By: Shahab Sabahi, Policy Analyst in Energy
Security and Policy Research Group
This short theme is an attempt to
introduce the evolution of the strategy paradigm to provide input for encouraging
further discussion to better understanding the concept of strategic thinking and strategy.
The first phase in the evolution
of the strategy paradigm involved “basic financial planning” in the 1950s where
the typical planning focus for the firm was the preparation of the financial
budget with a time horizon barely beyond 12 months. These organisations tended to
exhibit strong strategies however these strategies were rarely documented. The
success of the organisation was dependent on the quality of the CEO and the top
management team and their knowledge of products, markets and rivals (Gluck et
al, 1980). In the literature Drucker (1954, p. 77) drew attention to this issue
arguing that it is the role of top management to address the key questions with
respect to strategy: “What is our business and what should it be?”
Phase - 2
The second phase of “forecast-based
planning” in the 1960s resulted in organisations embracing a longer time
horizon, environmental analysis, multi-year forecasts and a static resource
allocation as the firm responded to the demands of growth (Gluck et al, 1980).
Important contributions to the evolution of the strategy literature were
offered in this period by Chandler (1962), Andrews (1965) and Ansoff (1965). In
particular Andrews (1965) and Ansoff (1965) were the first writers to address
explicitly strategy content and process. Chandler’s (1962) contribution from an
historian’s perspective explained the development of large corporations and the
way their administrative structures changed to accommodate the demands thrust
upon management as a result of business growth. Chandler (1962, p. 13) offered
a broad definition of strategy which did not distinguish between strategy
formulation and content noting: “Strategy can be defined as the determination
of the basic long-term goals and objectives of an enterprise, and the adoption
of courses of action and the allocation of resources necessary for carrying out
these goals.”
Phase - 3
In the 1970s there was a move to
the third phase of “externally oriented planning” in response to markets and
competition as strategic planning enjoyed the peak of its popularity. Planning
in this form included a thorough situation analysis and review of competition,
an evaluation of alternative strategies and dynamic resource allocation (Gluck
et al, 1980). Prescriptive techniques for strategy were at their peak at this
time with the planning school dominant (Mintzberg, Ahlstrand and Lampel, 1998)
and numerous simplified frameworks for strategic analysis were put forward
mainly by industry consultants. These frameworks included the Experience Curve,
the Boston Consulting Group’s (BCG) portfolio matrix and the Profit Impact of
Marketing Strategies (PIMS) empirical project.
In the 1980s firm’s embraced what
became known as the strategic management phase - the fourth phase - being the
combination of the firm’s resources to achieve competitive advantage. This
phase included:
1.
A planning framework that cuts
across organizational boundaries and facilitates strategic decision making
about customer groups and resources.
2.
A planning process that
stimulates entrepreneurial thinking.
3.
A corporate values system that
reinforces managers’ commitment to the company strategy (Gluck et al, 1980, p.
158).
The strategy process came to be
increasingly performed by line managers with occasional assistance from
internal strategy experts operating in fewer numbers compared with the past.
Initiatives in the field were driven by unprecedented levels of change and complexity
confronting organisations (Prahalad and Hamel, 1994) as firms endeavoured to
keep pace with environmental developments. At this time there was also a shift
from quantitative forecasting to greater use of qualitative analysis (Stacey,
1993). The focus became establishing the firm’s mission and vision for the future,
analysis of customers, markets, and the firm’s capabilities (Wilson, 1994).
By the mid-1980s it was evident
that the changes in the evolution of strategic planning into strategic
management were not leading to significant improvements in strategy
implementation. In addition, at this time there was apparent a greater sense of
the importance of organisational culture and internal politics in the strategic
management process (Wilson, 1994; Bonn and Christodolou, 1996). The ineffectiveness
of the strategic management process led many experts in the field to emphasise
the need for strategic thinking - the fifth phase in the evolution of the paradigm.
In this context Stacey (1993, p. 18) observes: “…that although the procedures
and analytical techniques of modern strategic management may not be of much
direct practical use, they do create a framework for strategic thinking and, it
is assumed, managers who think strategically are bound to act more effectively
in dealing with the future." That the strategic management process
provides a framework for strategic thinking is an important foundation in
attempting to conceptualise strategic thinking.”
The evolution of the paradigm from strategic planning to strategic
management into strategic thinking reflects the economic, technological and social
changes that have taken place since its inception in the mid 1950s, especially since
1984 (Aggarwal, 1987; Prahalad and Hamel, 1994) with higher levels of environmental
uncertainty evident placing greater demands on the strategy process in organisations.
Indeed, the day-to-day challenges of management bring forth issues that test
established frameworks, policies and procedures within organisations designed
to deal with them. The major task of managers is to determine when to apply these
established frameworks, policies and procedures and when to ignore them and develop
new solutions. Strategic thinking facilitates this process (Stacey, 1993).
