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Strategic Management
Strategic Management Robert A Burgelman, Stanford University, Stanford, CA, USA Ó 2015 Elsevier Ltd. All rights reserved.
Abstract Strategic management has become a well-established, though still somewhat fragmented, academic discipline. Two of its theoretical foundations – the strategic positioning view and the resource-based view – together with an integrative view on strategy formulation and implementation are combined into one conceptual framework. Similarly, strategizing and economizing are combined into a conceptual framework that integrates external-oriented perceived value (focused on strategizing) and internal-oriented delivered cost (focused on economizing) to provide further insight into the performance challenges facing strategic management. Finally, a framework is constructed that integrates four models of the strategymaking process proposed in different academic literature relevant for strategic management.
Genesis and Development The academic field of strategic management grew out of the earlier pedagogical field of business policy, which was conceptualized as an integrative capstone course to be taught at the end of the business school curriculum to teach students how to integrate the various functional areas, but was not considered a field of research in its own right or a broader scientific discipline (Schendel and Hofer, 1979). In the context of becoming viewed as a new academic field, strategic management was initially defined as “.a process that deals with the entrepreneurial work of the organization, with organizational renewal and growth, and more particularly, with developing and utilizing strategy which is to guide the organization’s operations” (Schendel and Hofer, 1979: 11). The creation, in 1982, of the Strategic Management Society provided scholars of the new academic field with an institutional home, and the yearly Strategic Management Society Conference and the establishment of the Strategic Management Journal (SMJ) offered them an outlet for their research. By the late 1980s, the strategic management field had gained enough momentum to motivate organizing a second conference in Napa, California, in 1991 to examine progress made since the 1977 conference in Pittsburgh, Pennsylvania, and to provide further directions for the development of the field. Synthesizing the insights from the conference papers and discussions into book form, the organizers (R. Rumelt, D. Schendel, and D. Teece) identified four key issues, translated into research questions, that could be helpful in defining the field of strategic management, its boundaries as they existed at the time, its concerns, and how the field could make a contribution to the practice of management: (1) How do firms behave? (2) Why are firms different? (3) What is the function of, or value added by, the headquarters unit in a multibusiness firm? and (4) What determines the success or failure of the firm in international competition? (Rumelt et al., 1994: 2). By the time they were able to publish their book 3 years after the conference, the organizers realized they had failed to pay enough attention to the nature of what they call the ‘policy process’ – the strategy-making process – and to several other important questions (1994, Afterword). In other words, it had
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become clear that there simply was no way to guide scholars in advance to what would be the important contributions to the strategic management field. By the mid-2000s, SMJ had become a well-respected A-level academic journal and the Strategic Management Society Conference every year attracted some 1000 academics, consultants, and business leaders (the ABCs) from all over the world. Yet the burgeoning new academic field was still viewed by many as fragmented and lacking of a coherent identity. As the result of empirically identifying the common substantive core of the field and the implicit consensus among its diverse scholars about what constitutes the field’s coherence and identity, Nag, Hambrick, and Chen were able to arrive at a new definition of the field: “The field of strategic management deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of firms in their external environments” (2007: 944). The researchers realized that this definition of the field was in many ways too restrictive, but suggested that “.the greatest benefit of having this definition is that it allows strategic management scholars to frame the debate about what they want the field to become, or how they want to change it” (2007: 951).
Some Theoretical Foundations Soon after the initial formation of the strategic management field, Porter (1980) appeared on the scene to provide the inchoate new field with a solid foundation rooted in the economics of industrial organization. Porter’s seminal discussion of the importance of ‘strategic position’ and ‘generic strategy’ for competitive advantage stimulated the development of the ‘positional school’ in the strategic management literature (for an updated view, see Stonehouse and Snowdon, 2007). Shortly after Porter’s breakthrough contribution, Wernerfelt’s (1984) articulation of the so-called resourcebased view offered an alternative to the ‘position-based view’ of competitive advantage. In this view, resources are broadly defined to encompass technical, commercial, as well as knowledge, administrative and cultural factors. Some of the
International Encyclopedia of the Social & Behavioral Sciences, 2nd edition, Volume 23
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foci of the resource-based view are on the competitive advantages that may derive from resource heterogeneity among firms and on the sustainability of resource-based advantages (for a critical review, see Kraaijenbrink et al., 2010). In an important sense, the resource-based view also relates to Bower’s finding that strategy making in reality is constituted, to a large extent, by the resource allocation process (Bower and Gilbert, 2005). Since 1990, ‘core competence’ (Prahalad and Hamel, 1990) has gained great currency among practitioners. So much so that Porter (1996) felt the need to respond with a strong reaffirmation of the importance of strategic positioning for competitive advantage. More recently, the concept of ‘dynamic capabilities’ (e.g., Teece, 2007) has focused strategic management researchers’ attention on how an organization’s resources and competencies may be combined into ‘capabilities’ and how these may change over time and drive the organization into new strategic directions. It is worth noting that the positional school and the resource-based view are part of a larger set of 10 identifiable ‘schools’ in strategic management (Mintzberg et al., 1998), which testifies to the field’s scholarly fertility but also its increasing complexity that Nag et al. (2007) tried to reduce.
An Integrative Conceptual Framework Longitudinal field research, which examined the role of the internal ecology of strategy making in helping shape Intel Corporation’s evolution (Burgelman, 2002a), provided a response to important research in organizational ecology that fundamentally questioned the role of strategic management in organizational survival and adaptation. The response was based on the view that organizations, such as Intel, are ecologies in their own right within which strategic initiatives compete for its resources, and that the role of strategic management is to orchestrate and guide this internal ecological process in light of the dynamics of the higher level, external ecological processes.
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This longitudinal field research produced an integrative conceptual framework for strategic management – the ‘strategy diamond’ – of the dynamic forces that drive a company’s evolution. This framework brings together ideas from the strategic management literature that emphasize the importance of product-market position (the industrial organization perspective) with ideas that emphasize the importance of distinctive (or core) competencies (the resource-based view), and proposes that both product-market positioning and distinctive competencies are important for the attainment of competitive advantage. In addition, the framework proposes that the reality of strategy (as opposed to the rhetoric of strategy) lies in its execution through strategic actions. In doing so, the strategy diamond framework integrates five dynamic forces: (1) the organization’s ‘official (or stated) corporate strategy,’ which defines the scope of the business(es) it wants to be a winner in and its intended competitive advantage relative to the other players in the industry; (2) the ‘basis of competitive advantage in the industry’ associated with the organization’s chosen product-market position in the industry; (3) the organization’s ‘distinctive competencies,’ which encompass the technical, commercial, and administrative and managerial competencies in which it excels to create customer value relative to competitors; (4) the organization’s ‘strategic actions,’ which refer to the ‘consequential’ actions; that is, actions that commit the organization in a strategic direction and are not easily reversed (see also Ghemawat, 1991), and through which it actually uses its product-market position and distinctive competence to achieve competitive advantage; and (5) its ‘internal selection environment,’ which comprises the internal contextual elements that help maintain alignment of the other four forces (organization structure, planning and control systems, measurement and reward systems, recruitment and executive development, and leadership style, values, and norms). This framework serves to analyze strategic dynamics at the organization–environment interface level of analysis. Figure 1 shows the strategy diamond framework.
