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11 General Strategic Thedrv The Strategy Concept I: Five Ps For Strategy Henry Mintzberg H uman nature insists on a definition for every concept. Thefield of strategic management cannot afford to rely on asingle definition of strategy, indeed the word has long been used implicitly in different ways even if it has traditionally been defined formally in only one. Explicit recognition of multiple definitions can help practitioners and researchers alike to maneuver through this difficult field. Accordingly, this article presents five definitions of strat- egy—as plan, ploy, pattern, position, and perspective—and considers some of their interrelationships. Strategy as Plan To almost anyone you care to ask, strategy is a plan—some sort of con- sciously intended course of action, a guideline (or set of guidelines) to deal with a situation. A kid has a "strategy" to get over a fence, a corporation has one to capture a market. By this definition, strategies have two essential characteristics: they are made in advance of the actions to which they apply, and they are developed consciously and purposefully. (They may, in addi- tion, be stated explicitly, sometimes in formal documents known as "plans," although it need not be taken here as a necessary condition for "strategy as plan.") To Drucker, strategy is "purposeful action'"; to Moore "design for action," in essence, "conception preceding action."^ A host of definitions in a variety of fields reinforce this view. For example: • in the military: Strategy is concerned with "draft[ing] the plan of war . . . shap[ing] the individual campaigns and within these, decid[ing] on the individual engagements."-^ 12 CALIFORNIA MANAGEMENT • in Game Theory; Strategy is "a complete plan; a plan which specifies what choices [the player] will make in every possible situation.'"* • in management; "Strategy is a unified, comprehensive, and integrated plan . . . designed to ensure that the basic objectives of the enterprise are achieved."*^ • and in the dictionary; strategy is (among other things) "a plan, method, or series of maneuvers or stratagems for obtaining a specific goal or result."^ As plans, strategies may be general or they can be specific. There is one use of the word in the specific sense that should be identified here. As plan, a strategy can be a ploy, too, really just a specific "maneuver" intended to outwit an opponent or competitor. The kid may use the fence as a ploy to draw a bully into his yard, where his Doberman Pincher awaits intmders. Likewise, a corporation may threaten to expand plant capacity to discour- age a competitor from building a new plant. Here the real strategy (as plan, that is, the real intention) is the threat, not the expansion itself, and as such is a ploy. In fact, there is a growing literature in the field of strategic management, as well as on the general process of bargaining, that views strategy in this way and so focusses attention on its most dynamic and competitive aspects. For example, in his popular book. Competitive Strategy, Porter devotes one chapter to "Market Signals" (including discussion of the effects of announc- ing moves, the use of "the fighting brand," and the use of threats of private antitrust suits) and another to "Competitive Moves" (including actions to preempt competitive response).' Likewise in his subsequent book. Com- petitive Advantage, there is a chapter on "Defensive Strategy" that dis- cusses a variety of ploys for reducing the probability of competitor retalia- tion (or increasing his perception of your own).^ And Schelling devotes much of his famous book. The Strategy of Confiict, to the topic of ploys to outwit rivals in a competitive or bargaining situation." Strategy as Pattern But if strategies can be intended (whether as general plans or specific ploys), surely they can also be realized. In other words, defining strategy as a plan is not sufficient; we also need a definition that encompasses the resulting behavior. Thus a third definition is proposed; strategy is a pattern—specifically, a pattern in a stream of actions."^ By this definition, when Picasso painted blue for a time, that was a strategy, just as was the behavior of the Ford Motor Company when Henry Ford offered his Model T only in black. In other words, by this definition, strategy is consis- tency in behavior, whether or not intended. This may sound like a strange definition for a word that has been so bound up with free will ("strategos" in Greek, the art of the army general"). But the fact of the matter is that while hardly anyone defines strategy in \ Five Ps for Strategy 13 this way,'- many people seem at one time or another to so use it. Consider this quotation form a business executive: Gradually the successful approaches merge into a pattern of action that becomes our strategy. We certainly don't have an overall strategy on this.'' This comment is inconsistent only if we restrict ourselves to one definition of strategy: what this man seems to be saying is that his firm has strategy as pattern, but not as plan. Or consider this comment in Business Week on a joint venture between General Motors and Toyota: The tentative Toyota deal may be most significant because it is another example of how GM's strategy boils down to doing a little bit of everything until the market decides where it is going.'