Mapping Strategic Diversity

In his influential work Strategy Safari, Henry Mintzberg and his colleagues
presented ten schools of strategic thought. In this impressive book, Dany Jacobs
demonstrates that the real world of strategic management is much wider and
richer.
In Mapping Strategic Diversity, Jacobs distinguishes between cockpit theories of
strategy, which bring rational analysis to the forefront, and process-orientated
social science approaches, which bring in a wider array of influences to the theory
and practice of business planning. Presenting 22 different approaches to strategy
making, this book:

provides a comprehensive overview of the field

guides the reader in developing theoretical and practical skills
helps develop both high and low level strategic thinking.

This textbook is a useful analysis for practising managers, but really comes into
its own as an advanced introduction to the field of strategic management; having
read this book, students are fully armed to enter the strategy jungle!
Dany Jacobs is Professor of Industrial Dynamics and Innovation Policy at the
University of Amsterdam and Professor of Art, Culture and Economy at the
Universities of Applied Science ArtEZ and HAN in Arnhem, The Netherlands.
He has been active in the field of innovation for more than 20 years.

Dany Jacobs provides us with one of the most innovative and exciting strategy
texts in a long while. The book provides a considerably broadened view of the
phenomena of strategic management and will create much new debate. A superb
text for students and managers alike.
John Hassard, University of Manchester, UK
Dany Jacobs Mapping Strategic Diversity presents an enlightening overview of
some of the most important schools of strategic thought, coupled with some fascinating insights and case accounts that are sure to be of real interest to managers
and students of strategy alike.
Danny Miller, Research Professor, HEC Montreal and Chair in Strategy and
Family Enterprise, University of Alberta, Canada
Dany Jacobs Mapping Strategic Diversity is a provocative and enlightening take
on strategy. It is also a fun read. Jacobs chapter titled 30 Ps for Perspectives on
Strategywith its rhetorical question, how many Ps can you think of?is
itself worth the price of admission.
Robert Keidel, Visiting Associate Professor of Management,
Drexel University, USA
Dany Jacobs has written a book about strategy, Mapping Strategic Diversity, that
manages both to demystify and de-economize the strategy discourse and make
this most fascinating area of organizational politics engaging for the student.
Stewart Clegg, Research Director of Centre for Management and Organization
Studies, University of Technology, Sydney, Australia

Mapping Strategic Diversity

Strategic thinking from a variety
of perspectives

Dany Jacobs

First published 2010

by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
Simultaneously published in the USA and Canada
by Routledge
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Routledge is an imprint of the Taylor & Francis Group, an informa business
This edition published in the Taylor & Francis e-Library, 2009.
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2010 Dany Jacobs

All rights reserved. No part of this book may be reprinted or reproduced or
utilised in any form or by any electronic, mechanical, or other means, now
known or hereafter invented, including photocopying and recording, or in any
information storage or retrieval system, without permission in writing from the
publishers.
British Library Cataloguing in Publication Data
A catalogue record for this book is available
from the British Library
Library of Congress Cataloguing in Publication Data
Jacobs, D. (Dany)
Mapping strategic diversity : strategic thinking from a variety of perspectives /
Dany Jacobs.
p. cm.
Includes bibliographical references.
1. Strategic planning. 2. Management. I. Title.
HD30.28.J327 2009
658.4'012--dc22
2009013654

ISBN 0-203-86956-7 Master e-book ISBN

ISBN10: 0-415-55023-8 (hbk)

ISBN10: 0-415-55024-6 (pbk)
ISBN10: 0-203-86956-7 (ebk)
ISBN13: 978-0-415-55023-9 (hbk)
ISBN13: 978-0-415-55024-6 (pbk)
ISBN13: 978-0-203-86956-7 (ebk)

Lost causes are the only ones worth fighting for.

Richard Farson,
Management of the Absurd

Contents

List of figures and tables

Preface
1

The essence of strategy: key components

x
xii
1

1.1 What do you know about strategy? What do you think

about it? 1
1.2 What are we talking about when we discuss strategy? 2
1.3 How important is strategy? 6
1.4 Basic components of strategy 10
1.5 Strategy and organizational levels 15
1.6 Prescriptive and descriptive strategy approaches 17
1.7 Tame and wicked problems 24
1.8 The score so far 29
2

Some traditional strategy typologies

30

2.1
2.2
2.3
2.4

Introduction 30
Porter: cost versus added value 30
Innovativeness: Miles and Snow 35
Ansoff and others: development trajectories for large
corporations 36
2.5 Miller and Friesen: archetypes of strategy-making 38
2.6 Strategy: long live diversity! 40
3 30 Ps for perspectives on strategy: toward
strategic-style flexibility
3.1 How many Ps can you think of? 41
3.2 Perspectives and the case for style flexibility 42
3.3 Strategy as a Plan or Programme 44

41

viii

Contents
3.4 Strategy as a Pattern or Path 44
3.5 Strategy as a Position 45
3.6 Strategy as a Perspective, Personality, Profile, Paradigm
and Perception 46
3.7 Strategy as a Ploy and a Principle 47
3.8 From 15 to more than 30 Ps 50
3.9 Summary and synthesis of the first three chapters 52
Appendix: avoid the frontal attack! What managers can learn
from the military 53