Figure 1 The strategy diamond: dynamic forces driving company evolution. Source: Adapted from Burgelman, R.A., March 1994. Fading memories: A process theory of strategic business exit in dynamic environments, Administrative Science Quarterly and Burgelman, R.A., 2002. Strategy is Destiny: How Strategy-Making Shapes a Company’s Future, Free Press, New York.
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The scalability of the strategy diamond framework, which can be scaled up and down levels of analysis (individual, functional, single business, multibusiness, or corporate), facilitates strategic integration across levels in the organization. For instance, it can be used to study the strategic situation facing the multibusiness firm as well as the strategic situation of any functional area within the firm. The strategy diamond draws attention of strategic management scholars and practitioners to the importance of considering strategic position together with distinctive competence in order to understand and secure an organization’s capacity to survive and thrive. This turns out to be surprisingly difficult. Two examples of the computer industry serve to illustrate this point. First, Novell’s preeminent strategic position in network operating system market segment in the early 1980s (more than 70% market share) may have led the company to allow its distinctive competence in network operating systems to wither while pursuing nonrelated opportunities in the PC application software market segment, leading to delays in the launch of its next-generation core product and giving Microsoft an opportunity to attack Novell’s core market with Windows NT. Second, Apple Computer has always had extraordinary strong distinctive competencies in software development, with many experts agreeing that the Mac operating system was superior to Microsoft’s Windows operating system. Yet, because Apple’s top management did not appreciate the importance of achieving a strategic position with a large installed base to gain ‘increasing returns to adoption’ (attracting independent software developers increases the value of the operating system, which increases the installed base and attracts even more software developers, and so on) Apple Computer was relegated to a small niche player in the PC industry.
Strategic Dynamics Think of the connections between the basis of competitive advantage in the industry, distinctive competence, official strategy, and strategic action as ‘rubber bands.’ During periods of strategic alignment, the rubber bands are evenly stretched because the dynamic forces are in harmony, and the strategy diamond looks like Figure 1. Over time, however, the alignment will come under pressure as the dynamic forces become disharmonious, causing the rubber bands to stretch unevenly. The stretching of the rubber bands causes ‘strategic dissonance’ between the company’s top and senior executives, which signals that the company likely faces an impending ‘strategic inflection point’ (Burgelman and Grove, 1996). Having established a baseline of alignment with the help of the strategy diamond may make it easier to understand the sources of the strategic dissonance. This, in turn, may make it easier to face up to the changes that top management must make to re-establish alignment over time in the face of changing environmental dynamics.
Role of the Internal Selection Environment Most organizations face a tough external selection environment constituted by evolving market forces, nonmarket forces (technological change, government regulation), and general
economic conditions (booms and busts). Most startup companies succumb to the pressures of the external selection environment and disappear, and even large companies or business units often face nonlinear strategic dynamics that can quickly change their relative success (Burgelman and Grove, 2007). Organizations that survive external selection gain the opportunity to substitute to some extent internal selection for external selection, which allows them to continue to outrun and outsmart the external selection environment. At the same time, however, as organizations grow and become more complex with multiple functional, product and geographic groups, and multiple levels of management, it becomes more difficult to accurately and in a timely fashion assess the pressures of a highly dynamic external selection environment. Hence, a key set of analytical questions concerns how well the company’s internal selection environment works to dynamically align strategic action with stated strategy and distinctive competence with the basis of competition in the face of changes in the external selection environment. First, to what extent do the criteria guiding the company’s resource allocation – the types of projects funded and the funding levels – reflect external competitive reality? If they do not, they will probably reflect purely internal standards of performance, internal politics, or simple inertia. (General electric’s determination that a business has to be #1 or #2 in its industry to remain in the corporate portfolio and Intel’s rule of maximizing margin-per-wafer-start to allocate scarce manufacturing capacity to different semiconductor products are examples of criteria that reflect competitive reality.) Second, to what extent does the strategic planning process offer the opportunity to debate new opportunities? These debates typically involve those who make money today (existing opportunities) and those who promise to make money tomorrow (new opportunities), and it is rational to expect that today will usually win against tomorrow. Third, a central concern is therefore the capacity of the senior team for ‘strategic recognition’; that is, how strong is the senior team’s ability to see the implications of internal and external changes often after they are already happening but before others see their strategic implications? And fourth, how strong is the senior team’s capacity to go from strategic recognition to strategic action; that is, their capacity for the sort of strategic leadership that forcefully drives change? Finding valid and reliable answers to these questions may help top management diagnose the capacity of the organization’s internal selection environment to maintain the key alignments over time in the face of environmental dynamics. In the case of divergences between strategy and action, for instance, this may help top management get clear about the extent to which these divergences are due to a poorly designed internal selection environment in the face of a relatively stable external selection environment, or to the fact that the internal selection environment is actually correctly picking up signals of external changes – caused either by the organization’s own strategic actions to shape the external environment to its advantage or by the strategic actions of others in the external environment to which it must respond – that are putting pressure on the alignment between strategy and action.
