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Business Policy and Strategy As A Professional Field: January 2001
Business Policy and Strategy As A Professional Field: January 2001
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Business
Policqand Strategaas a Professional
Field 27
evaluatethe executive'spart in the creation and direction of the firm, and of the
wider socio-economyof which it is a part. As soon as we forget this strategictask
and becomeabsorbedin subsidiarytheoreticalarguments,our field splintersinto
unconnectedacademicspecializations.(See also the discussionin Chapter I by
Tom Elfring and Henk W. Volberda.)
But in this chapter we argue, on the contrary, that there are several lines of
theorizing converging on a new and powerful emerging paradigm of strategic
analysis that draws us back towards Barnard, Schumpeterand Pemose, and to
their efforts to place leadership,entrepreneurshipand economicgrowth in a truly
dynamic framework. These new models find the organization's identity and
competitive advantagein the dynamic of its idiosyncratic knowledge, skills and
practicesand its learning processes.
Recent conferenceshave been marked by vigorous discussionsabout whether
our area is distinctive and, if so, in what way. In these sessionswe display a
certain disingenuity as we confessour inability to define our field. Despite stra-
tegy specialistsbeing among the most populous in managementeducation, it
appearsthat we are still searching for a professional identity. This display is
clearly unsettling to executives,as well as to our doctoral sfudents,newly minted
PhDs and junior faculty. Such uncertainty is not new (Bower, 1982; Bracker,
1980; Schendeland Hofer,1979), indeed it is not long since doctoral students
were being actively dissuadedfrom researchingbusinesspolicy and strategy
(Taylor and Macmillan, 1973). Nor are these doubts diminishing (Ghemawat,
l99l: l; Summeret al., 1990).Schendel(1991),in particular,hascalledfor a new
set of questionsto help define our field.
Some disputesabout our field are extremely public (Ansoff, l99l; Mintzberg,
l99l). Others are played out in the varied syllabusesof individual schools.
Incredibly, many businesspolicy and strategy (BPS) professors still focus on
strategyas the processof developinga fit betweenthe organizationand its envi-
ronment. Others have moved on and focus on industry analysis,negotiation and
game theory, protecting economic rents or the managementof cultural change.
Reflecting this diversity, our field's important papers appear in at least six
different journals (MacMillan, 1989).At the sametime the marketing and finan-
cial strategistsignore our journals and professionalmeetings,and the legal and
political theorists of organizationperiodically claim our territory. Occasionally
papers appear protesting this confusion and proposing theoretical closure (for
example,Camerer,1985;Shrivastava,1987).
Practitionersalso seemincreasinglydissatisfiedand some chargeour business
schools with failing the nation. Our journals clearly serye our institutional pro-
motion and tenure processwell, but do so at the expenseof alienating this clien-
tele (Behrmanand Levin, 1984;Porterand McKibbin, 1988: 167).Much of this
criticism is directed at our inability to deal with the practical aspectsof BPS:
executiveleadership,businessethics,global competitiveness,the comm ercializa-
tion of researchand development,the social and enyironmentalresponsibilities
of corporationsand so forth. There have been piecemealresponsesfrom indivi-
dual businessschools,but there is little consensuson the nature or place of BPS
in management education, though, prior to the International Association for
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28 Rethinfting
Strategg
We sometimestry to explain this sorry stateof affairs by saying that our field is
'young' (for
example,Huff, 1989: 658; Lamb, 1984: vii). This is historically
incorrect. Business policy has been a required course in American business
schoolsfor well over half a century (Schendeland Hofer,1979: v) and executive
level business education goes much further back than the founding of the
Harvard BusinessSchool in 1909 (Redlich, 1957).The real historical dynamic,
as Schendeland Hofer remind us, is the interplay of academicrigour and manage-
rial relevance(1979: 8). Prior to the 1950stherewas no recognizableacademic
field, though therewas widespreaduniversity teaching.The strategyfaculty came
from other disciplines.There were no strategyjournals, no theoretical literature,
no professionalsocietyand no BPS doctoral students.A distinctive field emerged
only as analysis replacedanecdote(Gilmore, 1970). The initial framework was
that of Learned et al. (1965). Their conceptof businessstrategyresolved a four-
way tension between what the managementwanted to do, thought it might do,
consideredit was able to do and thought it ought to do (Porter, l98l). This fram-
ing was sufficiently subtle to encompassthe ethical and political dimensionsof
businessleadership,as well as the more tangiblemattersof production,profit and
competitive position. Given such subtlety, the casemethod remained our field's
principal pedagogicaltechnique(Christensenand Hansen, 1987).
BusinessPolicgand StrategrJ
as a Professional
Field 29
immediately obvious that the planning literature was way too prescriptive and
bore scantrelation to practice.The espousedtheoriesof rational decision-making
had little to do with the way strategizingwas actually done. While some sampled
populations of decisions and sought generalizationsthat would vault over the
detail of specific strategy decisions,the Harvard BusinessSchool (HBS) stuck
doggedly to the casemethod and 'situational analysis' (Christensenand Hansen,
1987:30). They felt the relevance-seekingpractitioner neededprotection against
academics'abstracttheory and rigorous statistics.
