?	How to be like best competitor? How to be better than competitor?

Thinkers and doers should complements

v  Strategy direction setting and strategy making process should be captured what managers learn from all sources (soft and hard data) and then synthesizing that learning in to vision of the direction that the business should purse.

What thinkers do? Managers learn all forces by thinking and gather existing information and knowledge. Synthesize and create vision, mission, goals and objectives and strategies to achieve those future directions. Doers contribute to operationalize what thinkers thought.

v  Doers can operationalize and implement the creative dreams articulated by thinkers.

Thinkers think and doers operationalize what the thinkers formulate strategy. Strategic thinking and implementation should be combined each other. Those should not be considered as distinct functions.

2.5. Strategic Fit vs. Strategic Intent

Formulating strategy in addition to strategic planning and strategic thinking, we can use this method and approaches.

2.5.1. Strategic Fit

Tries to create a fit between the existing resources of a company and current environment opportunities and not enough upon building new resources and capabilities to create and exploit future opportunities.

In analyzing the environment we are able to achieve new opportunities. Then we look within the organizational strengths, resources and check whether they are enough and capable to capture that opportunity. If we are capable we capture that opportunity and react. Here we try to fit our internal capabilities to capture the external environmental opportunities.

Most of Sri Lankan companies are using this strategic fit approach. They are not going to improve, expand the organizational capabilities. They see the opportunities firstly and try to match those with organizational resources and competencies. Also they also not search future opportunities rather than trying to have today’s opportunity.

2.5.2. Strategic Intent

The notion that strategy formulation should involve setting ambitious goals, which stretch a company and then finding ways to build the resources and capabilities necessary to attain these goals. Although we have not enough resources or capabilities to grab a certain opportunity, we try to stretch the available resources and capabilities and try to achieve that particular opportunity. Starting from an ambitious goal, try to stretch it for needed resources and capabilities.

Strategic intent envisions a desired leadership position and establishes the criterion the organization will use to chart its progress. Here, it is needed a good leadership. Steve Jobbs also has applied the strategic intent when he establishing apple co. and when achieving its goals.

Some examples for strategic intent organizations in real world

·         Komatsu set out to “Encircle caterpillar”

·         Cannon sought to “beat Xerox”

2.6. Strategic Intent Concept Encompass an Active Management

·         Focusing the attention on the essence of winning.

·         Motivating people by communicating the value of the target

·         Leaving room for individual and team contribution

·         Sustaining enthusiasm by providing new operational definitions

·         Using intent to guide resource allocations- these are not mutually exclusive approaches. We can apply strategic intent and strategic fit approaches at the same time to the organization.

·         At times, strategic managers do have to analyze the external environments and company’s resources and capabilities as they do in the fit model.

·         At other times, strategic managers need to begin with challenging goals and throughout the process, high emphasis should be focus on finding ways to develop the resources and capabilities necessary to achieve these ambitious goals as they do in stretch model.

References

Johnson G., Scholes K., Whittington R. (2008). Exploring Corporate strategy: Text and Cases, 8^th edition, FT Prentice Hall Europe.