The strategy forest

4.1
4.2
4.3
4.4
4.5

59

What do you know about it? What do you think of it? 59

The (bounded) rationality of strategy 60
Splitters and lumpers 63
Four groups of strategy schools 65
The first maps of the strategy forest 70

Where theres a will, theres a way: all-powerful optimists

72

5.1 Eight schools 72

5.2 The design school 73
5.3 The entrepreneurial or vision school 76
5.4 The planning school 78
5.5 The positioning or IO school 84
5.6 The portfolio approach 87
5.7 The resource-based and competence-based approaches 91
5.8 The resource-dependence or stakeholder approach 97
5.9 The configuration school 100
5.10 Many roads to excellence 103
6

The entrepreneur deliberates, the market decides:

cautious optimists
6.1 Four schools 106
6.2 The transaction-cost approach (and related economic
theories) 107
6.3 Game theory 114
6.4 The evolutionary school 121
6.5 The guerrilla approach 129
6.6 Theyre big and were small and thats not fair 131

106

Contents ix
7

Thats the way we see it, thats the way we do it:

framed rationality
7.1
7.2
7.3
7.4
7.5
7.6

Four schools 134

The critical school 135
Postmodernism 137
The cognitive school 139
The cultural school 142
Strong thoughts and routines 145

8 Everything flows: interactive players

8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8

147

Six schools 147

The learning school 149
The political school 153
The identity approach 157
Systems dynamics 161
Social constructivism 164
Complexity and co-evolution 173
Strategy never ends 183

9 The second atlas of the forest

9.1
9.2
9.3
9.4

134

186

Back to the bigger picture 186

All the perspectives in one map 186
Strategy in practice: the strategic prayer wheel revisited 191
On to the paradoxes 196

10 Gusts at the top of the Pico Paradox

197

10.1 Why are paradoxes strategically important? 197

10.2 What is a paradox? 198
10.3 The danger of denying paradoxes 199
10.4 Dealing with ambiguity 201
10.5 Steering and self-organization 201
10.6 Hybrid solutions 204
10.7 Paradoxes relating to the internal context 206
10.8 Paradoxes relating to the external context 208
10.9 Paradoxes relating to the strategy-making process 210
10.10 Paradoxes relating to content 211
Notes
Bibliography
Index

214
221
230

Figures and Tables

Figures
1.1 Strategy in relation to an organizations primary processes
1.2 Static contingency and precise fit versus dynamic
contingency in unclear situations
1.3 Strategy: content, context, process
1.4 Main elements of strategy according to the traditional
design approach
1.5 Modified model of strategy-making
1.6 Second modified model of strategy-making
1.7 Levels of strategy-making
1.8 Rational versus emergent strategy
2.1 Porters generic strategies
2.2 Mapping cost and differentiation strategies
2.3 Ansoffs vision on possible development trajectories
for companies
2.4 Linking Ansoffs development matrix to other strategy
typologies
3.1 Strategic thinking between various theatres
4.1 Whittingtons matrix of strategy perspectives
4.2 Four forms of cockpit thinking
4.3 Approaches with a stronger social-science orientation
5.1 Methods for dealing with an uncertain future
5.2 The organization and its external environment
5.3 Porters Five Forces
5.4 Boston Consulting Group growth/share matrix
5.5 The categories of the BCG growth/share matrix
in relation to the life cycle
5.6 The system of production and knowledge exchange in Dutch
horticulture
5.7 Geoffrey Moores stages of the product or technology life cycle

5
10
11
12
13
15
17
23
32
34
37
38
47
64
70
70
83
84
85
87
87
99
102

Figures and Tables xi

6.1 Dependency of X in relation to Y
6.2 Holland Sweeteners strategic options, and the probable
reactions of Monsanto
7.1 The risk of strategic drift as a result of a mental model
of reality that is no longer adequate
8.1 The Balanced Scorecard
8.2 The interest and power of stakeholders
8.3 The development of skills and identity
8.4 Identity as a strategic compass
8.5 The dynamics of symptomatic solutions
8.6 Social construction, deconstruction and reconstruction
8.7 The social construction of an innovation
8.8 The linking of strategic projects
8.9 The possible development of a strategic process
8.10 Clustered networks linked by connectors
8.11 Linear and non-linear developments
9.1 The second map of the strategy forest
9.2 The strategic prayer wheel
9.3 Redefining the strategic profile
10.1 The McKinsey 7-S model

111
118
140
151
154
157
158
163
167
168
170
172
176
177
191
193
195
203

Tables
1.1
2.1
5.1
6.1
6.2
6.3
6.4

7.1
8.1
10.1
10.2

Tame versus wicked problems

Cost competition versus differentiation
The eight voluntaristic cockpit approaches
The four deterministic cockpit approaches
Pay-offs in the classic Prisoners Dilemma
The Mafia solution to the Prisoners Dilemma
The ten largest industrial enterprises in the United States
(by book value/assets), 1917, 1948 (Chandler 1999: 638657)
and 2008 (own calculations from Forbes, 04-02-08)
The four deterministic social-scientific approaches
The six approaches with a stronger voluntaristic and
social-science orientation
Relationship between steering and self-organization
The 7 Ss as zones of constructive tension