Strategic Management Implications Linking firm-level strategy and strategic action in one framework draws attention to their dynamic reciprocal relationship. For instance, as further discussed in section Strategy-Making Process, the received strategy at any given time will ‘induce’ (intended) action; but entrepreneurial, ‘autonomous’ (emergent) action may, in turn, influence the evolving strategy (Burgelman, 1983; Mintzberg, 1978). Explicitly drawing attention to both corporate strategy and strategic action also highlights the reality that the effectiveness of capabilities ultimately depends on human actors: Capabilities in and of themselves only constitute a potential. Also, the strategy diamond may help top management appreciate better that in the end strategy is only as good as strategic action, and that while strategy without capabilities is powerless, capabilities without strategy are aimless. The strategy diamond framework also draws attention to two inertial hazards associated with potential tradeoffs between positional advantages and advantages based on distinctive competence (e.g., Barnett, 1997; Burgelman, 2002b). Such tradeoffs may create two types of strategic traps. Companies that rely heavily on positional advantages shield themselves from competitive pressures but face a potential ‘position trap’: The security of their positional advantage may relax their diligence in continuing to hone and develop their distinctive competencies. As a result, their existing competencies may lose some of their efficiency or strength, which may make them potentially vulnerable to new, fitter competitors attacking their strategic position. On the other hand, companies that rely heavily on distinctive competence to compete vigorously with similar others may be able to sharply hone these competencies and become best in class. However, such efforts potentially create a ‘competence trap’: The relentless efforts to hone existing distinctive competence may make the company vulnerable to new competitors with different distinctive competencies as competitive dynamics in the industry change (Levitt and March, 1988), or they may simply fail to appreciate the competitive importance of achieving a dominant strategic position. Integrating the dynamic links between strategic positioning and the deployment of distinctive competence, the strategy diamond framework may potentially serve as a research tool for examining the microfoundations of dynamic capabilities, which as Teece points out can for analytical purposes “.be disaggregated into the capacity (1) to sense and shape opportunities and threats, (2) to seize opportunities, and (3) to maintain competitiveness through enhancing, combining, protecting, and, when necessary reconfiguring the business enterprise’s intangible and tangible assets” (2007: 1319). Examining dynamic capabilities in the framework of the strategy diamond may help prepare top management to better face the transient nature of all sources of competitive advantage in highly dynamic, ‘hypercompetitive’ environments (D’Aveni, 1994). The strategy diamond framework also highlights the critical role of the internal selection environment in helping top management cope with such hypercompetitive external selection environments. Introducing the concept of an internal
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selection environment into the strategic management literature made it possible to link the field to evolutionary and ecological organization theories. It directs scholarly attention to how the internal selection environment may help a company to dynamically align strategic action with strategy and distinctive competencies with the basis of competition (given its productmarket position) in the face of changes in the external selection environment and/or in response to its own strategic moves. It also provides a potential lens for studying the interplays between action and cognition in strategy-making, and may thereby become a potentially useful concept in the further development of what is now the emerging subfield of ‘behavioral strategy’ (e.g., Levinthal, 2011). Finally, while it takes hard work to clearly define, and get the organization to agree upon, each of the framework’s concepts in light of a specific situation, it may also help significantly speed-up the strategic recognition process because it may help top management achieve faster ‘knowledge churns’; that is, the framework could serve as a theory about how to make an organization successful, a means to initiate experimental strategic actions that test that theory, and a means of interpreting the results and quickly incorporating the learning of these experimental strategic actions into the strategy going forward (through the functioning of the internal selection environment). Interestingly, the process involved in generating fast knowledge churns through the use of the strategy diamond seems to support the three capacities associated with dynamic capabilities as discussed in Teece (2007). Hence, the most important advantage of using the strategy diamond may be to help avoid the loss of precious time that moving in the wrong strategic direction inevitably entails, and which puts at least some dent in the potential competitive advantage that moving in the right strategic direction earlier offers. This also suggests that the strategy diamond framework may have the potential to serve as a research tool for helping guide the field toward a dynamic theory of strategy.
Strategizing, Economizing, and Performance Enhancing the performance of firms in their external environment is a key factor in the definition of the strategic management field, but the link between strategic management and organizational performance, however, remains somewhat murky (Nag et al., 2007). Williamson (1994) observes that business strategy encompasses both strategizing (related to market power) and economizing (related to efficiency) and proposes that while performance can be a function of both strategizing and economizing, economizing – efficiency analysis, including governance costs as well as production costs, and comparative economic organization – is the most important factor in determining performance because all firms need economizing to survive and only relatively few firms have enough market power to do strategizing. While Williamson emphasizes the difference between strategizing and economizing, it may be more fruitful to view these two aspects of business strategy as inherently complementary. This can be readily seen if strategizing is cast in terms of creating ‘perceived value’ (PV) on the part of target customers and economizing is cast in terms of ‘delivered costs’
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(DCs) associated with creating and delivering PV. This is shown in Figure 2 (different versions of this framework have been proposed in the literature; e.g., Porter, 1996; Saloner et al., 2001). Figure 2 shows that at any moment in time, there exists a possibilities frontier linking DC to PV as a function of the best use of available technology (T1) and modes of organizing (O1). This possibilities frontier, which rules out the attainment of ‘bliss’ (DC-unconstrained achievement of PV), can be discovered through benchmarking to find best in class competitors at the high-end, mid-end, and low-end of the market. Most organizations will find themselves inside the frontier, and it is an important task of strategic management to try to move their organization closer to the frontier through programs such as total quality control and/or the re-engineering of business processes (see Figure 2). This requires careful analysis of the link between cost drivers and PV, and the readiness of top management to move costs from lower value-creation activities to higher value-creation activities on an ongoing basis. Combining strategizing and economizing in a PV/DC framework also offers the opportunity to represent different types of innovation. Incremental innovation moves the possibilities frontier commensurately and makes it possible for most industry incumbent companies to adapt, sometimes taking the lead and sometimes having to catch up. Radical innovation, however, shifts the possibilities frontier in a discontinuous fashion. This involves new technological solutions (T2 in Figure 2), for instance, the use of the Internet, new ways of organizing (O2 in Figure 2), for instance, various forms of outsourcing, and the introduction of new business models, for instance, shifting revenue generation from selling products to providing subscription services. Such changes are often introduced by new entrants to an industry and are usually very difficult for incumbent companies to adapt to because of various forms of strategic inertia.
Figure 2
Strategy-Making Process After the 1991 Napa conference, it had become clear that the strategy-making process (previously known as the policy process), also deserved systematic attention of strategic management researchers (Rumelt et al., 1994). As noted earlier, the interplay of strategy and action in the diamond model sheds light on the existence of intended/induced and emergent/autonomous strategy processes, which can be related to current work in strategic management that build on March’s (1991, 2006) influential discussion of exploitation and exploration in organizational learning. Top management sets the corporate strategy and induces strategic actions by lower level leaders that are aligned with it in order to exploit opportunities in the familiar environment. The autonomous strategy process, in contrast, explores new opportunities that are outside the scope of the existing corporate strategy, relate to new environmental segments, and are often based, at least in part, on new distinctive competencies. An important top management responsibility and challenge is to balance resource allocation between the intended/induced strategy process (so as to maintain ‘fit’) and the emergent/autonomous strategy process (so as to maintain ‘evolvability’) over time; in particular, the scaling up and vectoring of resources related to autonomous initiatives that demonstrate viability through the process of ‘strategic context determination’ (Burgelman and Grove, 2007). Taking into account the existence of intended/induced and emergent/autonomous strategy processes, the overall strategymaking process of a complex organization can be further characterized in terms of two key dimensions: (1) the degree of concentration (versus distribution) of strategic decisionmaking power, and (2) the degree to which strategy execution involves all relevant parties simultaneously (or sequentially). The combination of these two dimensions
Strategizing and economizing: perceived value and delivered cost. *Source: Robert A. Burgelman, Lecture Material, Stanford Business School.
