strategic management process

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The strategic management process described herein does not fit the notion of a linear process and strategy as a project or an event. It refers to a set of strategic management activities that are simultaneously distinctly separate and interdependent. Collectively these activities, when exercised with discipline, and managed with wisdom, produce a competitive advantage.

Strategic management process requirements --
For a strategic management process to be pragmatic, it must have methods of dealing with complexity. Without these methods, efforts to understand and design a business organization will burn-up resources and generate frustration. Then at some point in the process, complexity is either ignored or the subject is falsely believed to be understood. In either case, the strategy formulation and planning proceeds without a firm grasp on the subject, whether it be the problems to be solved, ideas to pursue, opportunities, or objectives.

The strategic management process is designed to deal with complexity and a dynamic environment, employing methods used to create knowledge, generate novelty, learn, assess, design, plan, and transform --

  • Knowledge creation -- new knowledge, or new meaning, emerges from organization activities. These activities, the organization structure and culture are key factors determining the knowledge creation capabilities of an organization. The strategic management process in this regard will not necessarily look like a process at all, but a relatively chaotic conversation.
  • Generate novelty -- novelty generation is essential to development of competitive advantage. Novelty results from diversity in interactions, in conversations, with the resulting anxiety and tension, which prompts the thinking that brings out the new to the world ideas, i.e. novelty.
  • Learning is the foundation for innovation and adaptation.
  • Synthesis is a general method for dealing with wholes, understanding them, designing them, and turning the complexity of wholes into pragmatic understanding and insights to be acted upon to produce a competitive advantage.
  • Pattern recognition deals with complexity the dynamic interrelationships in the business world. Pattern recognition is more intuitive, a general skill to be developed with practice.
  • Business design construct is based on the systems science definition of the business organization as a complex social system. Systems science and the science of complexity offer guidance regarding how to define, design, and develop complex systems. The design construct is the enabling light for inquiry to understand and design.
  • Iterative inquiry coupled with the business design construct deals with the complexity of understanding and design of the business organization. Iterative inquiry uses a construct to guide development of understanding or design or a subject, especially the business organization. .
  • Affinitization is applicable in cases where creativity and exploration is needed to develop ideas, an inherently divergent process, followed by convergent synthesis of new understanding, or truth. This truth must be accurate, address the whole of the subject at hand, and be practical in the way it is expressed in order to be usable by those requiring the results of the search for truth. .

Strategic management aspects --
The aspects, or types of activities, of the strategic management process, are by necessity represented linearly. In practice, it is insufficient to execute these activities in a rigid sequence. They are organized in a cyclical sequence, but they are also highly interdependent. Looking at the organization as a whole at any given time, all of these activities are present simultaneously, as all of the processes are continuous. As an example, there are activities which develop insight. There is not a time that management should not be developing insight, it is continuous, insight is associated with generating wisdom because that's where it is grouped with similar activities and it is a contributor to the strategy creation in the creating art activities. The creating art activities are those from which novelty emerges, thus are not a systematic process but are organization processes that have the characteristics necessary to create knowledge and set the stage for transformation.

The strategic management activities are separated into four aspects. These aspects reflect the multiple dimensions of the activities - their primary purpose, theory of business, type of activity, thinking types, etc.

  • strategy formation
    • generating wisdom -- the primary outputs of these activities are the current state and projected business models, a problem and opportunity definition - impetus to change, contextual understanding for idealized design, and insight. See generating wisdom for further details.
    • creating art -- the primary outputs of these activities are first novelty and eventually definition of transformational opportunities for the business organization, hypotheses to test, innovation requirements, and direction setting plans. See creating art for further details.
  • strategy execution
    • applying science -- the primary outputs of these activities are the plans for deployment, the organizational resource alignment mechanism, and control system, and learning process. See applying science for further details.
    • waging war -- the primary outputs of these activities are improved performance, new capabilities, strategic management competency, hypotheses test results, and a revised current state business model. See waging war for further details.