25
31
72
107
115
117

128
134
148
202
203

Preface

As the subtitle of this book indicates, this is an introduction to strategic thinking from a multitude of perspectives. Our discipline is usually known as strategic
management, but this book is more about strategic thinking than about strategic
management or planning. Thinking is perhaps even too strong a word, because
this book also deals with strategic intuition, strategic feeling. In my experience,
we develop this feeling for strategy mainly by learning to shift between perspectives.
The better part of this book is therefore an introduction to and an overview of
different strategic approaches or schools. In the past 50 years, the field of strategic management has developed in a quite fascinating way. Nevertheless, most
introductions to this field have not progressed much beyond the initial approach
of 50 years ago, i.e. the design approach. No matter how important this approach
still is, this is obviously rather a shame. I can only suspect that most of my fellow
authors reason that the design approach is the least difficult to explain, for as far
as I know, they keep track of all new developments in the field. For many years
now, I aim in my lectures to go beyond this rather simple representation, and
I know how difficult it is. When students (including experienced managers on
MBA courses) have already encountered strategic subjects at some point in time,
these are usually design-based introductions. For these students, strategic management tends to equate with this approach, and confronting them with more
perspectives generally leads to confusion. In a sense, this is no bad thing, because
it means they are confronted with the most typical strategic situation that most
managers abhor namely confusion.
My aim in writing this introductory book is to break through the closed,
design-oriented circle. Strategic management actually involves much more (and
is more fun) than anything that has emerged from the design school. Given my
experience, I cannot but expect that this book will lead not only to more transparency, but also (initially, at least) to a degree of confusion. I am also aware that
this confusion might ultimately lead to a form of liberation that stimulates real
strategic thinking, as I see it. One of the main goals of this book is therefore to
initiate a discussion about strategy with readers whom I take seriously, and who
themselves like to be taken seriously. If an introductory book is written only for
the strategically ignorant, then we should not complain if the result is no more

Preface xiii
than that. However, this does not mean that I have attempted to make this book
as difficult as possible quite the opposite.

What sets this book apart from others?

What can I promise you as a reader? What sets this book apart from other books?
What is its added value? These are all typical strategic questions, are they not?
One of the main premises of this book is that the variety of strategic
approaches does not constitute a weakness, but provides a rich source of
insights and perspectives. Existing introductory books do not address this diversity sufficiently. With this book, I therefore intend to present the overview of
strategic variety that I myself have sought for many years. Ten approaches have
already been presented in the best book on strategic variety to date Strategy
Safari by Henry Mintzberg (whom I greatly admire) and his colleagues
(Mintzberg et al. 1998a and 2009). However, several very interesting and
important approaches are missing in that book, and others are categorized in a
way that is incomprehensible to me. I will come back to this in Section 4.3.
The purpose of this book is to fill that gap, whilst helping you to distinguish the
wood from the trees.
In addition, this book will place greater emphasis than other introductions on
the continuing process of strategy-making and strategic interaction. Perhaps you
are wondering: surely strategic management is interactive by definition? Arent
strategies always related to the environment, i.e. competitors, colleagues, interest
groups, authorities and last but not least customers? And isnt it a fact that, as
a rule, all of these groups respond to your initiatives? Indeed, I couldnt agree
more. To put it even more strongly, within your own organization too, there is
continuous strategic interaction, for the simple reason that ideas usually outnumber resources. An organization cannot do everything at once. This is why there
are often different views about strategic and other priorities in each organization.
Who decides on these priorities, and how? Is there one boss who makes all decisions or who thinks he does? When reading certain books on the subject, one
could almost believe this. And supposing that only one person is responsible,
would everyone readily agree with him? Strategy without interaction is therefore
an empty shell and wouldnt even be necessary. It is nevertheless striking how
many books on strategic management hardly mention the strategies of competitors and interest groups, or those of colleagues who have plans that diverge from
the plans of others within the organization.
To some extent, this book draws upon the strategy-as-practice approach which
has emerged in the last decade. Strategy-as-practice researchers try to study as
closely as possible how strategies concretely come about, formally and informally
(Whittington 1996, 2003, 2006; Johnson et al. 2007). But this book does more
than present real-life strategy cases. Its ambition is to show how different theories
interpret strategic realities and how they can help practitioners to improve their
strategic performance. As many theoreticians before have said, there is nothing
so practical as a good theory.

