I hold an MBA in Banking and Finance and a bachelor’s degree in business studies. Both qualifications were obtained recently from UK Universities. I am also a graduate ICSA (UK). I possess broad knowledge and understanding of business management, finance, corporate laws, governance, companies’ ethics and standards. I have a keen interest in research of information relating to business and management fields. Passionate about reading and keeping up to date with business information, I spend a lot of time reading online articles, journals, newspapers and periodicals. My writings are more focused on strategic management, accounting and finance, and business related issues.
Critically evaluate the statement that traditional strategy tools do not work in a more turbulent environment
This essay evaluates the fact that traditional strategy tools do not always fit in today’s dynamic environment. The traditional management theories and strategic tools which were mainly associated with science and achievement of organisation’s objectives have been greatly praised by various theorists and academicians of the nineteenth century. They have proved their validity to a reasonable extent, in opening prospective avenues and helping management of organisations to achieve their objectives, despite being subject to the prevailing economic, social and ecological factors that were considered to be fairly reliable and stable at that time. However, today’s business entities have been hit by the effects of globalisation leading to rapid industrial and technological developments, innovation, competitive markets, combined with ecological concerns, such as corporate social responsibilities. Consequently, the traditional strategic tools and management thinking cannot be wholly fitted in the present environment.
Gary Hamel stated the twenty first century business cannot achieve success if it persists in using nineteenth century techniques and that the strategy life cycles are shrinking. He further stated that ‘a fundamental rethink is needed’, adding: ‘In the age of Web 2.0 and wikinomics, managers must modernise or die..’ There is, hence, an urgent need for an organisation’s management to bring novelties and changes to their traditional ways of managing, thus shifting the traditional world view to the emerging world view. Therefore, the trend in organisational management is towards creating knowledge- based systems or complex systems that constantly interact, anticipate and absorb the vagaries of the changing environment which impulsively give way to emergent and incremental strategies combined with creative thinking in organisational management. However, the extent to which traditional management theory and modern organisations are able to adapt to these fast-changing trends in management is highly debatable.
Traditional management theories defined management as an objective science, which focused primarily on the performance of standardised activities where the individual workers were framed within defined boundaries (F.W Taylor, 1911). A broader view of traditional management implied that management was mainly concerned with planning, organising, controlling and implementing strategies towards achieving the organisation’s objectives, while considering certain human aspects such as motivation and leadership (H. Fayol 1916; E. Mayo 1945). However, the turbulent environment has given rise to the Emerging Worldview (EWV) whose assumptions contradict those of the Traditional Worldview (TWV).
The emerging worldview takes into account the complexity theory, and as opposed to traditional approaches it is based on several assumptions including, holism, mutual causality, indeterminism, adaptive self-organisation, non-linear relationships, feedback and polarity thinking. Many ideas of the complexity theory do not wholly constitute novelties, but are extensions of the traditional approaches and reframing of the management ideologies, as in certain cases the current changes are merged with the traditionally rooted ideas which ultimately take the form of the emergent concepts of complexity science (Mc Kelvey 1999: Anderson 1999). This implies, in a few instances, the emerging worldview does not ignore the traditional approaches. This can be further explained by the idea of polarity thinking developed by Johnson (1992), who relates the trend in organisational management to polarities, where the success at one end of the continuum cannot be achieved to the detriment of the other end, hence, the emerging worldview considers that a balance between the ends would yield acceptable outcomes. Similarly, Prigogine and Stengers (1984) considered determinism and indeterminism as partners, where he elaborated that between bifurcation points determinism is appropriate, and at the bifurcation point indeterminism comes into play. Consequently the latter is considered to be more suitable in the real world of business, whereas scientific theories tend to be appropriate within a defined range only, and beyond that they fail (Capra 1982). In the same way, Newton’s work focused on two variables, which proved workable, and when a third component was added to the experiment the equation became unsolvable (Briggs and Peat, 1989).
In a broader sense, the assumptions of both worldviews differ in terms of planning, problem solving and learning. The traditional approach separates the planning phase from the implementation phase, and this practice does not fit in the current organisational management. Research has proved that most of the results achieved by organisations are due to emergent strategies rather than from deliberate actions. However, there have been rational arguments supporting the fact that planning contributes towards co-ordination of activities, increased performance and enhanced adaptation to critical organisations. Cooper, Brown and Eisendart supported this argument and were for the idea that planning contributes to success. For instance, Shell sustained the oil crisis through planning and co-ordination, which led to developments of mental models and shared learning.