Strategic management - a virtuous cycle of activities --
The strategic management process continually builds the capabilities of the members of the organization and the business organization's competencies. As insight grows, innovation increases. As hypotheses are formed and tested, learning increases exponentially. The disciplined execution brings increasing returns to the business due to the increasing returns to knowledge. As long as the process continues to execute, the activities are faithfully performed, the organization adapts and evolves to its advantage in a dynamic world. All of the stages together produce increasingly capable organization members and a more competent and competitive business organization.

Strategic management - a self-improving process --
The strategic management process, properly developed is a self-improving process.

  • From a systemic process perspective then, it is a double loop learning process, where the first loop processes the feedback from the decisions made and actions take to continually test and improve decisions. The second loop tests the mental models employed in the decision making process. When these models are found to be less effective than expected, the models are revised to meet the demands for effective decision criteria.
  • From a responsive processes perspective, the generation of novel processes come from the communicative interaction itself, complex responsive processes at work in the organization.

Strategic management - a decision making process --
Being a self-improving process, strategic management improves with disciplined attention to the development of the right activities, or processes, and their disciplined execution. It improves along two dimensions - improving the effectiveness of the use of the current decision criteria and by improving the decision mechanisms, criteria, and mental models, as the environment of the business organization changes. It does this through the rigorous development and testing of hypotheses. First is the recording of the decision factors -- criteria, assumptions, process used (reasoning), and expected results. When the performance results start coming in, a comparison is made between the observed performance and the expectations and assumptions. Based on this analysis, improvements to the decision making are made - whether this means gathering better information, developing better assumptions, improving the decision process itself, or even challenging the existing mental models used to make decisions.

Multiple dimensions of the strategic management activities --
Listed below are some of the multiple dimensions of the strategic management processes as described by stage --

Primary purpose view --

  • strategy formation
    • generating wisdom - assessment, insight
    • creating art -- idea generation, strategy origination, innovation, creative design
  • strategy execution
    • applying science -- planning for war, objectives and resource alignment
    • waging war -- acting to make the future

Theory of business view --

  • strategy formation
    • generating wisdom -- fodder for hypotheses
    • creating art -- hypotheses formation
  • strategy execution
    • applying science -- development of hypotheses tests
    • waging war -- testing the hypotheses

Idealization - realization view --

  • strategy formation - idealization unleashes creativity producing unbounded designs
    • generating wisdom - understand possibilities
    • creating art - idealized design
  • strategy execution - realization captures the new design and wrestles it to the ground to make it practical and implementable
    • applying science - plan results
    • waging war - realize results

Type of activity view --

  • strategy formation
    • generating wisdom - understand
    • creating art - design
  • strategy execution
    • applying science - planning
    • waging war - executing

Cognitive view --

  • strategy formation
    • generating wisdom - problem formulators
    • creating art - innovators-pathfinders
  • strategy execution
    • applying science - problem solvers
    • waging war - doers

Decision and assessment --

  • strategy formation
    • generating wisdom - assess
    • creating art - decide
  • strategy execution
    • applying science - decide
    • waging war - assess

Continuous improvement of the business organization's competitive capability (Shewart cycle) --

  • strategy formation
    • generating wisdom - check
    • creating art - act
  • strategy execution
    • applying science - plan
    • waging war - do

Learning and adaptation (following Ackoff's model) --

  • strategy formation
    • generating wisdom - Symptom and presymptom analyzer and organizational & environmental surveillance, decision support diagnosis
    • creating art - diagnosis and prescription
  • strategy execution
    • applying science - decision making
    • waging war - memory and comparator

Strategic management process and business model representations --
The strategic management process and the business model are intertwined. The business model, whether viewed as a business design construct, a template for understanding an existing business organization, or as a stimulus for strategic thinking, has the same form, just different functions. Following are the primary functions of the business model for each stage of the strategic management process.

  • Generating wisdom - viewing the business organization ""as is"" and plotting its current trajectory, the ""projected"" view
  • Creating art - the ""opportunity"", ""stimulating"", ""idealized"", ""to be"", and ""visionary"" views
  • Applying science - ""planned"" or ""next state""
  • Waging war - old ""as is"" and new ""as is""