xiv Preface
This is an introductory book, which means that I am attempting to write for a
broader audience. Strategy-making is never easy, because it is an attempt to outsmart ones competitors. But we shouldnt make it more complicated than
necessary, of course. People who know me are aware that I attach great value to
readability. Although our discipline can sometimes be tough, I will nevertheless
also try to show that it is exciting and fun. Strategy involves getting to know both
ourselves and the organizations of which we are a part, as well as trying to devise
clever ways to get the better of competitors and other opponents. Wisdom is more
important than size, as they say. Given the fact that only a few people and organizations operate on a large scale, for most of us it is important to be clever. As
large organizations become smarter, it is even more important for the smaller ones
to do the same!
This relationship between large and small brings me to yet another issue.
Those who are aware that they are merely pawns in a bigger game may be more
modest, strategically speaking. Of course, there is nothing wrong with ambition,
quite the contrary this book will top the bestseller lists, for example. Modesty,
however, helps us to understand the possible resistance and obstacles to our
plans. In this way, it guards us from the arrogance that often deals a fatal blow to
all manner of fantastic plans. Modesty challenges strategic thinking because it
makes us aware that we wont get our ambitions for free. In a way, the 20082009
crisis has made it easier to deliver this message, as more than previous recessions
this crisis has exposed the vulnerability of the strongest organizations. So, wisdom is more important than size. This awareness makes strategy more exciting,
more challenging and for those who like this more fun. By definition, there
are no easy strategic solutions. That which is easy does not require strategy.
That which is strategic is not easy, as a rule. I will return to this point frequently
in the book.
I therefore promise you no unambiguous answers or easy procedures, because
strategic management usually deals with unclear, uncertain and ambiguous situations that are changing all the time. This is what makes our discipline so
exciting. It is also why, in most cases, strategy-making has to be participative. It
wont succeed if it is confined to an individual or a small group. Other people
within and outside the organization (customers, for example) may know more
than you do. And others may simply not allow you to get your own way so easily.
At the same time, strategic thinking must lead to action, and vice versa.
This book will ultimately bring us to the question of how to deal with paradoxes, fields of tension for which an ideal balance does not exist (e.g. action
versus reflection, innovation versus the preservation of essential strong routines).
However, I promise to provide you with some tools theoretical as well as practical to ensure that you are better equipped to deal with paradoxical situations.
Each of the different approaches I present, for example, is accompanied by a
short list of questions raised by that approach. The questions relate not only to
you and your organization but also to your competitors (or co-opetitors1), inside
as well as outside the organization. I cannot tell you, however, which questions to
ask in which situation. To do this you will have to develop your own strategic

Preface xv
skills. I can only put you on the right path, and hope that you will actually start
to enjoy the process.
The fact that my style deviates somewhat from that of other books on strategy
is perhaps the result of the paradoxes I have just mentioned. I dont feel the need
to beat the big drum. Strategy is an interesting and exciting discipline, and yes, it
is vitally important. At the same time, however, it can be amusing to see how
companies actually deal with strategy. Sometimes a strategic plan is like a red
herring, not much more than an instrument to satisfy the Board, a department or
a sponsor (If they want a strategic plan, thats what well give them). On the one
hand, therefore, my aim is to assist you in producing well-thought-out plans and
gaining support for them. On the other hand, however, I also want to help you to
understand how organizations actually function, including the potential role of
strategic plans in this respect.
Within organizations, strategy is not infrequently about power and status, on
all levels. Who gets the best office? How can I justify a large bonus for myself?
Why is my department entitled to a higher budget than another department?
You may be thinking: So thats what its all about! No, of course it isnt, but you
would be surprised if you knew how many great plans are intended for not much
more than this kind of triviality. This is why strategies are an important instrument whereby organizations are continuously recreated and redefined.
For this reason, too, strategy is both as hard as nails and as soft as butter. Every
now and then, we need to underpin large investment decisions with hard data.
I will help you to find these. At the same time, however, you will see that all
these hard data are obtained with the help of models that merely approximate
reality and, from sheer necessity, are a simplified representation of it. We use this
hardness of facts to deny and/or smooth-over the strategic uncertainty and
ambiguity we encounter. Moreover, there are always interests at play that cause
us to see only what we want to see. That is why this book is about both the front
and back of strategy-making. The ultimate goal is strategic learning, i.e. understanding what we are good at and consolidating, expanding and improving this,
both in the context of competition and co-operation with others.

For whom have I written this book?

Almost everyone who is socially or economically active has to deal with strategy
and strategic interaction. When you want to achieve a certain goal, you have to
mobilize allies and aids. Of course, not everyone will start reading strategy books for
that purpose. To a large extent, such processes take place spontaneously, in a natural way. In a sense, it is strange that strategy is something that has to be taught,
since human beings are by nature social creatures, and strategic and tactical behaviour is part of their behaviour. Many people are subconsciously expert
strategists. Within families, too, it is about deciding who gets the best room, and
allocating scarce resources. Every day, as I sit in the train, I hear girls thinking up
arguments to persuade their fathers or boyfriends to fetch them in the car. By the
way, this is interactive strategy sometimes only the third argument does the trick.

