On the Origin of Great Strategies
2018; Institute for Operations Research and the Management Sciences; Volume: 3; Issue: 1 Linguagem: Inglês
10.1287/stsc.2018.0054
ISSN2333-2077
Autores Tópico(s)Management and Organizational Studies
ResumoFree AccessAboutSectionsView PDF ToolsAdd to favoritesDownload CitationsTrack CitationsPermissionsReprints ShareShare onFacebookTwitterLinked InEmail Go to SectionFree Access HomeStrategy ScienceVol. 3, No. 1 On the Origin of Great StrategiesGiovanni Gavetti, Joe PoracGiovanni Gavetti, Joe PoracPublished Online:9 Feb 2018https://doi.org/10.1287/stsc.2018.0054IntroductionAnyone who has taught a core strategy course has faced the question that motivates this special issue of Strategy Science on the origins of great strategies. After the course is over, inevitably a student or two will corral the instructor and ask, "Professor, the course was excellent, and the tools and concepts you provided really help me to understand strategic management. But, tell me, where do great strategies really come from, and how can I develop one?" We have always found this question a bit curious because it points to a gap in how strategy is often taught, and perhaps to a broader gap in our scholarly understandings. The frameworks that are provided in a foundations of strategy course are excellent for setting the stage for strategy formulation. They help students develop the right forma mentis for thinking about strategy, and certainly offer a battery of tests to evaluate the soundness of strategic ideas. But, students believe there is something more, and they ask for it. They ask for guidance on how strategic management concepts can help them to make a unique, profitable difference with their strategies, a difference that provides the foundation for a successful and thriving firm. What is a great strategy? Where do great strategies originate? And how can a strategist formulate one, or facilitate its development? We believe these are challenging questions, and conversations with colleagues over the years suggest that others in the field find them challenging as well. These are the questions that we set out to address in organizing this special issue of Strategy Science.We wrote this integrative editorial, our contribution to this special issue, with three goals in mind. First, we wish to provide the reader with background on why and how this special issue came to be. Another goal is to provide a general road map to help the reader navigate the arguments and varied perspectives that are covered by the special issue contributors. Finally, we would like to articulate a general framework that helps to integrate these varied perspectives and hopefully gives readers a useful way to think about the questions at hand. Several times in reflecting about the contributions and how we could integrate them, we found ourselves saying, almost in unison, something along these lines: "No matter what happens with the special issue, whether it ends up changing the conversation, one thing is clear—only three months ago our own conversations and understandings of the origin of great strategies were at least an order of magnitude shallower than they are right now." We hope our framework conveys, in a parsimonious manner, the kind of epiphanies we ourselves have had over the course of the past year.InspirationThe inspiration for this special issue evolved over the spring, summer, and fall of 2016. At a few different conferences, the two of us were asked to discuss, debate, and elaborate the microfoundations of creative strategies. We are both unabashedly "cognitivists" in that we are inspired by Simon's (1947) insight that the relationship between an organization's environmental demands and managerial choice is mediated by managerial cognitive representations. So, both of us are inclined to believe that great strategies are, at least to some degree, rooted in how strategists and top management teams think about and represent the market or competitive order in which their firms act. We discovered in our discussions and debates, however, that this fundamental commonality masks a variety of differences in our respective views on where great strategies come from and, relatedly, on the role of the strategist. Are great strategies evolutionary outcroppings produced by selection forces operating on semi-inert myopic economic actors? Or are they the product of superior foresight, informed by deep context-specific expertise? Or are they acts of constructive imagination by the actors involved, reframing and redefining large swaths of the market landscape? Are great strategies imposed on firms by strong cues and affordances in the competitive environment? More generally, are great strategies the products of a superior ability to "figure out" the world, or are great strategies those that "enact" a unique world of opportunities as a strategist imagines them? As we discussed these and other issues, it became clear to us that one's approach to the nature and origin of great strategies is crucially dependent on the foundational assumptions one makes about agency, rationality, reality, et cetera. As such, answers to the question, Where do great strategies come from? are likely to be as varied as the field of strategic management itself.It was this realization that prompted us to conclude that a single approach to the origin of great strategies might be impossible, and if one is possible, it would be so only after understanding how the issue of great strategies crosscuts and intertwines with the many varied perspectives of the field as a whole. We agreed that this sort of overview would best be undertaken as a collective effort with other strategy and organizations