Forces That Shape Business Strategy

Strategic decisions are rarely, straight forward or simple. This is because they involve value judgements that depend to a large degree on people's attitudes, perceptions and assumptions.

This is why so many strategic decisions turn out to be ill-judged.

In the next number of weeks this column will attempt to help those who have to make strategic decisions and will throw light on the decision-making process.

The first part of the series will focus on the forces shaping major decisions, including ideas, develop and potential pitfalls.

The second part will outline practical insights and techniques for handling decisions.

Strategic decisions are the choices that determine the direction and success of organisations.

Although many strategic decision makers are senior managers, entrepreneurs and leaders, increasingly those down the management structure are being empowered with the responsibility of making strategic decisions.

This is because organisations are flatter and more customer-centric than ever before, driven by the forces of change and complexity that are moving greater and fast than ever.

Although it makes sense to move decision-making closer to where it has its impact, the extent to which decision-making spreads through an organisation and the techniques applied vary from sector to sector.

For example, legal firms are often conservative and hierarchical, dominated by the nature of their profession, whereas as software firms are typically characterised by “bottom-up” rather than “top-down” management, reflecting the challenges and culture of their industry.

What matters is how individual organisations make decisions and implement them relative to their competitors.

 It follows that there is no single approach to strategy decision-making to fit every situation, organisation or person.

There are, however, broad truths and techniques for strategic decision makers.

It is said that experience is valuable only as long as the future resembles the past.

Superficially, this may appear to be true, but in truth, experience is valuable even if the future does not resemble the past because it helps us to understand and cope with change and the unknown.

It is not simply what we know that matters, but how we react to what we do not know.

What we do is influenced greatly by our experience. The art of strategic decision-making lies in both how we react to what we do not know and how we react to clearly defined situations.

There are techniques that can prepare mangers to cope with the unknown, enabling them to ride the waves of change and drive their organisations forward.

Experience points the way to likely futures, where new situations or “rules of engagement” are emerging. These will shape the way that we work and develop organisations in the future.

By understanding the forces that shape decisions in organisations today or which will become part of the management agenda in future, we are better able to understand the context for strategic decision-making.

Coming up with ideas and solutions that are rooted in the experiences and behaviours of the past is of limited value.

What matters more is an application of the forces shaping business strategy, the ideas influencing decisions and the drawbacks of strategic thinking, resulting in more effective decisions.

The Changing World

The world changes faster, yet more subtly and stealthily, than most people imagine.

Like the ageing process, it is only when looking back that pace and scope of the change are recognised, and even then the view is rarely complete.

When assessing social and behavioural change and its consequences, new attitudes may appear only when prodded by a new business development, a major technological innovation or a social or political event.

How social and cultural forces develop, where we are now and where we might be heading, are crucial to understanding how business strategy will need to be evolve. Business operates in a wide economic, political, and social context, and it is often said that the only constant is and ever increasing rate of change.

Yet what is driving that change, and what are the consequences for business strategy?

Interestingly, the forces shaping business derive their strength and energy from these potent sources of social change.

One consequence of this is that a number of fundamental business paradigms are facing extinction.

Many attitudes and beliefs that were relevant thirty, ten or even only five years ago, are now less significant or of no consequence.

If business decisions are to be effective, workable or sound, they must be grounded in the present and the likely future.

Peter Drucker, the respected management guru, believes that the business world we know is changing structurally and, in all probability forever.

Identifying what these changes are, what is driving them and what their effects will be is critical to the strategist.

Significant Paradoxes

The modern world involves increasing number of apparent contradictions.

In business, it has become more and more important for organisations to be both local and global; to be centralised in some ways and decentralised in others; to rely on people to be innovative and use their own expertise, but also to collaborate as par of a team; to plan for the long term yet remain responsive and flexible, in addition, business relies on “hard” management factors such as finance, technology and processes; yet, also on “soft” factors as leadership, communication and empathy.

In the words of Charles Handy, a contemporary management thinker: “Everywhere we look, paradox seems to be the companion of economic progress.”

The reasons for this are not difficult to perceive. Competitive pressures, both for individuals and organisations, are driving this need to excel in new ways.

Our ambition leads us to believe that we can benefit from doing things in ways that seem contradictory to the ways things have traditionally been done.

If we are adventurous yet disciplined, the result may be extraordinary and possibly unique in creating value and competitive advantage.

People in Organisations now recognise that paradoxes can be reconciled, and they are more enabled to reconcile them than ever before, partly because of technological progress.

Changed Societies

More women are getting employed than ever before, are postponing marriages (even in traditional cultures), and many want flexible careers. They are not alone: Men also want greater flexibility.

Demographic trends in most countries indicate that populations are ageing; increasingly people choose to work pas the traditional retirement ages, often on the sidelines.

People are accepting that there are no longer “jobs for life”, and many would not want to stay in the same job throughout their working life.

Individuals are likely to have several, even many, employers during their career. They are also changing their attitudes to work.

Studies have highlighted that people work longer average hours than they used to, and are often prepared to work flexible hours.

In return, they expect greater job satisfaction, higher rewards, more personal recognition, and more flexible work environment.

Competitive pressures for greater flexibility, productivity and cost control are driving changes in the way that organisations are employing people, and social and demographic changes are affecting what people want and expect from work.

There is no gulf between the needs of the employer and the worker as traditional philosophers thought some decades ago.

In truth, the interests of both the employer and employee are in many ways symbiotic, each needing and valuing the other.

Increasing flexibility requires people to have variety of skills (multiskilled) that relate not only to the tasks they can accomplish but also the levels at which they work. And they must be willing to develop existing skills and learn new ones.

 Similarly, management structures must be able to adapt – respond and learn, focus and co-ordinate.

Organisations with unnecessary, misunderstood bureaucracy that hinders this flexibility must change or risk decline.

 This pressing goal is to focus on adaptive organisational learning, where sensing and understanding changes in the external environment is routine, and the ability to respond swiftly and effectively is imperative.

Employees must be trained in the skills they will need. Reward systems should encourage people to take up and apply new skills.

Essentially therefore, to be more productive, organisations require the right people and the right resources in position at the right time.

They must also instil a culture that encourages continuous learning and improvement. This places important, and new, obligations on decision-makers.

Article by Capt. Sam Addiah

The writer is a lecturer at the Ghana Institute of Management and Public Administration (GIMPA)