xvi Preface
At the very least, a strategy book should ensure that people do not lose this
basic skill. It will do no harm, however, to think about ones personal style and,
in the process, acquire more flexibility strategy, long live diversity! When dealing with something on a grander scale, it helps to know more about strategy as a
discipline, if only because others know a great deal about it or because it is
expected of you. Could you put on paper how you would deal with this matter?
What is your business plan? Within organizations, more and more people are
involved, in one way or another, in devising major or minor strategies. People at
the top are sometimes authorized to decide on important investments or restructuring programmes, but these decisions are influenced by many others. Many
people try to stand out within an organization through their own success and
that of their teams (department, business unit). Also those who are relatively
unselfish and put the organizations interests first will often have to fight for the
scarce resources that are allocated to different purposes within the organization.
To a certain extent, every organization is a pyramid of smaller or larger plans,
which may or may not be laid down in writing and sanctioned. Money that is put
aside for one plan might be used for something entirely different. One may
approve or disapprove of this, but it happens.
Strategic management, then, is not the exclusive domain of the senior management of an organization, possibly complemented by strategic staff or a number
of hired advisers. The fact that many people are either explicitly or inexplicitly
engaged in strategy does not, of course, mean that they need to be trained in that
discipline. However, more and more people are expected to be. An increasing
number of team leaders, department heads, managing directors of subsidiaries
and leading executives of public-sector and private-sector bodies are required to
give strategic substantiation to their proposals, or to indicate by means of strategic plans the future vision for their team, unit or department, and how they
think they can accomplish this. As a rule, new entrepreneurs in search of financial support from banks or investors also have to draw up a business plan, of
which strategy will be an important part. In order to be strategically effective, it
is therefore useful, at the very least, to be acquainted with the well-known strategy jargon and, if necessary, be aware of other perspectives than the simplistic
ones that other people sometimes present with great aplomb as the only appropriate perspectives.
This book offers a helping hand to all those who need support in the context of
their role in strategic processes. This support consists not only of a framework,
some useful questions where appropriate, and tips for reflecting on a strategic plan,
but also of questions and perspectives for assessing the plans of others and raising
them for discussion. In addition, this book is especially about reflecting on ones
own position and operating methods in strategically relevant processes. I have
therefore written this book primarily for anyone who is involved in such processes,
to a greater or lesser extent, and wants to be better equipped to deal with them
executives in private and public organizations, for example. The book is also of
interest to the employees or advisers of these executives who are seeking more consciously to exert influence on policy-making within or outside their organizations.

Preface xvii
It may also be relevant for new entrepreneurs or people who want to form an interest group. The target group therefore also includes students from universities and
polytechnics, as well as their lecturers, because an increasing number of graduates
will eventually find themselves in the aforementioned positions.
What do I aim to teach you with this book? To put it simply, I want to teach
you something about strategic thinking and management and make you more
familiar with and, it is hoped, more appreciative of the plurality of the discipline, in this way enabling you to apply this in strategic trajectories. As is the
case with all books, you learn the most when you actively apply the knowledge
and information, but this is obviously something over which I, as a writer, have
no control. The only thing I can do is try to activate you by posing a number of
questions to reflect upon initially with more emphasis, later in a more subtle
way. If you formulate answers to these questions preferably on paper it is more
likely that you will become aware that my particular approach is slightly different
to yours. As you probably know, one learns more through confrontation . . .
If you are a lecturer who wishes to use this book for teaching purposes, you
will share most of my enjoyment and frustration if you also share my objective to
impart to students a certain amount of intellectual flexibility (and hence the
ability to put things into perspective). Although I intend to be practical, I aim to
offer more than a simple recipe-book approach. In educational terms, this book
is on the level of universities and polytechnics.

The general structure of this book

I will lay the foundation in Chapter 1, in which I seek to define the essence of
strategy. In doing so, I will start from the traditional model of the design school,
which I will then supplement with elements from other approaches. In addition,
I make a distinction between prescriptive and descriptive approaches to strategymaking. In Chapter 2, I bring together a number of relatively well-known and
frequently used classifications of strategies. For example, do you compete on
price (and, it is hoped, cost), or on the basis of a particular added value for your
customers? Are you a pioneer, or more of a follower who learns quickly from the
experiments of others? Chapter 3 presents a kind of party game, in which I use
the letter P to bring together as many different Perspectives on strategy-making
as possible. I would very much like you to join in. In the meantime, therefore,
I suggest that you start making a list of strategic Ps.
Chapter 4 lays the foundation for the subsequent four chapters. It presents
four main categories of strategic approach, i.e. the topographic map of the great
strategy forest. Chapters 5 to 8 give a detailed description of the different trees in
the forest, including their mutual relationships. I will use examples to show the
relevance of each perspective. Each time you will see the same landscape, but
from a different angle. It will also become clear that each viewpoint leads to different strategic questions.
Chapter 9 brings everything together again. With the help of a second map,
I will indicate how each school focuses on a certain aspect of strategy-making.

xviii Preface
In addition, I return to the strategic prayer wheel presented in my previous strategy book Spel en Discipline (Play and Discipline) (Jacobs 1999a), a schematic
representation of the various necessary elements in the strategy process. On the
basis of the arguments I have developed in the book, I can elaborate and refine this
further.
Finally, in Chapter 10, at the end of our long and bumpy journey, we reach the
summit of strategic thinking, i.e. thinking in terms of paradoxes for which there
are no easy solutions. Sometimes we place too much emphasis on decisiveness, at
other times we lose ourselves in too much reflection. Sometimes we are perhaps
too autocratic, at other times too participatory. Strategy, just like housework,
never ends. This book does end, however. At this point I will let you go, I will say
goodbye at the summit, where all these opposing forces continually pull us in all
directions. Contrary to what is sometimes claimed, however, it doesnt have to be
lonely at the top. That is entirely up to you.