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Table 1
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Models of strategy making Strategic decision-making power Concentrated
Mode of execution
Simultaneous Sequential
Rational actor model Bureaucratic modelb
Distributed a
Internal ecology modelc Garbage can modeld
Also called ‘Model I’ in Allison, G., Zelikow, P., 1999. Essence of Decision: The Cuban Missile Crisis, second ed. Addison Wesley Longman, New York. Also called ‘Model I’ in Allison, G., Zelikow, P., 1999. Essence of Decision: The Cuban Missile Crisis, second ed. Addison Wesley Longman, New York. Burgelman, R.A., 1991. Internal ecology of strategy-making and organizational adaptation: theory and field research. Organization Science. 239–262. The internal ecology model is perhaps closest to Allison and Zelikow’’s Model III: ‘governmental politics.’ d March, J.G., Olsen, J.P., 1976. Ambiguity and Choice in Organizations. Universitetsforlaget, Bergen. Reproduced from Burgelman, R.A., 2002. Strategy is Destiny: How Strategy-Making Shapes a Company’s Future. Free Press, New York, pp. 4–6. a
b c
makes it possible to integrate into one conceptual framework four organizational decision-making models previously developed in the literature (Burgelman, 2002a). Table 1 shows these four strategy-making processes. Rational actor model. A comprehensively rational top management (individual leader or leadership team) formulates the overall strategy and is able to get all the interdependent actors in the organization to simultaneously engage in the actions necessary to implement it. In this model, there is strong alignment between strategy and action. It is often viewed as the ideal type. However, it may be most effective to respond to environmental dynamics that can be reasonably well anticipated and influenced. It may also be the best model for coping with a ‘clear and present danger’ or for exploiting an extraordinary opportunity. While a comprehensively rational top management is in principle able to effectively balance induced and autonomous strategy processes for some period of time, they are likely to eventually start favoring the intended/induced strategy process. Bureaucratic model. In this model, the overall strategy is still formulated by a comprehensively rational top management, but implementation is less immediate because various parts of the organization are independent of each other and translate the strategy in terms of the logic of their own operations before taking action to implement it. This model has advantages in slow-moving environments because each part of the system has time to optimize its strategic actions in light of the overall strategy. In rapidly changing environments, however, it will lead to sluggish execution of the overall strategy. While autonomous strategic initiatives will undoubtedly spring up in different parts of the system, scaling them up will be difficult. By default, the intended/induced strategy process will become dominant. Internal ecology model. This model views organizational-level strategy as the result of successful strategic initiatives of interdependent actors (individuals or groups), who are in a position to commit the organization and who continuously try to do so. In this model, strategy making is a highly dynamic process that capitalizes on anticipated and unanticipated variations in the internal and external environments. It views the strategy making process as constituting an opportunity structure for strategic leaders in the organization, but one in which individual opportunity seeking is constrained, to some extent, by the imperative of organizational survival. This model may be most effective in highly uncertain, opportunity-rich environments. The emergent/autonomous strategy process is likely to be
dominant here. Coherence of system-level strategic action depends on the characteristics of the internal selection environment. Garbage can model. In this model, strategy making results from various independent actors taking action as a function of the sequence in which problems, solutions, and decision opportunities arise. The effectiveness of system-level strategic action depends on the sequence in which problems, solutions, and decision opportunities arise. There is neither an explicit or implicit overall strategy, nor a clear ecological survival force, serving as reference point for determining whether an initiative is induced or autonomous. Hence, by default the autonomous strategy process dominates. Arriving at a coherent overall strategy for the organization is to a large extent governed by chance. The normative implication of this model is to ‘just hang in there and keep trying.’
Conclusion Strategic management has come a long way since 1979. As Nag et al. (2007) observe, in addition to the great diversity among strategic management scholars proper, a wide variety of scholars in adjacent fields (economics, sociology, psychology, marketing, etc.) are doing significant work that has a bearing on strategic management. The launch of two new journals – Strategic Entrepreneurship Journal and Global Strategy Journal – in recent years, as well as the continued growth of the Strategic Management Society, attest to the further expansion of the field. While this expansion is important for the continued intellectual fertility of the field and will likely lead to unanticipated, radically novel insights over time, it also poses a potential problem in terms of an ever-expanding topical universe and concomitant fragmentation of the field into specialized communities (or even camps) that have increasingly less in common. Hence, it is perhaps useful to engage in some efforts along the way to continue to integrate various important insights generated within this diverse field. That is the main purpose of the framework of dynamic forces driving company evolution (the strategy diamond), the PV/DC framework, and the framework of models of strategy making.
See also: Business Models; Closed and Open Systems: Organizational; Ecology: Organizations; Entrepreneurship and Organizations; Strategizing.
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Bibliography Barnett, W.P., 1997. The dynamics of competitive intensity. Administrative Science Quarterly 42, 128–180. Bower, J.L., Gilbert, C.G., 2005. From Resource Allocation to Strategy. Oxford University Press, Oxford. Burgelman, R.A., 1983. A model of the interaction of strategic behavior, corporate context, and the concept of strategy. Academy of Management Review 8, 61–70. Burgelman, R.A., 2002a. Strategy is Destiny: How Strategy-Making Shapes a Company’s Future. Free Press, New York. Burgelman, R.A., 2002b. Strategy as vector and the inertia of coevolutionary lock-in. Administrative Science Quarterly 47, 325–357. Burgelman, R.A., Grove, A.S., 1996. Strategic dissonance. California Management Review 38 (2), 3–23. Burgelman, R.A., Grove, A.S., 2007. Let chaos reign, then rein in chaos – repeatedly: managing strategic dynamics for corporate longevity. Strategic Management Journal 28, 965–979. D’Aveni, R.A., 1994. Hypercompetition: Managing the Dynamics of Strategic Maneuvering. Free Press, New York. Ghemawat, P., 1991. Commitment. Free Press, New York. Kraaijenbrink, J., Spender, J.-C., Groen, A.J., 2010. The resource-based view: a review and assessment of its critiques. Journal of Management 36, 349–372. Levinthal, D.A., 2011. A behavioral approach to strategy: what’s the alternative? Strategic Management Journal 32, 1517–1523. Levitt, B., March, J.G., 1988. Organizational learning. In: Scott, W.R. (Ed.), Annual Review of Sociology 14, 319–340. March, J.G., 1991. Exploration and exploitation in organizational learning. Organization Science 1, 71–87.
