Strategic Management Journal

Strat. Mgmt. J. (2012)

Published online EarlyView in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/smj.2004
Received 7 July 2010; Final revision received 27 June 2012

MICROFOUNDATIONS OF STRATEGIC PROBLEM

FORMULATION†
MARKUS BAER, KURT T. DIRKS, and JACKSON A. NICKERSON*
Olin Business School, Washington University in St. Louis, St. Louis, Missouri, U.S.A.

Before a strategy can be developed, the problem it is supposed to address needs to be formulated.
We establish the microfoundations of strategic problem formulation by developing a theory that
predicts a core set of impediments to formulation that arise when complex, ill-structured problems
are addressed by heterogeneous teams. These impediments fundamentally constrain and narrow
problem formulation, thereby limiting solution search and potential value creation. We establish
these impediments as a set of design goals, which, if remedied by an appropriately constructed
mechanism, can expand problem formulation to be more comprehensive. Finally, we consider
how organizations can improve problem formulation by creating a structured process that
satisfies the theoretically derived design goals and detail a specific example of this mechanism
(collaborative structured inquiry). Copyright  2012 John Wiley & Sons, Ltd.

INTRODUCTION and disciplines, such as top management or cross-

functional/interdisciplinary teams (e.g., Amason,
Designing new business strategies, producing inno- 1996; Bantel and Jackson, 1989; Finkelstein, Ham-
vations to grow profit, or developing novel supply brick, and Cannella, 2009; Nickerson and Zenger
chain configurations to achieve a cost advantage 2004; Schweiger, Sandberg, and Ragan, 1986;
are some of the complex, ill-structured strate- Wanous and Youtz, 1986). To create valuable
gic challenges organizations must grapple with in solutions to strategic problems, however, these
creating sources of competitive advantage (e.g., teams first must know what problem they should
Camillus, 2008; Nickerson, Silverman, and Zenger, be addressing. Indeed, as many scientists recog-
2007).1 Tackling these strategic challenges is often nize, ‘the formulation of a problem is often more
the domain of teams, particularly those that bring essential than its solution. . .’ (Einstein and Infeld,
together actors from heterogeneous backgrounds 1938: 92).
Problem formulation has long been acknowl-
edged as a core activity in strategic decision mak-
Keywords: problem formulation; teams; structured pro- ing (Quinn, 1980; Shrivastava and Grant, 1985;
cess; incentives; selection Witte, 1972). Problem formulation is distinguish-
∗
Correspondence to: Jackson A. Nickerson, Olin Business able from the more frequently studied activity
School, Washington University in St. Louis, One Brookings
Drive. St. Louis, MO 63130, U.S.A. of problem solving, which comprises the gener-
E-mail: [email protected] ation, evaluation, and selection of alternative solu-
† Authors are listed alphabetically.
tions. Problem formulation can, for example, allow
1
Challenges include both problems and opportunities. Through- firms to identify fundamental challenges in their
out the remaining paper, we use the more conventional term
‘problem’ but do so with the intent of referring to problems and value chain for which they can generate alterna-
opportunities. tive innovative solutions and choose the optimal

Copyright  2012 John Wiley & Sons, Ltd.

M. Baer, K. T. Dirks, and J. A. Nickerson

one to provide unique value. Thus, problem for- conceptualization of the problem formulation activ-
mulation profoundly determines what problem is ity in teams and the criterion by which to evaluate
solved and ultimately the quality of the solution its success. Our focus is on SPF in teams because
(e.g., Ackoff and Emery, 1972; Churchman, 1971; tackling multifaceted and difficult-to-define strate-
Duncker, 1945; Loasby, 1976; Nutt, 1992; Simon, gic issues typically requires the formation of
1973; Simon and Hayes, 1976; Volkema, 1983). teams, particularly those that bring together indi-
Indeed, according to Mitroff and Featheringham viduals from heterogeneous backgrounds and
(1974), one of the most important challenges of disciplines, to assemble broadly dispersed informa-
the problem solving activity is solving the ‘wrong’ tion and knowledge sets (e.g., Mason and Mitroff,
problem by adopting a formulation that is either 1981; Mitroff and Emshoff, 1979). We conceptu-
too narrow or inappropriate. Similarly, Mintzberg, alize problem formulation as a collective activity
Raisinghani, and Theoret (1976) concluded that aimed at translating an initial problem symptom
diagnosing or formulating the problem may be or web of symptoms into a set of questions or
the most important aspect of strategic decision alternative formulations of the problem that are
making. sufficiently well-defined in terms of the causes of
Despite its long-recognized importance, strate- the symptoms to enable the subsequent search for
gic problem formulation (SPF) has attracted only or generation of solutions (Lyles and Mitroff, 1980;
limited attention from scholars and there is a lack Mason and Mitroff, 1981). Specifically, problem
of understanding as to the microfoundations of formulation encompasses two sets of interdepen-
this important activity.2 In fact, the observation by dent activities—one that involves establishing the
Lyles and Mitroff (1980) that most efforts have web of correlated regularities spanning all symp-
been directed toward identifying and describing toms that are related to the initial symptom that
optimal methods for solving already well-defined launched the inquiry and another activity that
problems and that little is known about how prob- involves the formulation of all causes that explain
lems are formulated appears to be as true today one or more of the previously identified symptoms.
as it was three decades ago. Mirroring this lack Second, relying on a set of assumptions common
of scholarly attention, Mintzberg et al. (1976) and to the field of strategic management—strategic
Nutt (1984) portrayed managers as being equally problems are complex and ill-structured; individu-
oblivious to the importance of systematically for- als are boundedly rational and may be self-interest
mulating problems, frequently skipping or abbre- seeking with guile; teams involved in strategic
viating formulation activities. In fact, analyzing decisions consist of individuals with heteroge-
33 case histories of SPF processes in large U.S. neous information, knowledge, and motivation—
companies, Lyles (1981) found that 75 percent we theoretically identify a set of impediments that
of problems that went through a problem-solving impact problem formulation.3 We then consider the
process had to be recycled back to problem formu- set of impediments as criteria—call them design
lation suggesting that many managers were either goals—against which mechanisms for improving
initially defining the problem inappropriately or the problem formulation activity can be evaluated.
neglecting this stage altogether (Niederman and Third, we consider how organizations can im-
DeSanctis, 1995). A systematic approach to effec- prove problem formulation by creating a struc-
tively formulating strategic problems appears to be tured process that satisfies the design goals that
rare. Given the importance of problem formulation emerged from our theoretical analysis. The extant
for strategic decision making, however, develop- literature provides limited guidance as to how firms
ing insights into this activity should be of great can improve their SPF capabilities. Although exist-
theoretical and practical relevance. ing work has provided descriptive accounts of
In the present paper, we advance the science how organizations formulate problems (e.g., Lyles
and practice of SPF in three ways. First, having and Mitroff, 1980) and has begun to explore the
highlighted the importance of problem formula- strategies and approaches that promote success-
tion for strategic management, we provide a novel ful problem formulation (e.g., Mason and Mitroff,

2 3
We use the term ‘microfoundations’ to refer to the analysis Our theory begins with the recognition of a situation to be
of behaviors and interactions of economic actors that underpin addressed. Such recognition assumes managerial attention has
aggregate phenomena, such as strategic problem formulation. enabled the identification of the symptom (e.g., Ocasio, 1997).

