STRATEGY SYNTHESIS

RESOLVING STRATEGY PARADOXES TO CREATE COMPETITIVE ADVANTAGE

Ron Meyer
Bob de Wit

This summary is a publication of the Center for Strategy & Leadership

 STRATEGY SYNTHESIS

RESOLVING STRATEGY PARADOXES TO CREATE COMPETITIVE ADVANTAGE

A publication of the
CENTER FOR STRATEGY & LEADERSHIP
Center for
Strategy &
Leadership

Adapted from the original publication

Cengage Learning, 2010
Text and Readings Version ISBN 978-1-4080-1899-6
Concise Version ISBN 978-1-4080-3223-7

Copyright© 2013 Ron Meyer

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 CHAPTER 3
CHAPTER 1

INTRODUCTION
Strategy. Power and knowledge. Science when Strategy is a course of action for achieving an
mere knowing; Art when doing is the object. organization's purpose. Strategizing involves
Karl van Clausewitz finding solutions to wicked problems
complicated issues without a clear problem
definition and without a fixed set of remedies.
The significant problems we face can never be
solved at the level of thinking that created them. Strategy tensions are at the heart of each
Albert Einstein
wicked problem. Tensions are created by
conflicting demands, pulling the organization in
The thinker without a paradox is like a lover opposite directions. These strategy tensions are
without feeling; a paltry mediocrity. what make strategic problem-solving inherently
Søren Kierkegaard difficult. Some strategists view the strategy
tensions as dilemmas, requiring a choice
between the opposite demands. Others
approach the strategy tensions as trade-offs,
requiring a compromise between the opposite
demands. But the strategy tensions can also be
seen as paradoxes.

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 CHAPTER 1

Strategy paradoxes are opposite demands Vision is the art of seeing things invisible.
placed on the organization that seem to be Jonathan Swift

contradictory at a certain level, but can be

combined in innovative ways. Viewing a strategy Every man takes the limits of his own field of
tension as a paradox challenges the strategist to vision for the limits of the world.
Arthur Schopenhauer
find a way to get the best of both worlds.
The test of a first-rate intelligence is the ability to
Strategy perspectives are views on how to deal hold two opposed ideas in mind at the same
with certain strategy paradoxes. While there are time, and still retain the ability to function.
numerous strategy perspectives, the extreme F. Scott Fitzgerald
poles are particularly interesting as they provide
the thesis and antithesis in a process of trying to
create a strategy synthesis.

Strategy synthesis is a course of action meeting In the following pages ten strategic issues are
opposite demands simultaneously. A synthesis is introduced, with their underlying strategy
a hybrid solution to a strategic problem that paradox and strategy perspectives. All material is
combines elements from opposing strategy from the book Strategy Synthesis: Resolving
perspectives. The process of synthesizing Strategy Paradoxes to Create Competitive
requires a rich understanding of both Advantage (2010), by Bob de Wit and
perspectives and dialogue between the two. Ron Meyer.

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 CHAPTER 2

STRATEGIC THINKING
Strategic thinking is the way in which the mind of the strategist works.
Key question is how managers should reason to come up with effective strategies.

When you have eliminated the impossible, Imagination is more important than
whatever remains, however improbable, knowledge.
must be the truth. Albert Einstein
Sherlock Holmes

PARADOX OF
LOGIC & CREATIVITY

Logic is present when each step in a line Creativity is present where leaps of imagination
of reasoning follows consistently and are made that are inconsistent with the previous
understandably from the previous. Managers line of reasoning. Managers want to be creative
want to think logically to build their strategies to break out of their existing frame of mind and
on a sound analysis of internal and external to explore new possibilities.
conditions.

The rational reasoning perspective The generative reasoning perspective

emphasizes the importance of logic. emphasizes the importance of creativity.

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 CHAPTER 2

RATIONAL REASONING GENERATIVE REASONING

PERSPECTIVE PERSPECTIVE

Emphasis on Logic over creativity Creativity over logic

Dominant cognitive style Analytical Intuitive
Thinking follows Formal, fixed rules Informal, variable rules
Nature of thinking Deductive and computational Inductive and imaginative
Direction of thinking Vertical Lateral
Problem defining seen as Recognizing and analyzing Reflecting and sense-making
Problem solving seen as Formulation and implementation Imagining and doing
Value placed on Consistency and rigor Unorthodoxy and innovation
Assumption about reality Objective, (partially) knowable Subjective, (partially) creatable
Thinking hindered by Incomplete information Current cognitive map
Decisions based on Calculation Judgment
Metaphor Strategy as science Strategy as art

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 CHAPTER 3

STRATEGY FORMATION
Strategy formation is the way in which strategy is formed.
Key question is how managers should formulate and implement strategies in their organization.

