Exploring Strategy

Chapter 6
History and
Culture
 Learning outcomes
• Analyse how history influences the strategic
position of an organisation, especially via path
dependence.
• Distinguish different kinds of cultures, national-
geographical, field-level and organisational.
• Analyse the influence of an organisation’s
culture on its strategy using the cultural web.
• Identify organisations which may be
experiencing the symptoms of strategic drift.
The influence of history and culture
 Path dependency
Path dependency is where early events
and decisions establish ‘policy paths’ that
have lasting effects on subsequent
events and decisions.
Path dependency and lock-in
 The impact of path dependency
Path dependency tends to reinforce the importance of
three aspects of strategy:
•Comprehensive change – Because of the system of
reinforcing elements, trying to change one aspect
without changing others is likely to fail.
•Conservatism – it is often not worth the costs of
changing everything to gain a small improvement in the
performance of one particular element.
•Path creation – what managers choose to do at the
start of an initiative or enterprise may lock them in on
long-term path.
 Why history is important
• Learning from the past. Will trends be repeated?
How were problems dealt with in the past? Asking
‘what if’ questions.
• Building capabilities. The lessons of the past can give
rise to new ideas and innovation. Can capabilities built
in the past be adapted or transfered to the current
situation?
• Legitimising strategy and change. Past success can
be used as evidence to support current strategies.
Methods of historical analysis

Chronological Cyclical
analysis influences

Key events Historical

and decisions story-telling
 Organisational culture
Organisational culture is the taken-for-
granted assumptions and behaviours that
are shared within a particular group and
help to make sense of the organisational
context.
Figure 6.3
Cultural frames of reference
 Geographically-based cultures
• Different countries may have different cultures.
• Such cultures may mean attitudes to work,
authority, equality, ethics and behaviours differ
between countries/regions.
• Subnational cultures may also differ within a
country, e.g. Northern and Southern Italy.
 Geographically based cultures
Hofstede suggests that there are at least four key
dimensions upon which national cultures tend to
differ:
•Power distance.
•Individualism-collectivism.
•Long-term orientation.
•Uncertainty avoidance.
 The organisational field
An organisational field is a community of
organisations that interact more frequently
with one another than with those outside the
field and that have developed a shared culture.
Examples might include:
•Justice – law firms, police forces, courts, prisons and
probation services.
•Accountancy – accountants, auditors and tax
inspectors.
 Categorisation
• The ways in which members of an organisational
field categorise (or label) themselves and their
activities has significant implications for what
they do.
• Over time, members of an organisational field
tend to converge on dominant categorisation
schemes.
• Example – the use of the ‘tablet’ as a category in
the computing industry.
 Recipes
A recipe is a set of assumptions, norms
and routines held in common within an
organisational field about the appropriate
purposes and strategies of field members.

For example, the shared understanding and

behaviours of health professionals – doctors,
nurses, pharmacists, ambulance service.
 Legitimacy
Legitimacy is concerned with meeting the
expectations within an organisational field in
terms of assumptions, behaviours and strategies.
Strategies can be shaped by the need for legitimacy
in several ways:
• Regulation.
• Normative expectations.
• The recipe.
Culture in four layers
 The paradigm
The paradigm is the set of assumptions held in
common and taken for granted in an organisation.
The paradigm:
•is likely to be about basic but fundamental
assumptions about the organisation (e.g. Policing
is about ‘thief taking’).
• informs what people in the organisation do.
• influences how organisations respond to change.
 Organisational subcultures
There are often subcultures in organisations:
• Differences between geographical divisions in a
multinational company.
• Differences between functional groups such as
finance, marketing and operations.
• Different nature of work in different functions –e.g.
in an oil company differences between those
functions engaged in ‘upstream’ exploration and
those concerned with ‘downstream’ retailing.
 Organisational identity
Organisational identity refers to what
members believe and understand about who
they specifically are as an organisation.
Managers and entrepreneurs often try to
manipulate organisational identity because it is
important for recruiting and guiding employees,
interacting with customers and dealing with
regulators. (e.g. Carslberg wanted to redefine
itself as a fast-moving consumer goods business
rather than a brewer).
 Culture’s influence on strategy
Culture may have a major influence on strategy:
•‘Cultural glue’ – employees often cohere around
the founding principles and values of an
organisation (e.g. IKEA).
•Captured by culture – faced with changes in the
environment, people may cling to solutions within
the existing culture.
•Managing culture – culture change is difficult to
manage.
 Culture’s influence on strategy

Source: Adapted from P. Gringer and J.-C. Spender, Turnaround: Managerial Recipes for Strategic Success, Associated Business Press, 1979, p. 203
 The cultural web (1 of 7)