Copyright  2012 John Wiley & Sons, Ltd. Strat. Mgmt. J. (2012)
DOI: 10.1002/smj
 Strategic Problem Formulation

1981; Volkema, 1986), most efforts have lacked resulting in the pattern of interactions changing
theoretical grounding. Our effort represents one over time. Due to a general lack of understanding
of the first attempts to theoretically motivate the of the variables involved and the interdependen-
design of a structured process. We provide an illus- cies among them, few formalized and agreed upon
trative example of a structured process that is a approaches are in place for formulating and mak-
unique recombination of known process steps that ing decisions regarding such problems, render-
collectively mitigate the set of impediments and ing them not only complex but also ill-structured
satisfy the design goals. It is the specific sequence (e.g., Fernandes and Simon, 1999; Funke, 1991;
of steps and the ability to verify execution of the Mason and Mitroff, 1981). Because of these fea-
steps that is unique about the structured process. tures, strategic problems invite the development of
In doing so, we integrate theories of individual and multiple, often competing views of the problem.
group behavior with theories of strategic decision As a result, problem formulation activities have
making (see Coff and Kryscynski, 2011). In addi- been suggested to be of particular importance with
tion, as we consider in the Discussion section, our respect to strategic problems and the decision mak-
analysis has implications for the dynamic capa- ing activities surrounding them (Lyles, 1981; Lyles
bilities perspective (Eisenhardt and Martin, 2000; and Mitroff, 1980; Mason and Mitroff, 1981). In
Helfat et al., 2007; Teece, Pisano, and Shuen, the following sections, we (1) consider the crite-
1997), particularly, for the various ‘organizational rion of success for the problem formulation activity
and managerial processes, procedures, systems, and (2) theoretically analyze the key impediments
and structures that undergird each class of capa- that firms face in formulating strategic problems.
bility’ (Teece, 2007: 1321).
Evaluating the success of the problem
THEORETICAL BACKGROUND formulation activity
What constitutes successful problem formulation?
Strategic problems Ultimately, we expect that problem formulation
We focus our theoretical development explicitly will result in better quality decisions as well as
on the formulation of strategic problems. Strate- in decisions that are likely to be more accept-
gic problems are typically those that have high able to senior management and thus more likely to
stakes and are of critical importance to a firm’s be implemented successfully and expeditiously. It
success, especially in the long term (Ireland and may, however, be difficult to use those downstream
Miller, 2004). We define a (strategic) problem as metrics as reliable gauges of problem formulation.
a deviation from a desired set of specific or a For example, using acceptability as the criterion
range of acceptable conditions resulting in a symp- carries the risk of curtailing problem formulation
tom or a web of symptoms recognized as needing as less acceptable or controversial formulations,
to be addressed (e.g., Cowan, 1986; Cyert and despite their potential to contribute to the under-
March, 1963; Newell and Simon, 1972). Strategic standing of the underlying problem, and are likely
problems, by their very nature, are complex and to be withheld. Using the quality of the decision
ill-structured (Kilmann and Mitroff, 1979; Lyles as the relevant yardstick may also be problematic
and Mitroff, 1980; Watson, 1976). A problem is because activities other than problem formulation
complex when it involves (1) a large number of (e.g., solution derivation, decision implementation)
different variables, many of which may not be are likely to impact quality, thereby providing an
directly observable such that only knowledge about unreliable and invalid measure of the formulation
symptoms is available from which the underlying activity. Given these shortcomings, we propose
state then has to be inferred; (2) a high degree of comprehensiveness as a primary metric by which
connectivity among the elements of the problem to judge the success of the problem formulation
such that change in any one variable will affect activity.
the status of many other variables making it dif- Comprehensiveness is defined as the extent to
ficult to anticipate the potential consequences of which alternative, relevant problem formulations
a given situation, especially because the effects are identified with respect to an initial symptom or
of these interactions are generally not immedi- web of symptoms. Although the concept of com-
ately observable; and (3) a dynamic component prehensiveness in strategic decision making is not
Copyright  2012 John Wiley & Sons, Ltd. Strat. Mgmt. J. (2012)
DOI: 10.1002/smj
M. Baer, K. T. Dirks, and J. A. Nickerson

new (Fredrickson, 1984; Fredrickson and Mitchell, Relevance is the second component of our
1984), our use of the concept and term differs in conceptualization of problem formulation compre-
at least two ways from previous work. First, we hensiveness. Each alternative formulation must be
use comprehensiveness as a criterion to evaluate relevant by illustrating at least one mechanism
specifically and exclusively the problem formu- that causes one or more of the identified symp-
lation activity, as opposed to the entire strategic toms (Mitroff et al., 1979). A set of formulations
decision making process. Second, whereas previ- that addresses only a subset of symptoms is hence
ous work has used comprehensiveness to evalu- considered to be less relevant and, as a result,
ate the process of strategic decision making (e.g., less comprehensive than a set that addresses the
Goll and Rasheed, 1997; Miller, Burke, and Glick, entire web of symptoms. There is a caveat to
1998), we use this concept to evaluate an outcome this conceptualization. Formulations that suggest
of the formulation activity. mechanisms that produce symptoms outside the
According to our definition, comprehensiveness web of symptoms, even while explaining some
increases as the number of alternative problem for- identified symptoms, are not considered relevant.
mulations grows. The ultimate success of the prob- Thus, comprehensiveness increases to the extent
lem formulation activity is intimately connected that an additional formulation (1) adds to the over-
to the number of alternative formulations pro- all number of identified symptoms that can be
posed regarding a symptom or web of symptoms explained without considering irrelevant symptoms
(Boland, 1978; Volkema, 1986, 1988). For exam- or (2) provides an alternative explanation for at
ple, Niederman and DeSanctis (1995) suggested least one of the identified symptoms.
that a necessary criterion for achieving accurate By focusing on formulation comprehensiveness,
and complete problem formulation is for teams we assume a probabilistic relation between the
to engage in intensive search for information—an comprehensiveness of a problem’s formulation
activity that should allow for alternative problem and the likelihood with which the root causes of
perspectives to emerge, that is, for equivocality a particular problem context will be discovered.
to surface, encouraging more successful problem Although problem formulation comprehensiveness
solving in the future. In a similar vein, Volkema by no means guarantees that teams are able to
and Gorman (1998) considered problem formula- isolate the root causes of a strategic problem, the
tion to flourish to the extent that teams extensively likelihood that such causes are detected improves
search for information allowing for the genera- as a function of the number of alternative, relevant
tion of alternative, competing problem understand- problem formulations that are being detected.
ings. Lyles and Mitroff (1980) also suggested that
improved formulation entails the generation and
Heterogeneous teams as vehicles for
selection of alternative views of the problem.
comprehensive problem formulation
It is important to note, however, that, in con-
trast to some previous accounts, we do not equate Establishing the microfoundations for SPF requires
comprehensiveness with completeness (number of the analysis of the behaviors of and the interac-
formulations divided by total number of possible tions between economic players that collectively
formulations). The total number of possible formu- constitute and determine the formulation activity.4
lations for a given problem—especially when it is
complex and ill-structured and, as a result, multi- 4
Given our focus on the interactions between economic actors
ple, competing, yet equally valid views of the prob- that undergird the problem formation activity as an aggregate
lem are plausible—often remains unknown and phenomenon, the level of analysis in the present examination is
may even be unknowable. As stated by Rittel and the team or collective. Consequently, we give limited attention
to individual differences and their effects on problem formula-
Webber (1973: 161, emphasis in original), ‘the for- tion comprehensiveness. We recognize, however, that numerous
mulation of a [complex] problem is the problem.’ individual-level decision biases exist. One of the reasons for cre-
This impossibility implies that any optimality cri- ating heterogeneous teams is to reduce the effect of these biases
and we assume that is the case here. Furthermore, we assume that
terion, such as completeness, is not appropriate for other individual differences will be randomly distributed across
evaluating the success of the problem formulation teams and will not systematically affect problem formulation
activity (Miller et al., 1998; Mitroff, Emshoff, and comprehensiveness. Evidence supporting this assumption is pro-
vided by Papadakis, Lioukas, and Chambers (1998). Examining
Kilmann, 1979; Rittel and Webber, 1973; Smith, the factors shaping the comprehensiveness of strategic decision
1989). making processes, these authors found that none of the wide