March, J.G., 2006. Rationality, foolishness, and adaptive intelligence. Strategic Management Journal 27, 201–206. Mintzberg, H., 1978. Patterns in strategy formation. Management Science 24, 934–948. Mintzberg, H., Ahlmstrand, B., Lampel, J., 1998. Strategy Safari. Free Press, New York. Nag, R., Hambrick, D.C., Chen, M.-J., 2007. What is strategic management really? Inductive derivation of a consensus definition of the field. Strategic Management Journal 28, 935–955. Porter, M.E., 1980. Competitive Strategy. Free Press, New York. Porter, M.E., November–December 1996. What is strategy? Harvard Business Review. Prahalad, C.K., Hamel, G., 1990. The core competence of the corporation. Harvard Business Review. Rumelt, R.P., Schendel, D.E., Teece, D.J., 1994. Fundamental Issues in Strategy. Harvard Business School Press, Boston. Saloner, G., Shepard, A., Podolny, J., 2001. Strategic Management. John Wiley, New York. Schendel, D.E., Hofer, C.W., 1979. Strategic Management: A New View of Business Policy and Planning. Little, Brown and Company, Boston. Stonehouse, G., Snowdon, B., 2007. Competitive advantage revisited: Michael Porter on strategy and competitiveness. Journal of Management Inquiry 16, 256–273. Teece, D.J., 2007. Explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal 28, 1319. Wernerfelt, B., 1984. A resource-based view of the firm. Strategic Management Journal 5, 171–180. Williamson, O.E., 1994. Strategizing, economizing, and economic organization. In: Rumelt, R.P., Schendel, D.E., Teece, D.J. (Eds.), Fundamental Issues in Strategy. Harvard Business School Press, Boston.
Abstract Strategic management has become a well-established, though still somewhat fragmented, academic discipline. Two of its theoretical foundations – the strategic positioning view and the resource-based view – together with an integrative view on strategy formulation and implementation are combined into one conceptual framework. Similarly, strategizing and economizing are combined into a conceptual framework that integrates external-oriented perceived value (focused on strategizing) and internal-oriented delivered cost (focused on economizing) to provide further insight into the performance challenges facing strategic management. Finally, a framework is constructed that integrates four models of the strategymaking process proposed in different academic literature relevant for strategic management.
Genesis and Development The academic field of strategic management grew out of the earlier pedagogical field of business policy, which was conceptualized as an integrative capstone course to be taught at the end of the business school curriculum to teach students how to integrate the various functional areas, but was not considered a field of research in its own right or a broader scientific discipline (Schendel and Hofer, 1979). In the context of becoming viewed as a new academic field, strategic management was initially defined as “.a process that deals with the entrepreneurial work of the organization, with organizational renewal and growth, and more particularly, with developing and utilizing strategy which is to guide the organization’s operations” (Schendel and Hofer, 1979: 11). The creation, in 1982, of the Strategic Management Society provided scholars of the new academic field with an institutional home, and the yearly Strategic Management Society Conference and the establishment of the Strategic Management Journal (SMJ) offered them an outlet for their research. By the late 1980s, the strategic management field had gained enough momentum to motivate organizing a second conference in Napa, California, in 1991 to examine progress made since the 1977 conference in Pittsburgh, Pennsylvania, and to provide further directions for the development of the field. Synthesizing the insights from the conference papers and discussions into book form, the organizers (R. Rumelt, D. Schendel, and D. Teece) identified four key issues, translated into research questions, that could be helpful in defining the field of strategic management, its boundaries as they existed at the time, its concerns, and how the field could make a contribution to the practice of management: (1) How do firms behave? (2) Why are firms different? (3) What is the function of, or value added by, the headquarters unit in a multibusiness firm? and (4) What determines the success or failure of the firm in international competition? (Rumelt et al., 1994: 2). By the time they were able to publish their book 3 years after the conference, the organizers realized they had failed to pay enough attention to the nature of what they call the ‘policy process’ – the strategy-making process – and to several other important questions (1994, Afterword). In other words, it had
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become clear that there simply was no way to guide scholars in advance to what would be the important contributions to the strategic management field. By the mid-2000s, SMJ had become a well-respected A-level academic journal and the Strategic Management Society Conference every year attracted some 1000 academics, consultants, and business leaders (the ABCs) from all over the world. Yet the burgeoning new academic field was still viewed by many as fragmented and lacking of a coherent identity. As the result of empirically identifying the common substantive core of the field and the implicit consensus among its diverse scholars about what constitutes the field’s coherence and identity, Nag, Hambrick, and Chen were able to arrive at a new definition of the field: “The field of strategic management deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of firms in their external environments” (2007: 944). The researchers realized that this definition of the field was in many ways too restrictive, but suggested that “.the greatest benefit of having this definition is that it allows strategic management scholars to frame the debate about what they want the field to become, or how they want to change it” (2007: 951).
Some Theoretical Foundations Soon after the initial formation of the strategic management field, Porter (1980) appeared on the scene to provide the inchoate new field with a solid foundation rooted in the economics of industrial organization. Porter’s seminal discussion of the importance of ‘strategic position’ and ‘generic strategy’ for competitive advantage stimulated the development of the ‘positional school’ in the strategic management literature (for an updated view, see Stonehouse and Snowdon, 2007). Shortly after Porter’s breakthrough contribution, Wernerfelt’s (1984) articulation of the so-called resourcebased view offered an alternative to the ‘position-based view’ of competitive advantage. In this view, resources are broadly defined to encompass technical, commercial, as well as knowledge, administrative and cultural factors. Some of the
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foci of the resource-based view are on the competitive advantages that may derive from resource heterogeneity among firms and on the sustainability of resource-based advantages (for a critical review, see Kraaijenbrink et al., 2010). In an important sense, the resource-based view also relates to Bower’s finding that strategy making in reality is constituted, to a large extent, by the resource allocation process (Bower and Gilbert, 2005). Since 1990, ‘core competence’ (Prahalad and Hamel, 1990) has gained great currency among practitioners. So much so that Porter (1996) felt the need to respond with a strong reaffirmation of the importance of strategic positioning for competitive advantage. More recently, the concept of ‘dynamic capabilities’ (e.g., Teece, 2007) has focused strategic management researchers’ attention on how an organization’s resources and competencies may be combined into ‘capabilities’ and how these may change over time and drive the organization into new strategic directions. It is worth noting that the positional school and the resource-based view are part of a larger set of 10 identifiable ‘schools’ in strategic management (Mintzberg et al., 1998), which testifies to the field’s scholarly fertility but also its increasing complexity that Nag et al. (2007) tried to reduce.