Moreover, complexity science supports the idea that the use of plans within a simple set of rules leads to variety and adaptability. In addition, the emerging worldview argues that strategic planning can be used to increase flexibility through the process of improvisation. Brown and Eisendart research has shown that deadlines and clear objectives that can be put into plans bring flexibility in the most critical situations, like in new product development. Similarly, research by Gersick and Hackman stated that tight deadlines make groups react and become creative to make sure that the results are achieved.
The traditional approach moreover is based on predictions of future events where the butterfly effect is unreliable, as planning relates to linear causality, whereas the emerging worldview considers mutual causality in planning. Along these lines, Karl Weick (1995) argued that strategic planning should be ‘real- time’ and in this situation the organisation participates in the environment.
Traditional management theories consider problem solving by setting up separate task forces as being an effective way of achieving the objectives, while on the other hand Ackoff calls for an end to problem solving under the holistic perspective. He relates ‘mess management’ to continuous balancing of complexities rather than problem solving. He further argues that problem solving should be regarded as a normal process within the organisation as a whole, since appointing task forces does not cause any change to the problem, and that it cannot be solved without simultaneously considering other aspects within the organisation. The traditional worldview considers performance measurement as subjective (Cummings and Worley 1993), while organisations should view performance appraisal on the assumption of objective observation.
In the field of control, which is influenced by feedback mechanisms, assumptions of the traditional theories are made on two concepts, namely the cybernetics and the cognitive psychology. Cybernetics can be described as the science of control, which relates to the interdisciplinary study of complex systems, in terms of communication processes, control mechanisms, feedback principles, black boxes and self-organisation. Cybernetics can be referred to as the study and control of the machine (Weiner, 1948). According to Weiner, cybernetics relates to negative feedback loops. The latter is considered important to control behaviour, as it provides the information to control behaviour in the opposite direction (Stacey, 2003).
However, sometimes the action taken to bring stability in the system may not be timely because negative feedback occurs too fast and the system may become too sensitive. From this analogy it is understood that the control model in management operates perfectly in a stable environment. If the organisation experiences disturbances more frequently which makes control impossible, then, it becomes difficult to gain stability (Clemson, 1984). The system is recursive and is controlled by regulators and it does not consider the non-linearity effects, and causal structure cannot be understood because of complexity. Whereas under the complexity science, the organisation, that is characterised as the complex adaptive system, considers the positive feedback and learns to adapt to changing circumstances. An example where the CAS took account of positive feedback and adapted to its environment was during the stock market crash in 1987.
Applying cybernetics in a managerial context means that whenever management performs planning, monitoring and reviewing activities as a way of control, it is considered that they are making the same assumptions as those of the cyberneticists. The problem is that in most cases the managers are not fully aware of these assumptions, and the cybernetics may not work well. Cybernetics does not take into account positive or amplifying feedback, and there is no possibility for a small change to generate major changes. The system is considered as a closed system since it exhibits clear boundaries from its environment. It seeks stability, and its success depends on consistency and harmony with the various factors of the environment. In addition, with the rapid development in computer science and technological innovation, research on organisational thinking took a wider dimension by considering issues such as cognition and reactions to behaviourism (Gardner, 1985: Mc Cullouch and Pitts, 1943).
The traditional worldview (TWV) considers decision making as a rational process, which according to Weick (1999) is almost unconceivable in the present. The strategic decision-making and processes are considered to be an emergent phenomena (MacIntosh and MacLean 1999). The process of decision making, however, constitutes management’s ability to scan the environment while considering updated issues on which the decision making process is based. Along similar lines, Ken Wilber (1995) argued that the traditional worldview ignores important aspects of life such as sensations, perceptions, emotions, impulses, images and symbols. Dent (1994) added that traditional worldview considers linear regression analysis on non-linear phenomena.
Research has revealed that there should be a shift in strategy from the modernist heritage to creativity (Whittington, Pettigrew, Thomas 2002). While Prahalad and Hamel (1994) emphasised that strategy field needs a new dimension towards breaking the orthodox literature. The concept of ‘bounded rationality’ (Herbert Simon, 1955) focuses enormously on equilibrium or the status quo of the organisation, which eventually constitutes a cause of rigidity and built in reluctance to change. Hence, under the traditional approaches, managers are rational commanders who think and act in a systematic, deliberate and intentional manner within the well set managerial structure, with the reluctance to improve their performance through knowledge enhancement, creativity and learning. Charles Darwin came up with the idea of the ‘survival of the fittest’, by which he meant that organisation that fits its environment has greater chance to survive. Therefore, if the organisation does not fit in the environment it is likely to tumble down in the future.