Copyright  2012 John Wiley & Sons, Ltd. Strat. Mgmt. J. (2012)
DOI: 10.1002/smj
 Strategic Problem Formulation

Indeed, comprehensively formulating strategic, that across multiple individuals.5 As Mason and Mitroff
is, complex, ill-structured problems is not an indi- (1981 : 13–14) noted, ‘the raw material for forg-
vidual activity (e.g., Ireland and Miller, 2004; ing solutions to [complex, ill-structured] problems
Mitroff and Emshoff, 1979). Given that strategic is not concentrated in a single head, but rather
problems typically constitute complicated mixtures is widely dispersed among the various parties at
of a range of different, yet highly interdepen- stake.’ As a consequence, teams comprising indi-
dent issues that cannot be addressed in isola- viduals with different information sets and cog-
tion from each other, comprehensively formulating nitive structures must be engaged if comprehen-
these problems poses extraordinary demands on sive formulation of a strategic problem is to be
the breadth and depth of information and knowl- achieved.6
edge required. Such demands naturally confront Along with information sets and cognitive struc-
bounded rationality, that is, the limitations of tures, members of heterogeneous teams also are
both knowledge and cognitive capacity (i.e., mem- likely to possess different objectives (Cyert and
ory and attention) characterizing human rationality March, 1963). As a key assumption of the polit-
(Simon, 1955, 1957). Bounded rationality makes ical perspective of organizations, we subscribe to
information and knowledge acquisition, accumula- the view that organizations consist of actors with
tion, and application costly activities—for exam- at least partially competing interests and objec-
ple, new communication channels and codes may tives (e.g., Allison, 1971; Pettigrew, 1973; Pfef-
have to be established cutting into limited resour- fer, 1981). Although we acknowledge that some
ces, such as time and attention, necessary for other objectives may be shared among all actors, other
activities—and constrains the ability of any one objectives may be at odds with each other due to
actor to tackle strategic problems (Arrow, 1974; differences among individuals’ interests resulting
Simon, 1955). Indeed, research suggests that when from occupying different positions, belonging to
confronted with such problems, individuals often different departments, or pursuing different career
only identify the most obvious symptoms, or those goals (Eisenhardt and Zbaracki, 1992). It is there-
to which they are most sensitive, resulting in the fore inevitable that teams composed of members
problem being described inappropriately (Mitroff from different functional and hierarchical back-
and Featheringham, 1974; Watson, 1976) or in grounds also possess different interests and objec-
overly simple terms (March and Simon, 1958). As tives—both in terms of content (what objectives
noted by Volkema (1997: 31), ‘[p]roblems have a are preferred) and in terms of degree (the extent
way of growing during discussions, often beyond to which a given objective is preferred) (Dean and
the limitations of the human mind. When this Sharfman, 1996). This heterogeneity can be func-
occurs, there is a temptation to oversimplify the tional for problem formulation in that it ensures
problematic situation to fit human capacity, rather that no single interest controls the lens through
than to find ways to extend memory.’ which the problem is viewed. Following a com-
The challenges associated with comprehensively mon behavioral assumption in strategy, however,
formulating strategic problems in conjunction with individuals have the potential to pursue this self-
the limitations resulting from bounded rationality interest with guile (e.g., Williamson, 1975), which,
and the fact that information processing is costly as we discuss below, has the potential to severely
suggest that no single actor is likely to possess or undermine the problem formulation activity, for
to be able to easily accumulate the range of infor- example, by restricting and distorting the flow of
mation and breadth of knowledge needed to span information (Cyert and March, 1963; Nickerson
the problem space (Newell and Simon, 1972). We and Zenger, 2004; Pettigrew, 1973).
therefore assume that the relevant information sets
and cognitive structures (mental models, knowl- 5
We use the term ‘cognitive structure’ to describe the basic
edge sets, etc.) needed to comprehensively formu- mental processes used to make sense of information. Thus, this
late strategic problems is likely to be dispersed concept encompasses comparative thinking structures, symbolic
representation structures, logical reasoning structures, and men-
tal models that serve to govern the interpretation, organization,
and use of information.
6
range of top management team personality characteristics stud- This assumes that the information and cognitive structures
ied (e.g., risk propensity, need for achievement, etc.) impacted within the team span the problem space. We explore the impli-
process comprehensiveness. cations of relaxing this assumption in the Discussion section.

