Strategy can be loosely defined as using a company’s resources in such a way that the business outshines the competition and arrives at a great bottom line. Management is about operating a business at a high level daily, while always keeping an eye to what can be done to ensure future success. Together these concepts become ‘strategic management’, which is all about smartly getting results for the business through goal setting, action planning and effective implementing. The two leading theories of business strategy were started by Alfred Chandler and Igor Ansoff during Cold War North America of the 1960’s. Economics provided ready-made frameworks to this new emerging field of strategy which found legitimacy this way in a context of prevailing “modernist scientism” (Whittington, 2004, p. 64). Ansoff’s analytics were further developed by Porter in the 1980’s with the introduction of new concepts and models such as “competitive advantage”, “value chain”, “five forces analysis” (Porter, 1980; Porter, 1985).
Strategic management is important because it encourages operations from a strengths or competence perspective. Russell-Walling (2008) notes that most companies have a few competencies and it is important to understand what leads to their success. A core competency greatly positions a business because: it is not easy for the competition to copy; the business can use it in multiple ways and; it provides great benefit to customers (Russell-Walling, 2008). Strategic management helps in the maximization of profits for shareholders by analyzing strengths and weaknesses and setting goals that are specific, measurable, attainable, realistic and time sensitive. This is opposite to haphazard planning which could lead a company to a place of devaluation.
A critical look at ‘rational planning model’.
The major approaches to strategy development are rational planning, logical incrementalism, emergent strategy, and planning as a guided learning process. All of these strategies are interrelated and any organization that seeks to develop a successful strategy needs to rely on certain principles of all the strategies. The question is how much of each approach should be included in the final plan and the avenues of a strategy where a particular approach should be added. The rational planning model assumes that people act in a defined, rational, and structural manner, and this is why it has been accused of being mechanistic in nature. The guided learning process seeks to introduce mental models of reality, and it states that predicting future internal or external environments is inherently difficult (Idenburg, 1993). Logical incrementalism states that planned implementation of any strategy from the first step to the final step as wanted by the planners is an illusion or an impossible reality. It advocates the development of strategy in a phased manner, and it basically strikes a balance between the emergent and rational approaches. The emergent approach to strategy development is a reactionary approach that advises planners to develop strategies based on the latest developments. It necessitates the formulation of a flexible and opportunistic strategy (Idenburg, 1993).
The four approaches all make relevant points and yet a dominant sprinkling of rational planning emerges as the clear winner in most cases unless the business environment is completely unpredictable. Strategic development needs to be functional in response to the present situation and the possible makeup of the future. Strategies shift over time, this is inevitable, and businesses need to ensure that strategy shifts as little as possible over the course of time yet they should not stall or reject inevitable changes. If a strategy manages to stay relatively stable from inception till culmination, it is essentially a victory for the business’s rational planning approach.
The goal of this essay is to critically analyze rational planning model to determine if it is the default form of strategy. Through an examined comparison with emergent strategy, an argument will be made that generally, planning accounts for the dynamic external environment and in fact does not solely occur in isolation (Pettigrew,1985 cited in Gerry 1988). Consequently, a model that focuses on predictions makes long-term planning tenuous.
Although much research has been written about organizational strategy development and implementation, it is mostly evenly divided between Michael Porter’s deliberate, and Henry Mintzberg’s emergent ideas. Porter (2001 cited in Burnes, 2009) purports that strategy is a planned position. In fact, it is a rational-mathematical process and strategy should be implemented based on understanding the competition and other economic forces. In other words, an optimal decision must be rational and therefore must be based on careful consideration of facts. Further, strategy does not occur in isolation; a company’s options will always be limited by what is going on around it (Porter, 2001 cited in Burnes, 2009). The planning process comes across as a top-down problem solving model that I use in Psychology.
The steps are very logical and follow a sequence as follows: development of a mission statement, setting of long-term goals, analyzing the environment, formulating a strategy, trying or implementing the strategy and using control systems (monitoring and evaluation) (Schendel and Hofer, 1979). Basically the steps guide a company to first define what the problem is; then figure out what it is they want to be different; then generate alternative solutions to the problem; then carefully weigh the pros and cons of each alternative to determine which alternative could be used with minimal costs; then finally choose and try the best alternative to the problem and monitor and evaluate its impact. The planning steps may serve as a way to integrate strategic actions and outline a way forward for a company’s activities (Andersen, 2004). What is great about the rational planning model is that the strategic and rational consideration of facts reduces the chance of mistakes and by extension reduces the chance of risk for a company.
Despite its widespread influence, this view has been under severe criticism. Mintzberg (1987) sought to define strategy in five distinct yet closely interrelated ways in his paper, “The strategy concept I: Five Ps for Strategy”. These definitions normally consider the strategy to be either a plan or a pattern based on the context in question. The definitions are meant to be interrelated as no singular definition can be expected to take precedence over the other four. Based on a business’s plan of action, they can add elements to the firm’s overall strategy and contribute to the firm’s overall strategy development.
