Culture and Strategic Management

1
Culture and Strategic Management:

Various cultural influences are involved in strategic making Past, present and
future

Old established companies and significance of culture Example, Mitsui Group

of Japan

Resources and capabilities have historical roots Over the years, these
become a part of organisational culture

In a positive way, these can be difficult to imitate hence become a strength

However, these also become difficult to change

2
Culture and Strategic Management:

Both historical and cultural roots create:

the taken-for-granted way of doing things

3
Strategic Drift:

Strategies develop incrementally because of historical and cultural influences

In doing so, the response to environmental changes can be slow

This can be explained using four phases:

a) Phase 1 Incremental Change

b) Phase II Strategic Drift
c) Phase III Flux
d) Phase IV Transformational change or Death

4
 Diagrammatical Representation

Amount of
Change

5
Phase 1 Incremental Change

Strategies change gradually / incrementally

Firms tend to not deviate from tried and tested ways

Example: Tescos growth and response of Sainsbury

Three reasons why firms behave in this fashion or have a continuity in their
approach

a) Alignment with Environmental Change It could be that the market

within which the firm is operating does not need dramatic changes

6
Phase 1 Incremental Change

Three reasons why firms behave in this fashion or have a continuity in their
approach

b) The success of the Past The tried and tested ways (resources and
capabilities) have proved to be successful in the past. Hence, no ground
to change

c) Experimentation around a theme Logical experimentation and

learning Referred as Logical Incrementalism. As per this view,
experiments should not deviate from their capability base

7
Phase 1I Strategic Drift

Environmental changes do not take place at a drastic speed but nevertheless

are accelerated

Slow response to environmental changes can be because of:

a) The problem of Hindsight Changes happening in the current market

when seen in the hindsight might look as major changes. For example,
a fad in the market is a temporary change

8
Phase 1I Strategic Drift

Slow response to environmental changes can be because of:

b) Building on the Familiar Incremental changes appear to be more

fruitful. Example of Tesco and Sainsbury Sainsburys superior offerings
have no comparison with Tescos offerings Is this the right attitude?

c) Core Rigidities Difficulty in changing ways of doing business can

convert into core rigidities. Taken-for-granted practices continue to
prevail and remain unquestionable. Also, these become embedded in
organisational routines thereby unravelling is difficult

9
Phase 1I Strategic Drift

Slow response to environmental changes can be because of:

d) Relationships become shackles Disrupting relationships with

existing suppliers, customers, distributors, etc. can be undesirable. This
in turn might create strategic drift for a firm

e) Lagged performance effects It is not easy to spot a strategic drift

Existing strong performance results can hide an approaching downfall

10
Phase 1I Strategic Drift

This can be referred as Icarus Paradox Terminology coined by Danny Miller

11
Phase III Flux

As the word suggests, strategies keep on changing. The change is directionless

Issues as a result of flux:

Critical changes in the top-management of a firm

Conflicts in decision making (need to stick to past practices or

introduce new practices)

Loss of customer loyalty

Fall in share price, etc.

12
Phase IV Transformational change or Death

In this phase, the firm can:

a) Go out of existence
b) Gets taken over by another firm
c) Introduces transformational change

Transformational change can take place when there is a major downfall in a

firm

In such a case, the onus very much relies on the top management to convert a
failed story into a success story

Note: In order to avoid reaching this stage, the firms can start making a difference
in phase II itself

13
History and Strategic Management:

Organisational history is important to understand for the following reasons:

a) Managers organisational experience Does this support or limit

their success? Ability to deviate from the inherited history

b) Avoiding recency bias Excessive emphasis on recent performance

can be avoided. Learning from past / historical incidents cannot be
ignored

c) Misattribution of success Attributing success to factors that are less

relevant. Success could be purely because of luck and not because of a
specific factor

d) What if questions Allowing change by asking what if questions

Creating dynamic firms
14
History and Strategic Management:

Organisational history is important to understand for the following reasons:

e) Detecting and avoiding strategic drift To what extent historical

influence will be allowed. Strategy can be informed by history but at
the same time kept distinct

15
History and Strategic Management:

Path Dependency:

Path dependency and historical lock-in are inter-related

Creation of policy paths These paths guide the present and the future

Path dependency is all about behavioural routines These get institutionalised

and hence difficult to untangle

16
History and Strategic Management:

Path Dependency:

Path dependence is a common explanation for why the choices that people or
organizations make based upon a given set of circumstances may persist long
after those initial circumstances have changed (Pendall et al., 2007: 10)

In the context of QWERTY:

Though August Dvorak introduced a simplified version of the existing

QWERTY keyboard, the accepted standardisation in the form of what was
existing (with documented evidence of it being inefficient) inhibited the change
process (David, 1985: 332-337)

17
History and Strategic Management:

Path Dependency and effect on Companies:

Strategy and path-dependent capabilities

Path creation

Innovation based on historic capabilities Example: BMWs museum

and its Innovation and Technology Division

Anyone who wants to design for the future has to leaf

through the past BMWs museum

18
History and Strategic Management:

Path Dependency in the context of regions:

One damn thing follows another Paul David (1985)

Bygones are rarely bygones

Example: Different regions of the UK Cambridge and Swansea

Which regions out of the both support intellectual openness and

out of the box thinking?

19
History and Strategic Management:

Path Dependency and Lock-In:

Three types of lock-ins:

a) The functional (high levels of inter-firm linkages making it difficult to break

existing engagements)

b) The cognitive (common outlook is shared by the majority of the actors with
regard to solutions thus restricting any new responses)

c) The political (rigidities created by power structures in relation to using

existing solutions)

20
History and Strategic Management:

Path Dependency and Lock-In:

Escaping lock-ins:

a) Indigenous Creation (Path 1) - Emergence of new technologies and

industries from within the region that have no immediate predecessors or
antecedents there

b) Heterogeneity and diversity (Path 2) - Diversity of local industries,

technologies and organisations promotes constant innovation and economic
reconfiguration, avoiding complete adaptation and lock-in to a fixed structure

c) Transplantation from elsewhere (Path 3) - Primary mechanism is the

importation of a new industry or technology from elsewhere, which then
forms basis of new pathway of regional growth

21
History and Strategic Management:

Path Dependency and Lock-In:

Escaping lock-ins:

d) Diversification into (technologically) related industries (Path 4) - Transition

where an existing industry goes into decline but its core technologies are
redeployed and extended to provide the basis of related new industries in the
region

e) Upgrading of existing industries (Path 5) - The revitalisation and

enhancement of a regions industrial base through infusion of new technologies
or introduction of new products and services

22
History and Strategic Management:

Historical Analysis:

a) Chronological Analysis Documenting the history in context of

environmental changes with regard to the company

b) Cyclical Influences Cyclical influences like acquisition activity or

divestment activity

c) Anchor Points Particular points in history become very important

Example: Henry Fords quote You can have any colour provided its black

d) Historical Narratives How people talk about their companys history?

23