Making strategic decisions – advice from a reputable scientist

Making strategic decisions – advice from a reputable scientist

It is not yet forbidden in society to think, analyze, have one’s own opinion about the surrounding reality, and for managers to choose a model for managing their own property.

The management model must ensure high competitiveness, be as flexible as possible in changing modern conditions, meet the interests and values ​​of staff and owners, the entire interested environment, and be affordable. The strategic model of knowledge management, which we briefly discussed in the previous article “Out of the crisis – it’s that simple,” meets these requirements.

This, in our opinion, is the standard of strategic art. The path to it, although accessible, is not easy. Moreover, along the way you come across many tempting offers, tips, techniques, and effective tools. Of course, you can take the risky path of trial and error or consistently implement and continuously adjust any one attractive model.

Enterprise strategy: formulation and implementation
Enterprise strategy: formulation and implementation

But all these actions do not guarantee results without a clear understanding of the specifics of strategic activities. And they are such that, according to G. Mintzberg, there are 10 schools (methodologies – author) of strategy and at least 5 of its definitions. The problem of their integration has not yet been solved even at the scientific level. It is even more difficult for practitioners to understand this.

Based on the work “New Corporate Strategy” by the founder of the basic theory of strategic management, I. Ansoff, and a considerable number of world-famous scientists in this field, we will give a brief (as far as possible) description of the strategic phenomenon.

Operational and strategic decisions

This is how all management decisions are divided. The main task of operational management is to react and adapt to current market changes by paying attention to product quality, its cost and prices. The main thing is to correctly identify and resolve emerging problems, including long-term ones. Analysis and decisions are dominated by numerical information (complete, specific, definite) that is factual or quite satisfactorily predictable.

Making strategic decisions

Almost the entire management apparatus works with operational tasks, which become more complicated in the absence or ineffectiveness of strategic activities. Since many operational problems are of the same nature (mostly subjective), the result is determined by the professional training and experience of management personnel, but… . In today’s rapidly and unexpectedly changing conditions, accumulated knowledge and experience become unsuitable for solving new problems. The forecasts do not come true. The company does not have time to respond to changes.

Long-term planning and management based on trend analysis and forecasting does not help either. A transition to strategic management is necessary. The latter consists in choosing the area of ​​activity of the organization, analyzing its potential and designing tools for its development. The central issue is the diversification of the enterprise.

Main distinctive features of the strategic model:

  • incomplete, group and probabilistic information is used;
  • the focus shifts from analyzing market threats and problems to exploring market opportunities;
  • adaptation to market conditions is replaced by the maximum possible management of the market situation, the creation of market conditions desired for the enterprise (thesis: the best forecast for the future is its creation);
  • quantitative and digital methods are giving way to expert ones;
  • promising solutions (3-5 or more years) become mandatory;
  • increased demands are placed on strategic goals.
Operational and strategic decisions do not differ from each other in timing and degree of importance; they are distinguished by content determined by the information used (weak signals). An alternative to strategic decisions in practice (and in a number of non-professional theoretical works) are operational decisions of long-term action.
Making strategic decisions

The result of strategic and operational actions is similar and consists in choosing:

  • what to produce;
  • how to produce;
  • how to sell;
  • to whom to sell;
  • where to sell.

Differences in novelty, validity, value and specificity (flexibility).

Let me give you a very typical practical example. A leading specialist from one of the large local enterprises presented as a strategy a project for the development of a new type of product using new technology, intended for implementation in a new (even foreign) market.

The novelty, importance for the enterprise, and the long-term nature of the project are obvious. Practical feasibility is proven by the enterprise’s full readiness to implement the project: all technical preparation has been completed (prior to the release of the pilot batch), all contractual terms have been agreed upon and signed with the customer.

But it was possible to prove that this is not a strategic, but an operational decision of a long-term nature. And the reason for this conclusion is that the project uses complete, specific and specific information (technical, economic, commercial). The project was strategic when it was not developed to such a specific depth. This leads to the conclusion that the overwhelming majority of business plans are not strategic decisions (either we have just learned about a widespread new product, or there is money for implementation).

Types of strategic decisions

As a rule, the generalized concept of “strategy” is used in the literature.

It would be more correct to distinguish three categories:

  • strategy
  • strategic planning
  • strategic management (management).
Making strategic decisions

Of all the definitions of strategy, we are closer to understanding it as the rules for making decisions regarding the behavior of an enterprise in the external environment. The rules determine the specific content of the strategy and the specific logic of the process of its formulation and at the same time allow for the originality of the content of the strategy.

Strategic planning is a periodically repeated process of reviewing the system of strategies while maintaining the industry specialization of the enterprise (synergetic diversification).

Strategic management differs from strategic planning in the development of new non-traditional areas of activity for the enterprise (conglomerate diversification).

The strategy itself can be formally formalized (according to the rules), or informally present in the “manager’s head” in the form of a mental image of the future. Every leader has a strategy. A formalized strategy is sufficient for relatively long-term use in large specialized enterprises, which, as a rule, occupy a dominant position in the market. The circle of counterparties is constant and even strategic planning is not necessary.

Implementation of an investment project: advice from an experienced economist
Implementation of an investment project: advice from an experienced economist

The more complex and dynamic the external environment of an enterprise is, the higher the requirements for the need and content of strategy become. The widespread opinion about the impossibility of strategic activity in a turbulent, unpredictable environment indicates a confusion of the concepts: long-term and strategic (a long-term plan in difficult conditions is unjustified).

Each of the three concepts can be used at three levels: corporate, business level, functional.

The corporate level task is to rationalize the product program in several product and market areas.

The business level allows you to take into account the individual features of each relatively independent business area. Recommended for complex network structures of an organization.

The functional section allows you to obtain separate functional strategies: financial, personnel management, marketing, investment, resource, pricing, social, etc. Strategies at all levels are developed according to a single unified methodology (strategic analysis scheme).

Implementation problems

The main problem is to change the type of thinking of the entire staff, the formation of a new organizational culture, a creative atmosphere and mutual trust. It is necessary to achieve the loyalty of each employee to the organization and a sense of pride, concern for its successes and failures. Personal responsibility, the desire for self-development, learning, a sense of ownership of the results of one’s work and the work of the entire team, self-control, creative behavior, optimism about the future and other positive values ​​should become the basis of staff behavior.

Making strategic decisions

Purely “technical” difficulties are associated with increased work on analyzing the external environment and closer interaction with the environment. It is necessary to begin work on introducing and practically mastering new tools and methods of working with incomplete strategic information.

We need seminars, trainings, master classes and other training technologies for staff. It is possible to invite third-party HR specialists for these tasks. Direct strategic decisions should be made by enterprise personnel with developed qualities of intelligence, intuition and erudition. These qualities are formed in the training system, the pinnacle of which is the knowledge management model. A strategist must see what others do not see and do what competitors do not do.

Operational and strategic activities complement and develop each other. In operational activities, information necessary for adopting a strategy is accumulated, and the strategy determines the optimal “corridor” of operational actions.

For the first time, we mention the author’s exclusively unified approach to building a strategic management system at an enterprise (organization) as an attempt to make this process more understandable and accessible to a wide range of managers and specialists solving strategic problems.