•* A journalist has inferred a pattern in the behavior of a corporation, and labelled it strategy. The point is that every time a journalist imputes a strategy to a corpora- tion or to a government, and every time a manager does the same thing to a competitor or even to the senior management of his own firm, they are implicitly defining strategy as pattern in action—that is, inferring consis- tency in behavior and labelling it strategy. They may, of course, go further and impute intention to that consistency—that is, assume there is a plan behind the pattern. But that is an assumption, which may prove false. Thus, the definitions of strategy as plan and pattern can be quite indepen- dent of each other: plans may go unrealized, while patterns may appear without preconception. To paraphrase Hume, strategies may result from human actions but not human designs.'-^ If we label the first definition in- tended strategy and the second realized strategy, as shown in Figure 1, then we can distinguish deliberate strategies, where intentions that existed previ- ously were realized, from emergent strategies, where patterns developed in the absence of intentions, or despite them (which went unrealized). Strategies About What?—Labelling strategies as plans or patterns still begs one basic question: strategies about what? Many writers respond by discussing the deployment of resources (e.g.. Chandler, in one of the best known definitions""), but the question remains: which resources and for what purposes? An army may plan to reduce the number of nails in its shoes, or a corporation may realize a pattern of marketing only products painted black, but these hardly meet the lofty label "strategy." Or do they? As the word has been handed down from the military, "strategy" refers to the important things, "tactics" to the details (more formally, "tactics teaches the use of armed forces in the engagement, strategy the use of en- gagements for the object of the war"'^). Nails in shoes, colors of cars: these are certainly details. The problem is that in retrospect details can some- times prove "strategic." Even in the military: "For want of a Nail, the Shoe was lost; for want of a Shoe the Horse was lost . . . " and so on through 14 CALIFORNIA MANAGEMENI Figure 1. Deliberate and Emergent Strategies Unrealized Strategy , JJ Realized Strategy the rider and general to the battle, "all for want of Care about a Horseshoe Nail."'^ Indeed one of the reasons Henry Eord lost his war with General Motors was that he refused to paint his cars anything but black. Rumelt notes that "one person's strategies are another's tactics—that what is strategic depends on where you sit.'"^ It also depends on when you sit: what seems tactical today may prove strategic tomorrow. The point is that these sorts of distinctions can be arbitrary and misleading, that labels should not be used to imply that some issues are inevitably more important than others. There are times when it pays to manage the details and let the strategies emerge for themselves. Thus there is good reason to drop the word "tactics" altogether and simply refer to issues as more or less "strate- gic," in other words, more or less "important" in some context, whether as intended before acting or as realized after it.-" Accordingly, the answer to the question, strategy about what, is: potentially about anything. About products and processes, customers and citizens, social responsibilities and self interests, control and color. Two aspects of the content of strategies must, however, be singled out because they are of particular importance and, accordingly, play major roles in the literature. 7 'Five Psfor Strategy 15 Strategy as Position The fourth definition is that strategy is a position—specifically, a means of locating an organization in what organization theorists like to call an "envi- ronment." By this definition, strategy becomes the mediating force—or "match," according to Hofer and SchendeF'—between organization and environment, that is, between the internal and the external context. In ecological terms, strategy becomes a "niche"; in economic terms, a place that generates "rent" (that is "returns to [being] in a 'unique' place"'^); in management terms, formally, a product-market "domain,"-^ the place in the environment where resources are concentrated (leading McNichols to call this "root strategy"'^). Note that this definition of strategy can be compatible with either (or all) of the preceding ones: a position can be preselected and aspired to through a plan (or ploy) and/or it can be reached, perhaps even found, through a pattern of behavior ("the concept of strategy need not be tied to rational planning or even conscious decision-making assumptions. Strategy is es- sentially a descriptive idea that includes an organization's choice of niche and its primary decision rules . . . for coping with that niche"'^). In military and game theory views of strategy, it is generally used in the context of what is called a "two-person game," better known in business as head-on competition (where ploys are especially common). The definition of strategy as position, however, implicitly allows us to open up the con- cept, to so-called n-person games (that is, many players), and beyond. In other words, while position can always be defined with respect to a single competitor (literally so in the military, where position becomes the site of battle), it can also be considered in the context of a number of competitors or simply with respect to markets or an environment at large."" Since head- on competition is not the usual case in business, management theorists have generally focussed on the n-person situation, although they have tended to retain the notion of economic competition.-' But strategy as position can extend beyond competition too, economic and otherwise. Indeed, what is the meaning of the word "niche" but a position that is occupied to avoid competition. Thus, we can move from the definition employed by General Ulysses Grant in the 1860s, "Strategy [is] the deployment of one's resources in a manner which is most likely to defeat the enemy," to that of Professor Rumelt in the 1980s, "Strategy is creating situations for economic rents and finding ways to sustain them,"-** that is, any viable position, whether or not directly competitive. Astley and Fombrun, in fact, take the next logical step by introducing the notion of "collective" strategy, that is, strategy pursued to promote cooperation between organizations, even would-be competitors (equivalent in biology to animals herding together for protection).-'' Such strategies can CALIFORNIA MANAGEMENT range "from informal arrangements and discussions to formal devices such as interlocking directorates, joint ventures, and mergers."^° In fact, consid- ered from a slightly different angle, these can sometimes be described as political strategies, that is strategies to subvert the legitimate forces of com- petition. Strategy as Perspective While the fourth definition of strategy looks out, seeking to locate the or- ganization in the external environment, the fifth looks inside the organiza- tion, indeed inside the heads of the collective strategist. Here, strategy is a perspective, its content consisting not just of a chosen position, but of an ingrained way of perceiving the world. Some organizations, for example, are aggressive pacesetters, creating new technologies and exploiting new markets; others perceive the world as set and stable, and so sit back in long established markets and build protective shells around themselves, relying more on political influence than economic efficiency. There are organiza- tions that favor marketing and build a whole ideology around that (an IBM); others treat engineering in this way (a Hewlett-Packard); and then there are those that concentrate on sheer productive efficiency (a McDonald's). Strategy in this respect is to the organization what personality is to the individual. Indeed, one of the earliest and most influential writers on strat- egy (at least as his ideas have been reflected in more popular writings ) was Philip Selznick, who wrote about the "character" of an organization—dis- tinct and integrated "commitments to ways of acting and responding" that are built right into it.^' A variety of concepts from other fields also capture this notion: psychologists refer to an individual's mental frame, cognitive structure, and a variety of other expressions for "relatively fixed patterns for experiencing [the] world"^^; anthropologists refer to the "culture" of a society and sociologists to its "ideology"; military theorists write of the "grand strategy" of armies; while management theorists have used terms such as the "theory of the business"^^ and its "driving force"-^ "^ ; behavioral scientists who have read Kuhn^^ on the philosophy of science refer to the "paradigm" of a community of scholars; and Germans perhaps capture it best with their word "Weltanschauung," literally "worldview," meaning collective intuition about how the world works. This fifth definition suggests above all that strategy is a concept. This has one important implication, namely, that all strategies are abstractions which exist only in the minds of interested parties—those who pursue them, are influenced by that pursuit, or care to observe others doing so. It is important to remember that no-one has ever seen a strategy or touched one; every strategy is an invention, a figment of someone's imagination, whether