Sunday, June 5, 2011


By Feso Bright
My PhotoAccording to David Needle (2009, pp 5), “an organization refers to the way in which people are grouped and the way in which they operate to carry out the activities of the business”. The ways in which people are grouped require directional success and effectiveness in order to deliver value to the stakeholders in their businesses. As such strategy is required to actualize the success requirements of business operations. To David Needle (2009, pp 4), “a strategy comprises a set of objectives and methods of achieving those objectives. A strategy is usually formulated by top management and is based on a mixture of careful analysis of the environment and the organization, the personal preferences of the managers involved, and a process of negotiation with various other stakeholders”.

This paper seeks to highlight a few of the factors which necessitate the application of strategic management to business operations. The study begins with the examination of the dynamics of the organization by discussing the Whittington matrix. This will allow us to examine the notion of effectiveness as a desirable outcome and the concept of business in context. The discussion then graduates to an examination of the chaos phenomenon as it determines how organizations are able to exist in a random system of self-organization and how strategy allows navigation towards survival through pattern recognition. This then leads the discussion to an appreciation of leadership when compared to management. Finally, the concept of EVR Congruence is highlighted to reveal strategy as a focal point.

The Whittington Matrix
Businesses exist for a variety of reasons; some exist as profit-making concerns while some are non-profit making or not-for-profit concerns (Needle, 2009, p. 2). The Whittington matrix encapsulates the various theories of action (Argyris, 1977, cited in Whittington, 1993, p. 10) on what processes and outcomes firms do pursue, in order to achieve competitive advantage; these are the classical, evolutionary, processual and systemic perspectives on strategy (Whittington, 1993, pp. 2,3).
Figure 1: Whittington Matrix

Source: Adapted from Whittington, 1993, cited in Rattray (2009)
The classical perspective holds the view that profitability is the desirable outcome of strategy while rational planning is the means to achieve it (Whittington, 1993, p. 11). According to Alfred Sloan (1963: 49) “the strategic aim of a business is to earn a return on capital, and if in any particular case the return in the long run is not satisfactory, the deficiency should be corrected or the activity abandoned”. This predominantly Anglo-Saxon (Whittington, 1993, p. 30) perspective also promotes the idea of a rational economic man (Hollis and Nell, 1975, cited in Whittington, 1993, p. 16) who is very prudent and maximizes his economic advantage at all times (Whittington, 1993, p. 16).
The evolutionary perspective views profit maximization as a desirable outcome however; rational planning is futile because markets and not managers dictate strategy; this is what Alchian (1950, cited in Whittington, 1993, p. 18) terms the environmental fit based on natural selection. Strategy is viewed as expensive and competitive advantage is derived from focusing on efficiency and a focus on costs for short term survival (Whittington, 1993, p. 20). The processual perspective focuses on more pluralistic outcomes than profit-maximization and does not promote strategy making as the rational economic man is limited in his rationality (Whittington, 1993, pp. 22,23). A process of internal bargaining between groups of individuals within the firm determines its goals; furthermore, strategy is about trial and error as well as satisficing (Whittington, 1993, pp. 23,24).The firm thus relies on its resources for competitive advantage (Grant, 1991b, cited in Whittington, 1993, p. 26).
 The systemic perspective holds that rational planning and other objectives allow firms to become effective within their environments (Whittington, 1993, p. 28); business is seen as socially embedded (Granovetter, 1985, cited in Whittington, 1993, p.28). Thus different economic systems result in different outcomes pursued by a firm. It is  entirely possible that desired outcomes in Anglo-Saxon environments such as the United States and the United Kingdom will be different from those of business in Asian market contexts (Whittington, 1993, p. 32). As such, based on its stakeholders a multinational firm is able to attain a local focus (Whittington, 1993, p. 30).
The Notion of Effectiveness as a desired Outcome
The four perspectives provide the building blocks for any corporate strategy; sometimes they may overlap however the broad direction of each perspective enables a distillation of each company’s corporate strategy thinking; hence strategic management direction. Effectiveness is thus conceivable as a desirable pluralistic or profit-oriented goal. For instance, effective stakeholder relationships may be a goal of pluralistic-oriented strategy while achievement of profits may be a measure of effectiveness of the classical and emergent strategic managers. The words of John Adair (1999) relating a Chinese proverb, “what does it matter if a cat is black or white as long as it catches the mice”, help us to capture the essence and imperative for the pursuit of effectiveness by organizations.
 Business in Context
According to David Needle (2009, pp 4 - 6), a business may have three contexts; an organizational context, a strategic context and an environmental context. The organizational level context refers to the goals, structure, ownership, size and organizational/ corporate culture; these factors are all within the control of the organization. The Environmental level context refers to the factors outside of the control of the organization; these include the economy, the state, technology, labour, culture and so on. The strategic level context refers to “management decisions, and the influences on those decisions, that determine the direction of business activities”. Thus Needle opines that strategic issues are intertwined with the organizational and environmental issues and can in fact change the other contexts significantly.
Fractal Patterns and Chaos (Self Organization)
Given that every industry is made up of several organizations, we understand that every industry has its unique history of development and is constantly changing; this gives the strategic manager a unique opportunity to map that development and plan competitive strategies for the future (De Wit & Meyer, 2005, p.182).  Howevever the future is not as predictable as it seems; the challenge is that there exists a chaotic system of randomness which prevents prediction of longterm future events existing side by side with a patterned order of self organization which serves as a guide for future actions (Levy, 1994 p. 170).  In fact, Levy (1994, p. 170-172) highlights that industries hardly achieve steady equilibrium while drastic unexpected change is a frequent occurence thereby suggesting that guidelines are required to handle the uncertainty and complexity that arise.
 Certain factors exist which –when properly identified and understood- provide a framework for mapping the complex evolution and current dynamics of the industry- as observed in figure 2 below; these internal and external factors are utilized reveal the unique dynamics that characterize an industry.
Figure 2: Drivers of Industry Development