In addition, Mintzberg (1987) also contrasted strategy as either a perspective or a position, and these were his third and fourth definitions of the term. Strategies can also be divided into deliberate and unrealized strategies according to the context in which a strategy is applied. The nature of emergence of the strategy defines how it is considered. A perspective can be introduced without altering the inherent position of a business and it can be used to broaden a business’s appeal beyond its core base. In other words instead of going out of the way to plot and ploy, a company may simply rely on strategy that has come out from past internal decisions that proved to be successful. The fifth and final definition of strategy views strategy as a ploy which essentially translates as a means to outsmart another party or individual.
Rational planning as a strategy development tool focuses on meeting goals that are objectively attainable and seeks to plan for a future that can be predicted with reasonable clarity. This approach seeks to be conceptual and systematic, and it does not advocate the principle of developing strategies in an unstructured manner in response to the environment at the time (Idenburg, 1993). Problem definition, information gathering, and goal definition are the tenets on which rational planning is built upon. All of these steps should ideally be conducted with great care and attention to detail for maximum effectiveness.
Rational planning typically involves the development of numerous strategies which are to be analyzed further. Generating all the possible solutions is one of the hallmarks of this method as every eventuality needs to be accounted for. Ideally, a business should generate anywhere between two to five possible final solutions. Brainstorming can then be utilized to arrive at a final solution. Before a solution is determined, rational planning requires the development of evaluative criteria. These criteria are essentially used as measurements to gauge the success and failure of all the solutions.
The rational planning model is also called the perfect planning model as it is based on the assumption of a perfect environment (Idenberg, 1993). It encourages organizations to plan like an economist, and it considers the future of an organization to be clear, known, and properly understood with perfectly quantifiable objectives. It assumes that people tend to act in a structured and rational manner at all times, which is why it is slightly mechanistic in nature. The inherent risk is that plans are formed with an ideal environment in mind and without sufficient analysis (Idenberg, 1993).
According to Schendel and Hofer, 1979 (cited in Bracker, 1980), within the strategic management paradigm, the rational planning perspective is considered to be essential. However, it is important to note that this perspective needs to be a calculated form of management rather than a committing form as stated by Mintzberg. According to Mintzberg (1994), managers with a committing style lead engaged employees on a journey rather than strictly calculating what a group must do to get there. Strategic rational planning can be favorable for higher performance in certain conditions in an organization and it is capable of maximizing an organization’s profit levels. There is a great deal of responsibility placed on the ability of managers to maximize profits via long-term rational planning.
Rational planning has been widely criticized for suggesting that all alternatives and all their consequences can be known. It is unrealistic to suppose that any manager has all the factors (e.g. time, aptitude, timely information) needed to accomplish such a feat. The fact of the matter is that the environment is complex and sometimes the information that is available is not sufficient. That makes evaluation of alternatives difficult and consequently the choice may not necessarily be an informed one. For example, when I want to introduce a new service that is not part of the existing market in my business, the lack of comparison can be good but also bad. There is no way for me to anticipate how clients would respond. The best one can aim for is to choose a solution that is the best fit based on the options available. However, because planning is about the future, one has to account for the unexpected. For example, other issues I may have are the pressure of time and lack of adequate funds. There is always pressure to develop and implement a new idea before someone else does. In my business that sometimes means that enough time is not taken in the ‘evaluation of alternatives’ step. Even worse, I can make a decision based on Mintzberg’s ‘Pattern’ and have problems because other factors in the business environment may have changed. For instance, factors such as price fluctuation or technological innovations can have a great impact on the strategist and strategy.
There are some modern adaptations of the rational planning model that seems to address some of the weaknesses of the more traditional approach. For instance, the Johnson, Scholes, and Wittington (JSW) model is one such adaptation. Instead of linearly approaching strategy through analysis, choice and implementation process, there is a recognition of interdependence that lends to more flexibility (Kaplan Financial Knowledge Bank). Despite criticism, Michael Porter is still considered the leading authority in business strategy and the rational planning approach is still at the core of MBA courses on strategy (Mathiesen, 2013).
The emergent approach to strategy development, also known as the process approach, essentially seeks to add a level of flexible reactivity to any form of developed strategy. According to Mintzberg (1992; 1994), it makes no sense creating a division between formulation and implementation, as strategy-making is a process whereby ideas “bubble up” from the bottom to the top of the organization. It requires managers at all levels to be flexible in the establishment of strategies. This view of strategy formation normally requires a business to learn in an unstructured or even haphazard manner and learn by making mistakes. The emergent approach seeks to prepare a company to respond to customer interactions and market trends that are unlikely to have been known when the initial strategy was under development (Mintzberg, 1987). With emergent strategy, one idea leads to another until a new pattern is formed and therefore a new strategy has emerged. For example, consider Nokia’s position in the smartphone market in 2007. The Finnish maker was dominant and the arrival of the iPhone completely upended its strategy. The Symbian OS was suddenly under attack, yet sales did not decline until 2009. However, by 2011, Nokia had to develop a partnership with Microsoft in order to stay afloat in the market. Nokia had never intended to start building Windows phones but the company’s hands were forced once it had no other choice (Yin, 2015). Here, Nokia had to react to market factors in order to remain relevant and it could even be argued that the Finnish phone maker should have been flexible in its approach well before it started lagging behind in the market.
