Strategy is planning the direction for achievement of a certain objective. Strategic management in business involves the formulation of goals and objectives of an organisation and the initiatives and strategies to achieve these goals and objectives (Forgang, 2015). Strategic management in other words is the process of choosing best action a firm can take regarding its goals and objectives. Strategic management helps in giving orientation to the organisation and helps in formulating policies to attain the objectives.
Various scholars have deliberated over theory of strategy in the 21st century. There are various views and conceptualisations regarding strategic management models and frameworks (Deal & Bolman, 2013). Models of strategic management help in understanding the steps in strategic management and formulation process (Ebner, 2013). The models of strategic management try to identify concepts and elements of strategy that are necessary for a firm to develop goals, objectives, vision and mission.
Henry Mintzberg has given 10 schools of thought model of strategy (Crainer, 2013). Under this model the field of strategic management is divided into 10 categories which help in suggesting the type of strategy to be adopted for certain objectives (Booth, 2014). Under this model the strategy formulation is seen as a process of conception. This mode focuses on matching the internal situation of an organisation to its external environment to create a deliberate strategy.
Strategic lenses are another model of strategic management which looks at strategy from four angles. These are four perspectives based on which strategy can be planned and implemented on a corporate level (Forgang, 2015). These four angles are as design, as discourse, as idea and as experiment. Therefore, different models give different frameworks for strategy formulation. Hence, firms can refer to various models of strategic management in order to frame a strategy.
Following is a literature review of the ten schools of thought and the strategic lenses.
As per, Schermerhorn, (2013) The Mintzberg model gives ten schools of strategic formulation which are the design school, the planning school, the positioning school, the entrepreneurial school, the cognitive school, the learning school, the power school, the cultural school, the environmental school and the configuration school. These strategies are used by a large number business organisation. Especially tools like SWOT are extremely popular.
According to Ebner, (2013) The design school of this model has a simplistic two stage approach where it focuses on the internal environment of the firm including its strengths and the weaknesses and the external environment. The model then tries to find a best fit between the two and tries to match internal and external environment in order to arrive at a feasible strategy. Strategy formulation is seen as a purely mental preposition by this approach. Furthermore, the focus is on designing new ideas for strategy under this approach. This strategy is suitable when business environment is stable. However, the market is suddenly disrupted by competitor this approach does not work.
Many business organisations including big business houses like Domino’s use SWOT analysis and Porters five forces model to map internal and external environment before implementing major decision (Frynas & Mellahi, 2015).
In the view of Schermerhorn (2012) the planning school formulates thought process for planning the strategies rigorously so that the firm moves ahead in the direction of attaining its objectives. Under this framework the entire plan of processes that the company will undertake is documented under this framework. Any disruption in the external and internal environment can disrupt the plan and create problems for this framework. Hence, the firms need to do predictive and contingency planning. Examples of use of the planning school are the digital technology firms like Microsoft, Apple etc. who understood the technical environment and customer needs and planned strategies to create products which became huge success with the customers.
Crainer, (2013) states that, under positioning school the management formulates strategy to decide product positioning in the customer’s mind. For this purpose competitor analysis needs to be done. Tools like five forces model, BCG matrix and value chain are used at this juncture. After assessing the market, effective positioning strategy can be implemented. Limitation of this thought process is that market is assumed non-changing; however, in the real world erratic changes may occur in the market.
Positioning strategies are widely used by firms to create positive image. Companies like L’Oréal, Samsung and McDonalds acquired immense success by creating positive brand image in customer’s mind.
European Decision Sciences Institute, (2015) mentions that, entrepreneurial school under ten school thought framework puts focus on the CEO of the company. According to this school the vision and the leadership of the CEO can make a company achieve its aims. It primarily focuses on leadership abilities of the CEO to drive the company. Company formulates whatever strategy the CEO envisages. Limitation of this school is that suitable leaders are not that easy to find.
Microsoft, Ford and Apple were all driven by the CEO’s vision and attained their current success because of the leadership abilities of Bill Gates, Henry Ford and Stevie Jobs respectively (Johnson, 2011).
According to Crainer, (2013) in the cognitive school of thought an analysis is made of people’s perception and information through tool like Johari window. Under this framework the company tries to find what is in the mind of the customer. As per the analysis the company can change or nurture this perception as the case may be. The limitation is the practical aspect as a company can’t map all its customers. Companies like Domino’s and Pizza hut use market research to gather information on people’s perception.
Hill & Schilling, (2016) write that under the learning school of strategy the strategy formulation is done based learnings from the past experiences. The companies look at its past successes and failures and tries to replicate success factors and remove the failure reasons in the future. However, this strategy does not work when something changes the success and failure factors. Samsung recently used this strategy by learning from its failed products and tried to rebuild its image.
Mintzberg & Lampel (2013) argues that, under the power school of ten school framework, decisions are taken by people who hold position of power in the management. Due to power positions there is less resistance to strategy implementation. This is a realistic school; however, this can lead to corruption of the powerful and it may cause failure of the company due to not listening to experts during strategic implementation. Bill Gates and Microsoft is an example of the power school usage by a firm.