An Integrative Conceptual Framework Longitudinal field research, which examined the role of the internal ecology of strategy making in helping shape Intel Corporation’s evolution (Burgelman, 2002a), provided a response to important research in organizational ecology that fundamentally questioned the role of strategic management in organizational survival and adaptation. The response was based on the view that organizations, such as Intel, are ecologies in their own right within which strategic initiatives compete for its resources, and that the role of strategic management is to orchestrate and guide this internal ecological process in light of the dynamics of the higher level, external ecological processes.
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This longitudinal field research produced an integrative conceptual framework for strategic management – the ‘strategy diamond’ – of the dynamic forces that drive a company’s evolution. This framework brings together ideas from the strategic management literature that emphasize the importance of product-market position (the industrial organization perspective) with ideas that emphasize the importance of distinctive (or core) competencies (the resource-based view), and proposes that both product-market positioning and distinctive competencies are important for the attainment of competitive advantage. In addition, the framework proposes that the reality of strategy (as opposed to the rhetoric of strategy) lies in its execution through strategic actions. In doing so, the strategy diamond framework integrates five dynamic forces: (1) the organization’s ‘official (or stated) corporate strategy,’ which defines the scope of the business(es) it wants to be a winner in and its intended competitive advantage relative to the other players in the industry; (2) the ‘basis of competitive advantage in the industry’ associated with the organization’s chosen product-market position in the industry; (3) the organization’s ‘distinctive competencies,’ which encompass the technical, commercial, and administrative and managerial competencies in which it excels to create customer value relative to competitors; (4) the organization’s ‘strategic actions,’ which refer to the ‘consequential’ actions; that is, actions that commit the organization in a strategic direction and are not easily reversed (see also Ghemawat, 1991), and through which it actually uses its product-market position and distinctive competence to achieve competitive advantage; and (5) its ‘internal selection environment,’ which comprises the internal contextual elements that help maintain alignment of the other four forces (organization structure, planning and control systems, measurement and reward systems, recruitment and executive development, and leadership style, values, and norms). This framework serves to analyze strategic dynamics at the organization–environment interface level of analysis. Figure 1 shows the strategy diamond framework.
Figure 1 The strategy diamond: dynamic forces driving company evolution. Source: Adapted from Burgelman, R.A., March 1994. Fading memories: A process theory of strategic business exit in dynamic environments, Administrative Science Quarterly and Burgelman, R.A., 2002. Strategy is Destiny: How Strategy-Making Shapes a Company’s Future, Free Press, New York.
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The scalability of the strategy diamond framework, which can be scaled up and down levels of analysis (individual, functional, single business, multibusiness, or corporate), facilitates strategic integration across levels in the organization. For instance, it can be used to study the strategic situation facing the multibusiness firm as well as the strategic situation of any functional area within the firm. The strategy diamond draws attention of strategic management scholars and practitioners to the importance of considering strategic position together with distinctive competence in order to understand and secure an organization’s capacity to survive and thrive. This turns out to be surprisingly difficult. Two examples of the computer industry serve to illustrate this point. First, Novell’s preeminent strategic position in network operating system market segment in the early 1980s (more than 70% market share) may have led the company to allow its distinctive competence in network operating systems to wither while pursuing nonrelated opportunities in the PC application software market segment, leading to delays in the launch of its next-generation core product and giving Microsoft an opportunity to attack Novell’s core market with Windows NT. Second, Apple Computer has always had extraordinary strong distinctive competencies in software development, with many experts agreeing that the Mac operating system was superior to Microsoft’s Windows operating system. Yet, because Apple’s top management did not appreciate the importance of achieving a strategic position with a large installed base to gain ‘increasing returns to adoption’ (attracting independent software developers increases the value of the operating system, which increases the installed base and attracts even more software developers, and so on) Apple Computer was relegated to a small niche player in the PC industry.
Strategic Dynamics Think of the connections between the basis of competitive advantage in the industry, distinctive competence, official strategy, and strategic action as ‘rubber bands.’ During periods of strategic alignment, the rubber bands are evenly stretched because the dynamic forces are in harmony, and the strategy diamond looks like Figure 1. Over time, however, the alignment will come under pressure as the dynamic forces become disharmonious, causing the rubber bands to stretch unevenly. The stretching of the rubber bands causes ‘strategic dissonance’ between the company’s top and senior executives, which signals that the company likely faces an impending ‘strategic inflection point’ (Burgelman and Grove, 1996). Having established a baseline of alignment with the help of the strategy diamond may make it easier to understand the sources of the strategic dissonance. This, in turn, may make it easier to face up to the changes that top management must make to re-establish alignment over time in the face of changing environmental dynamics.
Role of the Internal Selection Environment Most organizations face a tough external selection environment constituted by evolving market forces, nonmarket forces (technological change, government regulation), and general
economic conditions (booms and busts). Most startup companies succumb to the pressures of the external selection environment and disappear, and even large companies or business units often face nonlinear strategic dynamics that can quickly change their relative success (Burgelman and Grove, 2007). Organizations that survive external selection gain the opportunity to substitute to some extent internal selection for external selection, which allows them to continue to outrun and outsmart the external selection environment. At the same time, however, as organizations grow and become more complex with multiple functional, product and geographic groups, and multiple levels of management, it becomes more difficult to accurately and in a timely fashion assess the pressures of a highly dynamic external selection environment. Hence, a key set of analytical questions concerns how well the company’s internal selection environment works to dynamically align strategic action with stated strategy and distinctive competence with the basis of competition in the face of changes in the external selection environment. First, to what extent do the criteria guiding the company’s resource allocation – the types of projects funded and the funding levels – reflect external competitive reality? If they do not, they will probably reflect purely internal standards of performance, internal politics, or simple inertia. (General electric’s determination that a business has to be #1 or #2 in its industry to remain in the corporate portfolio and Intel’s rule of maximizing margin-per-wafer-start to allocate scarce manufacturing capacity to different semiconductor products are examples of criteria that reflect competitive reality.) Second, to what extent does the strategic planning process offer the opportunity to debate new opportunities? These debates typically involve those who make money today (existing opportunities) and those who promise to make money tomorrow (new opportunities), and it is rational to expect that today will usually win against tomorrow. Third, a central concern is therefore the capacity of the senior team for ‘strategic recognition’; that is, how strong is the senior team’s ability to see the implications of internal and external changes often after they are already happening but before others see their strategic implications? And fourth, how strong is the senior team’s capacity to go from strategic recognition to strategic action; that is, their capacity for the sort of strategic leadership that forcefully drives change? Finding valid and reliable answers to these questions may help top management diagnose the capacity of the organization’s internal selection environment to maintain the key alignments over time in the face of environmental dynamics. In the case of divergences between strategy and action, for instance, this may help top management get clear about the extent to which these divergences are due to a poorly designed internal selection environment in the face of a relatively stable external selection environment, or to the fact that the internal selection environment is actually correctly picking up signals of external changes – caused either by the organization’s own strategic actions to shape the external environment to its advantage or by the strategic actions of others in the external environment to which it must respond – that are putting pressure on the alignment between strategy and action.
