Strategy as Strategic Decision Making

Many executives realize that to prosper in the coming decade, they need to turn to the fundamental issue of strategy. What is strategy? To use a simple yet powerful definition from The Economist, strategy answers two basic questions: “Where do you want to go?” and “How do you want to get there?”1

Traditional approaches to strategy focus on the first question. They involve selecting an attractive market, choosing a defensible strategic position, or building core competencies. Only later, if at all, do executives address the second question. Yet in today’s high-velocity, hotly competitive markets, these approaches are incomplete. They overemphasize executives’ ability to analyze and predict which industries, competencies, or strategic positions will be viable and for how long, and they underemphasize the challenge of actually creating effective strategies.

Many managers of successful corporations have adopted a different perspective on strategy that Shona Brown and I call “competing on the edge.”2 At the heart of this approach lies the recognition that strategy combines the questions of “where” and “how” to create a continuing flow of temporary and shifting competitive advantages. Executives from a variety of firms echo this perspective. John Browne, CEO of British Petroleum, stated, “No advantage and no success is ever permanent. The winners are those who keep moving.”3 Michael Dell, CEO of Dell, commented, “The only constant in our business is that everything is changing. We have to be ahead of the game.”4 But creating a series of shifting advantages is challenging. It requires effective strategic decision making at several levels: at the unit level, to improvise business strategy; at the multibusiness level, to create collective strategy and cross-business synergies; and at the corporate level, to articulate major inflection points in strategic direction.

This article describes strategy as strategic decision making, especially in rapidly changing markets. Its underlying assumption is that “bet the company” decisions —those that change the firm’s direction and generate new competitive advantages — arise much more often in these markets. Therefore, the ability to make fast, widely supported, and high-quality strategic decisions on a frequent basis is the cornerstone of effective strategy. To use the language of contemporary strategy thinking, strategic decision making is the fundamental dynamic capability in excellent firms.

These ideas come from more than a decade of research on strategy in high-velocity markets.

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References

1. “Making Strategy,” The Economist, 1 March 1997.

2. For a managerial perspective, see:

S.L. Brown and K.M. Eisenhardt, Competing on the Edge: Strategy as Structured Chaos (Boston: Harvard Business School Press, 1998).

For an academic perspective, see:

S.L. Brown and K.M. Eisenhardt, “The Art of Continuous Change: Linking Complexity and Time-paced Evolution in Relentlessly Shifting Organizations,” Administrative Science Quarterly, volume 42, March 1997, pp. 1–34.

3. S. Prokesh, “Unleashing the Power of Learning:

An Interview with British Petroleum’s John Browne,” Harvard Business Review, volume 75, September–October 1997, p. 166.

4. D. Narayandas, “Dell Computer Corporation” (Boston: Harvard Business School, case 9-596-058, 1996).

5. For ideas on interaction, see:

H. Guetzkow, “Differentiation of Roles in Task-oriented Groups,” in D. Cartwright and A. Zander, eds., Group Dynamics: Research and Theory (New York: Harper & Row, 1968).

6. For more information on time pacing, see:

C.J.G. Gersick, “Pacing Strategic Change: The Case of a New Venture,” Academy of Management Journal, volume 37, February 1995, pp. 9–45.

7. For more information on successful negotiation, see:

R. Pinkley and G. Northcraft, “Conflict Frames of Reference: Implications for Dispute Processes and Outcomes,” Academy of Management Journal, volume 37, February 1994, pp. 193–205;

D. Tjosvold, The Positive-Conflict Organization (Reading, Massachusetts: Addison-Wesley, 1991); and

R. Fisher and W. Ury, Getting to Yes: Negotiating Agreement without Giving In (Boston: Houghton Mifflin, 1981).