A presentation questioning corporate strategic planning

1. Why Strategies don’t matter:Questions we should have asked Philippe Baumard CRG Ecole Polytechnique Presented at the Annual Conferenceof the Academy of Management, August 2008

2. “How do ‘our’ questions stack up against ‘their’ questions?” « Their » questions: What is going on? How do others do in similar situations? Is there a better metric to measure performance? What business model would generate more revenues? How do we create growth? Etc.. Etc.. “Our” questions: (from AOM 2008 program) “Duality and Board Attention” “Taxonomy of sequence of firms M&A” “Contractual completeness” “Strategic fabric of ambidexterity” “organizational vacillation” “punctuated identities”

3. “Classic” attacks on strategy… No correlation with performance Planning has yet to be correlated with profits (Norbun, Grinyer,, 1975), Starbuck, 1992, Baumard, Starbuck, 2002… etc) Management fads, imitation, institutionalization… Acting rationally is a societal, institutional, market, stockholders’ expectation… “State of the art” techniques are expected by management… (Abrahamson, 1992, 1996….) Prediction is just impossible Complexity of environment A firm’s environment is never the same (Starbuck, 1992)

4. Strategizing as a façade A “required” exercise Executive Committee is expecting “state of the art” techniques Expected conception of rational order (Abrahamson, 96) Strategizing is mostly retrospective (Fischhoff, 1975) Decisions are often taken when we start justifying them “we out-lucked” is not a receivable answer for the market, analysts, employees and shareholders Question we should have asked: “Can we seriously entrust corporate archives to measure ex-post success of strategies?” Implementation is slow and painful, demands of strategic rationale are random and urgent Availability of repertory of solutions that maintain a low level of uncertainty (Crossan et al, 2005).

5. Strategy as an ideological exercise A vital “enactment” of a relevant environment? Incremental arrangement (Baum & Dobbin, 2005) and social “peace keeping” Ideologies to act ideologies out (Starbuck, 1982, 2007) Question we should have asked: “If “ideologizing” is what matters, shouldn’t we need to measure the performance of ideologies instead?” Or do strategists live in an imaginary world? Existence of planning does not correlate with profitability (Grinyer, 1975). Meta-analysis didn’t improve this finding (Miller & Cardinal 94) It is too commonly taken for granted that firms must have major intentions, strategic intentions, and that they are baited to pursue them until the difference between announced strategy and realized actions is properly irreconcilable (Burgelman, 1996). Question we should have asked: “Are our categories creating a self-fulfilling prophecy?” – “Are we operationalizing what we want to see in organizations?” – “Are we really serving organizations doing so?”

6. Other counter-factual evidence Strategic advantage from ignorance In a study of 30 CI professional firms, we found that more ignorant firms displayed more assertiveness, more risk-taking and better market performance (Baumard, 1998) Large corporations are walking away from corporate strategy Both GE (under Jack Welch) and Orange (under T. Breton) suppressed their corporate strategy depts. altogether. They have displayed a better performance ever since “Letting go” of the paradigm does not improve the quality of findings “Competitive dynamics” literature that study moves not plans has not yet been able to come up with any kind of predictive results Ex-ante formalization trigger false consensus, create a ground for ideologies and encourage firms to act mimetically (Baumard Starbuck, 2002; DiMaggio & Powell, 1983)

7. Questions we should ask Firms favor precarious and experiential learning over literature To believe that firms favor a deep understanding of their environments is an “academic bias” : lexecutive behavior is more consistent with “action generation” (Starbuck, 1983) or March, Sproull, Tamuz’s “learning from samples of one” (1991) Actionable intelligence is manufactured through other channels Observations corroborate Fahey & King’s findings (1977) : firms are informal and unsystematic (even professional intelligence firms!) in their interpretation. They favor collateral and transient organizations (Zand, 1981 ; Wilensky, 1967). Sophistication of knowledge might not be correlated with subtlety of strategy expertise Poor knowledge favors determination 7