Strategic Management Implications Linking firm-level strategy and strategic action in one framework draws attention to their dynamic reciprocal relationship. For instance, as further discussed in section Strategy-Making Process, the received strategy at any given time will ‘induce’ (intended) action; but entrepreneurial, ‘autonomous’ (emergent) action may, in turn, influence the evolving strategy (Burgelman, 1983; Mintzberg, 1978). Explicitly drawing attention to both corporate strategy and strategic action also highlights the reality that the effectiveness of capabilities ultimately depends on human actors: Capabilities in and of themselves only constitute a potential. Also, the strategy diamond may help top management appreciate better that in the end strategy is only as good as strategic action, and that while strategy without capabilities is powerless, capabilities without strategy are aimless. The strategy diamond framework also draws attention to two inertial hazards associated with potential tradeoffs between positional advantages and advantages based on distinctive competence (e.g., Barnett, 1997; Burgelman, 2002b). Such tradeoffs may create two types of strategic traps. Companies that rely heavily on positional advantages shield themselves from competitive pressures but face a potential ‘position trap’: The security of their positional advantage may relax their diligence in continuing to hone and develop their distinctive competencies. As a result, their existing competencies may lose some of their efficiency or strength, which may make them potentially vulnerable to new, fitter competitors attacking their strategic position. On the other hand, companies that rely heavily on distinctive competence to compete vigorously with similar others may be able to sharply hone these competencies and become best in class. However, such efforts potentially create a ‘competence trap’: The relentless efforts to hone existing distinctive competence may make the company vulnerable to new competitors with different distinctive competencies as competitive dynamics in the industry change (Levitt and March, 1988), or they may simply fail to appreciate the competitive importance of achieving a dominant strategic position. Integrating the dynamic links between strategic positioning and the deployment of distinctive competence, the strategy diamond framework may potentially serve as a research tool for examining the microfoundations of dynamic capabilities, which as Teece points out can for analytical purposes “.be disaggregated into the capacity (1) to sense and shape opportunities and threats, (2) to seize opportunities, and (3) to maintain competitiveness through enhancing, combining, protecting, and, when necessary reconfiguring the business enterprise’s intangible and tangible assets” (2007: 1319). Examining dynamic capabilities in the framework of the strategy diamond may help prepare top management to better face the transient nature of all sources of competitive advantage in highly dynamic, ‘hypercompetitive’ environments (D’Aveni, 1994). The strategy diamond framework also highlights the critical role of the internal selection environment in helping top management cope with such hypercompetitive external selection environments. Introducing the concept of an internal
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selection environment into the strategic management literature made it possible to link the field to evolutionary and ecological organization theories. It directs scholarly attention to how the internal selection environment may help a company to dynamically align strategic action with strategy and distinctive competencies with the basis of competition (given its productmarket position) in the face of changes in the external selection environment and/or in response to its own strategic moves. It also provides a potential lens for studying the interplays between action and cognition in strategy-making, and may thereby become a potentially useful concept in the further development of what is now the emerging subfield of ‘behavioral strategy’ (e.g., Levinthal, 2011). Finally, while it takes hard work to clearly define, and get the organization to agree upon, each of the framework’s concepts in light of a specific situation, it may also help significantly speed-up the strategic recognition process because it may help top management achieve faster ‘knowledge churns’; that is, the framework could serve as a theory about how to make an organization successful, a means to initiate experimental strategic actions that test that theory, and a means of interpreting the results and quickly incorporating the learning of these experimental strategic actions into the strategy going forward (through the functioning of the internal selection environment). Interestingly, the process involved in generating fast knowledge churns through the use of the strategy diamond seems to support the three capacities associated with dynamic capabilities as discussed in Teece (2007). Hence, the most important advantage of using the strategy diamond may be to help avoid the loss of precious time that moving in the wrong strategic direction inevitably entails, and which puts at least some dent in the potential competitive advantage that moving in the right strategic direction earlier offers. This also suggests that the strategy diamond framework may have the potential to serve as a research tool for helping guide the field toward a dynamic theory of strategy.
Strategizing, Economizing, and Performance Enhancing the performance of firms in their external environment is a key factor in the definition of the strategic management field, but the link between strategic management and organizational performance, however, remains somewhat murky (Nag et al., 2007). Williamson (1994) observes that business strategy encompasses both strategizing (related to market power) and economizing (related to efficiency) and proposes that while performance can be a function of both strategizing and economizing, economizing – efficiency analysis, including governance costs as well as production costs, and comparative economic organization – is the most important factor in determining performance because all firms need economizing to survive and only relatively few firms have enough market power to do strategizing. While Williamson emphasizes the difference between strategizing and economizing, it may be more fruitful to view these two aspects of business strategy as inherently complementary. This can be readily seen if strategizing is cast in terms of creating ‘perceived value’ (PV) on the part of target customers and economizing is cast in terms of ‘delivered costs’
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(DCs) associated with creating and delivering PV. This is shown in Figure 2 (different versions of this framework have been proposed in the literature; e.g., Porter, 1996; Saloner et al., 2001). Figure 2 shows that at any moment in time, there exists a possibilities frontier linking DC to PV as a function of the best use of available technology (T1) and modes of organizing (O1). This possibilities frontier, which rules out the attainment of ‘bliss’ (DC-unconstrained achievement of PV), can be discovered through benchmarking to find best in class competitors at the high-end, mid-end, and low-end of the market. Most organizations will find themselves inside the frontier, and it is an important task of strategic management to try to move their organization closer to the frontier through programs such as total quality control and/or the re-engineering of business processes (see Figure 2). This requires careful analysis of the link between cost drivers and PV, and the readiness of top management to move costs from lower value-creation activities to higher value-creation activities on an ongoing basis. Combining strategizing and economizing in a PV/DC framework also offers the opportunity to represent different types of innovation. Incremental innovation moves the possibilities frontier commensurately and makes it possible for most industry incumbent companies to adapt, sometimes taking the lead and sometimes having to catch up. Radical innovation, however, shifts the possibilities frontier in a discontinuous fashion. This involves new technological solutions (T2 in Figure 2), for instance, the use of the Internet, new ways of organizing (O2 in Figure 2), for instance, various forms of outsourcing, and the introduction of new business models, for instance, shifting revenue generation from selling products to providing subscription services. Such changes are often introduced by new entrants to an industry and are usually very difficult for incumbent companies to adapt to because of various forms of strategic inertia.