conceived of as intentions to regulate behavior before it takes place or inferred as patterns to describe behavior that has already occurred. ""ive Psfor Strategy What is of key importance about this fifth definition, however, is that the perspective is shared. As implied in the words Weltanschauung, cul- ture, and ideology (with respect to a society) or paradigm (with respect to a community of scholars), but not the word personality, strategy is a perspec- tive shared by the members of an organization, through their intentions and/or by their actions. In effect, when we are talking of strategy in this context, we are entering the realm of the collective mind—individuals united by common thinking and/or behavior. A major issue in the study of strategy formation becomes, therefore, how to read that collective mind— to understand how intentions diffuse through the system called organization to become shared and how actions come to be exercised on a collective yet consistent basis. Interrelating the Ps As suggested above, strategy as both position and perspective can be com- patible with strategy as plan and/or pattem. But, in fact, the relationships between these different definitions can be more involved than that. For example, while some consider perspective to be a plan (Lapierre writes of strategies as "dreams in search of reality"-^ ;^ Summer, more prosaically, as "a comprehensive, holistic, gestalt, logical vision of some future align- ment""), others describe it as giving rise to plans (for example, as positions and/or pattems in some kind of implicit hierarchy). This is shown in Figure 2a. Thus, Majone writes of "basic principles, commitments, and norms" that form the "policy core," while "plans, programs, and decisions" serve as the "protective belt."^^ Likewise, Hedberg and Jonsson claim that strate- gies, by which they mean "more or less well integrated sets of ideas and constructs" (in our terms, perspectives) are "the causes that mold streams of decisions into pattems."^^ This is similar to Tregoe and Zimmerman who define strategy as "vision directed"—"the framework which guides those choices that determine the nature and direction of an organization ."''^ Note in the second and third of these quotations that, strictly speaking, the hierarchy can skip a step, with perspective dictating pattem, not necessarily through formally intended plans. Consider the example of the Honda Company, which has been described in one highly publicized consulting report"*' as parlaying a particular per- spective (being a low cost producer, seeking to attack new markets in ag- gressive ways) into a plan, in the form of an intended position (to capture the traditional motorcycle market in the United States and create a new one for small family motorcycles), which was in tum realized through an inte- grated set of pattems (lining up distributorships, developing the appropriate advertising campaign of "You meet the nicest people on a Honda," etc.). All of this matches the conventional prescriptive view of how strategies are supposed to get made.'*" 18 CALIFORNIA MANAGEMENT" Figure 2. Some Possible Relationships Between Strategy as Plan, Pattern, Position, Perspective a) Conventional hierarchy Pattern (and/or position) c) Pattern (or position) producing perspective Pattern (position, etc.) b) Formalizing on emergent strategy within a perspective d) Perspective constraining shift in position ("Egg McMuffin" syndrome) Psfor Strategy 19 But a closer look at Honda's actual behavior suggests a very different story: it did not go to America with the main intention of selling small, family motorcycles at all; rather, the company seemed to fall into that mar- ket almost inadvertently.""^ But once it was clear to the Honda executives that they had wandered into such a lucrative strategic position, that presum- ably became their plan. In other words, their strategy emerged, step by step, but once recognized, was made deliberate. Honda, if you like, de- veloped its intentions through its actions, another way of saying that pattern evoked plan. This is shown in Eigure 2b. Of course, an overall strategic perspective (Honda's way of doing things) seems to have underlaid all this, as shown in the figure as well. But we may still ask how that perspective arose in the first place. The answer seems to be that it did so in a similar way, through earlier experiences: the organization tried various things in its formative years and gradually con- solidated a perspective around what worked.'^ '* In other words, organiza- tions would appear to develop "character"—much as people develop per- sonality—by interacting with the world as they find it through the use of their innate skills and natural propensities. Thus pattern can give rise to perspective too, as shown in Eigure 2c. And so can position. Witness Perrow's discussion of the "wool men" and "silk men" of the textile trade, people who developed an almost religious dedicatio