Those who triumph compute at their It is a mistake to look too far ahead.
headquarters a great number of factors prior Only one link of the chain of destiny can be
to a challenge. Little computation brings defeat. handled at a time.
How much more so with no computation at all! Winston Churchill
Sun Tzu

PARADOX OF
DELIBERATENESS & EMERGENCE

Deliberateness refers to the quality of being Emergence refers to the quality of gradually
intended. Managers want to deliberately move taking shape. Managers want to let their
their organizations in a particular direction, as strategies unfold over time, incorporating
effectively and efficiently as possible. emerging opportunities and growing insight,
while flexibly adapting to new circumstances.

The strategic planning perspective emphasizes The strategic incrementalism perspective

the importance of deliberateness. emphasizes the importance of emergence.

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 CHAPTER 3

STRATEGIC PLANNING STRATEGIC INCREMENTALISM

PERSPECTIVE PERSPECTIVE

Emphasis on Deliberateness over emergence Emergence over deliberateness

Nature of strategy Intentionally designed Gradually shaped
Nature of strategy formation Figuring out Finding out
View of future developments Forecast and anticipate Partially unknown and
unpredictable
Posture towards the future Make commitments, prepare for Postpone commitments, remain
the future flexible
Formation process Formally structured and Unstructured and fragmented
comprehensive
Formation process steps First think, then act Thinking and acting intertwined
Decision-making Hierarchical Dispersed
Decision-making focus Optimal resource allocation & Experimentation and parallel
coordination initiatives
Implementation focused on Programming (organizational Learning (organizational
efficiency) development)
Strategic change Implemented top-down Requires cultural and cognitive
shifts

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 CHAPTER 4

STRATEGIC CHANGE
Strategic change refers to significant organizational alterations with a major impact on long-term
objectives. Key question is how fast and sweeping organizational shifts should be.

Every act of creation is first of all an act of Slow and steady wins the race.
destruction. Aesop
Picasso

PARADOX OF
REVOLUTION & EVOLUTION

Revolution is the quality of changing rapidly and Evolution is the quality of changing gradually
dramatically by overthrowing the status quo. and steadily by transforming the status quo.
Managers want revolutionary change to break Managers want evolutionary change to build on
through the old established order and quickly the current strengths and loyalties on a
book significant results. continuous basis.

The discontinuous renewal perspective The continuous renewal perspective

emphasizes the importance of revolution. emphasizes the importance of evolution.

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 CHAPTER 4

DISCONTINUOUS CONTINUOUS
RENEWAL PERSPECTIVE RENEWAL PERSPECTIVE

Emphasis on Revolution over evolution Evolution over revolution

Strategic renewal as Disruptive innovation/turnaround Uninterrupted improvement
Strategic renewal process Creative destruction Organic adaptation
Magnitude of change Radical, comprehensive and Moderate, piecemeal and
dramatic undramatic
Pace of change Abrupt, unsteady and intermittent Gradual, steady and constant
Lasting renewal requires Sudden break with status quo Permanent learning and flexibility
Reaction to external jolts Shock therapy Continuous adjustment
View of organizational crises Under pressure things In the cold everything freezes
become fluid
Long-term renewal dynamics Stable and unstable states alternate Persistent transient state
Long-term renewal pattern Punctuated equilibrium Gradual development

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 CHAPTER 5

BUSINESS LEVEL STRATEGY

Business level strategy is the strategy a firm develops for a cluster of product-market
combinations (a business). Key question is how to sustain competitive advantage.

One does not gain much by mere cleverness. Drive thy business; let it not drive thee.
Marquis de Vauvenargues Benjamin Franklin

PARADOX OF
MARKETS & RESOURCES

A firm is market-driven when it adapts itself to A firm is resource-driven when it builds on its
the demands and opportunities of the market own unique qualities. Managers want to focus
place. Managers want to focus on satisfying on the development of products and services in
customer wishes, getting the best suppliers and areas where the firm's physical assets, relational
distributors, and outperforming rival firms. resources and competences offer a clear
advantage.

The outside-in perspective emphasizes the The inside-out perspective emphasizes the
importance of markets. importance of resources.