Complex Adaptive System (CAS) allows interactions between teams that is an effective way to connect and enable learning and adaptation to take place (Axelrod and Cohen 1999; Capra 1996). The transmission of information among group leads improves learning capacity and innovation. Learning is enhanced through participation of informal groups that contribute to organisational success (Stacey 1992). Connections and learning eliminate the levels in the hierarchy, resulting in a flatter organisational hierarchy. Complex adaptive systems also consider past experiences which are in the form of some built-in memory. The system consists of many interactive agents and can produce emergent phenomena. For instance, Sainsbury had set up an innovation centre in 1995 to deal with complex adaptive modelling projects (Casti 1998). Moreover, CAS is believed to be a new science for the leadership approach, in that today’s business requires heroic visionary leaders (Mckelvey 1999).
Complexity science considers the chaotic behaviour of systems. Complexity science applies to living organisms, such as ant colonies, beehives and others. In a turbulent environment, the CAS is characterised as a system that interacts with its environment by continuous: co-evolution or co-determination (Achrol 1991; Polynsky et al 1999), self- organisation and emergence through loose couplings (Tasaka 1998; Peters 1999) of unpredictable environmental changes and developments that indicate sensitive dependence on initial condition (Tedesco Analytics, 2001), and non-linearity in the business environment (Black and Farias, 1997).
The complex adaptive system (CAS) considers the edge of chaos that is a particular type of behaviour in complexity theory. It is a condition where the organisation is between the stable and the unstable environment. If the system is stable then a slight disturbance brings it back to its initial position. Contrarily, if it is unstable, a small disturbance will cause it to move away from the initial position. However, the movement depends on the conditions such as the positive and negative feedback. Rather than seeking equilibrium, which is precursor to death, the CAS tends to move towards the edge of chaos. It is considered that new possibilities and opportunities emerge from disorder.
The research on the edge of chaos stated that there are three essential techniques to drive the organisation to the edge of chaos. The attractors are driving forces that direct the system to settle out of the comfort zones. The amplifying and damping feedback regulate the process by accelerating or slowing it down. For instance, the director of British Petroleum Oil Exploration Unit used amplification devices to direct the system out of equilibrium and toward the edge of chaos. The fitness landscape is used to map the competitive advantage of species. When a specie is threatened from the traditional landscape, it moves towards the edge of chaos. There it should learn to cope with different factors such as climate and rivals, hence the original habitat is improved.
The complex systems often exhibit irregular and unexpected behaviour, which makes forecasts almost impossible. In his book ‘Chaos: Making A New Science’, Gleick (1987) draws the unique features of the complex system which eventually became famous by the ‘butterfly effect’. However, a small change can result in massive gain, for example, in the business environment, by focusing on value added competencies (VCA’s) and adopting new technological approaches and innovative ways to routine and distribution, the Mexican cement company, Cemex, was able to penetrate foreign markets as a world leader in their industry and gain high position on the stock market.
The CAS can either move in a vicious or virtuous cycle (R. Sheel 1999). Moreover, the strategies of the CAS are intended to be of two types, namely, the complexity reduction and complexity absorption (Boisot and Child 1999). Despite the drawbacks of the traditional view, the machine model of organisation as characterised by the Newtonian perspectives continues to be attractive because of its highly described rules which intend to simplify the decision processes. Despite the various descriptions of complexity science, managers continue to rely on simplifying the mechanistic machine model (Stacey 1992; Weick 1979).
Despite the drawbacks of the traditional view, the machine model of organisation as characterised by the Newtonian perspectives continues to be attractive because of its highly described rules which intend to simplify the decision processes. In spite of the various descriptions of the new business complexity era, managers continue to rely enormously on simplifying the mechanistic machine model (Stacey 1992; Weick 1979). Even today many organisations still rely on long term planning, for instance, the Japanese motor car industry devise long term planning. However, the complexity science may be considered to have certain shortcomings. It has been developed out of the study of physical systems, and it takes into account ant colonies without considering the nature of human beings. Complexity science has not yet formulated a coherent that explains from where order emerges (McKelvey 1999; 2000). On the other hand, in terms of innovation and efficiency, complexity science can contribute to a deeper and more integrative understanding.
In this light, whether traditional approaches can be useful in today’s turbulent environment depends on several issues as stated above. The traditional management styles can suit a business whose activities and environment are fairly stable. In these circumstances, management is often faced with the fact that planning follows the other functions of management. Whereas, where there is a competitive environment or where technological advances are rapid, the traditional tools and functions do not work. However, to some extent traditional theories still have a place in the present, but it depends on management and how they apply to the emerging strategies. A combination of both may give better results.
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