John B. Lacson Foundation Maritime University Arevalo), Inc.

GRADUATE SCHOOL
Iloilo City

Module 1

The Strategy

Lesson 1: Traditional Approaches

Introduction

This lesson starts by defining the traditional approaches to strategic management. It

further explains the competitive forces in the work industry and the key attributes of strategic
management. The strategic management process is discussed with emphasis on strategy analysis
which assesses the organization’s goals, external environment and internal environment.

It introduces strategic innovation and point out the major differences between the
traditional approach to strategic management and strategic innovation. Various success stories
are touched upon to showcase the impact of strategic innovation. The sources of strategic
innovation are analyzed with focus on the ‘who-what-how’ framework. Finally, the seven
dimensions of strategic innovation which drives growth are discussed.

Learning Outcomes

At the end of the lesson, the students shall have been able to:

1. define what is Strategy;

2. differentiate the traditional approaches and new approaches to strategic management.

Pretest:

Multiple Choice: Select the correct answer from the choices given below each question. Write
the letter of your answer on the blank provided before each number.

__________1. The fundamental purpose for the existence of any organization is described by its
a. policies
b. mission
c. procedures
d. strategy

__________2. The acronym SWOT stands for

a. special weapons for operations timeliness
b. services, worldwide optimization, and transport
c. strengths worldwide overcome threats
d. strengths, weaknesses, opportunities, and threats

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Iloilo City

__________3. An organization’s strategy:

a. remains set in place longer than the mission and objectives
b. generally, forms over a period of time as events unfold
c. tends to be formed at the same time the mission is developed and objectives
are formulated
d. is usually conceived at a single time when managers sit down and work out a
comprehensive strategic plan for the next 3-5 years

__________4. The task of strategy choice involves:

a. developing plans and activities which will improve the organization’s
performance and competitive position
b. determining how the organization can be more market and efficiency oriented
c. monitoring whether the organization is achieving good financial performance
d. keeping the organization free of debt

__________5. The goal of the organization’s is to capture the hearts and minds of
employees, challenge them, and evoke their emotions and dreams.
a. vision
b. mission
c. culture
d. strategy

__________6. The fundamental purpose of an organization’s mission statement is to

a. create a good human relations climate in the organization
b. define the organization’s purpose in society
c. define the operational structure of the organization
d. generate good public relations for the organization

__________7. Which of the following is not a characteristic of strategic management that makes
it different from other types of management?
a. it is interdisciplinary.
b. it has an external focus.
c. it has an internal focus.
d. it concerns the present direction of the organization.

__________8. Which of the following is NOT a major element of the strategic management
process?
a. formulating strategy
b. implementing strategy
c. evaluating strategy
d. assigning administrative tasks

__________9. Competitive advantage can best be described as:

a. increased efficiency.
b. what sets an organization apart?

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Iloilo City

c. a strength of the organization.

d. intangible resources.

__________ 10. The foundation of blue ocean strategy.

a. Innovation
b. Value creation
c. Value innovation
d. value cost trade-off

Reading

Management theory and practice widely accept today those businesses operate in a more
and more complex, dynamic, less predictable environment. This situation requires managers to
develop new ways of thinking and acting. Nevertheless, many managers still follow the old
approach of strategic positioning and strategic planning. This basic model proved to be very
worthwhile for decades and has become the dominant pattern of strategic thinking. However, the
dynamic developments in recent years taught many businesses that this approach has its limits.

Starting with a description and critique of traditional strategic planning, this series of
articles compares traditional and new approaches in strategic management.

The new one’s direct companies towards more flexibility and more strategic
innovativeness; but they do not present ready-to-use solutions though. Rather they are intended
to provide ideas for new thinking and acting as a starting point to give all processes in the
organization a new strategic direction.

The typical and well-known strategic planning process starts with the vision and mission
of the business. This is followed by a detailed internal and external analysis, which leads to
a SWOT. The results from this analysis allow developing several strategic options. They are
evaluated and finally, one option is chosen for implementation.