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 CHAPTER 5

OUTSIDE-IN INSIDE-OUT
PERSPECTIVE PERSPECTIVE

Emphasis on Markets over resources Resources over markets

Orientation Opportunity-driven Strength-driven (internal potential)
(external potential)
Starting point Market demand & industry Resource base & activity system
structure
Fit through Adaptation to environment Adaptation of environment
Strategic focus Attaining advantageous position Attaining distinctive resources
Strategic moves External positioning Building resource base
Tactical moves Acquiring necessary resources External positioning
Competitive weapons Bargaining power & mobility Superior resources & imitation
barriers barriers

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 CHAPTER 6

CORPORATE LEVEL STRATEGY

Corporate level strategy is the strategy a firm develops for a range of businesses.
Key questions are which businesses the firm should be in and how they should be managed.

Consider the little mouse, how sagacious an None ever got ahead of me except the man
animal it is which never entrusts its life to of one task.
one hole only. Azariah Rossi
Plautus

PARADOX OF
RESPONSIVENESS & SYNERGY

Responsiveness is the quality of being able to Synergy is the added value created by bringing
quickly react to demands of the environment. together two or more elements into a larger
Managers want to have the autonomy to whole. Managers want to coordinate the
respond to the specific circumstances in each activities of various business units to capitalize
individual business arena. on the potential benefits of working together.

The portfolio organization perspective The integrated organization perspective

emphasizes the importance of responsiveness. emphasizes the importance of synergy.

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 CHAPTER 6

PORTFOLIO ORGANIZATION INTEGRATED ORGANIZATION

PERSPECTIVE PERSPECTIVE

Emphasis on Responsiveness over synergy Synergy over responsiveness

Conception of corporation Collection of business Common core with business
shareholdings applications
Corporate composition Potentially unrelated (diverse) Tightly related (focused)
Key success factor Business unit responsiveness Multi-business synergy
Focal type of synergy Cash flow optimization & Integrating resources, activities &
risk balance positions
Corporate management style Exerting financial control Joint strategy development
Primary task corporate center Capital allocation & performance Setting direction and managing
control synergies
Position of business units Highly autonomous (independent) Highly integrated (interdependent)
Coordination between BUs Low, incidental High, structural
Growth through acquisitions Simple to accommodate Difficult to integrate

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 CHAPTER 7

NETWORK LEVEL STRATEGY

Network level strategy is the strategy a firm develops together with other firms.
Key question is what type of relationship should be maintained between organizations.

The strong one is most powerful alone. All for one, one for all.
Friedrich von Schiller Alexander Dumas jr.

PARADOX OF
COMPETITION & COOPERATION

Competition is the rivalry between two or more Cooperation is the joint undertaking of activities
entities due to conflicting objectives. Managers by two or more entities based on a common
want to have the independence and power to objective. Managers want to cooperate to share
assert their own interests in interaction with each others' strengths, to create stability in their
other organizations with competing goals. interaction and to minimize risk.

The discrete organization perspective The embedded organization perspective

emphasizes the importance of competition. emphasizes the importance of cooperation.

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 CHAPTER 7

DISCRETE ORGANIZATION EMBEDDED ORGANIZATION

PERSPECTIVE PERSPECTIVE

Emphasis on Competition over cooperation Cooperation over competition

Preferred position Independence Interdependence
Environment structure Discrete organizations (atomistic) Embedded organizations
(networked)
Firm boundaries Distinct & defended Fuzzy & open
Inter-organizational relations Arm's length & transactional Close & structural
Interaction outcomes Mainly zero-sum (win/lose) Mainly positive-sum (win/win)
Interaction based on Bargaining power & calculation Trust & reciprocity
Network level strategy No Yes
Use of collaboration Temporary coalitions Durable partnerships
(tactical alliance) (strategic alliance)
Collaborative arrangements Limited, well-defined, Broad, open, relationship-based
contract-based

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 CHAPTER 8

THE INDUSTRY CONTEXT

The industry context is the competitive arena in which a firm operates.
Key question is to what extent the firm can shape its environment.

The pilot cannot mitigate the billows The reasonable man adapts himself to the world;
or calm the winds. The unreasonable one persists in trying to
Plutarch adapt the world to himself. Therefore, all
progress depends on the unreasonable man.
George Bernard Shaw

PARADOX OF
COMPLIANCE & CHOICE

Compliance is the adherence to imposed rules. Choice is the freedom to select a course of
Managers want to adjust their organizations to action. Managers want to have as much liberty
the 'rules of the game' in their industry. as possible to shape the industry to their
organizations' own benefit.

The industry evolution perspective emphasizes The industry leadership perspective emphasizes
the importance of compliance. the importance of choice.