Copyright  2012 John Wiley & Sons, Ltd. Strat. Mgmt. J. (2012)
DOI: 10.1002/smj
M. Baer, K. T. Dirks, and J. A. Nickerson

With our definition of problem formulation com- of executive cognitive diversity—defined in terms
prehensiveness and assumptions about human of differences in beliefs and preferences held
nature (i.e., bounded rationality with the potential by upper echelon executives within a firm—on
to pursue self-interest with guile) as well as the comprehensiveness of strategic decision making,
relevant contextual conditions (i.e., need for teams the authors found that executive diversity inhibits
composed of individuals with heterogeneous infor- rather than promotes comprehensive examinations
mation and cognitive structures, existence of het- of problems and opportunities (for similar results,
erogeneous objectives and ‘stakes’ in the issues), see Simons, Pelled, and Smith, 1999).
we consider the team-level impediments to this In sum, although heterogeneity creates the poten-
activity. tial for improved decision making and problem
solving, this potential may not always be realized.
Impediments to comprehensive problem Previous research suggests that it is the interac-
formulation in heterogeneous teams tions among actors that frequently seem to get
in the way of teams fully realizing their potential
By combining different sets of information and (Janis, 1972; Steiner, 1972). Consequently, analyz-
cognitive structures, in the abstract, a heteroge- ing the behaviors and interactions of the individual
neous team is more likely to find formulations actors that underpin SPF, that is, establishing the
that encompass the root causes of a problem and microfoundations of problem formulation, should
engender discovery of more valuable solutions provide valuable insights into the dynamics that
than either an individual alone or a homogenous determine whether and when heterogeneity may
team. Whether this ideal is achieved in practice, constrict formulation comprehensiveness. Draw-
however, is not clear (e.g., Watson, Kumar, and ing on our assumptions, in the following we
Michaelsen, 1993). Some studies seem to sup- theoretically derive a core set of impediments
port a positive relation between heterogeneity and following from the three types of heterogene-
the quality of the overall strategic decision mak- ity—information sets, cognitive structures, and
ing process, or various downstream outcomes of it objectives—and describe how these impediments,
(previous research has rarely examined the effects individually and jointly, limit comprehensiveness.
of heterogeneity on formulation comprehensive- Although our list may not reflect all possible
ness) (see Finkelstein et al., 2009). For example, impediments, it nonetheless derives from only a
Bantel and Jackson (1989) studied the adoption few assumptions and identifies a set of biases that
of various technical and administrative innova- have been reported to be common and important.
tions at 199 banks and found a positive association
between top management team (TMT) heterogene-
Impediments resulting from heterogeneous
ity of functional backgrounds and innovativeness.
information sets
Results from the broader TMT literature, however,
appear to be mixed. For example, a meta-analysis We begin our theory development assuming homo-
examining the effects of TMT heterogeneity on geneity of objectives. We relax this assumption in a
firm performance found no consistent associations later section (entitled ‘Impediments resulting from
between different TMT indicators, such as func- heterogeneous objectives’) to explore the unique
tional and educational heterogeneity, and different effects of heterogeneous objectives, as well as how
indicators of firm performance (Certo et al., 2006). this heterogeneity interacts with and amplifies the
Similarly, in a recent review, van Knippenberg negative effects of heterogeneous information sets
and Schippers (2007) concluded that there is lit- and cognitive structures on problem formulation
tle evidence that heterogeneous teams outperform comprehensiveness.
homogeneous teams on a variety of tasks, includ- The promise of assembling teams of individuals
ing decision making and problem solving. Some with different sets of information is that it provides
studies even report negative associations between the potential for a more complete understanding
TMT heterogeneity and performance. For instance, of the many facets of a strategic problem and the
work by Miller and colleagues (1998) suggests opportunity to derive a more comprehensive for-
that diversity among upper echelon executives has mulation of the problem. However, the potential
the potential to limit strategic decision making. is often not realized (Miller et al., 1998; Simons
Drawing upon three studies examining the impact et al., 1999). We propose that teams composed
Copyright  2012 John Wiley & Sons, Ltd. Strat. Mgmt. J. (2012)
DOI: 10.1002/smj
 Strategic Problem Formulation

of executives with homogeneous objectives but which is far more likely to involve information that
heterogeneous information sets will discuss and they hold in common (e.g., Larson et al., 1996,
consider only a small subset of the total amount of 1998; Stasser, Taylor, and Hanna, 1989). Shar-
information available to the team. There is a ten- ing unique information incurs additional costs for
dency, as we describe below, to discuss informa- an individual as new communication channels and
tion that is commonly held at the expense of unique codes may have to be established before unique
and uncommon information (when resources are information can be understood and appropriately
limited (see effect ‘1’ in Figure 1). In turn, this interpreted. With information processing, mem-
tendency will narrow and limit the extent to ory, and attention capacities being limited (i.e.,
which teams are able to comprehensively formu- the assumptions of bounded rationality), teams
late strategic problems. members are more likely to discuss and consider
Heterogeneity in information sets implies that information that incurs lower communicating and
although there may be some problem-relevant in- decoding costs, such as information that is held in
formation that is held in common by the members common, leaving unique, individually held infor-
of a team (known to most or all members), each mation less likely to be communicated (Stasser and
member also holds unique information (known Titus, 1985, 1987).
only to a single member). Given the limitations Research on the effectiveness of collective infor-
associated with bounded rationality, individuals mation sharing processes in decision making
will find it difficult to initially judge which ele- groups provides evidence supporting these argu-
ments of the information they hold are most ments. Hearing other members reveal information
likely to be relevant to a particular problem. makes similar and commonly held information
Team members therefore will begin communicat- appear more important or relevant (Wittenbaum,
ing by sending cues they believe are most likely Hollingshead, and Botero, 2004). Moreover, pre-
to be understood. Generally, understanding sig- vious research shows that groups often make sub-
nals requires recipients to recognize cues and then optimal decisions because they tend to discuss
engage in a conversation to transfer and verify and incorporate information that is shared at the
the information sent and received. Individuals are expense of information that is unshared (e.g., Lar-
more likely to respond to cues that they recognize, son et al., 1996; Stasser et al., 1989, Stasser and

Figure 1. Model of strategic problem formulation

Copyright  2012 John Wiley & Sons, Ltd. Strat. Mgmt. J. (2012)
DOI: 10.1002/smj
M. Baer, K. T. Dirks, and J. A. Nickerson

