Strategic Planning in a Turbulent Environment: Evidence from the Oil Majors

Topics: Strategic management, Strategic planning, Management Pages: 53 (15989 words) Published: April 14, 2012
Strategic Management Journal
Strat. Mgmt. J., 24: 491–517 (2003) Published online in Wiley InterScience ( DOI: 10.1002/smj.314

McDonough School of Business, Georgetown University, Washington, DC, U.S.A.

The long-running debate between the ‘rational design’ and ‘emergent process’ schools of strategy formation has involved caricatures of firms’ strategic planning processes, but little empirical evidence of whether and how companies plan. Despite the presumption that environmental turbulence renders conventional strategic planning all but impossible, the evidence from the corporate sector suggests that reports of the demise of strategic planning are greatly exaggerated. The goal of this paper is to fill this empirical gap by describing the characteristics of the strategic planning systems of multinational, multibusiness companies faced with volatile, unpredictable business environments. In-depth case studies of the planning systems of eight of the world’s largest oil companies identified fundamental changes in the nature and role of strategic planning since the end of the 1970s. The findings point to a possible reconciliation of ‘design’ and ‘process’ approaches to strategy formulation. The study pointed to a process of planned emergence in which strategic planning systems provided a mechanism for coordinating decentralized strategy formulation within a structure of demanding performance targets and clear corporate guidelines. The study shows that these planning systems fostered adaptation and responsiveness, but showed limited innovation and analytical sophistication. Copyright  2003 John Wiley & Sons, Ltd.

Since the early 1980s, strategic planning—systematic, formalized approaches to strategy formulation—has come under heavy attack from management scholars. Criticisms have addressed the theoretical foundations of strategic planning, particularly the impossibility of forecasting (Mintzberg, 1994b: 110), while empirical evidence—both longitudinal case studies (e.g., Mintzberg and Waters, 1982; Pascale, 1984) and investigations of strategic decision making (e.g., Bower, 1970; Burgelman, 1983)—points to strategies emerging from the Key words: strategic planning systems; oil and gas industries *Correspondence to: Robert M. Grant, McDonough School of Business, Georgetown University, Old North Building, Washington, DC 20057, U.S.A.

weakly coordinated decisions of multiple organizational members. Increased volatility of the business environment makes systematic strategic planning more difficult. Rapid change requires strategies that are flexible and creative—characteristics which, according to Hamel, are seldom associated with formalized planning: ‘In the vast majority of companies, strategic planning is a calendar-driven ritual . . . [which assumes] that the future will be more or less like the present’ (Hamel, 1996: 70). Eisenhardt’s research into ‘high velocity environments’ points to the advantages of ‘semicoherent’ strategic decision-making processes that are unpredictable, uncontrolled, inefficient, proactive, continuous, and diverse (Eisenhardt, 1989; Brown and Eisenhardt, 1997). If complexity and uncertainty render decision making impossible,

Copyright  2003 John Wiley & Sons, Ltd.

Received 25 October 1999 Final revision received 15 December 2002


R. M. Grant
practices included, in the United States, Cleland (1962), Henry (1967), the U.S. House of Representatives Committee on Science and Technology (1976), Ang and Chua (1979), and Capon, Farley, and Hulbert (1987); and in the United Kingdom, Denning and Lehr (1971, 1972) and Grinyer and Norburn (1975). As strategic management developed as an area of academic study, interest in companies’ strategic planning practices waned. By the 1980s empirical research in strategic planning systems focused upon just two areas: the...
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