Acknowledgements
This last remark boomerangs on myself, as my greatest debt of acknowledgement
is to Aad Vijverberg. He was the person with whom I embarked upon this journey. He fed me with pieces of text, interesting literature and cases, remarks and
criticism. Eventually, however, we went our separate ways. This was partly due to
me and partly due to Aad a typical form of co-evolutionary dynamics we will
encounter more often in the course of this book.
In addition, the comments (and additional literature suggestions) made by
Ritzo ten Cate, Marjanne Dirksen, Otto Lapphn and Theo Postma on early versions of this text have been of great value to me. I am also grateful to everyone
who, in recent years, has fed me, either in a strategic or non-strategic sense. But
thats another story
For more than 90 per cent, this book is a translation of the book I published in
Dutch (Strategie: Leve de diversiteit) in 2005. Here and there small changes have
been made: by using another case or updating an existing one, or by integrating
some new literature.
Dany Jacobs
Zutphen, The Netherlands, 2009

The essence of strategy

Key components

In order to identify the many different approaches to strategy, we must first establish a theoretical framework with a number of basic concepts and components.
That is what this chapter aims to do, by discussing the essence of strategy. What
is strategic management about? When we talk about strategy, which themes do
we include or leave out? You will notice that occasionally I will mention some of
the strategic approaches and schools of thought that we will discuss later on. This
is inevitable. In fact, I hope to familiarize you with some of them.

1.1

What do you know about strategy? What do you think

about it?

As I mentioned in the preface, each chapter will begin with a number of questions designed to activate your knowledge of and views on strategic
management. In the earlier chapters of the book I will place more emphasis on
this. I would suggest that you answer the questions below for yourself, preferably
on paper, and check them again after you have worked through this chapter to
see whether your answers have remained the same. If they have not, why is this?

In your view, what is the essence of strategy? Think of five words that you
associate with strategy.
When did you last use the terms strategy or strategic at work, or in another
setting? What precisely did you mean by that? Have you recently heard
someone else use these words? With the same meaning?
You are probably a member or employee of an organization. Do you think
that the organization has a strategy? Does it matter whether it has a strategy?
Who is involved with strategy?
Do you think that an organizations strategy must be clear? Should it be clear
for the management? For the staff? For potential competitors?
What do you think of an organization that manifestly deviates from its strategy?
Is strategic management a matter for top management alone, or should other
levels of the hierarchy also be involved? Would you like to be involved?
Why, or why not?
What distinguishes strategic management from normal management?

The essence of strategy

What is your view of the statement strategy is about the past?

Are you already familiar with some existing strategic schools of thought?
If so, what are their distinguishing features?

1.2

What are we talking about when we discuss strategy?

Strategy is important
When we talk about strategy, we are talking about important matters. Your reaction may well be of course you would say that, its your profession. No, I mean it
literally. Look around you. In many situations, strategy is synonymous with
important. If you want something to be taken seriously, label it as strategic.
Having an action plan is all well and good, but a strategic plan really has an
impact! A statement about personnel policy is fine, but one about strategic HRM
carries real weight! Managers who are involved in formulating the strategy of an
organization must be important people. Compare this with how production managers are perceived. Surely production is just as important, even essential? Yet it
is unlikely that production managers will be regarded as more important than
strategists.
Actually, strategy is important in practice. Decisions are clearly strategic if
they are crucial to the development of the organization, have a broad scope,
create added value, and have consequences for many jobs and activities within
the organization. Decisions are also strategic if they are difficult to undo, for
example because they lay claim to considerable resources (human resources,
financial resources, machines, buildings, energy) in the longer term. They therefore represent a strategic commitment by the organization. They can also serve
as a signal to other parties, for example to discourage them from doing the same
thing. Such decisions are, therefore, often the motivation for organizing strategic
processes or formulating strategic plans.
The following are examples of decisions that are clearly strategic:

Starting a business.
Investing in a new large location.
Uniting with your team to oppose a planned reorganization.
Entering a new market (e.g. the Far East or Eastern Europe).
Investing in new technologies and innovations in products and production
processes.
Formulating a business plan for a new department.
Appointing key staff with unique skills.
Initiating a merger, acquisition or partnership.