Titus, 1985). Finally, earlier work supports the what Mason and Mitroff (1981: 25) have termed,
notion that common information has a sampling ‘tunnel vision’ (the phenomenon can occur even
advantage over unshared information because it is with homogeneity in information sets).7 Concep-
often considered to be more important, relevant, tualizing a problem in accordance with one’s cog-
and accurate than unique information (Postmes, nitive structures allows an individual to focus his
Spears, and Cihangir, 2001; Wittenbaum, Hubbell, or her attention and capitalize on scarce cognitive
and Zuckerman, 1999). resources and can have significant consequences
Sharing and discussing information that is com- for comprehensive problem formulation in the con-
monly held by many members rather than reveal- text of a heterogeneous team. Specifically, differ-
ing unique information is likely to undermine ences in cognitive structures are likely to produce
comprehensive problem formulation. Failure to problem understandings that are at least partially
discuss or share information that is unique under- incompatible with one another thereby triggering
mines the ability of teams to generate not only the emergence of representational gaps (see effect
different or alternative but also relevant problem ‘2’ in Figure 1). Such gaps jeopardize problem for-
formulations. This limitation arises because teams mulation comprehensiveness in at least two ways.
are likely to prematurely, that is, before the entire First, the emergence of representational gaps
problem space is explored, converge on the first makes it difficult and costly for team members to
common denominator—a problem understanding share knowledge and recombine representations to
that everyone can easily agree upon but that does explore additional problem formulations. As dif-
not necessarily reflect the complexity of the under- ferent representations or problem understandings
lying problem. involve different concepts and terminologies, com-
munication across these divides will be difficult.
Impediments resulting from heterogeneous For example, a concept that exists in one domain
cognitive structures may not exist or may carry a different meaning
in another. Naturally, these differences make the
The promise of teams of individuals with different communication of such concepts not only diffi-
cognitive structures is that they provide varying cult but also costly as significant time and energy
perspectives of the problem and describe poten- would have to be invested in order for members
tial causes in a more multifaceted and intricate to be able to identify and bridge the gaps.
way. This promise, in turn, enhances the number Different cognitive structures may not only
of alterative formulations as well as their rele- involve different concepts and terminologies but
vance and, ultimately, the comprehensiveness of also differences in the assumptions about the way
the strategic problem formulation activity. How- those concepts are interrelated. Such assumptions,
ever, we suggest that teams composed of members which are often unarticulated, provide the foun-
with homogeneous objectives (we consider het- dations on which representations are not only
erogeneous objectives later in the section entitled constructed but also transferred from one team
‘Impediments resulting from heterogeneous objec- member to another. Discovering differences in
tives’) but heterogeneous cognitive structures will assumptions along with differences in concepts
not fully realize their potential due in part to the and definitions, then codifying and transmitting
emergence of representational gaps. A representa- them is costly for boundedly rational actors and,
tional gap is a team-level phenomenon capturing as a result, likely to impede the sharing and
differences in representations—understandings of recombination of such representations. As both the
a problem situation constructed on the basis of an
individual’s domain-related knowledge—among
the members of a team (Cronin and Weingart, 7
The tendency of tunnel vision has been supported by previ-
2007). Due to the limits associated with bounded ous research (e.g., Boland and Greenberg, 1988; Walsh, 1988).
rationality, individuals faced with strategic prob- For example, Dearborn and Simon (1958) investigated depart-
mental affiliation as a contributing factor to executives’ problem
lems are likely to formulate those problems in a formulation activities. Their results suggested that problem for-
way that capitalizes on the knowledge they pos- mulation is selectively directed toward the department to which
sess. In other words, existing knowledge and its the executive belonged. Looking at the same data, for example,
83 percent of sales executives identified sales as the most impor-
organization determines how people come to see tant problem compared with 29 percent of executives from other
and formulate a given problem context, resulting in areas.

Copyright  2012 John Wiley & Sons, Ltd. Strat. Mgmt. J. (2012)
DOI: 10.1002/smj
 Strategic Problem Formulation

communication and integration of different prob- protect the self-interest of individuals or groups’
lem understandings are essential to formulating (Allen et al., 1979: 77). Previous research has
problems, differences in assumptions are likely to documented that political behavior is a dominant
undermine the comprehensiveness of this activity. and pernicious factor in problem formulation (e.g.,
Second, differing cognitive structures and the Lyles, 1981; Lyles and Mitroff, 1980; Mason and
resulting inability of team members to understand Mitroff, 1981). Our analysis considers both the
each other can promote conflict and distrust, which individual and joint mechanisms through which
further impedes the sharing and recombination of heterogeneous objectives result in political behav-
representations, let alone the recognition of one ior that ultimately impedes comprehensiveness.
another’s formulations. In general, task conflict Direct effects include the tendency of team
consumes scarce cognitive resources, which can members to engage in dominance activities and to
negatively impact overall team performance (De jump to solutions (see effect ‘3’ in Figure 1). First,
Dreu and Weingart, 2003), particularly when there individuals who have high stakes are more likely
are also tensions and disagreements over values to advocate strongly for solutions from which they
and beliefs (i.e., relationship conflict) (Shaw et al., benefit. Those individuals who have few stakes
2011). For instance, Carnevale and Probst (1998) are likely to acquiesce because the cost to advo-
suggested that conflict limits problem solving abil- cate a position exceeds the benefit of succeeding.
ities because it makes individuals more rigid in Such dominance behavior, which arises from het-
their thinking processes—that is, less able to see erogeneity of objectives, likely leads to the narrow-
or integrate alternative ideas or perspectives—and, ing of formulation comprehensiveness by focusing
as a result, less creative. As strategic problems attention on formulations and solutions that are
require that different problem understandings are consistent with those members who have the most
generated and integrated, such rigidity will neces- at stake.
sarily undermine the production of alternative and Second, numerous scholars have observed the
relevant problem formulations, that is, formulation tendency for team members to prematurely pro-
comprehensiveness. Furthermore, in the absence of
pose solutions at the expense of investing time and
trust, task conflict can turn into relationship con-
energy into comprehensively formulating problems
flict, thereby diverting even more resources away
(Maier and Hoffman, 1960; Van de Ven and Del-
from problem formulation toward the management
becq, 1971). Although this tendency may in part
of relationships (Shaw et al., 2011; Simons and
derive from bounded rationality (abbreviating or
Peterson, 2000). As a result, formulation compre-
forgoing the problem formulation activity econ-
hensiveness is even less likely to be achieved.
omizes on bounded rationality), heterogeneity of
objectives nevertheless creates incentives to jump
Impediments resulting from heterogeneous to a solution. Specifically, as every solution implic-
objectives itly suggests a certain problem formulation or set
The promise of assembling teams of individuals of formulations (e.g., Dutton and Ashford, 1993),
with differing objectives is that it provides the actors who prematurely suggest a particular solu-
potential that many different interests are repre- tion are in the unique position to limit problem
sented during the formulation activity and that no formulation to such alternatives that support their
single interest controls the lens through which the objectives, as opposed to searching for and con-
problem is ultimately viewed—all of which should sidering other relevant formulations. The tendency
allow for greater comprehensiveness. We propose, to jump to solutions quickly forecloses the search
however, that heterogeneity in objectives results and evaluation of alternative formulations, which
in team members engaging in political maneu- ultimately limits comprehensiveness.
verings that consume scarce resources (attention, In addition to these direct effects, heterogeneity
memory, time) and contaminate and constrain the in objectives can interactively as well as indirectly
exchange of information and cognitive structures, affect comprehensiveness. Heterogeneous objec-
thereby further limiting and narrowing problem tives may interact with heterogeneous informa-
formulation comprehensiveness. Consistent with tion sets and heterogeneous cognitive structures to
previous research, we define political maneuver- squelch information exchange and the integration
ing as ‘intentional acts of influence to enhance or of knowledge. Individuals may be motivated to
Copyright  2012 John Wiley & Sons, Ltd. Strat. Mgmt. J. (2012)
DOI: 10.1002/smj
M. Baer, K. T. Dirks, and J. A. Nickerson