Chandler's work profoundly influenced the basic definition of our field in ways
quite separablefrom the particulars of the strategy/structureresearchparadigm.
He showed, reinforced later by the work of Bower, Mintzberg, Child and
cH02.QxD 08/09 /2000 10:05 AM Pase 30
30 RetfrinkingStrategy
Isenberg,that executivesdo not think in the ways presumedby the older planning
and decision-making models. Assailed by so many details, senior executives
struggleto focus on a few broad topics. By identifying these,Chandler gave the
field the specific new categoriesthat openedup a new theoreticalterritory based
wholly on strategic practice. Whereas the planning paradigm treated strategy as
part of the rational decisionprocessof an economicmachine,Chandlerrelocated
strategy in the broader framework of the economic history of a society and
its organizational institutions. Even though much of the work derived from
Chandler's retreatedback into purely economic models, neglecting this broader
institutionally determinedframework, our field was pushedforward by thesenew
categoriesand intellectual frameworks. Its readinessto absorb them was a sure
sign of its intellectual vigour. But the discovery of new categoriesis an over-
looked part of the researchprocess(seealso Part 5 on the configurationalschool).
It stands dialectically opposed to the more familiar process of hypothesizing,
samplingand statisticalanalysis.For too many studentsand researchers, methodo-
logy starts and stops with hypothesis testing, though we see that far greater
progresscomeswith establishingnew categories(Daft, Griffin and Yates, 1987).
Category generationresearch,such as Chandler performed when he argued for
the distinctions betweenmultidivisional, centralizedand regional firms, remains
high risk, while hypothesistesting, using secondarydata, is a safer method that
appealsto our field's prevailing tenureand promotion pathologies.
The next crucial step forward was the move to investigatethe strategist'sidio-
syncratic categoriesand rationality (cf. Chapter 5, this volume). As soon as
researchersaccepted Simon's (1947) argument that economic rationality was
problematic,no longer pre-supposed,they were forced to develop alternatives,if
only becausethe strategist'srationality also becomesthe basisfor an explanation
of his4rer action (cf. Chapter4, this volume). In the social sciencesnew frame-
works generally come from the actorsinvolved inthe phenomenaof interest,i.e.
managers,workers, deal-makers,entrepreneurs,inventors, etc. or are borrowed
from the other social sciences.SomeBPS researchers,such as Mintzberg, remain
committed to these actors' views and intuitions, pointing out the irrelevanceof
decision-making theory (Mintzberg, 1994). In this sense Mintzberg's entire
oeuvre is a prolonged attack on our field's typically uncritical pre-suppositionof
economicrationality.In his best-knownpaper(Mintzberg,1976),Mintzbergadopts
the split brain metaphorto argue that businessstrategyis more art than science.
This critique goes to the heart of strategictheory, suggestingthat businessstra-
tegy can be distinguishedfrom all else, such as decision making, tactics,pricing
or market positioning, by being inexplicable within the framework of a priori
rationalism. For Mintzberg, strategy is the creative outcome of managerial experi-
ence,judgment and introspection,only researchablebecauseit guides practice
and thereby reveals the shape and working of the managerial or organizational
unconscious.An easier option is to borrow from the other social sciencesand
assumethe actor's rationality is relatively pre-defined, a reflection of his/her
culfure or mental D?p, whether that is located in an organization, work group,
profession,industry or nation. Starting from Simon's notion of 'bounded ratio-
nality', strategy is redefined as the process of sense-making,of creating the
cH02.QxD 08/09 /2000 10:05 AM Page 31
Business
Policqand Strateguas a Professional
Field ?l
local rationality or framework of analysis. The strategic process becomes the
construction and disseminationof a particular rationality. Strategic change is
not simply the redirection of the enterprise towards different product markets
or levels of performance, it may also be the displacementof one rationality
or culture (Miles and Snow, 1978) or one industry recipe (Spender, 1989) by
another.
Note that this attack on economic rationality also suggestsa framework in
which multiple actorsand multiple rationalitiesmight be active at one time. (See
also Chapters4 and 8, this volume.) Game theory begins with a two personzero-
sum game in which both actorsadopt the samerationality. Negotiation begins as
actors with divergent rationalities seek outcomesthat benefit both. In the same
way we can expect different rationalities to result from the division of interest
between a principal and his/her agent.Unless the latter is adequatelybonded or
policed, he/shewill make decisionsthat run againstthe owner's interest.Child,
Pfeffer, Pettigrew and othersmount a similar attack on rationality from political
theory. Political theory argues that competition between actors with different
rationalities may not be reconcilableunless those with power suppressthe dif-
ferences,superimposingtheir rationality on others.Under conditions of multiple
rationality the organization loses its identity and it becomesimpossible to dis-
tinguish the interestsof the organization from those of the dominant coalition.