Strategies differ in their importance and visibility. To be more precise, the strategy followed in practice is not necessarily the strategy that is set down on paper.
Certain difficult decisions are never implemented. Many actions are not the
result of formal decisions. That brings us to the first important concept: emergent

The essence of strategy 3

strategy, i.e. strategy that emerges spontaneously. Strategy is often a form of pattern
recognition. As the philosopher Kierkegaard observed, We live life forward but
understand it backward. Ask yourself to what extent your career choices were
conscious decisions. Did you really make them logically and rationally?
Sometimes it is also a question of luck or chance. Or did you seize an opportunity
that turned out to be just the right one for you? In many cases, you understand
the rationality (i.e. the pattern) better with hindsight than beforehand.
Some strategic literature concentrates on important, strategic subjects about
which an important decision must be taken: a new direction, a merger, the establishment or closing of branches or departments. But many strategies are the result
of a series of smaller actions or decisions that initially seem unimportant.
Strategy-forming, then, is more a case of identifying a pattern in our actions after
the event. Moreover, it may be that, in the case of an important decision that is
expected to generate opposition, tactics are deliberately employed to implement
the decision through a series of apparently minor actions. This is known as
salami tactics. The salami is not served whole, but in slices. Salami tactics can
be used not only for top-down decisions, but also for bottom-up decisions.
Therefore, the real strategy is important. But this is formed not only through
important, well-considered rational decisions. Remember emergent, spontaneous strategy. I will return to it in Section 1.6.
The air we breathe is free, strategy isnt
In the past decade we have learned to our cost that linking strategy and importance also has a downside. We often associate strategic with costly or too costly.
Strategic consultancy costs more than normal consultancy. When a takeover is
labelled as strategic, it often means we have to pay a lot, but . . . (Kay 1998).
Literally one of the most expensive concepts in strategic management literature
is the concept of synergy: the idea that elements interact and their combined
effect is greater than the sum of their individual effects. Not infrequently, this is
the justification for paying a relatively large sum for a takeover, because the integration of the new organization will supposedly yield even more! A nice idea, but
unfortunately thats usually all it is. In 2002, the merged American Internet and
media group AOL Time Warner announced losses of EUR 108 billion, an almost
inconceivable amount. To give you some idea, the losses made by a single company within the space of one year were approximately 80 per cent of the Dutch
governments budget in 2005. So remember, next time someone in your organization starts to talk about synergy benefits, dont let them near the company
coffers!
Strangely enough, this shows that some people dont take strategy very seriously.
After all, if strategy is simply a synonym for important, or even very important,
then there is no need to pursue the subject. The association with too expensive
(value destruction in economic terms) is possibly even more damaging because in
such cases it just means stupid. It is the exclusive playing field of top management,
where there apparently has to be room for the occasional expensive hunting trip.

The essence of strategy

As we know, the true hunter doesnt rest until he has bagged his quarry. But then
he loses interest . . . It is all well and good if strategy is associated with importance,
but this book will serve little purpose if it means no more than that.
Strategic versus normal operational decisions
As I said previously, strategy often arises spontaneously from a pattern of apparently minor decisions. But more deliberate strategies do take the normal
operational level seriously. Although research has repeatedly shown that, on
average, businesses with an explicit strategy perform better than those that do
not, the difference is usually not very large (see for example Waalewijn and
Segaar 1993). Healthy business operations are just as important. Research conducted by Jim Collins into the few companies that made a successful transition,
the results of which were sustained in the long term,1 revealed that a strong strategy was not developed until the process was in its fourth phase, after an ambitious
but modest top manager had been appointed and a good management team had
been formed, and after the company confronted the hard facts (Collins 2001).
How can you make good decisions (strategic and otherwise) without an effective
management-information system that keeps you informed about the companys
real situation? What are the real costs? Which departments perform best, and
why? What really generates our revenues?
That brings us to the next important component of strategy. Strategy is always
built on knowledge of the actual strengths and weaknesses of an organization.
Does the organization, in its own way, create added value, or not really? The feedback between the strategic and operational levels will therefore be a constant in
this book. If the organizations strategic core competences are not anchored in its
basic processes and skills, then surely we are building on sand? That connection
is the essence of strategic learning, however difficult that may be. What activity is
the organization involved in, and which opportunities and problems do they create? How can we improve and/or change the way we do things?
The relationship between strategy and primary processes can involve two
forms of feedback and learning: improving what exists and/or creating something
completely new. In the literature about learning organizations, a distinction is
made between single-loop learning and double-loop learning. When an organization
is confronted with a particular problem (or a unique market opportunity), this
can be dealt with as effectively as possible using the existing business model. But
new ideas may also evolve with regard to dealing with this in a more original and
fundamental way, for example by developing new approaches, restructuring the
organization, developing new skills, or integrating organizational units. Here we
see a relationship between strategy and radical innovation, an increasingly
important theme that will be explored later in this book. This is illustrated in
Figure 1.1 (based on Jacobs 1999a: 24).
Organizations have material assets (machines, buildings, raw materials and
resources) and intangible assets (knowledge and skills) that are used in primary
processes. This results in products and services of a certain quality, i.e. added

The essence of strategy 5

primary
processes
input

resources

partners

customers

output

translation of S/V into

products & services

competences

processes

qual.

processes

qual.

processes

qual.

positions
on
markets

customer
satisfaction
financial
results

O/S

S/V

O/S

learning processes
O/S = operational/strategic
S/V = strategy/vision

S/V

single-loop learning
double-loop learning

Figure 1.1 Strategy in relation to an organizations primary processes.

