Mintzberg is a professor of management studies at McGill University in Montreal and a professor of organisations in INSEAD in France. (www. onepine. info/pminz. htm) Many believe that organisations are more intricate in today’s turbulent world. Requirements in strategic management are changing in today’s business environment. A strategy is argued to be vital to maintaining success of businesses in the long term “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 to achieve those goals. (Chandler 1961) The first three schools of thought are prescriptive in nature, and more concerned with how strategies should be formulated.
The six other schools that follow consider specific aspects of the process of strategy management and have been concerned more with describing how strategies get made. The last school sees people seeking an integrative cluster of all the schools. The Planning, Learning and Positioning Schools are the 3 schools of thoughts that I am going to focus on.
I will be analysing their underlying assumptions, perspectives and paradigmatic stances. The planning school emerged with the design school “in fact the planning school originated at the same time as the design school; it’s most influential book, Corporate Strategy, by H. IgorAnsoff” (H. Mintzberg, 1998). Planning school formalize design school’s perspective, seeing strategy making as a more separated and systematic process of formal planning. In short “strategy should be like a machine”. The overall message is: formal procedure, formal training, and lots of numbers.
The basic strategic planning takes the ‘SWOT model, divide it into neatly delineated steps, articulate each of these with lots of checklists and techniques, and give special attention to the setting of objectives of the front end and the elaboration of budgets and operating plans on the back end’ (Mintzberg et al 1998) I think that many organisations will use staff planners to replace senior managers as the key players in the process. Nowadays most organisations receive little value from their annual strategic planning process.
Because of new challenges, this process should be redesigned to help real strategy making and to encourage “create accidents”. Some newer aspects of planning school include qualitative information, like scenario building, but schools spirit is in formal procedures and analysing mainly quantitative data. Planning suggests that by applying a set of powerful analytic tools, managers can predict the future of their business accurately enough to allow them to choose a clear strategic direction.
But sometimes the environment can be so uncertain that no amount of analysis will allow a manager to predict the future. Most entrepreneurs tend not to write their plans but this doesn’t mean that they don’t plan, their plans mainly reside in their minds, proponents of planning stress the value of planning, and it helps entrepreneurs anticipate change in environment, deal with investors and attract funds. (Busenitz, Barney, 1997). Planning can also aid an entrepreneurs thinking and decision making helping them avoid bigger risk taking business activities.
Mintzberg argues that planning does not see every eventuality, Mintzberg states that the key concept is the “forecasts about future conditions” so that the company knows which direction to take should there be a change in circumstances, but “no intended strategy can ever be so precisely defined that it covers every eventuality” (Mintzberg, 1990). Moreover, if the company has relied on its strategy to guide it through change, there may be an over reliance on prepared solutions.
This may result in a lack of innovative thinking and difficulties when an unaccounted problem presents complications for the organisation. Thus proving that Mintzberg’s point that planning does not contribute to the success of a business is true This is most evident in the case of Daimler Benz a large car manufacturing company, a product of Daimler Benz that is well known is the Smart car. When manufacturing this car the company used the planning model in the company marketing and production strategies but the overall success was due to the firm’s ability to adapt quickly to environmental changes.
Firstly the production strategy. The manufacturing of these cars involves a high level of innovation. The cars are produced in a plant, Smartville, and the parts needed are contracted from 7 suppliers. Smartville itself has an ergonomic and efficient floor layout to minimize time wastage in transferring the car parts. The final assembly area is cross shaped to maximize efficiency, requiring just 4. 5 hours per car. (http://www. autointell. net/nao_companies/daimlerchrysler/smart/smart-sales. htm)
This is clearly an example of the planning school strategy approach, the part shipments had to be worked out and set up in advance, and the most efficient plant layout had to be planned before it was built. The strategy results in low assembly time, it can be argued to give the Smart car a cost advantage over other automobiles in terms of production. The problem with the planning school was that the strategic planning literature grew dramatically. However, the contents in the literature did not evolve.
“Strategy became to static” (www. 12manage. om) this led to senior managers not giving it the attention it required. Also, hardly any research was conducted by people associated with this school to find out how planning really worked in practice. Planners’ response to this criticism has been that the ‘lack of managerial support for planning and the absence of an organisational climate congenial to the process’ (Mintzberg 1998) are responsible for planning’s shortcomings. The planning school does not specifically define the way in which the strategies are conceived (Mintzberg 1990).