This approach assumes a fairly stable and predictable environment. Although these
conditions are hardly present today any more, the traditional strategy process still has its merits.
The process as a whole and the accompanying models and tools are widely known and very
popular. There is a huge body of knowledge. Templates for almost every thinkable situation are
readily available. This gives the process and its results a high acceptance and credibility
throughout organizations.

The general model of the traditional strategy process:

The traditional strategy process as described in this article has evolved during the
20th century. Concepts like positioning, analysis, strategic options, portfolio management and
more were developed as a response to the increasing complexity of the growing post-war
economy. These were the years when more and more large, multi-national, multi-product
companies evolved and finally formed global conglomerates. Competition increased and global

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Iloilo City

interdependencies intensified. In this situation, businesses needed more sophisticated

management tools than their predecessors, which were much smaller and more locally oriented.

Basic structure of the traditional strategy process:

Many business school textbooks teach you that every strategy process should be based
on the Vision and Mission of the business. From these, medium- to long-term objectives are
derived. Vision, Mission, and Objectives provide the framework and context for the strategy.
Hence, the resulting strategy has to guide the business on its way to fulfilling its Vision and
Mission.

After a thorough analysis is conducted:

1. On the internal side, strengths and weaknesses are identified

2. On the external side, opportunities and threats are identified

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Iloilo City

The most popular tool for summarizing analysis results is the SWOT. In addition, there
are many other models and tools around for internal and external strategic analysis, as
in PESTLE, Porters Five Forces, Value Chain, or the 7-S-Model.

After this analysis phase, the business should have a clear idea which Strengths (that
hopefully set it apart from competitors) it can use to exploit market Opportunities or to respond
to unfavorable Threats in its external development. It is also aware of its Weaknesses. These
would limit the businesses strategic options or are areas to work on for improvement.

Based on this information, the business can develop several strategic options. Ideally,
these should take into account different future scenarios. Again, there are some tools available
for this step. Some of the best known are Ansoff’s Matrix, the Boston Box and Porters Generic
Strategies.
In order to make a strategic choice, the options have to be evaluated. They should be checked for
Suitability, do they address the most relevant external trends, Opportunities and Threats?
Feasibility, is the business able to implement these options? Does it have the necessary
capabilities and resources? How much change is involved? Which timeframe is needed? …
Acceptability, is the strategy acceptable for the most influential stakeholders? Is it in
synchronization with the Vision and Mission?

The standard process implies, that the business should decide for one strategy and then
enter implementation phase. Of course, it is wise to have one or two alternative strategies just in
case the external environment will develop different than expected.

This strategy and its implementation progress would be reviewed on a regular basis.
Many businesses follow a strategic planning cycle with a frequency of one or more years. As a
result of this review, the strategy can be adjusted. However, the general idea is that these are
minor adjustments. The overall strategy should remain valid at least for a medium time frame.

Underlying assumptions of the traditional strategy process:

This model assumes an understandable, fairly stable, and predictable environment.

Although external analysis includes some thinking about possible future developments, these are
mainly based on an extrapolation of the present.

Traditional strategy schools of thought see strategies as a means for achieving

competitive advantages and a favorable position in the marketplace. This takes place in a stable
or predictable environment by exploiting competences and resources.

The traditional strategy process still has some benefits

This basic process – with some variations – has been taught in business schools for
decades, hence, the process and the accompanying models and tools are well known and still
very popular. Managers and specialists are familiar with the steps and terminology. It doesn’t

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Iloilo City

need much prior explanation and training to perform a SWOT analysis for an organization or a
business unit.

Consultants, authors and strategic thinkers have built their own approaches and products
for strategy consulting based upon this basic process. Thus they helped to anchor these ideas in
the collective thinking of every major organization.

Such a process will gain credibility and acceptance much easier than an innovative
approach for dynamic times. It also is easier to design and implement. This is an advantage that
many executives and strategists’ value.

The traditional strategy process may still lead to reasonable results in particular industries
and markets. This applies in particular to markets that are not strongly affected by disruptive
changes. However, such a seemingly stable situation may vanish virtually overnight.

