Ten Schools of Thoughts of Strategic Management

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TOPIC: TEN SCHOOL OF THOUGHT OF STRATEGIC MANAGEMENT

TEN SCHOOL OF THOUGHT OF STRATEGIC MANAGEMENT 1. The Design School. This school sees strategy formation as a process of conception. Approach: Clear and unique strategies are formulated in a deliberate process. In this process, the internal situation of the organization is matched to the external situation of the environment. Basis: Architecture as a metaphor. In short: Fit! "Establish fit!" Contributions: Order. Reduced ambiguity. Simplicity. Useful in relatively stable environments. It supports strong, visionary leadership. Limitations: Simplification may distort reality. Strategy has many variables and is inherently complex. Bypassing learning. Inflexible. Weak in fast changing environment. There is the risk of resistance (not-invented-here behavior). Typical / compare: SWOT Analysis | Ashridge Mission Model 2. The Planning School. This school sees strategy formation as a formal process. Approach: A rigorous set of steps are taken, from the analysis of the situation to the execution of the strategy. Basis: Urban planning, system theory, cybernetics. In short: Formalize! "Strategy should be like a machine." Contributions: Gives clear direction. Enables firm resource allocation. Analysts can pre-screen the facts and they can judge the crafted strategies. Control. Limitations: Strategy can become too static. The risk exists of Groupthink. Predicting is difficult. Top managers must create the strategy from an ivory tower. Strategy is partly an art. Typical / compare: Theory of Mechanistic and Organic Systems | Parenting Styles | Levers of Control | Scenario Planning 3. The Positioning School. This school sees strategy formation as an analytical process.

Approach: It places the business within the context its industry, and looks at how the organization can improve its strategic positioning within that industry. Basis: Industrial organization (economics) and military strategy. In short: Analyze! "Nothing but the facts, madam." Contributions: This school made Strategic Management into a science, enabling future progress. Provides content in a systematic way to the existing way of looking at strategy. Focus on hard (economic) facts. Particularly useful in early stages of strategy development, when data is analyzed. Limitations: See Planning School. Neglects power, politics, culture, social elements. Is biased towards large firms. Number-oriented. Typical / compare: Competitive Advantage | Five Forces | Value Chain | BCG Matrix | Game Theory | The Art of War (Sun Tzu) 4. The Entrepreneurial School. This school sees strategy formation as a visionary process. Approach: The visionary process takes place within the mind of the charismatic founder or leader of an organization. The school stresses the most innate of mental states and processes intuition, judgment, wisdom, experience, and insight. Basis: Economics. In short: Envision! "The CEO is the architect of the Strategy." Contributions: A sound vision and a visionary CEO can help organizations to sail cohesively through muddy waters. Especially in early or very difficult years for the organization. Deliberate in the broad lines. Flexible and emergent in the details. Limitations: Sailing a predefined course can blind someone for potential unexpected dangers or developments. How can you find the right leader, with all of the many needed qualities? Entrepreneurial, visionary leaders have a tendency to go too far. Being CEO is an extremely demanding job in this perspective. Typical / compare: Entrepreneurial Government | Seven Surprises for New CEO's | Leadership Styles

5. The Cognitive School. This school sees strategy formation as a mental process. Approach: It analyzes how people perceive patterns and process information. It concentrates on what is happening in the mind of the strategist, and how it processes the information. Basis: Psychology. In short: Frame! "I'll see it when I believe it." Contributions: Sees...
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