As per Wages, (2014) the culture school of thought states that a proper culture in terms of its human and social capital can give a company a proper direction. This school favours involving various departments into the decision making process. It involves the role of values and beliefs in company functionality. Cultural school can get disrupted if people do not want to maintain positive culture and resist change and indulge in group behaviour. International firms like HSBC use cultural school and generate ideas through assigning team roles. They also encourage out of the box thinking.
As per Ebner, (2013) the environmental school is a situational framework which gives importance to the environment or rather raw material resources. For example, a paper firm would formulate its operational strategy based on availability of wood. This thought is used in situations where there is dependency on environment. Many manufacturing companies like Nike, Adidas etc. prefer to have their plants near to raw material source.
Schermerhorn, (2012) writes that, the configuration school stipulates that strategy needs to be configured. As the strategy helps an organisation to move forward, its values also needs to be changes as time progresses. Due to certain shifts in technology or competitor policy the processes in the firm may get changed and the values may need to be reconfigured to attain sauces. Companies like Cadbury, J.P Morgan Chase have survived through many years of changes due to proper configuration of values and beliefs to new changes.
These ten schools of thought help a firm to select the strategy based on its environment, customers and competitors.
Booth, (2014) states that, Strategic lenses model involves looking at corporate strategy from four angles. These are strategy as a design, strategy as an experience, strategy as a variety, strategy as a discourse.
As per Johnson, (2011) design lens views strategy as a process where activities are determined logically. The firm carefully examines the industry, environment and resources that it has in order to formulate the proper strategy. The strategy is developed through a process of analysis- selection and implementation. This lens holds top management responsible for the strategy formulation. Many firms these days take this view. Large companies like Walmart. General Electronics and HP formulate their strategy after careful evaluation of all factors pertaining to environment, customer and competitor. Therefore they manage to be on top of the success ladder year on year.
As per Adner, (2012) certain scholars like Henry Mintzberg say that the top management is not aware about the ground reality and hence cannot formulate proper strategy. According to the experience lens the strategy should be adaptive to situation. Under this lens strategy is divided into three categories intended strategy, realised strategy and emergent strategy. Strategy is a continuous developmental process emerging out of learning from past experiences. Strategy by experience suffers from the risk of strategic drift which occurs due to changes in business environment. Firms like Samsung, Apple and Sony function in a very erratic market due to constant technological changes. Therefore, they have plan and change strategy continuously based on experience.
In the view of Gibson, (2015) the lens of variety talks about the need of new ideas generation and innovation in the organisation in order to develop strategy. Environment continuously changes, both within and outside the organisation. This lens stipulates that strategy can itself emerge out of people’s response to this change .This view states that evolutionary principle forces people to accommodate the systems in the face of change and they come up with responses which formulate the strategy. Firms working in global markets like Vodafone, Microsoft and Dell have a diverse workforce hence they have to use lens of variety.
Leleur, (2012) mentions that, strategy as a discourse is the fourth lenses of the strategic lenses model. Under this viewpoint strategy emerges from choice which needs to be made among different alternatives. This view talks more about legitimacy of strategy and less about innovation. It sees strategy development as a resource which managers use to communicate and sustain their own positions. Many companies like Microsoft work on the principle of power of the top management.
It is important to compare and contrast the two models by analysing their features and drawing on relevant business examples to understand how strategy is formulated by these models.
Mintzberg’s ten schools framework is an extremely popular framework and most organisations formulate the strategies based on this frame work. Especially the design school which analysis the external and internal environment. This school has given many popular strategic tools like the SWOT analysis and the five forces model with which to assess and map the external and internal environment facing the firm (Obolensky, 2014). To site a business example a firm like Samsung would need to design its strategy by mapping its internal environment that is its customers, employees, management and suppliers to its external environment like the political, economic, social and legal environment. Additionally, the firm would need to assess its competitor, supplier, customer potential new entries and substitutes to formulate its strategy
However, the major limitation of the school is the assumption that internal and external environment remains the same while strategy formulation is done (Alkhafaji, 2013). However, in the real world business situations are extremely dynamic and technology, customer choices and competitor policies keep on changing at all times. In such a situation the strategy formulated by assuming the external and internal environment as static would fail.
To take the same example of Samsung, if the firm assumes that business environment will remain contract it will not be able to formulate proper strategy (Stroh, 2014). This is because the technology, political scenario, competitor counteraction and internal dynamics keep changing continuously. Hence, the firm will have to take into consideration all these factors.
The design lens framework creates a more farsighted and a logical view to business strategy and tries to focus on logical prediction of customers and competitors’ actions after which environment is assessed to formulate the strategy (Forgang, 2015). Therefore, the lanes framework tries to give a more realistic foundation to strategy. Firms like Samsung have now started using logical deductions about the market, environment and competitor to design strategy so that they take into account the dynamism of the market.