Finally, the analysis process and the SWOT model still can serve as a way for compiling,
analyzing and structuring information. Businesses are easily overwhelmed with the vast amount
of data, information, explicit and tacit knowledge when analyzing their situation. The use of well-
known tools can help to filter and make sense of this information overload.
Problems with this approach

Despite these benefits, the original design of this process did not take into consideration
today’s dynamic and unpredictable business environment. It wasn’t designed for these
circumstances. Hence, it won’t lead to optimal results. Problems arise from the following issues:

The process and the associated tools can’t keep up with the pace of change in the business
environment. They will lead to lagging results.
Strategists are tempted to shrink their focus, due to the increasing uncertainty. Their focus shifts
to internal analysis and the near-term future.
Strategies resulting from this process are always based on the current situation and limited to
thinkable futures.

The growing number of viable future scenarios makes it a lottery to decide for a strategy
that fits one particular future.
The strategic plans may be too inflexible for today’s pace of change.

Strategies are based on and limited to the pre-determined corporate vision, mission, and
objectives.

Approaches to Strategy Formulation – 6 Main Approaches: Intuition, Disjointed

Incrementalism, Entrepreneurial Approach, Key-Factors Approach and a Few Others:
Possible approaches to strategy formulation are many. Gilmore has distinguished between the
traditional approaches which developed during the period between World Wars I and II and the
modern approach which has evolved since the mid-1950s.

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Iloilo City

The traditional approach comprised:

a. A size-up of the situation of the company as a whole generally on the basis of size-
ups of the functional departments;
b. Determination of objectives; and
c. Development of programme of action covering the various activities of the company
in the light of direction and unity of purpose provided by the objectives.

As Gilmore put it, there was a definite tendency for top management to size up the
situation, starting at the very base; formulate objectives and programmes of action; organize to
carry out the plans; and exercise executive control; but then drift along until serious problems
made it necessary to size up the situation again. In short, the traditional approach was
characterized by a concern for short-term problems, sporadic diagnosis and sizing up the
situations as a basis for new course of action, and adaptability to meet changes in current
conditions.

The new, modern approach has evolved with emphasis on reappraisal of the existing
strategy in the light of changing external conditions, constant surveillance of the environment to
identify and capitalize on long-term opportunities, formulation of alternative strategies, if
necessary, and choosing an appropriate strategy, all within a formalized system.

In a model set-up, the process of strategy making should work as follows – Current
strategy is reappraised from time to time in the light of internal operating results, economic
trends, competitors’ action, and technological developments. When opportunities and threats
have been disclosed, management proceeds to ask questions designed to indicate when and in
what respect strategy should be changed. If a new economic mission is called for, the planners
proceed to formulate a revised approach. This, in turn, calls for the revision of the competitive
approach and of the programmed of action.

If the economic mission is considered sound, the competitive approach is questioned. If

the competitive approach seems appropriate, the process continues until the appropriate area for
revision is identified and a new strategy is formulated.

The method of strategy formation delineated above is a rational, normative proposition.

One may also distinguish between different approaches to strategy-making on the basis of the
thrusts which generate strategic alternatives and determine the effectiveness of strategic
decisions.

Approaches to strategy making.

Approach 1. - Intuition:

The basic premise of this approach is that the strategy evolves in the mind of the
chief executive without ever being explicitly stated and without the aid of formal

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procedures. “Intuition.” Sterner has observed, “is an excellent approach if it is brilliant.”

Along with intuition, personal judgment is also a necessary element in this approach.

In the United States, Alfred Sloan of General Motors Corporation, Henry Ford of Ford
Motor Car Company, and in India, Lala Sri Ram, Walchand Hirachand, J.R.D. Tata, G.M.
Modi, Shri Anantharamakrishnan. G.D. Birla, to name a new among the pioneer
industrialists, are often remembered for their imagination, drive and expansive vision,
which led to corporate growth and prosperity in different fields.