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 CHAPTER 8

INDUSTRY DYNAMICS INDUSTRY LEADERSHIP

PERSPECTIVE PERSPECTIVE

Emphasis on Compliance over choice Choice over compliance

Industry development Uncontrollable evolutionary Controllable creation process
process
Change dynamics Environment selects fit firms Firm creates fitting environment
Firm success due to Fitness to industry demands Manipulation of industry demands
Ability to shape industry Low, slow High, fast
Normative implication Play by the rules (adapt) Change the rules (innovate)
Development path Convergence towards Divergence, create new design
dominant design
Firm profitability Largely industry-dependent Largely firm-dependent

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 CHAPTER 9

THE ORGANIZATIONAL CONTEXT

The organizational context is the whole of resources and activities that make up the firm.
Key question is to what extent managers can shape their organizations.

An institution is the lengthened shadow Chaos often breeds life, when order
of one man. breeds habit.
Ralph Waldo Emerson Henry Brooks Adams

PARADOX OF
CONTROL & CHAOS

Control is the ability to order and regulate Chaos is the state of disorder, in which no one
behavior to meet desired standards. Managers has the power to shape the behavior of the
want to have the power to command resources whole system. Managers want to purposely
and direct activities in the organization, to allow creative disorder, to encourage bottom-up
deliberately achieve the intended results entrepreneurship and self-organization
(the visible hand). (the invisible hand).

The organizational leadership perspective The organizational dynamics perspective

emphasizes the importance of control. emphasizes the importance of chaos.

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 CHAPTER 9

ORGANIZATIONAL ORGANIZATIONAL
LEADERSHIP PERSPECTIVE DYNAMICS PERSPECTIVE

Emphasis on Control over chaos Chaos over control

Organizational development Controllable creation process Uncontrollable evolutionary
process
Development metaphor The visible hand The invisible hand
Development direction Top-down, imposed organization Bottom-up, self-organization
Decision-making Authoritarian (rule of the few) Democratic (rule of the many)
Change process Leader shapes new behavior New behavior emerges from
interactions
Change determinants Leader's vision and skill Political, cultural and learning
dynamics
Organizational malleability High, fast Low, slow
Development driver Organization follows strategy Strategy follows organization
Normative implication Strategize, then organize Strategizing and organizing
intertwined

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 CHAPTER 10

THE INTERNATIONAL CONTEXT

The international context is the arena of two or more nations in which the firm can operate.
Key question is to what extent firms should work in a standardized and integrated manner across
international boundaries.

You may say I'm a dreamer, but I'm not the When I am at Milan, I do as they do at
only one; I hope some day you'll join us, Milan; but when I go to Rome, I do as
and the world will live as one. Rome does.
John Lennon ST. Augustine

PARADOX OF
GLOBALIZATION & LOCALIZATION

Globalization is the process of increasing world- Localization is the process of increasing regional
wide similarity and integration. Managers want dissimilarity and fragmentation. Managers want
to coordinate their activities across international to adapt their activities to local demands as the
boundaries as the world merges into one global world remains a loose system of semi-
economic and cultural system. independent economies and cultures.

The global convergence perspective The international diversity perspective

emphasizes the importance of globalization. emphasizes the importance of localization.

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 CHAPTER 10

GLOBAL CONVERGENCE INTERNATIONAL DIVERSITY

PERSPECTIVE PERSPECTIVE

Emphasis on Globalization over localization Localization over globalization

International variety Growing similarity Remaining diversity
International linkages Growing integration Remaining fragmentation
Major drivers Technology and communication Cultural and institutional identity
Diversity and fragmentation Costly, convergence can Reality, can be exploited
be encouraged
Strategic focus Global-scale synergies Local responsiveness
Organizational preference Standardize/centralize unless Adapt/decentralize unless
Innovation process Center-for-global Locally-leveraged
Organizational structure Global (centralized hub) Transnational (integrated network)

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 CHAPTER 11

ORGANIZATIONAL PURPOSE
Organizational purpose is the reason for an organization's existence.
Key question is whose interests the organization should serve.

The business of America is business A business that makes nothing but money is
Calvin Coolidge a poor kind of business.
Henry Ford

PARADOX OF
PROFITABILITY & RESPONSIBILITY

Profitability refers to the monetary gain resulting Responsibility refers to the moral obligation to
from business activities. Managers want their act according to expectations. Managers want
firm to be profitable, as this is the primary their organizations to behave in a manner that
interest of the stockholding owners and to benefits all participants holding a stake in the
motivate them to remain as investors in the enterprise, as well as society at large.
company.