Similar problems arise with the socio-psychological research of Hambrick,
Finkelstein, Castanias and Helfat, and others investigating top management
teams, looking at, for instance, the relationship between its members' back-
grounds and their strategic choices. Before the attack on economic rationality
many of thesedifficulties usedto be sidelinedby separatingstrategyformulation
from its implementation(Schendeland Hofer,1979: l4). The field has benefited
hugely from Simon's insights into the limitations of economic rationality by
showing that cognitive theory denies the distinction between formulation and
implementation.
Any attack on economic rationality is damaging. With one sweep it wipes
away the familiar structureof goal-orientedstrategicanalysiswhile also cuffing
the ground for analysesthat treat the organizationas the principal unit of analy-
sis. Both the individual's bounded decision making and the group's political
processesbecome crucial, and much greateraffention needsto be paid to team-
work (Alchian and Demselz, 1972).The damageis so severethat many writeres
still refuse to recognize these implications of Simon's critique. But to ignore
Simon's work is to miss the way our field has been successfullypushedthrough
these'paradigmbarriers'.No longerpresumingeconomicrationality,we ask com-
pletely new questionsabout the nafure of organizationsand their management.
The field's new answersrevolve around knowledge and skills, what managers
and employeesactually know and bring to the workplace. We puzzle over the
subtle combination of objective and tacit knowledge (Polanyi, 1962), and the
heuristicsand intuitions that were being denied by our previous presumptionof
economic rationality. Bounded rationality drives a wedge betweenrational deci-
sion making and managerialpractice, and so createsthe appropriatetheoretical
spacefor tacit knowledge as a new mode of explanation.It makes it important to
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32 Rethinfting
Strategy
Business
Policyand StrategAas a Professional
Field 77
34 Rethinking
Strategg
. joint venfures,mergers,acquisitionsand portfolio management
. top, middle managementand workplace teamwork
o gslno theory, bargainingand co-operation
. industrial organization, strategic groups and oligopoly
. instifutional and transactioncost economics
o agency theory, property rights and corporate control
. technology strategy,developingand protecting intangible assets
. skills, tacit knowledge and organizationallearning
' organizationalculfure, symbolism, communicationand changemanagement
o interorganizationalnetworking and strategicalliances
. globalization, localization and internationalcompetitiveness.
Though this list is not exhaustive,it seemsa forbidding menu of ways for think-
ing about why one firm performs beffer than another or about why firms differ
(Schendel,1991).At its worst it is little more than a laundry list of fashionable
'strategic
lenses',but even then its scopeimplies how rich is the strategytheory
we now seek,how great is the progressmade since the 1960s.
36 Rethinking
Strategg
Dealingwith Practice
To break through into a truly dynamic knowledge-basedparadigm we need to
addressthe conceptsof organizationaland individual practice.Practicelies at the
core of the discussion of tacit knowledge and skills, and it opens up a third
'action'
dimensionof the emergingframework of strategictheorizing.To the two
previous dimensions of strategicanalysis,the need to deal with multiple ratio-
nalities and levels of analysis,we add the distinction between reasonedanalysis
and human action. We argue that human action cannot be fully analysedas the
unproblematic consequenceof reasoneddecision making. Some action may be
ffeated this way, but much cannot, especially that which is sffategic and per-
formed under conditions of uncertainty(Spender,1989:a\. By introducing this
third dimension we suggestthat much of the executive creativity that results in
strategicadvantageemergesonly through action, and as we delve into the notion
of practicewe shall seethat our field's notions of rationality and levels of analy-
sis also change.
Polanyi's (1962) discussion of tacit knowledge is often summarized in the
maxim 'we know more than we can tell', the point being that much of human
knowledge is embeddedin practice and cannot be readily articulated using the
abstractionsof language.Strategistshave recently taken up the taciVexplicit dis-
tinction, recognizingthat the firm's tacit knowledge,embeddedin organizational
routines,is likely to be inimitable and so the sourceof persistenteconomic rents.
But the distinction may be more profound than this. For us, tacit knowledge is not
simply an under-articulatedform of explicit organizationalor individual know-
ing. It also suggeststhat the ability to engageskilfully (and heedfully) in organi-
zational practice is a form of knowing that differs from the explicit form of
knowing associatedwith managerial decision making. The point is not lan-
guage's inability to grasp what some people reveal in their practice, rather that
the knowledge capturedby languageis itself not in the 'world' of organizational
activity. This is most obviously true when we build theoretical models that are
deliberately absffacted and generalized away from'the world we experience.
Practice,by definition, is immediate,in the world and contextualized,and beyond
being wholly capturedin linguistic generalities.
The implication is that to grasp organizationalpractice fully we may have to
move away from the idea of generality.Action is always in context,and strategic
advantage is always in the world. Thus theorists are forced to make strategic
| ""or.o*o 0 8 / 0 9/ 2 o o o 1 0 : 0 5 A M p a s e 3 r A
I Y
3E Rethinft.ingstrategq
Conclusion
40 Rethinfting
Strategy