The strategies developed by each of them over the years may be attributed to their
intuition and judgment. The very nature of strategy formation is said to provide the raison
d’ etre of this approach. As Anthony has put it, Strategic planning is essentially irregular.
Problems, opportunities, and ‘bright ideas’ do not arise according to some set time table;
they have to be dealt with whenever they happen to be perceived.

The appropriate analytical techniques depend on the nature of the problem being
analyzed and currently there is no general approach (such as a mathematical model) that
is of much help in the analysis of the types of strategic problems. Indeed, any attempt to
introduce a systematic approach is quite likely to dampen the essential element of
creativity.

Approach 2. -Disjointed Instrumentalism:

Sometimes referred to as ‘muddling through’, this approach to strategy-making

reflects an attitude of management having strong preference for acting only when forced
to, and then considering a few convenient alternatives involving only small, non-
disruptive changes in the organization.

The decisions made are of remedial nature. Only those alternatives are considered
which are important, interesting and easily understandable. The strategist, instead of
comprehending strictly and literally present states of affairs or the consequences of
present policies, attempt only to understand the respects in which various possible states
differ from each other and from the status quo.

Lindblom stressed the rationale of this approach on the ground that the
comprehensive analytical approach to strategy-making – careful analysis of many
alternatives of expected goals – is not helpful because of man’s inability to cope with
complex problems, the lack of information, the cost analysis, the problem of timing, and
the difficulty of stating realistic goals.

Approach 3. -Entrepreneurial Approach:

The thrust underlying this approach is related with the role of the manager as an
entrepreneur. Drucker has depicted the role of an entrepreneurial manager as that of a
systematic risk-maker and risk-taker, looking for and finding opportunity.

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Iloilo City

“Entrepreneurship is essentially the acceptance of change as an opportunity and the

acceptance of ‘the leadership in change’ as the unique task of the entrepreneur.”

The role of an entrepreneur is opportunity-focused and not problem- focused.

Briefly speaking this general description of the entrepreneurial manager indicates what is
expected of him, but it does not enlighten us on how he should go about performing his
role.

Approach 4. -Key-Factors Approach:

This approach consists of determining the really significant factors that are
important in the success of a particular business and concentrating major decisions on it.
For instance, a new imaginative toy may be a critically strategic factor in the success of
a toy company. Or, finding a propitious niche in the market where a company can give
the customers an irresistible value that is not being satisfied at a relatively low cost, may
again be the cornerstone of strategy formation.

Approach 5. -‘Inside Out’ Planning:

According to Ewing, a basic approach to developing strategies could be ‘inside

out’planning. Strategies, he suggests, ought to be first conceived in a thought process
arising out of the unique talents and resources possessed by a company. Market forecasts
should be considered later as a kind of check or constraint on strategies so conceived.

Approach 6. - Integrated Approach:

An integrative approach to the strategy-making process provides a framework

which consists of the following parts

(a) Analyzing the present internal and external conditions;

(b) Identifying and evaluating the present strategy—the major objectives,
policies and plans currently guiding the firm;
(c) Search for strengths and weaknesses viewed within the present strategy
and environment;
(d) Considering changes in the present strategy;
(e) Generating alternatives to resolve the problems and exploit the
opportunities;
(f) Developing alternative unified strategies by combining the various
alternatives in each of the problem and opportunity area;
(g) Evaluation of each unified strategy in terms of the enterprise objectives
and choosing the strategy that best satisfies the objectives.

For an on-going organization, re-appraisal of the present strategy actually

becomes the first phase in the total process. This requires identification of the existing

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Iloilo City

strategy. It is often difficult to identify the present strategy. The strategy being followed
may not be articulated.

Or, there may be an articulated strategy that is not adhered to in practice. Or,
again, the enterprise may not have developed any real strategy, it may be muddling
through and being tossed about by the force of events. If no strategy is clearly indicated,
it must be constructed from actual events and statements.

Identification of the present strategy is invariably accompanied by an analysis of

the enterprise objective, policies, and plans in the context of the functional areas and
managerial configuration of the organization, and the external conditions. Thus, by
implication, in the process of identification and description of the strategy, the evaluation
of strategy, is also under way.

