In the 1980’s the US management academic henry Mintzberg described three modes of strategy-making found in organisations. Do you recognise your business in one of these modes:
- The Entrepreneurial Mode
- The Adaptive Mode
- The Planning Mode
The entrepreneurial mode is characterised by bold, risky actions. The organisations role is defined as innovation, uncertainty and brokerage. This is someone with capital viewing a marketing opportunity. It predominates in new organisations and those operating in new markets. It is a policy of risk taking.
Entrepreneurial mode strategy is dominated by active scanning for new opportunities. Opportunity is the driver of strategy and problems are secondary and often ignored.
Power in the entrepreneurial mode is often in the hands of an individual at the head of the firm. An example would be James Dyson, Elon Musk or Richard Branson. These charismatic leaders often rule by decree. Often there is no chartered plan of the organisation and operations are based solely on the bosses vision. The aim is to make dramatic leaps forward in the face of uncertainty. The CEO often thrives on such uncertainty.
The overall goal of an entrepreneurial organisation is growth, physical expansion of the organisation, not profitability. Often this is the CEO wanting to build an empire.
This is a high risk strategic mode and there are lots of examples of existing firms pushing the entrepreneurial mode of strategic development and coming up short. Jessops, the specialist camera retailer pushed its expansion just as the smart phone arrived, and failed spectacularly. Pizza Express became a large scale high street restaurant chain; from the base of a single outlet which doubled as a jazz venue; and collapsed with over half a billion pounds of debt, roughly one million pounds of debt per restaurant.
And I have written at length at the collapse of Sinclair following the development of the C5 electric tricycle.
The Adaptive Mode is ‘the science of muddling through’ (Lindblom). It is disjointed incrementalism. The status quo is accepted and there is a lack of clear objectives. Decisions are remedial solutions and progress is through baby steps not giant leaps. This is often an organisation coming to terms with a complex environment. Any strategy as a coping mechanism. Focus is on short-term solutions not long-term existence. Strategic solutions are often taken with a view as to reducing organisational conflict.
The adaptive organisation lacks clear goals and power is often divided between divisional managers and other stakeholders. Decisions are often made in incremental steps due to environmental complexity. Feedback from stakeholders is often critical to decision-making.
This mode leads to disjointed decisions forced by diverse organisational demands (just look at UK nationalised industries during the 1970s). Strategy is fragmented and there is no overall coordination. Often there is no overall corporate plan.
The planning mode of strategy development is often found in mature organisations, big businesses and government departments. Complex analysis is used to define an organisation’s path into the future. Analysis is undertaken before action is taken. Often there is anticipatory decision-making. Decisions are interdependent across and organisation. There is a formalised decision-making process. Plans anticipate one or more future states.
There is rationality in decision-making through the systematic attainment of goals stated in precise quantitative terms. Scientific technique is used to develop formal comprehensive plans.
In the planning mode, analysts work alongside managers and play an important part in decision-making. Systematic analysis and statistics play an important part as a basis for planning. Cost benefit analysis is central to decision-making.
The organisation focuses on both new opportunities and problem-solving but always in a systematic structured way. Risk is analysed and after strategies are implemented, they are regularly reviewed,
The Planning mode is sometimes criticised for being slow, costly and unwieldy.
Most organisations will experience each of these modes of strategic planning during their life. Managers must be aware of the pros and cons of each mode.