The design lens makes a logical and analytical evaluation of the situation. Under this approach the external and internal environment is mapped by using SWOT and five force analysis, but a more realistic analysis is done of the industry, environment and markets to arrive at a proper and functional strategy. (Obolensky, 2014) Planning school framework is also including in the design lens and plans are made after logical deduction. Large firms like Samsung and Dominos formulate and plan their strategy through logical reasoning and evaluation of their external and internal environment.
The learning school and cognitive school attribute strategy formulation to thinking, experiences, cultural background and learning of the workforce in an organisation (Ebner, 2013). The cognitive school focuses on psychological assessment of the customer’s mind. The learning school talks of replicating the past successes and removing the past reasons of failure (Adner, 2012). The experience lens of the four lens framework also talks on similar lines.
However, this lens focuses on experience of the workforce to formulate strategy. The experience can be due to psychological assessment of the customer’s mind through surveys or it could be due to cultural values and beliefs. It could also be due to past learning (Johnson, 2011). The experience lens put together past learning, cultural views and cognitive thinking together to come out with a strategy for propelling the organisation. This lens focuses on learning from people’s experiences including experience of the customer. Moreover, it also focuses on emergence of new ideas. Large business firms like Samsung and Apple have a huge experience in terms of customer demand, tastes and preferences. Therefore, it is easy for them to draw on this experience and learn from the experience. To give a business example, the experience lens strategy won’t work for smaller firms which do not have huge customer experience. Such firms would need to draw on their assessment of external and internal environment.
The variety lens corresponds to cultural school of strategy formulation and talks about variety in organisations. The cultural school emphasises on the role of value system and beliefs in the act of strategy formulation and decision making process (Jones, 2016). In addition to generating ideas from social values and beliefs of people as propounded by cultural school, the variety lens also focuses on idea generation from a diverse workforce and a diverse customer base in and around the organisation. This is very suitable to a large organisation with huge diversity in both workforce and customers.
There are many large conglomerates firms which operate worldwide on a very large scale. Some examples are Apple, Microsoft, Dominos, Vodafone and Samsung. These firms have a very huge customer base and a very large number of workforces. Diversity is a common element of such organisations (Harrison, 2013). Such firms cannot manage themselves by have a single strategy formulation through design and planning. They need to draw on the experience of their workforce and diverse customers and use predictive strategy to formulate ways to address their needs. They also have to manage their workforce in a way that it remains united despite their diverse views so that new ideas are generated.
The discourse lens corresponds to power and entrepreneurial school. However the entrepreneurial school talks of leadership abilities and vision of the CEO to propel the organisation. In real life scenario very few people have such vision (Alkhafaji, 2013). The power school of strategy formulation, talks of influential and powerful people taking strategic decisions.
The discourse lens takes a more realistic view of the concept of power and modifies decision making by powerful people into the concept of strategy being a tool for mangers to legitimise their power and influence. Many organisations have shaped up due to the power and influence of one person or a group of people. Microsoft is an example of an organisation which came up due to the vision of one person that is Bill Gates (Yoffie, 2015). Leaders like Bill Gates and Steve Jobs use their power to make the organisation grow by creating an entrepreneurial vision.
However sometimes the vision of CEO can fail due to his using power and refusing to listen or implement the ideas generated by employees and managers. An example is Nokia which was once a global leader in mobile technology. But self-admitted failure of the CEO to see the dynamic changes and a refusal to listen to other management lead to its debacle (Dawn, 2012). Therefore, power and influence as per the discourse lens can only succeed if the CEO has vision and allows for innovative thinking. However, the discourse lens is mostly focused on legitimacy and not on innovation.
Therefore, both these models give various approaches to strategy development. However, strategic lens takes more realistic view as compared to ten schools.
Conclusion
Both the ten schools of strategic formulation and strategic lenses give a solid foundation to strategy for organisations in the 21st century. The major reason why strategic lenses seem more useful is the logical manner in which they try to create foundation for strategic formulation. The lenses are more realistic and logical as compared to ten schools. The ten schools assume that external and internal environment remain constant while strategy is formulated which is not a realistic assumption. The world of business is ever changing and the business methods change often. The lens framework looks at strategy in terms of changing environment, customer and competitor hence in this context the lens framework is more useful.
The ten schools and the lens framework both talk about learning and experience. However, the lens framework adds knowledge addition to the strategy formulation which is not there in the ten schools. Both the frameworks talk about culture and variety in an organisation leading to idea generation. In this sense both the schools focus on use of culture and diversity to formulate strategy.
Both the frameworks talk about power and entrepreneurial vision. However, the lens framework is more realistic and believes that power is used by management to legitimise itself and strategy is only a resource to do so. Therefore, both frameworks are suitable for strategy formulation; however lens framework is more suitable.
References
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Johnson, G. J., (2011) Exploring Strategy. New Jersey: Financial Times Prentice Hal.
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