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Incremental Strategy Development

 

Research on historical patterns of strategy development in organizations shows a pattern of what has become known as incremental strategy development. Strategies do not typically change in major shifts of direction. They typically change by building on and amending what has gone before. Prior decisions tend to affect future directions giving rise to the sort of pattern . An apparently coherent strategy of an organization may develop on the basis of a series of strategic moves each of which makes sense in terms of previous moves. Perhaps a product launch, or a significant investment decision, establishes a strategic direction which, itself, guides decisions on the next strategic move – an acquisition perhaps. This in turn helps consolidate the strategic direction, and over time the overall strategic approach of the organization becomes more established. As time goes on, each move is informed by this developing pattern of strategy and, in turn, reinforces it.

In many ways this is to be expected. It would be strange and, arguably, dysfunctional for an organization to change its strategy fundamentally very often.
Moreover, if it has embarked on an overall strategic direction, it is to be expected that strategic decisions would be taken in line with that. So such a pattern is consistent with a view of strategy development as an intentional, considered and deliberate process. However, it is also possible to account for the same pattern as a persistent application of the familiar – organizations repeatedly taking decisions based on where they have come from, rather than a considered view of their future or as the outcome of routines, activities and processes within an organization leading to decisions that become the long-term direction – the strategy – of an organization. These cumulative decisions may then subsequently be more formally described, for example in annual reports and strategic plans, as the strategy of the organization. This section explains the organizational processes that might account for such emergent strategy development.

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In a study of major multinational businesses, James Quinn concluded that the
strategy development processes he observed could best be described as logical
incrementalism. Logical incrementalism is the development of strategy by experimentation

and ‘learning from partial commitments rather than through global
formulations of total strategies’.15There are a number of reasons this is likely
to be so:

● Environmental uncertainty. Managers realize that they cannot do away with the
uncertainty of their environment by relying on analyses of historical data or
predicting how it will change. Rather, they try to be sensitive to environ-
mental signals by encouraging constant environmental scanning throughout
the organization.
● Generalized views of strategy. Managers have a generalized rather than specific
view of where they want the organization to be in the future and try to move
towards this position incrementally. There is also a reluctance to specify
precise objectives too early, as this might stifle ideas and prevent innovation
and experimentation. Objectives may therefore be fairly general in nature.
● Experimentation. Managers may seek to develop a strong, secure, but flexible
core business. They will then build on the experience gained in that business
to inform decisions both about its development and experimentation with ‘side
bet’ ventures. Commitment to strategic options may therefore be tentative in
the early stages of strategy development. Such experiments are not the sole
responsibility of top management. They emerge from what Quinn describes
as ‘subsystems’, in the organization. By this he means the groups of people
involved in, for example, product development, product positioning, diversification, external relations, and so on.
● Coordinating emergent strategies. Top managers may then utilize a mix of
formal and informal social and political processes to draw
together an emerging pattern of strategies from these subsystems. These
may then be formed into coherent statements of strategy for stakeholders
(for example, shareholders, financial commentators, the media) that need to
understand the organization’s strategy.
Quinn argues that, despite its emergent nature, logical incrementalism can be
‘a conscious, purposeful, proactive, executive practice’ to improve information
available for decisions and build people’s psychological identification with the
development of strategy. In a sense, then, logical incrementalism encapsulates
processes that bridge intention and emergence, in that they are deliberate and
intended but rely on social processes within the organization to sense the environment

and experiments in subsystems to try out ideas.
This view of strategy making is similar to the descriptions that managers
themselves often give of how strategies come about in their organization.
The figure provides some examples of managers explaining the strategy
development process in their organization as they see it. They see their job as
‘strategists’ as continually, proactively pursuing a strategic goal, countering competitive

moves and adapting to their environment, whilst not ‘rocking the boat’
too much, so as to maintain efficiency and performance.
Arguably, developing strategies in such a way has considerable benefits. Continual

testing and gradual strategy implementation provides improved quality
of information for decision making, and enables the better sequencing of the
elements of major decisions. Since change will be gradual, the possibility of
creating and developing a commitment to change throughout the organization is
increased. Because the different parts, or ‘subsystems’, of the organization are in
a continual state of interplay, the managers of each can learn from each other
about the feasibility of a course of action. Such processes also take account of the political nature of organizational life, since smaller changes are less likely to face
the same degree of resistance as major changes. Moreover, the formulation of
strategy in this way means that the implications of the strategy are continually
being tested out. This continual readjustment makes sense if the environment is
considered as a continually changing influence on the organization.

 

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