More specifically, the effectiveness of the present strategy may be assessed on the
basis of the following criteria:

(a) Past results;

(b) Its appropriateness for the future; and
(c) Its rationale, i.e., by asking why the present strategy has been pursued.

Review of performance in terms of results achieved is an important basis of

appraising the present strategy. But the relevant questions to be raised in this connection
are: How do the results compare with the objectives of the enterprise? Have the
achievements been realized within the bounds of policies established by management?
Have the results been achieved with an acceptable degree of risk? Were the achievements
really the outcome of strategy, or fortuitously derived in spite of the strategy? Or, if the
results have not been up to expectations, was it due to a faulty strategy or due to
unforeseen changes in the environment?

Rather than the past results, what is perhaps more essential to consider is whether
the present strategy would be appropriate for the future; in other words; ‘consistency with
the environment’ should be the major criterion to assess the present strategy. In a dynamic
sense, it implies judging the effectiveness of strategy with respect to the environment as
it is changing, rather than with respect to the environment as it is now. If the present
strategy was effective in the past, it is history. The more important question is “whether
it will be a useful compass in the uncharted waters of the future.”

An insight into the appropriateness of the present strategy for the future can be
had also by reference to its rationale, i.e., the fundamental reasons underlying the present
strategy. Often the raison d’ etre of a strategy lies in the personal background, needs,
aspirations, and values of the owners, managers, or the strategy- makers.

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GRADUATE SCHOOL
Iloilo City

Summary

The appropriateness or otherwise of these factors, among other things, should be taken
into account in determining the appropriateness of the strategy. Again, the genesis of the present
strategy might have been the identification and exploitation of one or more opportunities
perceived by management in the past.

Changes in the environment may have thrown up other opportunities since then.
Obviously, the present strategy needs to be judged in terms of the newly emerging environment
for the future. A third possible basis of the present strategy may be the distinctive internal
capacity of the firm in particular respects. To judge the appropriateness of the present strategy
which stemmed from a competence or capability, one should naturally ascertain whether and to
what extent the strategy is consistent with the internal resources position, the potential
advantages.

While it may be possible to identify the most dominant reasons underlying a strategy, it
is also possible that a combination of several reasons formed the basis of the present strategy.
Assessment of the strategy should, therefore, be governed by the appropriateness of the blend of
factors leading to the strategy.

Whether a change in strategy is called for should not be difficult to decide in the light of
the appraisal of present strategy. The change called for may be in the strategy itself, or in the
implementation of the strategy. Change in strategy may be necessitated by one or more of the
following reasons – changes in the environment; changes in the internal resource position and
capabilities; results not measuring up to expectation in sales and profits or market shares;
increased intensity of competition in the product market; changes in consumer preferences; a
change in the size of the organization; and to correct problems which are apparent

Self-Assessment Questions.

Answer briefly the following questions:

1. Discuss the meaning of Strategy

2. Discuss the meaning of traditional approaches
3. Enumerate the six main approaches
4. Discuss the most popular tool for summarizing analysis result?
5. Explain the general model of the traditional strategy process.

Suggested Enrichment Activity

Describe the role of Traditional Approach to the development of Strategy. What are the
characteristics of traditional approach to management? Explain its components. Differentiate
Traditional Approaches and Modern Approaches.

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References:

https://www.uniassignment.com/essay-samples/marketing/traditional-approach-to-strategic-
management-marketing-essay.php

https://www.businessmanagementideas.com/term-paper/strategic-management-term-
paper/term- paper-topics-on-strategic-management-management/14099

https://www.businessmanagementideas.com/term-paper/strategy-term-paper/strategy-of-an-
organisation-term-paper-management/13134

https://mgcobb.com/2017/12/07/strategic-planning-models-better-than-traditional-
approach/#:~:text=The%20Traditional%20Approach%20to%20strategic%20planning%
20models&text=A%20company's%20vision%20and,basis%20for%20the%20strategy%
20itself.