The cultural web shows the behavioural,

physical and symbolic manifestations of
a culture that inform and are informed
by the taken-for-granted assumptions, or
paradigm, of an organisation.
Figure 6.6
The Cultural web of an organisation
 The cultural web (2 of 7)
Rituals and routines
• Which are embedded in history?
• What behaviour do routines encourage?
• What are the key rituals?
• What assumptions and core beliefs do rituals
reflect?
• What do training programmes
emphasise?
• How easy are routines/rituals Rituals/ Paradigm
to change? routines
 The cultural web (3 of 7)
Stories
• Tend to be about heroes, villains, mavericks,
successes and disasters.
• What core beliefs do the stories reflect?
• What stories are commonly told, e.g. to
newcomers?
• How do stories reflect core assumptions and
beliefs?
• What norms do mavericks
deviate from?
Stories Paradigm
 The cultural web (4 of 7)
Symbols
• Symbols are objects, events, acts or people that
convey meaning over and above their functional
purpose.
• What objects, people or events do people in the
organisation particularly identify with?
• What are these symbols related to in
the history of the organisation? Symbols

• What aspects of strategy are

Paradigm
highlighted in publicity?
 The cultural web (5 of 7)
Power structures
• Where does power reside?
• Who makes things happen?
• Who stops things happening?
• Indicators include:
– Status.
Paradigm Power
– Claim on resources. structures
– Symbols of power.
 The cultural web (6 of 7)
Organisational structures
• What are the formal but also informal
organisational structures?
• Do structures encourage collaboration or
competition?
• What types of power structure
do they support?
Paradigm

Organisation
Structure
 The cultural web (7 of 7)
Control systems
• What is closely monitored/controlled?
– Formally.
– Informally (e.g. social control).
• Is emphasis on reward or punishment?
• Are controls rooted in history or
current strategies?
• Are there many/few controls? Paradigm

Control
Systems
 Undertaking cultural analysis
When conducting cultural analysis:
• The cultural web – can help build an
understanding of a culture.
• Statements of cultural values – be aware that
statements in company reports (e.g. values
statements) can be misleading about the actual
culture.
• Pulling it together – a cultural web can be quite
detailed so it can be useful to summarise the
essence of a culture in a few brief statements.
 Strategic drift (1 of 2)

Strategic drift is the tendency for strategies

to develop incrementally on the basis of
historical and cultural influences, but fail to
keep pace with a changing environment.
Strategic drift (2 of 2)
 Incremental strategic change
• Gradual change in alignment with
environmental change.
• Building on successful strategies used in the
past.
• In successful businesses, there are usually quite
long periods of continuity where strategies are
largely unchanged or change incrementally.
 The tendency towards
strategic drift (1 of 2)
Strategies fail to keep pace with environmental change
because:
• Steady as you go – reluctance to accept that change
may require moving away from strategies that have
been successful.
• Building on the familiar – uncertainty of change is
met with a tendency to stick to the familiar.
• Core rigidities – capabilities that are taken for
granted and deeply embedded are difficult to change.
 The tendency towards
strategic drift (2 of 2)
• Relationships become shackles – organisations be
reluctant to disturb relationships with customers,
suppliers or the workforce.
• Lagged performance effects – the financial
performance of the organisation may hold up
initially (e.g. due to loyal customers or cost cutting)
masking the need for change.
 A period of flux
As performance declines and the organisation
becomes out of touch with its environment,
a period of flux may occur typified by:
• Strategic change, but in no clear direction.
• Top management conflict and managerial
changes.
• Internal disagreement on the ‘right’ strategies.
• Declining performance and morale.
• Customers becoming alienated.
 Transformational change or death
As performance continues to deteriorate the
outcome is likely to be:
• The organisation dies (e.g. goes bankrupt or
into receivership).
• The organisation is taken over (and perhaps
radically changed by new owners).
• The organisation implements transformational
change – multiple, rapid and fundamental
changes.
 Summary (1 of 2)
• Historical, path-dependent processes may play a
significant part in the success or failure of an
organisation and need to be understood by managers.
There are historical analyses that can be conducted to
help uncover these influences.
• Cultural and institutional influences both inform and
constrain the strategic development of organisations.
• Organisational culture is the basic taken-for-granted
assumptions, beliefs and behaviours shared by
members of an organisation.
 Summary (2 of 2)
• The seven elements of the cultural web are useful for
analysing organisational cultures and their relationships
to strategy.
• Historic and cultural influences may give rise to
strategic drift as strategy develops incrementally on
the basis of such influences and fails to keep pace with
a changing environment.
Exploring Strategy
11th edition
Text and Cases

