Design School- Strategic Management (school Of Thoughts) 5h516w

Ayesha Sa MBA

Strategic Management THE DESIGN SCHOOL STRATEGY FORMATION AS A PROCESS OF CONCEPTION

Submitted to: Col. Imtiaz A. Mohar

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Table of Contents

1. Abstract...........................................................................................3 2. Introduction.....................................................................................4 3. Origin of Design school...................................................................4 4. Design school model.......................................................................4 5. Premises of Design school..............................................................6 6. Critique of design school.................................................................7 7. Marketing Myopia............................................................................8 8. Design School: Contexts and Contributions....................................9 9. Applications of Design School.......................................................10

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Abstract Strategy Safari (FT Prentice Hall, 2002), subtitled "A Guided Tour Through the Wilds of Strategic Management" by Henry Mintzberg, Bruce Ahlstrand and Joseph Lampel is an overview of the full field of academic and business studies of strategy, based on a previous lecture series by Mintzberg. The 'design school' of strategic management, which focuses on a non-complex model that perceives the process of strategic formation as a design process to reach a satisfactory balance between internal distinctive competence and external threat and opportunity. Strategy formation should be a conscious, informal and controlled process of thought. While the model has limitations, four conditions may encourage an organization to use the design school model, including when relevant knowledge has been established and a situation is stable; an organization can cope with a centrally articulated strategy; and one person can handle all data connected to developing strategy. There are several criticisms on the design school of thought on its reliability and validity. Author has counteracted with these criticisms and explained that it is based on assumptions which are misleading, as the concept propagated by design school was over simplified and restricted in application.

Introduction to Design School: The design school proposes a model of strategy making that seeks to attain a match, or fit, between internal capabilities and external possibilities. In the words of this school's best3

known proponents, “Economic strategy will be seen as the match between qualifications and opportunity that positions a firm in its environment”. Design School has an important and influential contribution in developing other schools of thoughts and providing a foundation to strategic management principles.

Origins of the Design School: The origins of the design school can be traced back to two influential books written at the University of California (Berkeley) and at M.I.T.: •

Philip Selznick's Leadership in istration of 1957, and

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Alfred D. Chandler's Strategy and Structure of 1962.

But the real impetus for the design school came from the General Management group at the Harvard Business School, beginning especially with the publication of its basic textbook, Business Policy: Text and Cases (cited above), which first appeared in 1965 (by Learned, Christensen, Andrews, and Guth). This quickly became the most popular representation of the ideas of the design school and most of the explanation of design school in this chapter, is taken from this book.

Design School Model: The model places primary emphasis on the appraisals of the external and internal situations, the former uncovering threats and opportunities in the environment, the latter revealing strengths and weaknesses of the organization (fig 1). On external appraisal, the technological, economic, social, and political aspects of a company's environment are important and brief consideration of the issues of forecasting and scanning. While on internal appraisal, commitments to ways of acting and responding are built into the organization are crucial. Two other factors are believed to play major role in strategy making. One is managerial values—the beliefs and preferences of those who formally lead the organization, and the other is social responsibilities— specifically the ethics of the society in which the organization functions, at least as these are perceived by its managers.

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Richard Rumelt suggests that the strategy must be evaluated once it has been selected from multiple options. This evaluation should be based upon following tests which are considered to be the best evaluation framework:  Consistency: The strategy must not present mutually inconsistent goals and policies.  Consonance: The strategy must represent an adaptive response to the external environment and to the critical changes occurring within it.  Advantage: The strategy must provide for the creation and/or maintenance of a competitive advantage in the selected area of activity.  Feasibility: The strategy must neither overtax available resources nor create unsolvable sub problems.

Premises of Design School:

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A number of basic premises underlie the design school, some fully evident, others only implicitly recognized. These premises include external environmental variables and factors of strength and weaknesses as their variables. These premises are as follows: 1. Strategy formation should be a deliberate process of conscious thought. Action must flow from reason: effective strategies derive from a tightly controlled process of human thinking. Strategy making in this sense is an acquired, not a natural, skill or an intuitive one—it must be learned formally. 2. Responsibility for that control and consciousness must rest with the chief executive officer: that person is the strategist, the manager who sits at the apex of the organizational pyramid. It might be noted that this premise not only relegates other of the organization to subordinate roles in strategy formation, but also precludes external actors from the process altogether (except for of the board of directors, who Andrews believed must review strategy. 3. The model of strategy formation must be kept simple and informal. Fundamental to this view is the belief that elaboration and formalization will sap the model of its essence. This premise, in fact, goes with the last: one way to ensure that strategy is controlled in one mind is to keep the process simple. This distinguishes the design school from the entrepreneurial school on one side and the planning and especially positioning schools on the other. 4. Strategies should be one of a kind: the best ones result from a process of individualized design. As suggested above, it is the specific situation that matters, not any system of general variables. It follows therefore that strategies have to be tailored to the individual case. And that process above all should be a "creative act", to build on distinctive competence. 5. The design process is complete when strategies appear fully formulated as perspective. This school offers little room for instrumentalist views or emergent strategies, which allow "formulation" to continue during and after "implementation." The big picture must appear— the grand strategy, an overall concept of the business. 6. These strategies should be explicit, so they have to be kept simple. Andrews, in common with virtually all the writers of this school, believed that strategies should be explicit for those 6

who make them, and, if at all possible, articulated so that others in the organization. "Simplicity is the essence of good art". 7. Finally, only after these unique, full-blown, explicit, and simple strategies are fully formulated can they then be implemented. Central to this distinction is the associated premise that structure must follow strategy. It appears to be assumed that each time a new strategy is formulated, the state of structure and everything else in the organization must be considered a new.