strategically share information and problem under- addressing strategic problems, (2) comprehensive-
standings while strategically withholding others ness is the appropriate metric by which to evaluate
in order to manipulate the formulation activity problem formulation, (3) the formulation activity
for personal benefit (e.g., Dutton and Ashford, typically unfolds in the context of heterogeneous
1993; Wittenbaum et al., 2004). These interac- teams, and (4) the formulation of strategic prob-
tions are represented by effect ‘4’ in Figure 1. lems in heterogeneous teams (along with bounded
In addition, heterogeneity in objectives may indi- rationality and self-interest with guile) is the likely
rectly shape problem formulation comprehensive- cause of a set of impediments that collectively con-
ness. This dynamic process is represented by effect strain and narrow problem formulation. In the next
‘5’ in Figure 1. Once team members observe or section, we consider how our analysis can provide
suspect others of engaging in political behaviors the basis for developing a mechanism to mitigate
such as dominance or proposing solutions that are the impediments and thus increase comprehensive-
consistent with their self-interests, they may be ness. Specifically, we describe why using a (struc-
inclined to engage in similar behaviors. In short, tured) process based on the theoretical framework
the introduction of heterogeneity in objectives is an effective way to alleviate the impediments
is likely to amplify the impediments associated and illustrate how the theory can be used to design
with heterogeneous information sets and cognitive such a process.
structures by initiating strategic behaviors.
Ample research supports the dynamics described
in the prior paragraph. For instance, Pettigrew
DESIGNING A MECHANISM TO
EXPAND FORMULATION
(1973) analyzed the decision making process of
COMPREHENSIVENESS
a computer adoption. Different managers in the
firm had conflicting preferences for outcomes. As
The problem formulation impediments described
a consequence, managers would block and slant
above might be addressed via three general
information to favor their preferred solution. Like-
approaches—selection/team composition, use of
wise, in an experimental study of problem solving,
incentives, and process design (i.e., input, output,
Ferrin and Dirks (2003) observed that when the
and behavior controls; see Ouchi, 1977, Thomp-
team members faced competing incentives, they son, 1967). Selection involves purposely compos-
perceived the other parties more negatively, trusted ing teams to capture the gains from heterogene-
their partners less, and withheld and misrepre- ity while simultaneously attenuating impediments.
sented important information. The results indicate However, this mechanism presupposes that man-
that although team members may have insights agers not only have the ability to verify a pri-
on the problem or relevant data, they may with- ori what individuals’ interests and objectives are
hold such information when it undermines their and how they differ in terms of their cognitive
objectives, or may choose to emphasize particular structures and informational sets but also that they
elements that support their positions. These polit- have enough control over the composition of work
ical actions further contribute to a narrowing as teams to select ideal members for inclusion—both
well as a biasing of the formulation activity as assumptions that are typically not met in orga-
scarce resources are consumed on political pos- nizations (Wanous and Youtz, 1986). Although
turing instead of comprehensively exploring the some previous research has found that individ-
problem space. In addition, political maneuver- uals’ perceptions of heterogeneity do converge
ing generates mistrust that dynamically and further with reality to some extent, suggesting that people
undermines a team’s willingness to expend scarce should be able to verify individuals’ information
resources to create shared understandings because sets, cognitive structures, or interests, these rela-
of the limited returns expected from doing so. As a tions seem to have currency only in the case of
result, unique information is even more unlikely to more visible aspects of heterogeneity, such as age,
be shared and representational gaps are even less sex, or race/ethnicity (e.g., Harrison et al., 2002).
likely to be bridged, further undermining problem In cases where heterogeneity concerns nonvisible
formulation comprehensiveness. indicators, such as values (which has implications
So far we have suggested that (1) problem for individuals’ objectives) or cause-effect beliefs
formulation is a particularly pivotal activity in (which has implications for individuals’ cognitive
Copyright  2012 John Wiley & Sons, Ltd. Strat. Mgmt. J. (2012)
DOI: 10.1002/smj
 Strategic Problem Formulation

structures), correlations tend to be nonsignificant Given the difficulties associated with the accu-
or negative and generally too low to guide any rate measurement of performance in the problem
selection decision in practice (e.g., Harrison et al., formulation activity and formulation comprehen-
2002; Miller et al., 1998). These findings sug- siveness, one alternative may be to measure a more
gest that it would be difficult for senior managers distal outcome of the activity, for example, the
to assemble a team of a certain composition in acceptance of the problem formulation by senior
terms of information sets, cognitive structures, or management or the overall success of the strate-
objectives by relying on their perceptions of rel- gic decision making process. However, even these
evant attributes. In fact, the general discrepancy alternatives are flawed and limited in their abil-
between perceived and objective heterogeneity has ity to overcome the impediments to comprehensive
lead Harrison and Klein (2007: 1216) to conclude problem formation. Using the acceptability of the
that ‘measures of perceived diversity are not likely problem formulation as the criterion carries the risk
to be construct-valid measures of “actual” diver- of curtailing comprehensiveness as less accept-
sity.’ Overall, it appears that selection may be an able formulations are likely to be withheld. Using
incomplete and difficult-to-implement mechanism the success of the overall decision making pro-
to overcoming the impediments. cess as the yardstick is problematic because activ-
Incentives offer another alternative mechanism. ities other than problem formulation (e.g., solution
Similar to selection, however, incentives may be derivation, decision implementation) are likely to
somewhat limited in mitigating the impediments impact the overall success of the process thereby
to comprehensive problem formulation. The prob- providing a diluted measure of the formulation
lems with the use of incentives largely stem from activity. The mechanisms of selection and incen-
the difficulty of objectively and accurately measur- tives therefore appear to be difficult to implement
ing effort and performance (DeMatteo, Eby, and and not sufficient to attenuate the impediments
Sundstrom, 1998; Hall, 2002), and from the costs associated with SPF.
associated with selectively intervening in an orga- Given the insufficiency of these two options
nization by offering targeted incentive structures to fully address the challenges of problem for-
(Nickerson and Zenger, 2008; Williamson, 1985). mulation, we explore the potential usefulness of
Three fundamental problems—controllability, a third category of mechanisms—structured pro-
alignment, and interdependency (Hall, 2002)—are cesses. Van de Ven (1992) observed that the term
associated with measuring performance accurately, ‘process’ has been used in a variety of ways in
particularly in the context of problem formulation. the management literature (see also Chakravarthy
A range of factors affecting problem formulation and White, 2002; Maritan, 2007). In this paper,
comprehensiveness may not be controllable by the we define a structured process as a specified set
team and its members, making (un)controllability a of rules or guidelines that direct team interac-
concern when measuring the performance of prob- tion to arrive at a desired outcome (e.g., com-
lem formulation teams. Next, problems of align- prehensiveness). Thus, structured processes focus
ment between what can be measured and verified on intermediary steps that cause team heterogene-
easily and what actually creates value may arise. ity in information, knowledge, and objectives to
Finally, given the collective nature of problem for- be reliably transformed into enhanced problem
mulation, it is difficult, if not impossible, to deter- formulation comprehensiveness. Our conceptual-
mine the contributions to the formulation activity ization is consistent with previous work (Eisen-
of any individual team member creating difficulties hardt and Martin, 2000; Maritan, 2007), which
due to interdependency.8 considered processes as dealing with the question
of how strategies are formed, implemented, and
8
The controllability problem refers to the notion that like other
forms of performance, comprehensively formulating a problem
is only partly under the control of the team and the efforts and measured. For example, although it may be possible to mea-
skills brought to bear by its members. For example, unavail- sure information sharing in general, it is impossible to measure
ability of key individuals who hold relevant information and the sharing of unique information as this information, by defini-
knowledge may constrict the team in its ability to comprehen- tion, is only accessible to a few or a single member of the team
sively formulate a problem. The alignment problem is likely and is not known a priori. Lastly, the interdependency problem
to arise because most of the value creating efforts in problem describes the difficulties of measuring outcomes that are funda-
formulation—cognitive efforts related to sharing unique infor- mentally the result of the joint, interdependent efforts of many
mation and overcoming representational gaps—are not easily people, not the result of the efforts of a single individual.