Also, as the CEO is only involved in overseeing the project, there is a danger that top management may become too distant from the workings of the organization and lower level detailed processes which are crucial to maintaining an effective strategy (Mintzberg 1990). The concept of the learning school links to the learning theory in psychology and education and the chaos theory in mathematics. The learning school provides us with the understanding of play rather than pursue, this gives the emphasis that people are inclined to “experimentation, ambiguity, adaptability”.
A homily associated with this school of thought is ‘if at first you don’t succeed, try, try again’ This suggests that strategy should be implemented as an evolving process The learning school view, conversely, embodies experience and trial and experience approaches to strategy formulation. Mintzberg’s (1991) opinion is that a sequence of events, disjointed or logical, moulds the firm’s strategy in an ongoing process. The structure is initially conceived informally through these events, and the strategy follows from it. Thus “structure follows strategy as the left foot follows the right in walking” Mintzberg (1990).
This allows the firm to react quickly to changing surroundings, and to carry on functioning whilst the strategy is being formulated; an example of this is when my dad decided to open a shop on a main street in Cambridge city centre, initially he was breaking even, but gradually as it became more established the shop became more profitable and it was making money, but with the emerging supermarkets like Tesco’s and Sainsbury’s they were always going to be a risk to the business, many other small businesses in the surrounding areas were losing trade due to the supermarkets emerging, and thus going bankrupt, my dad knew this and understood that he couldn’t compete, so he decided to sell up and go and get as much money as possible before he would go bankrupt, (inevitably he would have gone bankrupt eventually).
Now these large supermarkets have a strong hold on the market. This is an example of my dad reacting quickly to the changing environment. As shown in the Daimler Benz example above, production would start off before any learning took place, when examining the marketing strategy Daimler Benz wanted to aim its product at young people, because it was supposed to be affordable, but the problem was that the Smart car was more expensive than initially thought and the technology was conventional and predictable, this meant that the company had to choose a different aspect to the market and focus changed from practicality to fashion accessory.
As the product didn’t get off to a flying start the company centred around the internet audience by selling the Smart car online, not only did this save on rent and staff but appealed to the newly defined market of fashionable young people, this suggests that Daimler Benz had to change its initial planned strategy by looking at its surroundings and decide to act in a learning school approach. Another example of how the learning school is imperative is in the case of Honda in the US, as they tried to break into the American market. Honda’s strategy was to learn how business was conducted in America before implementing a strategy. They made mistakes in the process but learnt from them.
The learning school sees the world as too complex to allow strategies to be developed all at once as clear plans or visions. Hence strategies must emerge in small steps, as an organization adapts or learns. For the learning school, the world is too complex to allow strategies to be developed all at once as clear plans or visions, as Mintzberg mentioned above “People inclined to experimentation, ambiguity, and adaptability”. Hence strategies must emerge in small steps, as an organisation adapts or learns. According to this school, strategies emerge as people come to learn about situation as well as their organization’s capability of dealing with it. Eventually they converge on patterns of behaviour that work.
Thus strategies can be tracked to a variety of little actions and decisions made by all sorts of different people. In other word, informed individuals anywhere in the organization can contribute to the strategy process, through the diffusion processes of knowledge bases, which are necessary for strategy systems, deliberate control is excluded. Whereas the leader must learn too, this can create a sense understanding involvement between the leader and the foot soldiers on the firing line, which are closest to the action and both can relate to problems that arise. (Bob De Wit and Ron Meyer, 2004). Information needs of learning school are not clear, but could include anything.
However, situation in external environment and internal capabilities are highlighted, and thus information needs could be described to be similar as in design school. The biggest difference is the user of this information. In previous schools, chief strategist or group of strategists used this information. In learning school, instead, all employees of an organization can contribute to strategy creation, which leaves it with a greater chance of creating a strategy which will work for the organization and its employees. The major problem with learning model is when learning by trial and experience firms may incur large costs. By using the planning approach, potential “non-starters” can be eliminated from the strategy. Mintzberg argues that it is not possible to tell what will be a “non-starter”.
However if there are large amounts of investment being risked, then it may be wise to think before doing, when employing the learning concept a company may find it hard to implement any actions because its in a process of learning and this can be very frustrating for shareholders or investors awaiting returns on their investments so a company will have to bear this in mind when implementing this strategy. Mintzberg argued that it sees strategy as a “chaotic unpredictable and process- rather than result-oriented” (www. 1000ventures. com). The learning concept lacks understanding of the business environment, when following the learning school methods it doesn’t fully appreciate the environment. Ansoff (1991) argues that the market should be assessed in order to establish whether the environment is suitable to the model.