The shareholder value perspective The stakeholder values perspective

emphasizes the importance of profitability. emphasizes the importance of responsibility.

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 CHAPTER 11

SHAREHOLDER VALUE STAKEHOLDER VALUES

PERSPECTIVE PERSPECTIVE

Emphasis on Profitability over responsibility Responsibility over profitability

Organizations seen as Instruments Joint-ventures
Organizational purpose To serve owner To serve all parties involved
Measure of success Share price & dividends Satisfaction among stakeholders
(shareholder value)
Major difficulty Getting agent to pursue principal's Balancing interests of various
interests stakeholders
Corporate governance thru Independent outside directors with Stakeholder representation
shares
Stakeholder management Means End and means
Social responsibility Individual, not organizational Both individual and organizational
matter
Society best served by Pursuing self-interest Pursuing joint-interests
(economic efficiency) (economic symbiosis)

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 WHAT ARE YOUR STYLES ?

STRATEGIST PROFILER
Rational Reasoning Style Generative Reasoning Style
Firms should focus on thorough Firms should focus on creativity and
strategic analysis to figure out the 1.......2.......3.......4.......5.......6 business intuition to find the best
optimal route forward. route forward.

Strategic Planning Style Strategic Incrementalism Style

Firms should first formulate detailed Firms should set a general strategic
strategic plans, then move to 1.......2.......3.......4.......5.......6 direction, and then fill in the details
disciplined implementation. along the way.

Discontinuous Renewal Style Continuous Renewal Style

Firms that push through strategic Firms keeping up a steady pace of
changes radically and rapidly 1.......2.......3.......4.......5.......6 moderate strategic changes have the
have the highest chances for success. highest chance of success.

Outside-In Style Inside-Out Style

Firms should be driven by market Firms should be driven by their strong
opportunities, developing 1.......2.......3.......4.......5.......6 competences, developing markets to
competences to match. match.

Portfolio Organization Style Integrated Organization Style

Firms' business units should be as Firms' business units should be highly
autonomous as possible, to flexibly 1.......2.......3.......4.......5.......6 coordinated and share key resources
respond to differing markets. and activities.

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 WHAT ARE YOUR STYLES ?

Discrete Organization Style Embedded Organization Style

Firms should be as independent as Firms should build long-term
possible and gain the power to 1.......2.......3.......4.......5.......6 cooperative relations and alliances
influence the behavior of others. with other firms.

Industry Leadership Style Industry Dynamics Style

Individual firms should try to shape Individual firms should follow
their industry by breaking the rules 1.......2.......3.......4.......5.......6 industry trends, riding the waves of
of the game. change.

Organizational Leadership Style Organizational Dynamics Style

Strategy should be made by top Bottom-up strategic initiatives should
management and then 1.......2.......3.......4.......5.......6 be stimulated and then ratified by
communicated downward. top management.

Global Convergence Style International Diversity Style

International firms should focus on International firms should focus on
global standardization and cross- 1.......2.......3.......4.......5.......6 local (national) adaptation and
border integration. responsiveness.

Shareholder Value Style Stakeholder Values Style

Firms should primarily focus on Firms should serve the interests of
earning a profit for their 1.......2.......3.......4.......5.......6 all stakeholders in a balanced
shareholders. manner.

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 Center for
Strategy &
Leadership

Center for Strategy & Leadership Ron Meyer

The Center for Strategy & Leadership is an Dr. Ron Meyer is founder and managing director of the
international research, consulting and management Center for Strategy & Leadership and Professor of
development company, dedicated to improving Corporate Strategy at TiasNimbas Business School,
companies' effectiveness in the areas of strategy, University of Tilburg, the Netherlands. He is also
leadership, business innovation and change visiting professor at a number of other European
management business schools.

The Center for Strategy & Leadership helps firms to Ron is an active strategy consultant to a wide variety of
develop robust strategies by facilitating strategy-making European firms, focusing on facilitating their strategy-
processes, managing the necessary steps, challenging making process. He is also a leading speaker and
assumptions, offering tools and methodologies, doing educator, contributing to many management
research and structuring results. development programs around the world.

The Center for Strategy & Leadership helps firms to His research is focused around the themes of strategic
develop robust leaders by designing and delivering thinking, business innovation, entrepreneurship and
state-of-the-art training programs, running workshops leadership. He has written various books, among others
and seminars, organizing round-table and discussion, the best-selling Strategy Synthesis. The new third
and by offering coaching and assessments. edition was published in 2010.

For more information see: www.c4sl.eu For more information: [email protected]

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Center for
Strategy &
Leadership