Copyright  2012 John Wiley & Sons, Ltd. Strat. Mgmt. J. (2012)
DOI: 10.1002/smj
M. Baer, K. T. Dirks, and J. A. Nickerson

changed and the identification of the routines and formulates the problem by identifying and veri-
mechanisms that undergird this set of activities. fying all root causes of the web of symptoms.
In essence, structured processes represent mecha- To help accomplish this split, ‘ground rules’ for
nisms that may serve to mitigate the biases plagu- discussion are laid out for each phase. For exam-
ing the formulation of strategic problems into value ple, in the framing phase, a facilitator may ask
creating strategies. participants to refrain from discussing causes or
Our theory provides the opportunity to identify solutions. Second, participants begin their discus-
and evaluate alternative structured processes (or sion by engaging in a modified version of the
process elements) for expanding problem formula- nominal group technique (mNGT) (Van de Ven
tion comprehensiveness. Thus, rather than relying and Delbecq, 1971). Participants first write down
on ad hoc and descriptive accounts of the effective- individually all possible symptoms correlated with
ness of processes, we determine the effectiveness the symptom that launched the inquiry along with
of process elements by evaluating their ability to supporting evidence of their existence. Then, in a
mitigate the previously identified impediments. By round robin fashion, each group member reveals
theoretically analyzing the impediments and their one symptom he or she has written down until
causes, our approach allows for flexibility in how all symptoms are considered. Each symptom and
the design goals are addressed. Put differently, its correlation are then discussed until the team
there could be any number of alternative structured reaches consensus on its inclusion in or exclu-
processes used to achieve comprehensive problem sion from the set of correlated symptoms. Third,
formulation as long as the process components sat- using results from the mNGT procedure, team
isfy the design goals of mitigating the specific set members compile the web of symptoms and sup-
of impediments. porting information into a document on which the
In the section below, we describe one example team is required to reach consensus in terms of its
of a structured process that was designed in adher- wording.
ence with our design goals and that can be used The formulation phase immediately follows the
to mitigate the previously identified impediments. completion of the framing phase and relies on
The purpose of this process is to illustrate how an approach similar to the one used during the
our theory can be used to guide the design of a latter, with a few exceptions. First, the ground
structured process; the example is not intended to rules now focus the team members specifically on
claim superiority of this specific process vis-à-vis the formulation of the problem thereby prohibit-
alternative processes or mechanisms. We begin by ing the discussion of potential solutions. Second,
providing an overview of the structured process during the mNGT, instead of identifying the web
and then detail the theory underlying its design. of symptoms, the team now lists and discusses all
causes that could potentially explain one or more
of the previously identified symptoms. It is each
Collaborative structured inquiry: an example of these causes that represent alternative formula-
of a structured process to mitigate the tions. The end product of this phase is a document
impediments to comprehensive problem that offers a set of formulations that represent plau-
formulation sible and relevant causes of the previously iden-
tified symptoms. The formulation document and
The process we refer to as ‘collaborative structure problem framing document are then distributed to
inquiry’ (CSI) involves splitting the problem for- relevant stakeholders outside the group for review
mulation activity into two distinct phases, which and input. These individuals are asked to add miss-
we refer to as framing and formulating the prob- ing symptoms or causes and to provide evidence
lem. The purpose of the framing phase is to iden- supporting their inclusion.
tify all empirical regularities (i.e., symptoms) that A crucial point of the paper is that the CSI pro-
are correlated with the symptom that launched the cess is not designed in an ad hoc manner, but each
inquiry (a symptom may be a drop in profits, a element is intended to address one or more of the
loss of market share, or some other key issue that impediments identified by our theoretical analysis.
has the concern and attention of leaders). Once Following, we explain how the combination and
the web of correlated symptoms is identified and sequence of elements were intended to mitigate
verified through the framing phase, the next phase the theoretically derived impediments.
Copyright  2012 John Wiley & Sons, Ltd. Strat. Mgmt. J. (2012)
DOI: 10.1002/smj
 Strategic Problem Formulation