According to him, the model is especially unsuited to “turbulent environments” due to the lack of a planned strategy. The organisation may not be as quick to alter its strategy as planning school firms which have assessed the situation before. This is evident in the Honda example where they researched the environment before planning a strategy. The Positioning school was the dominant view of strategy formulation in the 1980’s. It was given impetus especially by Michael Porter in 1980 ( published Competitive Strategy), following earlier work on strategic positioning in academy and in consulting, all preceded by a long literature on military strategy, dating back to 400 B. C. and that of Sun Tzu (The Art of War) and Carl Von Clausewitz (On War 1989).
A homily associated with the positioning school is “Nothing but the facts madam”, the centralised message of this school is to calculate rather than create or comment. In this view, strategy reduces to generic positions selected through formalized analysis of industry situations. Whilst the chief executive remains the strategist, planners elevate into analysts. Hence, the planners ‘feed the results of their calculations to managers who officially control the choices’ (Mintzberg et al 1998). This proved especially lucrative to consultants and academics alike, who could sink their teeth into hard data and so promote their “scientific truths” to companies and journals alike.
This literature grew in all directions to include strategic groups, value chains, game theories, and competitive analysis. This school closely relates to the learning school. This is due to the fact that it takes into consideration past events before implementing strategy. ‘When I have won a victory I do not repeat my tactics but respond to circumstances in an infinite variety of ways’ (Sun Tzu 1971) Porter argues that ‘strategy is about competitive position, about differentiating yourself in the eyes of the customer, about adding value through a mix of activities different from those used by competitors’. In other words, he argues strategy to be about achieving goals.
Porter defines competitive strategy as ‘a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there. ‘ This suggests that Porter used planning and positioning. In his model of competitive analysis, Porter identifies five forces model had an effect on competiveness in the industry. These forces deem to be responsible for which strategy an organisation decides to take. Whilst one might argue that given the range of possible external forces, the range of possible strategies would be immense, Porter states that ‘only a few generic strategies survive competition in the long run’ (Mintzberg 1998). The separation of thinking from acting can render the strategy-making process excessively deliberate hence undermine strategic learning.
Also there are risks in predicting the future by extrapolating the trends of the present … and relying on hard data’ (Mintzberg 1998). This is due to the fact that the market is not stagnant. One can never foresee what will happen in the future. By basing an organisation’s strategy on predictions, the chief executive would be leaving the organisation exposed and vulnerable. Porter argues that there are “two basic types of competitive advantage that a firm can posses” pursuing low cost or differentiation strategies. This taken together with the “scope”
A critique of this school is the fact that its context seems to be biased toward traditional big business. Porter’s five forces model is only suitable in a stable market. This would be useless to a positioning analyst working in an unstable industry as it would be impossible to tell who has what market share. ‘… if strategy is stretched to include employees and organisational arrangements, it becomes virtually everything a company consists of. Not only does this complicate matters, but it obscures the chain of causality that runs from competitive environment to position to activities to employee skills and organisation’ – Michael Porter, Harvard Business review April 1997
By saying this, Porter implied that Japanese companies ‘rarely have strategies’ that they ‘will have to learn strategy’. This statement seems to be a little untrue as Japanese companies are so successful in today’s world. Drawing conclusions, the choice of strategy depends on the circumstances at the time. So is it as important to have a specific approach to strategizing as it is to have a strategy itself? This was a point raised by Goold (1992). As long as the business succeeds and is able to account for it, so that it is of value to other firms, the actual process of arriving at the strategy may not be as important. What is interesting is that in the Daimler Benz example, there was an initial, planned strategy, which was subject to change at later stages.
A company should know what it is aiming to do, but this does not necessarily have to be correct and scheduled, as implied by the planning school. Mintzberg (1990) asserts that the existence of a strategy gives managers confidence and a sense of direction. Should this sense of direction change, then the strategy can follow the change. This means that a compromise between the two views can be achieved; each extreme view has flaws as well as benefits, and is argued to be dependent on the environment. The coexistence of both approaches in strategy making is acknowledged by Goold (1996), Rumelt (1996) and Pascale (1996). The planning part of the strategy may include market research, in the example of Daimler Benz the workforce would have been figured out in advance.
A business would use the planning school during a thriving business environment, especially if it wishes to take advantage of open markets during this period as it is more likely that the opportunity will arise in this condition and this school can be a great tool use to capitalize on these opportunities, but during a recession one might expect the learning school to predominate when one is looking for one core business and selecting the best from what has been seen to work, this is similar to the Honda situation. The key here is that organisations should be able to evaluate its strategy continuously, involving top managers and assistants to insure optimal information and to enforce corporate ethos to the organisation, this will, in turn, help the achievement of the strategy, which may follow, or be followed by, the structure of the firm.