PART 8 – THE BUSINESS ENVIRONMENT

8.1 Introduction

This can be viewed as the surroundings. Key questions about strategic environment are:

1. Who are our major competitors?

2. How competitive is your organization for the long term? Why?

3. What can you do? What are you doing for your strategic planning to remove long term obstacles
and exploit advantages?

4. Do you anticipate major resources problems for the future? If so, how do you plan to deal with
them?

5. Do you see any threats to your long term survival?

The process of environmental scanning is designed to come up with assessments, conceive long term
objectives, and formulates long term plans to achieve the same. This, however, is difficult and involving.
Strategic leaders therefore need to gain a sense of dynamic forces in their environments in order for
them to come up with good strategies. The first step is to have a sense of history coupled with the
reflection needed to examine the flow of events over time in order to understand the cause and effect
linkages that have been operational. A frame of reference must be build. This is a particular set of
beliefs, ideas, or experiences that affect how a person understands or judges.

The second step is to test the frame of reference built to establish whether it is still representative of the
real world. Barriers to scanning that exist in the environment as well as the leader have to be dealt with
also. Barriers internal to the leader include his or her personal view or stake in the outcome, which
make objective considerations difficult. Barriers related to the environment include the VUCA factors
i.e. Volatility, Uncertainty, Complexity, and Ambiguity.

8.1.1 Volatility – rate of change

Peter Vaill describes volatility as “permanent white water”. According to John Parkinson, the amount of
information that is available is doubling every 18 months or less. This is further compounded by new
technology. To cope with these changes, organisations should build robust scanning systems. This
system can be described as capacity for timely system change, i.e. management either anticipates or
adapt to external changes to maintain competitive advantage. Such a system requires:

 Accurate, comprehensive environmental scan

  Accurate articulation of key values, beliefs, and assumptions

 Freedom to question values, beliefs, and assumptions

 Creativity to formulate new options

 Tolerance of risk involved with the new course

The relevance of volatility to strategic leadership and decision making stems from the competitive
nature of the world today and in future. The character of competition is however changing to the extent
that a competitor can be hurt by rapid obsolescence of its capital intensive equipment and machinery.
This makes it necessary for organisations to pursue new developments in order to achieve superiority on
the balance sheet. Superior performance today is in itself a reflection on decision – on research and
development made in the past. This is also a reflection on the assumptions of strategic leaders about
the nature and rate of change in the world environment. Environmental change often determines
where the point is reached when a change in policy should be initiated. There may be only a thin line
between success through persistent advocacy for change, and failure because of inability to change.

8.1.2 Uncertainty about the present situation and future outcomes

Strategic leadership is complicated further by uncertainties about what the effects of even known
changes are likely to be. This uncertainty results from both the complexity of systems and subsystems
at the strategic level and from incomplete knowledge about the current situation. This is further
complicated by the fact that strategic leaders know that competitiveness is often gained through
surprise. To this end, strategic leaders conceal their strategic direction especially their means to achieve
the same from their competitors. Strategic leadership and decision-making sometimes must resolve
uncertainty by penetrating the competitors carefully laid screen designed to confuse competitors, e.g.
Barclays closing Takawira Branch in Bulawayo without selling off or leasing building

8.1.3 Multiplicity of key decision factors – complexity

Business today rests on the effective operation of many subsystems some of which include production
distribution, marketing, etc. Distress in one segment means that others cannot function effectively e.g.
a distribution system, without it or ineffectiveness therein will result in poor product availability and this
would hurt all the other subsystems. This is further compounded by the unreliable fuel supply situation.
System complexity impacts largely on the capacity of strategic leaders as decision makers to formulate
and execute plans. Cause and effect relationships are difficult to see, much less assess, when there are
many causes and when many divergent effects exists. Determination of cause and effect is compounded
by the time lag of effects in a complex system. In addition there may be many linked cause and effect
chains. A given initial cause may produce an effect that gives rise to second-order effect, which may, in
turn give rise to a third-order effect – a vicious cycle.

The challenge of strategic leadership is two-fold; a frame of reference, or perspective, that is dynamic
enough for the decision maker to recognize, understand and explain to others; and a leader’s mastery
of decision tools and processes that enable him or her to bring a broader set of perspectives than just
his or her own into the decision making process.

8.1.4 Lack of clarity about the meaning of an event – ambiguity

Ambiguity exists when a given event or situation can be interpreted in more than one way. System
complexity contributes ambiguous meaning, as does uncertainty about the full range of factors
operating in a situation. Ambiguity may also exist because the intentions of significant actors in the
strategic situation may either not be known or may be misinformed. The challenge to strategic leaders
is recognizing that the decision maker cannot have a ‘stand alone’ perspective, and that effective
strategic decisions must flow from a managed process that produces a perspective through consensus
that is broader than any single person probably possesses.