STRATEGY FORMULATION METHODOLOGIES

STRATEGY FORMULATION

METHODOLOGIES

MICHAEL S. SCOTT MORTON

November 1986

CISR WP No. 149

Sloan WP No. 1845-86

90s WP No. 86-028

?

1986 Massachusetts Institute of Technology

Center for Information Systems Research

Sloan School of Management

Massachusetts Institute of Technology

Strategy Formulation Methodologies

Michael S. Scott Morton

Sloan School of Management, M.I.T.

Premises

The

short

topic of formulating a strategy is a hard one to address in a

space of time. Concepts that help with strategy formulation are

evolving

of

one

clear

and information technology itself is changing, so the impact

on

the

about

other is complex.

the

the

substance

the

world

underlying

of

and

the

the

way

assumptions before beginning to address

question.

it

As such, it seems important to be

There are some basic beliefs about

operates

which

underlie the arguments

developed in this paper.

The

first

strategies

of

are

premises

is

that

information

technology (I.T.)

most effective when they are developed in the context

of

business

to

know where the organization is headed before one begins to work on

the

question

and corporate strategies.

Thus a critical first step is

of what a sensible direction for the use of information

technology should be.

II

-2Such

an

explicit, statement

the

"rational

one

to use.

the

years,

Science

decision

Simons

terms,

in

Decision

"intelligence,"

interactive

it

seems

this

published

in

1960.

In this view

solve

alternatives

"design" and "choice" being the three

phases.

useful

In

In

to

light

of

work

since

Simon's

add a fourth step namely "action."

model an organization, or an individual, first defines

problem,

would

one of the earliest was Herbert Simon in his New

Management

publication

the

This model has been espoused by a series of authors over

making is thought of as falling into a series of phases.

principle

Thus

actor" model of the organization is the most effective

perhaps

of

of strategy assumes implicitly that

that

that

is' clarifies

it, then creates alternatives that

particular problem, then selects the best of these

following which they go through implementation, that is,

a set of actions are taken.

This

work

"rational

that

is

formulation.

research,

as

it

actor"

going

paradigm implicitly underlies much of the

on

in

corporate

strategy

and

strategy

The 'rational actor' paradigm dominates the writing and

particularly

relates

in the area of methodologies and even more so

to information technology since many who work in this

area come out of an engineering and science background.

However,

equally

well

example,

follow

there

there

a

primarily

the

are

several

activity

that

alternative

models

which describe

takes place in organizations.

For

is a large group of managers who seem to successfully

problem-solving

process

which basically acts first, based

on intuition, then examines the results in an intuitive way

-3-

and

if

senses

through

to

a

next

decision

making

second.

Such

on.

results

seem

set

actions.

the

of

action

to be good.

comes

In

first

They then cycle back

this view of management

and

the

analysis

comes

a view turns the standard methodologies for strategy

upside down and there is little prescriptive or normative

formulation

writing

the

for

managers or academics with this view of the world to act

the

In

comments

follow,

that

the

rational

actor model is

dominant but is not in any way meant to be exclusive.

second premise that underlies this paper is that the need for

The

an

explicit

of

an

that

view of the organization's strategy is necessary because

increasingly

external environment.

turbulent

The premise is

next decade is more likely to be one of "economic war" than

the

"economic

It seems

peace".

overcapacity

discontinuities;

that

in

we

are

industry,

entering

an

increasingly

era

global

expectations both of the quality of products and

competition,

rising

services

well as expectations as to one's standard of living.

indeed

as

we

are

management

the

entering

systems

If

a period of continuing economic change then

and

ways

of

doing

business

that will be

in such a period of change will be different from those in

successful

past.

the

of

is assumed that incremental "business as usual" will

It

not be adequate in the years ahead.

Although

years

of

than

these

social,

the pace of change is assumed to be higher in the coming

it

was in the '60s and '70s, it is not assumed that most

changes

are

I.T.

related.

In fact, quite the reverse;

political, global economics, and technologies such as genetic

l1

-4-

engineering

are

enables

organization

they

the

occur

argued

technology

example,

activities

in

South

and

to

the

way.

Information

However,

facilitating

technology

to facilitate and mediate these changes as

information

for

added

organizations.

and impact on the organization.

that

change,

driving

live

Africa

As an aside, it could be

facilitates

television

a

faster

coverage

in

rate of

America

on

has undoubtedly increased the awareness

political pressure for America to respond in some

by

and

change

large,

or

information

technology seems to be

enabling it to happen rather than driving it

in a causal way.

A

third

several

external

second

premise

levers

by

world

imperative.

they

occur

that

an

which

and

premise,

is that information technology is merely one of

an

organization adjusts to changes in the

in management practices.

there

Strategy

is

to

no

As is suggested in the

assumption

of

a

technological

be effective has to be driven by ideas as

to informed capable managers.

On balance, it is unlikely

effective strategy will be driven by the technology in a way

that brooks no alternatives.

than

The

fourth premise is that strategy formulation is more of an art

a

science and to be effective it should be the province of line

management.

Hence;

formulation.

differently

If

in

the

resulting

and

others

the

built-in

difficulty

of

I.T.

strategy

corporate strategy formulation is an art practiced

different

strategy

scarcely

at

organizations by different managers and if

is articulated in some firms in great detail

all,

then clearly there is no "science" of

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