value. Customers compare the products and services with those of the competitors, and are either satisfied or dissatisfied, which has a direct impact on the
result (in terms of profit or market share). The outcome of this and/or other factors triggers new ideas for improvements. Those improvements may involve
simple operational modifications, which may or may not have a strategic component (O/S in Figure 1.1). But a more fundamental new strategic vision may
evolve (S/V in the figure) with regard to radically improving the product or
service for the customer, and may require new material and immaterial assets.
That brings us to another principle. In contrast to many other people, I believe
that strategy is not developed at the beginning of a process, but is always based on
experience. Many other books present a sequence other than the one shown in
Figure 1.1, beginning with missionvisionstrategy on the left. In my view, however, visions relating to strategy and mission evolve during the process (halfway,
as it were), not at the beginning. People who set up a new organization do so on
the basis of past experience, as in Figure 1.1, but in a different place.
Provisional conclusions
A couple of matters may have become clear with these opening remarks:

Strategy is about important decisions or a profile that develops from a series

of smaller actions that initially seem less important.
Strategy should be about learning processes: learning about the strengths
and weaknesses of an organization (does it really create added value?), and
building on these.

The essence of strategy

But our search has only started. Lets return to the question that has been asked
several times and has to be central to an introductory book such as this: just how
important is strategy?

1.3

How important is strategy?

We can approach this question from various perspectives, and I will discuss five
of them. The first is purely economic: how will strategy benefit the organization?
The second perspective relates to timing: taking timely action gives an organization more room to manoeuvre. The third perspective is identity, or driving
force. The fourth perspective is commitment and consistency. Finally, in the
fifth perspective, I introduce an important concept: contingency.
What does strategy yield?
For many people, the economic perspective is the most obvious one. What benefits does strategic management bring? Does it lead to improved performance?
Does it create added value for its environment and/or for the organization itself
(Kay 1993: 192218)? This question has been the subject of a great deal of
research. The general answer is: yes, to a certain extent. On average, companies
that employ strategic management techniques are slightly more profitable. This
is easiest to assess in small companies because they do not all focus on strategy to
the same extent (Robinson and Pearce 1984). But we do not know for sure
whether the improved results are due to strategy. Perhaps companies that place
greater importance on strategy also manage their other processes more carefully.
Some small companies undergo a learning process whereby they gradually professionalize their management style. This begins with financial planning. Based on
their experience, these companies increasingly analyse their markets in terms of
growth potential for different scenarios. Over time, this integrated strategic management gradually takes account of more aspects (Waalewijn and Segaar 1993).
Large companies all employ strategic management techniques to some extent.
We can only assess the result of this by looking at the quality of those management techniques. As we have seen above, certain strategies in the past have
resulted in enormous value destruction. But we shouldnt throw out our beautiful
baby with the bathwater, so lets keep to the traditional circular argument: good
strategic management leads to better results! The question then remains: how do
we achieve good strategic management?
Timing and room to manoeuvre
If we consider strategy from a management perspective, an important function of
good strategic management is that it encourages organizations to start thinking at
an earlier stage about strategic issues, choices, and their consequences. Research by
the German consultancy organization Roland Berger has shown that many
companies do not carry out necessary restructuring until a relatively late stage.2 In

The essence of strategy 7

57 per cent of cases, restructuring is not carried out until there is a problem with
profits, and 23 per cent of companies even wait until they are faced with liquidity
problems. Only 20 per cent of the companies studied identified and analysed
strategic issues at an early stage. By anticipating issues early on, an organization has
more room for thinking about different possible scenarios and related decisions.
Identity, meaning, adventure
A third perspective from which we can assess the importance of strategy relates
to identity, driving force and sense-making. This brings us closer to the more
cognitive or socio-psychological approaches to strategy-making. Strategy is often
related to what drives people individually and collectively, to identities, and to
how they interpret the world. We are continually interpreting the world in
which we live, and our place within it. Strategy should set out a general course; a
perspective for the longer term. This helps us to structure information. In this
sense, strategy serves as a sort of compass, a tool for sense-making in the longer
term. We notice this especially when someone a new senior manager tries to
alter the identity of an organization in a way that is unpopular. An identity can
be very powerful, even in a negative sense. In such situations it is difficult to deny
that strategy is important.
As I have mentioned, strategy is often associated with important. People like
to be involved in important things. Strategic sense-making facilitates this. Were
not just muddling on; no, were doing important things! A directional strategic
concept must therefore have something appealing or exciting. Russell Ackoff illustrates this in the following story.

Transistors
Russell Ackoff has long been an inspiring business author. He clarifies
management issues using short fables. One of his fables is about a small
company that made woodworking tools. The company had three owners,
who were also involved in other activities. They didnt need to devote
much time or energy to the company, because it was doing well, albeit in a
stagnating market that was not very challenging or exciting. They hired a
consultant to look into potential markets for diversification. The consultant came up with the usual suggestions, such as tools for plumbers and
other tradesmen. The owners were not very enthusiastic, and asked the
consultant to look into better, more challenging opportunities. The consultants next idea was tools for aircraft maintenance. Thats better, the
owners said, but carry on looking. The consultant gradually ran out of
ideas. One day he heard something on the radio about the importance of
transistors, which were just being developed at the time. He suggested to