Commentary on
Part I:
The strategy lenses
 The strategy lenses (1 of 3)
The strategy lenses are ways of looking at strategy
issues differently in order to generate many
insights. Looking at problems in different ways will
raise new issues and new solutions.
Strategy can be seen as:
• Design
• Experience
• Variety
• Discourse
 The strategy lenses (2 of 3)
The design lens views strategy development as a
logical process of analysis and evaluation. The most
common view of strategy is as an objective and
formal process.
The experience lens views strategy development as
the outcome of people’s taken-for-granted
assumptions and ways of doing things. This view
emphasises the roles of people, history and culture
in strategy.
 The strategy lenses (3 of 3)
The variety lens views strategy as the bubbling up
of new ideas from the variety of people in and
around organisations. Strategic ideas can emerge
from the bottom of an organisation or from outside
organisations.
The discourse lens views language as important
both for understanding and changing strategy and
for managerial power and identity. This view
exposes the hidden meanings in manager’s
language and in their political interests.
Strategy as design (1 of 3)
 Strategy as design (2 of 3)
Key assumptions:
• Systematic analysis is the key to developing
‘good’ strategies.
• Analysis precedes action in a linear process.
• Objectives should be clear and precise.
• Organisations are hierarchies where top
managers develop the strategy for the
organisation.
• Organisations work mechanically – pulling the
right ‘levers’ produces predictable results.
 Strategy as design (3 of 3)
Key implications:
• It helps in dealing with complexity and uncertainty.
The rational, logical and structured approach makes
the point that strategy is more than guesswork.
• Meeting stakeholder expectations. Rational
procedures and analysis meets the expectations of
important stakeholders (e.g. banks, Investors). It is
re-assuring and legitimises the strategy process.
Strategy as experience (1 of 3)
 Strategy as experience (2 of 3)
Based on insights from ‘The Behavioural Theory of
the Firm’ (H.Simon), it highlights problems of rational
analysis:
• External constraints on rationality. It is impossible
to obtain all the information needed for a
comprehensive analysis. Forecasts can never be
100% accurate.
• Internal psychological limitations. Managers tend to
suffer from two problems – ‘bounded rationality’ and
‘cognitive bias’. This bias results from the manager’s
individual experience and collective experience.
 Strategy as experience (3 of 3)
Key implications:
• Analysis is typically biased to some extent.
Managers bring their experience to bear on every
strategy issue – complete objectivity is impossible.
• Watch out for undue conservatism. Experience leads
to routine responses and the ‘tried and tested’.
• Analysis can cost more than it’s worth. Too much
analysis is very costly and can lead to ‘paralysis’.
• Experience may provide a good enough guide. Rules
of thumb and instinct can be effective.
• Challenge the consensus. Outside views can be
useful and organisations should avoid ‘groupthink’.
Strategy as variety (1 of 3)
 Strategy as variety (2 of 3)
The variety lens builds on insights from evolutionary
theory and complexity theory. Key elements are:
• Variety of ideas. Organisations and players in their
environments are a rich source of new ideas, e.g.
sales staff interacting with customers. Even mistakes
can generate new strategies (e.g. Post-it notes).
• Selection. Ideas may be adopted simply because
they fit the existing selection criteria (‘internal fit’) or
get ‘positive feedback’ from stakeholders and the
market place.
• Retention. Particular policies and procedures
become embedded – they become ‘routines’ within
the culture of an organisation.
 Strategy as variety (3 of 3)
Key implications:
• Allow for emergence. Rather than being deliberately
designed, strategies can emerge from outside the
top management.
• Encourage interaction, experiment and change.
Some potentially disruptive interactions can
generate a variety of new ideas – cross departmental
initiatives and communication with outside players.
• Attend to the rules. Managers should pay attention
to the ‘context of strategy’. Organisations can adopt
‘simple rules’ for strategy selection and retention.
Strategy as discourse (1 of 3)
 Strategy as discourse (2 of 3)
Strategy involves a high level of discourse – in both spoken
and written communications (e.g. in meetings, plans, reports
press releases, etc.) Discourse has three important effects on
strategy:
• Shaping understanding. The language used can be convincing
and motivating. Using strategic jargon and techniques can
add legitimacy and be used to convince stakeholders to adopt
particular strategies.
• Defining identities. How managers talk about strategy can
lead to the adoption of a particular identity (either by choice
or others’ perceptions). For example managers can become
‘strategists’, ‘heroes’, ‘leaders’, ‘entrepreneurs’ or
‘competitors’.
 Strategy as discourse (3 of 3)
• Instrument of power. Understanding the concepts and
language of strategy gives managers power. They can exert
this power over those who do not have it and it can attract
followers.
Key implications:
• Use strategy discourse skillfully. Choosing appropriate
language can add legitimacy to particular strategies or the
individuals using it.
• Treat strategy discourse sceptically. Discourse can also be
used as a ‘smokescreen’ to advance the power and influence
of managers. It is important to question the rhetoric and not
accept everything at face value.
The strategy lenses summary