Strategy and Management of Change

1. Strategy and Management of Change Strategy Processes Professor Julian Lowe University of Ballarat

3. Strategy Processes: • How strategic decisions are made • Links between strategy and organisation • Relationship between formulation and implementation • Strategy as something which is designed or emerges • Who is involved in strategic decisions • Power, information, knowledge, organisational structures and strategy processes.

4. Aims • To document the different decision processes through which strategy is made and implemented (formed) • To examine how this can be managed • To understand the place of history, culture, organisation, individuals in framing and implementing strategy • Contrast the various ‘Schools’ of Strategy • To develop approaches to strategy decision making which will enhance competitiveness, now and in the future

5. Why study processes? We may be strategic thinkers and develop strategies for the future – but how do we manage the process • Top Management’s role • Analysis • SWOT Meetings • Plans vs Planning • Procedures v Outcomes What is the impact of different environments • High velocity/change environments • Long term/heavy investment (eg.Pharmaceuticals) • Organisational context • Manage profit, government, small, large multi-national company • Strategy and structure

6. The Main Strategy Formation Activities De Wit & Meyer (2004). Op cit.

7. The Problem/Issue intended deliberate unrealised Realised Strategy is about where you are going and how you are going to get there!!! emergent

8. Strategy Decisions as Different Stages of the Strategy Process • The environment • Expectations • Resources & competences Strategic Analysis Strategic Implementation Strategic Choice • Bases of choice • Options • Strategy evaluation & selection • Organisational structure • Control systems • Managers Strategic thinking

9. Questions: Strategy Processes in Your Organisation 1. Is your ‘competitive advantage ‘real’? Are strategic plans (in the plan or in annual reports) realistically played out? What inhibits non-pursuit of plans? 2. Compare the strategy process challenges for (say): - a ‘health service’ - a ‘multinational confectionery firm’ - a ‘growing SME and ISP service provider’ - a ‘top 100 company’

10. Now try this • Describe in no more than three lines strategy practice in your organisation • …. And how would you improve it – no more than than 25 words

11. What can be measured? • Thinking v Creating v Implementing • Intended v Realised Formulation Strategic Behaviour prior to action in practice A pattern of A pattern of actions decisions

12. Hidden Flaws in Strategy (Roxburgh) A behavioural economic critique of why strategy often gives wrong answers or gets it wrong • Overconfidence – see how wrong engineers estimate project costs • Mental accounting – valuation depending on where the money comes from. Restructuring may cost millions – small profit and loss changes less – but attract more attention • Status quo bias – less likely to sell you high risk securities but would never buy them • Anchoring – biased estimate of the future based on what we’ve just experienced • Sunk cost effect – good money after bad • Herding Instinct – dot com boom!/bust! • Hedonic States – over estimate how much you need to live on or how bad a change will be • False consensus – selective recall, asking biased questions, interpreting in a biased way

14. When do we design strategy and when do we let it emerge? Strategy is about the future and the future is unknown • Responding to the future • Creating the future • Insuring for the future

15. Deliberateness and Emergence – put in another way .. Planning • Think before you act • Link activities • Look at the facts • Stop drift/give direction • Long term thinking v Muddling through and short term change Incrementalism • Shaping in the face of changing patterns • Planing is good for organising and coordination but not doing new things • Innovation requires reflecting, tinkering and uprooting • Problems can’t be analysed objectively – interpretive perspectives are dominant • Behavioural/mindset issues

16. Deliberateness and Emergence – put in another way …… De Wit & Meyer (2004).

17. Allison: the essence of decision and the Cuban missile crisis 3 Models: Rational Actor Organisational Process Bureaucratic Politics And Evolutionary Selection? Organisational Configuration • Entrepreneurial • Machine • Adhocracy • Professional • Diversified But balance needed, what happens when one gets out of control?

18. Categorisation of Approaches by Degree of Control

19. Three Generic Processes?

20. Strategic Planning to Strategic Architecture Strategic Planning Formulaic and ritualistic Existing market structure and base line Industry structure Fit Capital budgeting Individual business units Strategic Architecture Exploratory and open ended Discontinuities and competences as base line New functions Enlarging opportunity horizons Competence migration and acquisition Whole organisation and its network

21. Exercise: Strategy Processes in your Organisation What are main impediments in your organisation to strategy processes? Make some recommendations for their improvement. Is logical incrementalism the same as muddling through? Do organisations drift? Is this good or bad? When is drift most problematic? What do you think of Stacey on the video and the concept of complexity theory being a reasonable explanation and model for strategy?