Critique of the Design School: A strategy that locates an organization in a niche can narrow its own perspective. This seems to have happened to the design school itself (not to mention all the other schools) with regard to strategy formation. The premises of the model deny certain important aspects of strategy formation, including incremental development and emergent strategy, the influence of existing structure on strategy, and the full participation of actors other than the chief executive. The important criticism is about: •

How does an organization know its strengths and weaknesses? On this, the design school has been quite clear—by consideration, assessment, judgment ed by analysis; in other words, by conscious thought expressed verbally and on paper. One gets the image of executives sitting around a table (as in the cartoon at the beginning of this chapter), discussing the strengths, weaknesses, and distinctive competences of an organization, much as do students in a case study class. Having decided what these are, they are then ready to design strategies.

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But are competences distinct even to an organization? Might they not also be distinct to context, to time, even to application? In other words, can any organization really be sure of its strengths before it tests them?

The criticism is dealt by following steps:

Assessment of strength and weaknesses: By ing learning: The question of how a firm is going to determine its strength and weaknesses is addressed by simply analyzing the firm’s present position. This analysis requires judgmental behaviour. Every strategic change involves some new experience, a step into the unknown, the taking of some kind of risk. Therefore no organization can ever be sure in advance whether an established competence will prove to be strength or a weakness. 7

Structure follows the strategy: As the left foot follows the right foot: The past counts, just as does the environment, and organization structure is a significant part of that past. Claiming that strategy must take precedence over structure amounts to claiming that strategy must take precedence over the established capabilities of the organization, which are embedded in its structure. Structure may be somewhat malleable, but it cannot be altered at will just because a leader has conceived a new strategy. Many organizations have come to grief over just such a belief.

Making strategy explicit: Promoting inflexibility: Once strategies have been created, then the model calls for their articulation. Failure to do so is considered evidence of fuzzy thinking, or else of political motive. But there are other often more important, reasons not to articulate strategy, which strike at the basic assumptions of the design school. Explicit strategies are blinders designed to focus direction and so to block out peripheral vision. They can thus impede strategic change when it does become necessary. Put differently, while strategists may be sure for now, they can never be sure forever. The more clearly articulated the strategy, the more deeply imbedded it becomes in the habits of the organization as well as in the mind of its strategists.

Separation of formation from implementation: Detaching thinking from acting: The formulation-implementation dichotomy is central to the design school—whether taken as a tight model or a loose framework.

"MARKETING MYOPIA" MYOPIA: In 1960, Theodore Levitt, a marketing professor at the Harvard Business School, published a celebrated article entitled "Marketing Myopia." It is difficult to find a manager or planner who does not know the theme, even if he or she has never read the article. The basic point was that firms should define themselves in of broad industry orientation—"underlying generic need" in the words of Kotler and Singh (1981:39)—rather than narrow product or technology . To take Levitt's favourite examples, railroad companies were to see themselves in the transportation business, oil refiners in the energy business. Companies had a field day with the idea, rushing to redefine themselves in all kinds of fancy ways—for example, the articulated mission of one ball bearing company became "reducing friction." Often the problem came down to some awfully ambitious assumptions about the strategic 8

capabilities of an organization—namely that these are almost limitless, or at least very adaptable. Levitt's intention was to broaden the vision of managers. At that he may have succeeded— all too well. Ironically, by in effect redefining strategy from position to perspective, Levitt really reduced its breadth. Internal capability got lost; only the market opportunity mattered. Critics of Levitt's article have had their own field day with the terminology, pointing out the dangers of "marketing hyperopia," where "vision is better for distant than for near objects", or of "marketing macropia," which escalates previously narrow market segments "beyond experience or prudence”. The article concludes simply that Levitt's notion of marketing myopia itself proved myopic.

The Design School: Contexts and Contributions: We see a set of four conditions in particular that should encourage an organization to tilt toward the design school model: 1. One brain can, in principle, handle all of the information relevant for strategy formation. There are times when organizations do need grand designs: a chief executive who is highly capable of synthesis can take full charge of a process of deg strategy. Here the situation must be relatively simple, involving a base of knowledge that can be comprehended in one brain. 2. That brain is able to have full, detailed, intimate knowledge of the situation in question. This potential for centralizing knowledge must be backed up by sufficient access to, and experience of, the organization and its situation, so that one strategist can understand in a deep sense what is going on. 3. The relevant knowledge must be established before a new intended strategy has to be implemented—in other words, the situation has to remain relatively stable or at least predictable. 4. The organization in question must be prepared to cope with a centrally articulated strategy. Other people in the organization must be willing to defer to a central strategist. They must also have the time, the energy, and the resources to implement a centrally determined strategy.

Application of Design School of Thought: The design school model would seem to apply best at the junction of a major shift for an organization, coming out of a period of changing circumstances and into one of operating 9

stability. Of course, a clever new management might also wish to impose a better strategy on an organization whose circumstances have not changed. But lots of clever managements have gone astray; needed here is wise management. There is another context where the design school model might apply, and that is the new organization, since it must have a clear sense of direction in order to compete with its more established rivals (or else position itself in a niche free of their direct influence). This period of initial conception of strategy is, of course, often the consequence of an entrepreneur with a vision, the person who created the organization in the first place. And that really brings us closer to the entrepreneurial school (which, as we shall see, favours a less formal, more "intuitive" process).

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