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Iloilo City

Lesson 2: New Approaches

Introduction

Developing strategy and delivering change continue to be a challenge for many

organizations. As a result, many leaders are shifting their focus from strategy to agility. The logic
is that if their organizations were agile, they would be more responsive to change and strategy
would not be needed. While there is some merit to this argument, being agile is not the complete
answer and the value of having a clearly-thought-through strategy should not be underestimated.
Without strategy the organization could never be responsive to change

Learning Outcomes

At the end of the lesson, the students shall have been able to:

1. define what is Strategy

2. differentiate the traditional approaches and new approaches

Pretest

Multiple Choice: Select the correct answer from the choices given below each question. Write
the letter of your answer on the blank provided before each number.

__________1. Indicate the item that does not reflect the essence of strategy.
a. strategy includes many activities that come together synergistically to produce
the results expected by the shareholders in the firm
b. strategy should be defined as a consistent pattern of resource allocation
directed to those competitive methods.
c. strategy demands high levels of energy and an orientation to the future.
d. in order to achieve the results expected by the stakeholders in the firm,
strategy should be done every three years.

__________2. In essence, an organization's strategy provides a basic understanding of

a. how the organization will compete.
b. how the resources will be allocated.
c. how the organization will invest.
d. none of the above.

__________3. In order to realize its intended strategy, management of the firm must focus all its
energies on alignment between\
a. core competencies and remote environment.
b. competitive methods and task environment.
c. business strategy and corporate strategy.
d. core competencies and competitive methods.

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__________4. Strategic objectives are considered to be routine if

a. they reflect implementation efforts to realize strategy.
b. they are focused upon the functional areas of the firm.
c. standards are not available as guides to management.
d. they are generic in nature.

__________5. Indicate the item that doesn't accurately describe the characteristics of the firm's
mission statement.
a. the mission statement reflects the firm's corporate strategy.
b. the mission statement describes the nature of the business.
c. the mission statement is the first task completed in the strategic process.
d. the mission statement enables a firm to set its general direction and define the
boundaries of its business.

__________6. For strategy evaluation to be effective, it will depend most importantly on

a. effective resource allocation systems.
b. decision support systems.
c. management information systems.
d. value-added comparisons.

__________7. Which individuals are most responsible for the success and failure of an
organization?
a. strategists
b. financial planners
c. personnel directors
d. stakeholders

__________8. What are the means by which long-term objectives will be achieved?
a. strategies.
b. strengths.
c. weaknesses.
d. policies.

__________9. A possible and desirable future state of an organization” is called:

a. mission
b. vision
c. strategy implementation
d. none of above

__________10. A strategy is a company’s

a. value statement
b. pricing policy
c. game Plan to outsmart competitor
d. long-term objective

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Reading

Traditional approaches to strategy

Traditional approaches to strategy typically begin by defining a vision that is then realized
through the execution of a change programmed. The problem with this approach is that it
assumes:

Sufficient is known at the outset to define a meaningful vision.

The big, hairy and audacious goals (BHAGs) that are often defined in the vision are realistic and
feasible.

The context within which the organization operates will not change during development
and execution of its strategy.

The influence of exogenous and endogenous forces that are determining the
organization’s current trajectory – the one taking it to its default future – can be controlled.
Organizations are programmable and can be changed according to a predefined plan.

It also assumes that the organization’s leadership is aligned, both in terms of the need for
a new strategy and how the resultant strategy will be executed.

Essential Purpose of Strategy

In their book Beyond Default, David Trafford and Peter Boggis argue that the essential
purpose of strategy is to change an organization’s trajectory, from the one taking it to its ‘default
future’ to one that takes it to an improved future. They describe a default future as the place an
organization ends up if its leaders take no action other than that currently planned. They also
argue that developing a successful strategy involves assessing the influence of the exogenous
forces that are changing the context within which an organization operates, exploring emerging
strategic opportunities and making an informed choice on strategic intent. They also make the
point that a strategy is only of value if it is successfully executed, which is about turning strategic
intent into operational reality.

New approaches to strategy development and execution.