scholars, and we approached Dan Levinthal about whether Strategy Science could be the outlet for a collective discussion on the origins of great strategies. Dan graciously agreed, and after honing a joint vision for a special issue during the early months of 2017, we invited 17 prominent strategy and organizations scholars to contribute short articles on the subject. Fifteen scholars agreed to participate: Professors Barnett, Brandenburger, Burt, Eisenhardt, Ghemawat, Levinthal, Ocasio, Podolny, Powell, Rao, Rindova, Schilling, Silverman, Whittington, and Zenger. Many of the 15 invited coauthors to join them in the project: Professors Bingham, de Figueiredo, Dutta, Felin, Fink, Joseph, Martins, and Soda, and the leader of the BCG Henderson Institute, Martin Reeves. Collectively, the 24 contributors to this special issue represent a rich cross section of the theoretical perspectives that currently define the strategy and organizations literature.We provided the authors only broad guidelines for their contributions. We asked that they focus their efforts on the very practical student-driven question, Where do great strategies come from, and how do I develop one? We strongly encouraged them to answer the question from either their own theoretical standpoint or from a position informed by their own research. We left the definition of "great strategy" to them and urged them to take their point of view as far as they could comfortably take it in defining greatness and accounting for great strategies. Over the summer of 2017, we exchanged drafts and emails with the authors, providing feedback and advice on what they were writing, but our editorial focus was quite general and directed toward maximizing the distinctiveness of each of their voices. We conceptualized the scope of the papers as a journey through the varied perspectives of our field and what each perspective had to say about the origins of great strategies. Authors worked in isolation of the other special issue contributors in producing drafts that were close to completion by the end of August 2017. In mid-September 2017, the two of us as well as most of the contributors convened at Apple University in Cupertino, California, for a day to exchange ideas and circulate feedback on the respective papers. This workshop was the first opportunity for the authors to hear about the other contributions to this special issue and to debate the nuances of their own perspectives with those who were making related arguments. They also confronted perspectives that were quite different from their own. Following the workshop, authors were afforded one last opportunity to revise their papers for this special issue after receiving additional editorial feedback.Illustrative Exemplars of Strategic GreatnessSince we encouraged contributors to define great strategies on their own, some took up the invitation and worked an explicit definition of greatness into their paper. Many, however, dealt with this issue empirically by giving examples of companies and strategies that, for them, exemplified greatness through action and success. In this regard, the Apple University venue for the workshop was especially fortuitous. Apple's history is well known in strategy circles, and various Apple cases are standard fare in strategy classrooms. By just about any qualitative or quantitative measure, it is difficult not to consider Apple one of the great success stories of modern business. Spending the day on the Apple campus in Cupertino gave us the opportunity to interact with Apple executives and to debate the nuances of great strategies among ourselves within the context of a large global enterprise currently enjoying the height of its success as the most valuable company in the world. We encouraged contributors to exploit this context in their papers, and many did. In the end, we think that this common backdrop adds to the uniqueness and informativeness of this special issue because contributors from very different theoretical perspectives found at least some support for their arguments in various aspects of Apple's strategic history. While the inspiration for this special issue came from our conclusion that divergent perspectives in the field may have quite disparate accounts of great strategies, the Apple exemplar as interpreted by the different contributors suggests that such accounts may not be mutually exclusive. This was an important realization for us. Different perspectives may make different assumptions about the world, and as a result emphasize different key considerations. Yet, given the complex multidimensionality of organizations, strategies, and greatness, we eventually began to see that the different views expressed in this special issue were far from mutually exclusive, with some even being complementary. This realization gave additional impetus to our desire to compare and contrast the arguments and our attempt to pull them together in a way that provides a coherent answer to the questions that motivated this special issue.Of course, Apple is not the only exemplar company used by the contributors to illustrate various elements of great strategies. Others include Starbucks, Vanguard, Airbnb, Dropbox, Hewlett Packard, Canon, Casper, Walmart, and a host of other companies cited in passing or through pseudonyms. In our own discussions, we found the contrast between Apple and Walmart particularly generative in helping us to understand the elements of great strategies and the similarities and differences among the various contributions to this special issue. Both companies are among the largest and most valuable in the world, yet the two have very different histories and follow quite different