Figure 2
Strategy-Making Process After the 1991 Napa conference, it had become clear that the strategy-making process (previously known as the policy process), also deserved systematic attention of strategic management researchers (Rumelt et al., 1994). As noted earlier, the interplay of strategy and action in the diamond model sheds light on the existence of intended/induced and emergent/autonomous strategy processes, which can be related to current work in strategic management that build on March’s (1991, 2006) influential discussion of exploitation and exploration in organizational learning. Top management sets the corporate strategy and induces strategic actions by lower level leaders that are aligned with it in order to exploit opportunities in the familiar environment. The autonomous strategy process, in contrast, explores new opportunities that are outside the scope of the existing corporate strategy, relate to new environmental segments, and are often based, at least in part, on new distinctive competencies. An important top management responsibility and challenge is to balance resource allocation between the intended/induced strategy process (so as to maintain ‘fit’) and the emergent/autonomous strategy process (so as to maintain ‘evolvability’) over time; in particular, the scaling up and vectoring of resources related to autonomous initiatives that demonstrate viability through the process of ‘strategic context determination’ (Burgelman and Grove, 2007). Taking into account the existence of intended/induced and emergent/autonomous strategy processes, the overall strategymaking process of a complex organization can be further characterized in terms of two key dimensions: (1) the degree of concentration (versus distribution) of strategic decisionmaking power, and (2) the degree to which strategy execution involves all relevant parties simultaneously (or sequentially). The combination of these two dimensions
Strategizing and economizing: perceived value and delivered cost. *Source: Robert A. Burgelman, Lecture Material, Stanford Business School.
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Table 1
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Models of strategy making Strategic decision-making power Concentrated
Mode of execution
Simultaneous Sequential
Rational actor model Bureaucratic modelb
Distributed a
Internal ecology modelc Garbage can modeld
Also called ‘Model I’ in Allison, G., Zelikow, P., 1999. Essence of Decision: The Cuban Missile Crisis, second ed. Addison Wesley Longman, New York. Also called ‘Model I’ in Allison, G., Zelikow, P., 1999. Essence of Decision: The Cuban Missile Crisis, second ed. Addison Wesley Longman, New York. Burgelman, R.A., 1991. Internal ecology of strategy-making and organizational adaptation: theory and field research. Organization Science. 239–262. The internal ecology model is perhaps closest to Allison and Zelikow’’s Model III: ‘governmental politics.’ d March, J.G., Olsen, J.P., 1976. Ambiguity and Choice in Organizations. Universitetsforlaget, Bergen. Reproduced from Burgelman, R.A., 2002. Strategy is Destiny: How Strategy-Making Shapes a Company’s Future. Free Press, New York, pp. 4–6. a
b c
makes it possible to integrate into one conceptual framework four organizational decision-making models previously developed in the literature (Burgelman, 2002a). Table 1 shows these four strategy-making processes. Rational actor model. A comprehensively rational top management (individual leader or leadership team) formulates the overall strategy and is able to get all the interdependent actors in the organization to simultaneously engage in the actions necessary to implement it. In this model, there is strong alignment between strategy and action. It is often viewed as the ideal type. However, it may be most effective to respond to environmental dynamics that can be reasonably well anticipated and influenced. It may also be the best model for coping with a ‘clear and present danger’ or for exploiting an extraordinary opportunity. While a comprehensively rational top management is in principle able to effectively balance induced and autonomous strategy processes for some period of time, they are likely to eventually start favoring the intended/induced strategy process. Bureaucratic model. In this model, the overall strategy is still formulated by a comprehensively rational top management, but implementation is less immediate because various parts of the organization are independent of each other and translate the strategy in terms of the logic of their own operations before taking action to implement it. This model has advantages in slow-moving environments because each part of the system has time to optimize its strategic actions in light of the overall strategy. In rapidly changing environments, however, it will lead to sluggish execution of the overall strategy. While autonomous strategic initiatives will undoubtedly spring up in different parts of the system, scaling them up will be difficult. By default, the intended/induced strategy process will become dominant. Internal ecology model. This model views organizational-level strategy as the result of successful strategic initiatives of interdependent actors (individuals or groups), who are in a position to commit the organization and who continuously try to do so. In this model, strategy making is a highly dynamic process that capitalizes on anticipated and unanticipated variations in the internal and external environments. It views the strategy making process as constituting an opportunity structure for strategic leaders in the organization, but one in which individual opportunity seeking is constrained, to some extent, by the imperative of organizational survival. This model may be most effective in highly uncertain, opportunity-rich environments. The emergent/autonomous strategy process is likely to be
dominant here. Coherence of system-level strategic action depends on the characteristics of the internal selection environment. Garbage can model. In this model, strategy making results from various independent actors taking action as a function of the sequence in which problems, solutions, and decision opportunities arise. The effectiveness of system-level strategic action depends on the sequence in which problems, solutions, and decision opportunities arise. There is neither an explicit or implicit overall strategy, nor a clear ecological survival force, serving as reference point for determining whether an initiative is induced or autonomous. Hence, by default the autonomous strategy process dominates. Arriving at a coherent overall strategy for the organization is to a large extent governed by chance. The normative implication of this model is to ‘just hang in there and keep trying.’
Conclusion Strategic management has come a long way since 1979. As Nag et al. (2007) observe, in addition to the great diversity among strategic management scholars proper, a wide variety of scholars in adjacent fields (economics, sociology, psychology, marketing, etc.) are doing significant work that has a bearing on strategic management. The launch of two new journals – Strategic Entrepreneurship Journal and Global Strategy Journal – in recent years, as well as the continued growth of the Strategic Management Society, attest to the further expansion of the field. While this expansion is important for the continued intellectual fertility of the field and will likely lead to unanticipated, radically novel insights over time, it also poses a potential problem in terms of an ever-expanding topical universe and concomitant fragmentation of the field into specialized communities (or even camps) that have increasingly less in common. Hence, it is perhaps useful to engage in some efforts along the way to continue to integrate various important insights generated within this diverse field. That is the main purpose of the framework of dynamic forces driving company evolution (the strategy diamond), the PV/DC framework, and the framework of models of strategy making.
See also: Business Models; Closed and Open Systems: Organizational; Ecology: Organizations; Entrepreneurship and Organizations; Strategizing.
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