According to the emergent approach, it is not feasible, possible, or rational to develop a functional perspective of the future as the environment is inherently unpredictable. It is imperative to react based on situational necessities and go with the flow of what is happening. This view states that companies are constantly left adrift by developments that are often outside their control and need to learn by making mistakes (Idenburg, 1993). However, this is incredibly risky as emergent approaches need to be developed rapidly on an organizational scale and it places great stress on individual heads of department. Hence it is quite susceptible to factors such as ignorance, conformism, irrational necessity, and wishful thinking (Idenburg, 1993). Emergent strategy introduces a dynamic view in which the role of the strategist is problematized, and provides a humanizing perspective to strategy research (Jarzabkowski, 2008). It is a view that accounts for the messy, political and sometimes irrational nature of organizations. This approach is post-rational as the focus is on how strategy actually unfolds in organizations (Pettigrew, 2007) as opposed to the rational planning approach whose focus lies on prescription and the idea of an ideal organization. Although emergence theory offers solid counterpoints to the rational planning approach, it has also been criticized. For instance, Mintzberg’s work has been criticized for focusing only on grass roots strategies that emerge within the organization, negating agency in strategy-making, and centering the attention on the messy emergence of strategy that overlooks the relationship between formal intent and emergence (Jarzabkowski, 2008).
While it is incredibly unlikely that any company would follow a singular approach to strategy development, companies are more likely to lean more greatly on the benefits of a particular approach. Strategies that synthesize the benefits of both the approaches are normally crafted to create a truly creative strategy. This process should represent a fluid and smooth learning process as response and future predictions merge to form as a whole.
The planning mode in certain occasions can only be effective when it is mixed with other forms of strategy development as rational planning is a more effective short-term planning strategy rather than an effective long-term planning strategy. Often times, in the long-term, market and customer factors dictate the formation of a long-term strategy, but the risk of merely responding rather than substantiating a certain strategy is real with this approach. For example, consider that a summer camp table tennis club in Barbados has decided well in advance of its top transfer targets in the summer transfer window. Club A has developed a list of first-choice targets and a series of backup targets. This approach seems to include the best of rational and emergent approaches on the surface. Club A makes a bid for its primary target from Club B only to be accused of speaking to the player without permission. This problem remains unresolved for most of the summer and Club A cannot get the player it wants. Now, its secondary target has already moved on to another club leaving Club A in a delicate situation that it has not planned for. The window closes in two weeks, and Club A is faced with the possibility of signing an undesirable player. In this approach, Club A failed to synthesize the rational and the emergent appropriately as it was not rational to attempt to lure the primary target for as long as it did. The market forced it to change tack at an undesirable time and Club A should have ideally leaned on rational planning more. It should have prepared a greater list of targets, accounted for market inflation in football or contacted the target in a legal manner. The football market is unpredictable but it is quite predictable in how uncertain it can become.
In situations where the market is known to be volatile, Club A should have placed a greater degree of emphasis on rational planning rather than waiting for market forces to force its hand. Rational planning may be imperfect with emergent approaches but most businesses would benefit from greater rational planning as most markets can be predicted with some degree of accuracy. It is only in a truly exceptional or rare market where it is nigh-on impossible to predict how the market would be in a certain situation.
Conclusion
In conclusion, a singular approach to strategy development is almost never the right answer in any scenario. The degree of emphasis placed on a particular school of thought is critical to the success of a strategy. In nearly all cases, market factors and customer reactions can be predicted with a modicum of accuracy and it makes zero rational sense to not prepare for it until after the factors are known. In most cases, strategies often begin as some form of a rational plan before the strategy is changed due to some form of emergency that cropped up along the way. Adaptation is critical to the success of any business and a failure to adapt is often irrational. A business cannot hope to succeed on the sole basis of a plan that was formed when market factors were not completely known.
Organizational learning is key to developing and formulating the right kind of adaptive strategy. Rational planning is capable of succeeding in both stable and unstable environments but emergent planning is only capable of succeeding in an unstable environment. Every business needs a central master plan that ideally should bear a good degree of resemblance to their final strategy. If the initial formal plan is completely dissimilar to the final strategy, it is often a sign that a business has failed to plan ahead effectively and has failed to develop an effective strategy.