Traditional approaches to strategy and change were developed in a different age, one
where, to a large degree, the future was a continuation of the past. It was before the knowledge
economy took hold, where wealth was created from resources and factories rather than the
knowledge and skills of individuals. It was when talent was readily available and peoples’
expectation of work and their contribution to the future direction of the organization were very
different. Today’s context – often described as the VUCA world – is very different and requires
new approaches to strategy and change that are cognizant of the ever-changing conditions within
which organizations operate today.

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Establishing the necessary conditions

New approaches to developing strategy and executing change should not be linear,
starting at step 1 and concluding at step n. While some things do need to be done before others,
it’s more important that a set of conditions are established from the outset that enable an
organization to adapt its strategy and modify its execution plan as circumstances change. These
conditions include:

Clarity of strategic intent

If the essential purpose of strategy is to change the trajectory of an organization, then

strategic intent defines the trajectory the organization has chosen to pursue. It’s an informed
choice resulting from an assessment of the influence of the exogenous and endogenous forces
that determine strategic opportunities. It’s not the same as a vision as it defines the direction of
travel rather than an end-state. For example, the strategic intent of a retail bank could be to focus
on being a digital financial services provider that gives its customers compelling digital
experiences over their tablets and smart phones, rather than, as in the past, focusing on expanding
its branch network.

This condition is in place when the leadership team has an aligned view of the target
trajectory they want their organization to pursue, and colleagues across the organization clearly
understand this. Equally important is everyone understanding the consequences of not changing
the current trajectory.

Explicit operating principles

Operating principles define how the organization needs to operate in order to change its
trajectory and realize its strategic intent. An operating principle is a ‘conscious choice between
two equally valid alternative ways of operating’. For example, if an organization’s strategic intent
was to become a ‘truly digital enterprise that engages with its customers over their mobile
devices’, one of its operating principles could be:

‘We engage with customers via their mobile devices only, on a 24/7 basis. ‘as opposed to …
‘we engage with our customers over multiple distribution channels.’

Note that the operating principle not only defines the intent but also what it intends not
to do. It’s as important – if not more so – to be clear about how an organization has decided NOT
to operate as how it’s decided to operate. Defining an equally valid alternative principle, the ‘as
opposed to …’, does exactly this. Typically, between 10 to 12 operating principles would be
needed.

This condition is in place when people begin referring to the target operating principles
and it becomes apparent that their actions and behaviors are guided by them.

Agile digital platform

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 John B. Lacson Foundation Maritime University Arevalo), Inc.
GRADUATE SCHOOL
Iloilo City

All organizations are digital to some degree and will become more so as advances in
digital technology become more pervasive. The question is how agile is the IT landscape that
forms their digital platform? Was it designed with agility in mind or is it an accumulation of
applications, databases, networks and data centre’s that have grown and evolved over time? Agile
digital platforms are based on contemporary digital architecture design principles, including the
PACE framework, service-oriented architecture (SOA), middleware and open application
integration (APIs).

An example of an agile digital platform is that of Alibaba, the Chinese tech giant, which
is able to deploy enhancements every four hours whilst simultaneously continuing to process
huge numbers of transactions. During ‘singles day’ 2019 the platform processed 1.3 billion orders
in a 24-hour period.

This condition is in place when technology is no longer the major constraint and the digital
platform is robust, extendable, reconfigurable and open.

Adaptive execution capability

Executing strategy is not like erecting a bridge or constructing a building. Yes, a plan is
needed but organizations are living things that respond, in often unforeseen ways, when attempts
are made to change them. As a result an adaptive approach is therefore needed.

The area that has made most progress in this respect is software development, driven by
the Agile Manifesto. It’s an approach where software is developed, built and tested incrementally
via minimum viable products (MVP). Multidisciplinary teams collaborate closely to deliver
quickly and iterate frequently. They priorities and reprioritize the requirements pipeline
continually as they deliver, experiment and learn. More recently the approach – enabled by
developments in cloud computing, continuous testing, virtual machines and continuation –
enables new software to be deployed on an almost continuous basis.

