NEW APPROACHES TO STRATEGY DEVELOPMENT
In the past, the formulation of strategy – at least in large corporations – was the domain of upper-level management. The traditional approach involved top managers coming up with a strategic direction for the company, setting it forth in an annual written strategic plan, and then disseminating the plan to various departments and employees, who were expected to contribute only within their own spheres of influence. This approach seemed to work fairly well for slow-moving companies in a stable external environment.
In recent years, however, the process of developing strategy has changed dramatically in response to changes in the overall business world. There is little question that the traditional approach on strategic planning, formulated in different era, is often inadequate to deal with the rapid and continuous changes taking place in today’s marketplace; it also fails to take into account the increased demand for autonomy in today’s workforce.
Traditional approaches to strategy development have been criticized for being too rigid, inflexible, and authoritative. Experts claim that these approaches were too concerned with analysis and quantification to be able to predict and adapt quickly to market changes. As a result, new approaches have emerged that no longer relegate strategy to top management; instead, the strategy formulation process involves all individuals in an organization, particularly those who are in direct contact with customers. A new approach to the strategic planning process, one that involves managers at all levels, can result in a dynamic process that increases competitive advantage. Strategic planning has evolved due to the increasingly urgent need for responsiveness to market changes.
In large measure, the changes that have taken place in business strategy have come as a result of changes in the environment. As the global marketplace have become increasingly volatile and competitive, companies have had to adjust by reducing their time frames for responding to changes in customer needs. In addition, the changes in business strategy have come in part because today’s workers tend to want and even demand more control over their work lives. The combination of these two factors has resulted in a new value being placed on employee participation in the strategy process.
In an environment in which change is the norm, the insights of those in the front lines take on a new importance, since those close to the action – salespeople and others who deal directly with outside clients – are first to get wind of the changes in customer needs. With this in mind, many companies have chosen to develop through the creation of multifunctional teams. Combining employees from different functional areas in this way tends to promote strategic thinking, because the groups are able to focus on broad company goals rather than on more limited functional, department, or individual goals. In addition to establishing functional teams within the organization, some companies have begun to solicit strategic input from external customers and suppliers as well.
Benefits from the New Approaches
Employee participation in the strategy process not only helps the company to develop a more responsive strategy, but also improves employee morale and commitment to the organization. The new, participative approaches to strategy formulation can also enable companies to improve their focus on customer needs by increasing the access of line employees to top management. In fact, hierarchies are designed to filter the information that goes to upper-level managers. But this lack of information can lead to overconfidence and myopic decision-making. Similarly, the new approaches can also help companies to remain flexible and responsive to market changes. The greater amount of information that managers receive about the market enables them to adapt the company’s strategic direction to take advantage of new circumstances.
Participative strategic development also may help companies to retain key employees, because employees gain satisfaction by being able to direct and see the results of their efforts. Retaining these highly skilled and trained professionals will become increasingly important as knowledge has more and more to do with the company’s ability to build and maintain a competitive advantage.
Finally, participating in strategy formulation may enable managers to make better use of their time. This benefit is particularly helpful because time is always limited as companies try to do more with less people.
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