Structuring CSI into distinct stages is expected reduce representational gaps by causing individu-
to be beneficial given past research document- als to share their knowledge and understand others’
ing the value of distinguishing between prob- mental models.
lem formulation and solution generation (Lipshitz The unanimity decision rule is used to address
and Bar-Ilan, 1996; Maier and Hoffman, 1960). two impediments: representational gaps and diver-
Segmentation is targeted at two impediments. sity in objectives. Majority and unanimity are
First, it is intended to mitigate being ‘solution the most common decision rules used by teams
minded’ (Maier and Hoffman, 1960). Specifically, (Mohammed and Ringeis, 2001). In contrast to
in the framing and formulation phases members unanimity, majority rule is considered to be less
are focused on identifying symptoms or causes, time consuming and more likely to avoid impasses,
as opposed to prematurely leaping to solutions. and less likely to produce post-decision entrap-
Second, the sequential structuring of segments is ment (Castore and Murnighan, 1978; Hare, 1976;
designed to limit political or strategic behavior. Kameda and Sugimori, 1993; Kerr et al., 1976;
For example, one way that managers may engage Miller, 1989). Most benefits of majority rule, how-
in political behavior is by providing solutions that ever, are only likely to materialize in teams that
are advantageous to themselves or their department are either purely cooperative (here, majority rule
(Pettigrew, 1973). By first focusing on identify- should be more efficient than unanimity at reaching
ing relevant symptoms and prohibiting solutions a decision) or purely competitive (here, majority
prior to formulating the problem, CSI is designed rule should be more likely to avoid an impasse
to limit strategic behavior within the team. For and to produce an agreement that is acceptable to
instance, it is unlikely that discussions of symp- the largest number of team members) (Thompson,
toms will trigger political reactions the way that Mannix, and Bazerman, 1988). In contrast, when
team members share some objectives but not others
deriving solutions can (discussing symptoms has
(a likely characteristic of the types of heteroge-
fewer direct implications for which actions need
neous teams involved in the formulation of strate-
to be taken and whom such actions may bene-
gic problems), majority rule may produce dysfunc-
fit). Although it provides no guarantee that polit-
tional outcomes related to problem formulation.
ical maneuverings are completely eliminated, we
Specifically, in teams with heterogeneous objec-
expect that the sequential structuring of segments
tives, majority rule may cause members to com-
fosters a context in which team members come
promise early rather than to search for more inte-
to slowly agree on the goal of eliminating the grative understandings and solutions (Mohammed
symptoms. Such convergent expectations can then and Ringeis, 2001; Thompson et al., 1988). When
attenuate impediments that derive from heteroge- teams compromise prematurely, it is unlikely that
neous motivations. all information is revealed and unlikely that team
The modified NGT is intended to attenuate the members invest in the communication codes and
impediments of information sampling and repre- channels needed to understand and integrate dif-
sentational gaps, as well as the related problem ferent information and cognitive structures. Thus,
of dominance by a few members (Van de Ven the unanimity rule should help teams with hetero-
and Delbeq, 1971). Specifically, the mNGT forces geneous objectives mitigate narrow sampling and
individuals to identify and commit to their infor- representational gaps.
mation or cognitive structures before being influ- Finally, CSI involves external stakeholders.
enced by their fellow team members; this can Although the mNGT is intended to maximize
reduce the tendency for teams to engage in narrow information exchange within the team, it is pos-
sampling. In addition, by requiring team mem- sible that team members may not have the full set
bers to individually reveal their information (which of information necessary to comprehensively for-
prevents low stakes individuals from engaging mulate the problem and/or may fail to reveal all
in ‘social loafing’) and specifying rules for dis- unshared information. To address the impediment,
cussing and evaluating ideas (which prevents high a step is included to allow external stakehold-
stakes individuals from dominating), each indi- ers to comment on the symptoms or their under-
vidual has an equal chance at participation. By lying causes. As Ancona and Caldwell (1992)
requiring that every listed symptom and cause must found in the study of new product development
be discussed and evaluated, the conversations may teams, reaching out to external teams can partially
Copyright  2012 John Wiley & Sons, Ltd. Strat. Mgmt. J. (2012)
DOI: 10.1002/smj
M. Baer, K. T. Dirks, and J. A. Nickerson

address the bounded rationality of the group. Thus, adopting only some of the structured process ele-
involving external parties by circulating symptoms ments proffered would unlikely satisfy all of our
and problem formulations can expand problem for- design goals and therefore not mitigate the identi-
mulation comprehensiveness. fied problem formulation impediments. Our theory
therefore led to specific guidance for managers
interested in implementing a process to enhance
DISCUSSION the formulation of complex, ill-structured prob-
lems. Although not reported in this manuscript,
The goal of this paper was to build theory- CSI has been applied in a number of organiza-
based microfoundations for SPF. Although prob- tions with preliminary evidence of its success in
lem formulation has been discussed in literatures improving SPF. Empirical research that examines
that span several academic disciplines including the effectiveness this or other structured processes
business strategy, organizational behavior, psy- intended to improve problem formulation is now
chology, sociology, and operational management, needed in order to advance the science and practice
and despite earlier work having provided impor- of SPF.
tant insights into the problem formulation activ- Our effort to build the microfoundations for SPF
ity, these largely descriptive accounts are scattered is predicated on several assumptions that deserve
across fields and have failed to provide a theoret- attention. For example, we assumed that the mem-
ical approach, let alone lead to the development bers of the team in aggregate possess sufficient
of microfoundations for this important activity. information and knowledge to span the space of the
Perhaps as a consequence, research on problem problem. One direction for future theory develop-
formulation has made little progress over the last ment is to relax this assumption and explore mech-
several decades. anisms to increase the likelihood of encompassing
As a first step toward establishing the micro- relevant information and knowledge. This may be
foundations of SPF, we identified a criterion by particularly important when it comes to exploring
which to evaluate the success of the formula- new opportunities, as it is difficult to predict a
tion activity. Next, using a relatively common set priori what expertise is required in such circum-
of assumptions in strategic management, we sys- stances. Another direction is to consider problem
tematically and theoretically identified a critical contexts that are less complex and more struc-
set of challenges that teams comprising heteroge- tured. We envision that our analytical approach is
neous members are likely to face when formulating flexible enough to accommodate such variation in
strategic problems. While these and other indi- assumptions. These variations may then lead to the
vidual impediments have been described in the discovery of new processes that are particularly
literature on group and individual decision mak- suitable for particular situations. Ultimately, we
ing, we developed a theory that not only identifies hope to launch the beginnings of a process-design
which impediments are likely to impact formu- paradigm by establishing the microfoundations of
lation comprehensiveness but also describes how a firm’s ability to discover, develop, and formu-
they interact to jointly impact problem formation. late strategic challenges in a range of different
With the set of impediments identified, we con- circumstances.9
sidered how a mechanism could be designed to Finally, within the strategy literature, our anal-
mitigate them. Highlighting the limitations of the ysis has important implications for the dynamic
mechanisms of selection and incentives in atten- capability perspective and the microfoundations
uating the impediments associated with SPF, we that undergird the various capabilities (Eisenhardt
suggested that the appropriate mechanism could and Martin, 2000; Helfat et al., 2007; Teece et al.
be a structured process. Based on our theory of 1997). According to Teece (2007: 1333), regularly
impediments, we developed one version of a struc- applying procedures to overcome impediments to
tured process, CSI, for mitigating the impediments strategic decision making is ‘not a well-distributed
to comprehensive problem formulation. Although
we borrowed individual elements from processes 9
The prior paradigm for a process-based view of strategy for-
previously identified in the literature, the novelty mulation dates back to Allison (1971) and Bower (1970). In
contrast to this earlier paradigm, our approach focuses on identi-
of CSI derives from the particular combination fying cognitive, social, and motivational impediments to strategy
and sequencing of these elements. Put differently, formulation and developing mechanisms to overcome them.

Copyright  2012 John Wiley & Sons, Ltd. Strat. Mgmt. J. (2012)
DOI: 10.1002/smj
 Strategic Problem Formulation

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