Many companies and executives have dedicated staff for strategy formulation. It is a very important process for the company, as it tells the future direction which the company has to take, and the way that the company can succeed.
Overall, the Mintzberg’s 10 school of thoughts for strategy formulation are applicable even today. However, one firm can follow a single strategy only. And hence, deciding where your firm stands, the influencers in the firm, its dependency on environment and culture, and in general looking at your own firm, you can decide which of the 10 school of thoughts of management are suitable for you.
The Design School
The original view sees strategy formation as achieving the essential fit between internal strengths and weaknesses and external threats and opportunities (see SWOT analysis). Senior management formulates clear and simple strategies in a deliberate process of conscious thought – which is neither formally analytical nor informally intuitive – and communicates them to the staff so that everyone can implement the strategies. This was the dominant view of the strategy process at least into the 1970s given its implicit influence on most teaching and practice.
The Planning School
This school grew in parallel with the design school. But the planning school predominated by the mid-1970’s and though it faltered in the 1980’s it continues to be an important influence today. The planning school reflects most of the design school’s assumptions except a rather significant one: that the process was not just cerebral but formal, decomposable into distinct steps, delineated by checklists, and supported by techniques (especially with regard to objectives, budgets, programs, and operating plans). This meant that staff planners replaced senior managers, de facto, as the key players in the process. Today, many companies get little value from their annual strategic-planning process. To meet the new challenges, this process should be redesigned to support real-time strategy making and to encourage ‘creative accidents’.
The Positioning School
This prescriptive school was the dominant view of strategy formulation in the 1980’s. It was given impetus especially by Harvard professor Michael Porter in 1980, following earlier work on strategic positioning in academe and in consulting, all preceded by a long literature on military strategy, dating back to 500 BC and that of Sun Tzu, author of The Art of War. In this view, strategy reduces to generic positions selected through formalized analysis of industry situations. Hence, planners became analysts. This proved especially lucrative to consultants and academics alike, who could sink their teeth into hard data and so promote their “scientific truths” to companies and journals alike. This literature grew in all directions to include strategic groups, value chains, game theories, and other ideas – but always with this analytical bent.
The Entrepreneurial School
Much like the design school, the entrepreneurial school centered the process on the chief executive, but unlike the design school, and in contrast to the planning school, it rooted that process in the mysteries of intuition. That shifted the strategies from precise designs, plans, or positions to vague visions, or perspectives, typically to be seen through metaphor. The idea was applied to particular contexts – start-ups, niche players, privately owned companies and “turnaround” situations, although the case was certainly put forward that every organization needs the discernment of a visionary leader.
The Cognitive School
On the academic front, there was interest in the origin of strategies. If strategies developed in people’s mind as frames, models, or maps, what could be understood about those mental processes? Particularly in the 1980’s, and continuing today, research has grown steadily on cognitive biases in strategy making and on cognition as information processing. Meanwhile, another, newer branch of this school adopted a more subjective interpretative or constructivist view of the strategy process: that cognition is used to construct strategies as creative interpretations, rather than simply to map reality in some more or less objective way.
The Learning School
Of all the described schools, the learning school became a veritable wave and challenged the omnipresent prescriptive schools. Dating back to early work on “incrementalism”, as well as conceptions like “venturing”, “emerging strategy”, (or the growing out of individual decisions rather than being immaculately conceived) and “retrospective sense making”, (that we act in order to think as much as we think in order to act), a model of strategy making as a learning developed that different from the earlier schools. In this view, strategies are emergent, strategists can be found throughout the organization, and so-called formulation and implementation intertwine.
The Power School
This comparatively small, but quite different school has focused on strategy making rooted in power, in two senses. Micro power sees the development of strategies within the organization as essentially political, a process involving bargaining, persuasion, and confrontation among inside actors. Macro power takes the organization as an entity that uses its power over others and among its partners in alliances, joint ventures, and other network relationships to negotiate “collective” strategies in its interests.
The Cultural School
As opposite to the power school that focuses on self-interest and fragmentation, the cultural school focuses on common interest and integration. Strategy formation is viewed as a social process rooted in culture. The theory concentrates on the influence of culture in discouraging significant strategic change. Culture became a big issue in the United States and Europe after the impact of Japanese management (see Kaizen and Competitive Advantage: US versus Japan) was fully realized in the 1980’s and it became clear that strategic advantage can be the product of unique and difficult-to-imitate cultural factors.
The Environmental School
Perhaps not strictly strategic management, if one takes that term as concerned with how organizations use their degrees of freedom to create strategy, the environmental school nevertheless deserves attention for the light it throws on the demands of the environment. Among its most noticeable theories is the “contingency theory”, that considers what responses are expected of organizations that face particular environmental conditions, and “population ecology”, writings that claim severe limits to strategic choice.
The Configuration School
This school enjoys the most extensive and integrative literature and practice at present. One side of this school, more academic and descriptive, sees organization as configuration – coherent clusters of characteristics and behaviors – and so serves as one way to integrate the claims of the other schools: each configuration, in effect, in its own place, planning for example, in machine-type organizations under conditions of relative stability, entrepreneurship under more dynamic configurations of start-up and turnaround. But if organizations can be described by such states, then change must be described as rather dramatic transformation – the leap from one state to another. And so, a literature and practice of transformation – more prescriptive and practitioner oriented (and consultant promoted) – developed as the other side of the coin. These two very different literatures and practices nevertheless complement one another and so belong to the same school.