This agile model is increasingly relevant in areas beyond software as it allows more
adaptive strategy execution. Whether in product development, marketing, sales or production the
agile approach offers a viable alternative, especially where the required change is too complex
for traditional approaches.

This condition is in place when cross-functional teams self-organize, the change pipeline
is continually reprioritized, MVPs are delivered in sprints and product owners take accountability
for outcomes.

Experiment and learn mindset

In his book That Will Never Work, Marc Randolph, the co-founder and first CEO of
Netflix, describes how the company was formed. From the outset their strategic intent was ‘to
provide personalized home entertainment’ and their key operating principle was for customers

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 John B. Lacson Foundation Maritime University Arevalo), Inc.
GRADUATE SCHOOL
Iloilo City

to ‘select DVDs online, for home-delivery by post’ as opposed to customers ‘select and collect
their

DVDs in store’. They soon learned that things didn’t always go to plan and that a different
approach was required. Randolph’s mantra during these early days was “nobody knows
anything” and the best way to reduce the risk of getting it wrong is to experiment and learn. This
mindset established Netflix as an innovator and pioneer of video streaming – making it the global
entertainment provider it is today.

This condition is in place when there is a level of openness and learning, and recognition
that anything is possible if we try.

Clarity of decision-making

During execution of a strategy there will inevitably be the need to make mid-course
corrections, either in respect of the strategic intent or how the strategy is being executed. What’s
therefore essential is having clarity on how these decisions are made; including who ultimately
has the rights – and resultant accountabilities – to make these decisions. Nothing kills the
execution of a strategy quicker than a lack of clear decision-making, whether in respect to
reallocation of funding, ensuring resources are in the right place or dealing with the inevitable
‘that wasn’t supposed to happen’ twists and turns. This condition is about governance where
decisive decision-making drives pace and momentum.

It’s clear that this condition is in place when people know the process by which a decision
will be made, who is accountable for the decision and what information is required so that an
informed choice can be made.

Collective leadership

Collective leadership is where multiple individuals exercise their leadership roles within
a group – and then the entire group provides leadership to the wider organization. A key aspect
of collective leadership is collective accountability – where the outcomes of decisions and actions
are felt by every leader in equal measure. Leaders who exercise collective leadership are often
described as being aligned in their decisions and actions, acting as one and are ‘joined up’ in their
thinking and behavior. Without collective leadership there will be no collective strategy, and
without a collective strategy an organization will pull itself in multiple directions.

This condition is in place when all members of the leadership group are pulling in the
same direction.

Summary

The seven conditions described above individually contribute to a new and different
approach to developing and executing strategy, one that’s more relevant to the fast-paced VUCA
world that most organizations operate in today. But they don’t work in isolation. For example,

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 John B. Lacson Foundation Maritime University Arevalo), Inc.
GRADUATE SCHOOL
Iloilo City

it’s not really possible to have adaptive execution capability if the organization doesn’t have an
agile digital platform. Equally, if the strategic intent is not clear, self-organizing teams will not
have clear criteria by which to prioritize change. Furthermore, if the operating principles are not
defined there is no guidance on what the changes should contain. Also, if there is not an
experiment and learn mindset the result will be more of the same. And finally, without collective
leadership there will be no one single strategic intent and the organization will be pulled in many
different directions.

All seven conditions – and possibly more – therefore need to be in place.

Self-Assessment Questions.

Answer briefly the following questions:

1. Discuss the meaning of Strategy

2. Discuss what is new approaches
3. Enumerate the five establishing necessary condition under new approaches.
4. Discuss what is Adaptive execution capability
5. Discuss the Clarity of strategic intent

Suggested Enrichment Activity

Discuss the Strategic Approach. What are the approaches to strategic thinking and
discuss its components? Explain the new Approach: Next Generation Strategy. What are the
five (5) service categories and discuss each category.

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 John B. Lacson Foundation Maritime University Arevalo), Inc.
GRADUATE SCHOOL
Iloilo City

References

https://beyond-default.com/succeeding-vuca-world-strategy-change/

https://www.universalclass.com/articles/business/new-approaches-of-strategic-sourcing-in-
procurement-management.htm

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