Adapted from: Wit & Meyer, 2005, p. 187
From figure 2, the arrows depict the level of complexity and feedback from one factor to the next; showing no directional causation. This shows that the development of industry does not always commence from a distinct starting point; rather the interaction of the several factors drives the industry along a seemingly unpredictable and dynamic path (Wit & Meyer, 2005, p. 187). In essence, past history of an industry may be a weak tool for planning for the future. Rather it may be discerned that a recognition of the patterns by the strategic manager in the development of each industry are useful tools for scenario planning (Buchanan & Huczynski, 2004, p. 46) and short term predictions of ways in which the industry will self organize. 
Leadership versus Management
Strategic management can be likened to leadership quality as it has been traditionally associated with a senior hierarchy function. For example, the word from which strategy is derived is known as ‘’Strategos’’- which means ‘’Army Leader’’. According to Needle (2009, p. 266) “while management focuses on coordination, leadership deals with influencing the performance of individuals and groups and inspiring them to higher levels of performance....; leadership is currently thought by many to be a determining factor in the success of the organization”. Strategic management thus appears to be relevant in elevating performance through leadership.
EVR Congruence
Figure 3: EVR Congruence

Source: Rattray (2009)
EVR congruence involves a matching of the environment, values and resources of the organization with a view to establishing the strongest match- which would imply strong competitive position and performance for a firm. A strong matching or otherwise suggests the need for strengthening of strategic direction. This makes strategic management a necessity for the organization.
BP Texas Refinery Blast and 'Gulf of Mexico' environmental disaster as a Failure of Strategic Management
Strategic Management takes part on the Global level, Corporate Level, Business Level and Functional Level. I have probably done an overkill on BP in this website (search for my articles on BP), however the company provides a classic case of the leadership versus management, effectiveness versus efficiency case. Now, BP was a market leader in cost efficiency (Eg lowest lifting costs, etc) and a lot of performance parameters before the Texas Refinery and Gulf of Mexico accidents; an emphasis on RESOURCES to the detriment of the ENVIRONMENT. But leadership was lacking in its risk management practices (according to formal reports); this may be attributed directly to a failure of strategic leadership- unable to IMPLANT VALUES of an appropriate risk management culture throughout the entire business. In my opinion, the lack of ''strategic management'' in the real and pure form or at least a misapplication of it in some form- led to the failure of BP at Macondo. How much of a distinctive advantage does BP have today? Post Macondo, I am really not sure.
Oceanic Bank vs GTBank in Nigeria Post Sanusi Lamido (Central Bank of Nigeria Governor) Era
This may be a sensitive topic for some Nigerians however it may be argued that one of the reasons for the sack of the former Managing Director of Oceanic Bank by the CBN Governor is- the strategic leadership dynamics. Here was a bank which -according to the CBN Governor was tittering on the brink of insolvency. How did the bank get to this? If we check the EVR congruence model we may find some answers. What were the strengths and weaknesses (Resources) of the bank? What were the opportunities and threats (Environment)  What were the values of the business; and how did its strategic choices and strategic implementation lead it to the brink of alleged insolvency? We may judge by the outcomes and suggest that there was an apparent deficiency of strategic management. This is because, as soon as Sanusi Lamido became the CBN Governor the Banking landscape changed somewhat irrevocably and the banks who had relatively unsustainable management practices began to decline and their leaders got the sack. 
On the flip side, we have GTBank, a bank which achieved a pioneer ISO 9002 status in the banking industry (an evidence of visionary leadership). The Bank is famed for its ''world class'' approach to the business in terms of standards and delivery. Judging from the mass migration of customers from the more uncertain banks at the time to GTBank, one may judge on this outcome that something must have gone right for GTBank. GTBank was declaring profits when most of the banking industry in Nigeria was declaring double digit loses. How did this happen? The answer is simple. GTBank had appropriately matched and mastered its ENVIRONMENT, had entrenched its VALUES deep within the organization and deployed its RESOURCES to maximum competitive advantage. Unfortunately, the above treatise of the examples is far from exhaustive and may be dealt with separately and with more attention; however the spirit of the argument is that the existence of appropriate strategic management in organizations- which RECOGNIZE THE IMPERATIVE to IMPLANT strategic leadership and strategic management processes into their very core- will always reveal itself one day. 
This light-hearted article has attempted to establish the position that strategic management is the very fibre that is required for an organization to achieve effectiveness. In order to do this, a preliminary analysis was carried out on various interpretations of desirable outcomes and success, as well as the notion of effectiveness as a desirable outcome. A view of business within its context led us to discuss the system of chaos which requires strategic management to make sense and success of complexity. It was also established that leadership is an integral part of strategy which would always be necessary in every organization. Finally, an examination of the EVR congruence template revealed that strategy is the glue that maximizes competitiveness- and by extension, performance of the organization.
In the final analysis, one must point out that leadership may not be misconstrued as synonymous with strategic management. However, strategic management naturally involves setting the agenda from the top and passing it down through the ranks- in the pattern of Army practice. Within the framework of chaos theory, leadership and EVR congruence it becomes logical to realize that there is a strong case and the imperative for the strategic management for organizational effectiveness. Examples of businesses which have adopted or probably discounted Strategic Management are briefly discussed as well - to bring some practicality to the discussion. Some of the thoughts in this article may be repetitious (from previous articles of mine) but within the context of an organization, I think they do justice to answering the question.

1 comment:

  1. Dear Feso,

    Would you kindly provide me the list of references you used? I would like to search the topic more.