strategies. Apple's success is rooted in high profit margins from offering cutting-edge products and services for which buyers are willing to pay more when compared to the products of competitors. Walmart's success stems largely from its efficiency, which gives it the ability to offer lower prices on common consumer goods in convenient locations with friendly service. In typical strategy classifications, the two companies are polar opposites, yet both are iconic in their own way. In our view, any account of the origins of great strategies must be robust and general enough to account for both the Apples and Walmarts of the world. As we proceed with our overview and integration of this special issue contributions, we will liberally use examples from both companies to illustrate our arguments.Great Strategies and the Primitives of Market OrderAll of the contributions to this special issue recognize that great strategies are rooted in meaningful departures from a prevailing status quo—the cognitions, practices, routines, and institutions that stabilize a market or competitive order at any given point in time.1 The status quo is not easy to escape, but any given firm pursuing strategic greatness needs to depart from the prevailing order in some fashion. Not all departures, however, define greatness. They must lead to what Brandenburger and Stuart (1996, p. 6) called "favorable asymmetries" that advantage one firm over others in a local market context. Such asymmetries underpin added value, which, in turn, and under not-so-restrictive assumptions, is a prerequisite of value capture. This is, we think, a very powerful generalization. It frames the problem of greatness in terms of market orders and profitable departures from them. Added value, in essence, stands as a metaphorical "north star" in the pursuit of strategic greatness. The key issue, of course, is the nature and origin of these departures. The contributors to the special issue, implicitly or explicitly, pursue this general approach and identify different origins and different kinds of departures. This commonality gives us a useful analytical anchor around which to interpret what the papers tell us about the origins of great strategies.In this section, we explore the varied conceptions of market order that are reflected in the contributions. Similar to most of the contributors, by "order" we do not mean "equilibrium." Equilibrium indicates a stationary state. We do not think of order as something fixed or stationary, but as a changing flux of actors, cognitions, activities, routines, and artifacts. However, any market order is characterized by a relatively sticky, well patterned, and evolving set of "givens" that affect firms' competitive options and behavior at any given time. Within this set of givens, the challenge of greatness comes in two forms. Firms that already enjoy a favorable asymmetry that has allowed them to achieve greatness face the challenge of maintaining this asymmetry, of maintaining their greatness. They must figure out what has made them great and what they can do to continue their success. Established firms within the market order, or those new to the market order, that have yet to achieve greatness face the challenge of becoming great. They must figure out what will make them great in the market order. The contributions to this special issue, although quite varied in their perspectives, suggest that both challenges are shaped by three sets of conceptual primitives that together define market orders: material technologies and their embedded routines, cognitive representations and belief systems, and actor values and their attendant valuations. Each primitive acts as both a constraint to action within a particular competitive order and an enabler or gateway to variation that changes the market order. We emphasize the former in this section of our paper and elaborate on the latter in the section Three Paths to Great Strategies.First Primitive: Material Technologies and Their Embedded RoutinesMarkets are underpinned by technologies and the routines that make them work in arrays of products and services. Although new technologies may start out as equivocal stimuli that are interpretively flexible (e.g., Bijker et al. 1987, Weick 1990, Nelson 2008), they develop in ways that are typically cumulative and path dependent, and thus acquire temporal consistency and paradigmatic "closure" (Dosi 1982). As they evolve and acquire the status of "facts," they increasingly constrain and shape the evolution of products and services within them. In a recent informal exchange with a few colleagues, Winter (2017, p. 1) remarked that "Like it or not, a firm typically faces some important circumstances that are pretty much given in the short run … . Those facts exist, and are key 'strategic' facts, independent of how or whether they are seen by a decision-maker." Similarly, Ghemawat (1991, p. 66) observed that "[a]n organization's ability to act upon opportunities as they present themselves is constrained by the stocks of factors that it has accumulated." The inertial factors that are embedded in the material technologies and associated routines underlying products and services are the first set of conceptual primitives, or givens, that define a market order at any point in time.Several of the articles in this special issue explicitly point to the "heaviness" of technologies and routines, their inertia, as a key challenge for the strategist searching for favorable asymmetries and a gateway to greatness. Some view the strategic problem in terms of firms confronting a large and complex landscape of possibilities. For instance, Levinthal (2017) (implicitly) and Podolny (2018) (explicitly) frame their contributions in terms of firms walking on a rugged "fitness landscape"—a complex mapping between all possible courses of action and some measure of performance (Levinthal 1997). Complexity means that the relevant variables of the problem—as embodied, for instance, in firms' practices and routines—are many and interdependent. The complexity of the problem is assumed to outstrip managers' and firms' rationality constraints. The most immediate consequence is that rationality is of a local variety. The representative firm is thus a largely "reactive" entity. It can intelligently navigate proximate waters, reacting to local feedback, but it avoids the uncertainty that by necessity surrounds more distant ones. One key implication is that initial conditions matter a lot. Although a typical firm can intelligently climb local peaks of a rugged landscape, it has a harder time jumping onto more distant ones, or at least to do so intelligently. Its evolution—the evolution of its practices, routines, and skills—is thus heavily path-dependent. A second implication is that learning and change are most often incremental and involve trade-offs between local expediency and more distant optimality. Market order thus naturally arises with firms semistably clustering around some select peaks of the landscape.In "Mendel in the C-Suite: Design and the Evolution of Strategies," Levinthal (2017) depicts favorable asymmetries as evolving out of especially inspired experimental activity. Experiments need not be expensive. The Mendelian chief executive officer (CEO) distinguishes herself by her ability to create an organizational context that is congenial to the generation of cheap and meaningful variations—experiments that depart from the status quo and are tested via internal, or "artificial," selection mechanisms. This same notion of order is also evident in the contributions of Podolny (2018), "An Exploration of Discerning Search," and Fink et al. (2017), "Searching for Great Strategies." Podolny (2018, p. 295) defines a great strategy "as one that escapes the local equilibrium in which industry strategies are situated" and that leads an industry to a "greatly superior equilibrium." Great strategies emerge when strategists with a particularly discerning eye for new and profitable combinations refuse to accept the local trade-offs other strategists might see as acceptable and keep searching for more distant, and better performing, possibilities. Similarly, Fink et al. (2017) conceptualize products as sets of components such as materials, skills, and routines. The market order at any given time is a pool of components whose individual utility depends on the other components with which they are combined to create some number of products. Fink et al. (2017) argue that the task for the strategist is to search this space and construct component bundles that optimize component usefulness. However, since component usefulness is contingent on the current pool of components and their potential combinations, strategists face a decision to optimize in the short term where the usefulness of known combinations is easier to discern, or wait until some future period where the usefulness of components might be higher but their optimal combinations are not yet foreseeable.Other contributors agree that great strategies are generated within a very local order of routines and technological givens, but they embed this order in the practices and agendas of the firms involved rather than rationality constraints. For instance, in "Greatness Takes Practice: On Practice Theory's Relevance to 'Great Strategy,' " Whittington (2018, p. 344) also focuses on path dependency and stability, or what he calls the "rooted regularity" of practices driven by habit. He suggests that, "practice theory emphasizes the importance of local, everyday activity, especially as it congeals into repeated practices. Practices are gritty, rooted in the social and material reality of their contexts" (Whittington 2018, p. 344). Moreover, for Whittington (2018, p. 343), a focus on local practice and routine also calls attention to "the layers that lie behind action in the moment and beneath events on the surface." Strategic greatness thus does not come from "heroic individuals, grand visions, and imaginative leaps" (Whittington 2018, p. 343), but, rather, from the strategist's attention to the mundane, the trivial. According to Whittington (2018), it is the microcomplexity of the mundane that, if properly understood and unpacked, offers opportunities for favorable asymmetries in the prevailing order.Ocasio and Joseph's (2018) "The Attention-Based View of Great Strategies" shares a similar sensibility. Their implicit market order is comprised of routines and practices for creating value. For them as well, favorable asymmetries from a market order are not about radically new ideas, but instead result from an evolutionary and emergent process. Indeed, from their perspective, "great strategies are not about developing great ideas, which may or may not succeed, but about how ideas become part of focused and sustained strategic agendas in the organization … . Great strategies typically require the development and acquisition of new organizational resources and capabilities, and are largely dependent on attentional structures and processes" (Ocasio and Joseph 2018, pp. 292–293). For Ocasio and Joseph (2018), great strategies emerge through a long and nonlinear process. Their key insight is that the proper management of this process may be more consequential than the strategic idea itself.Second Primitive: Cognitive RepresentationsThe constraints of materiality are strong and directive. Many of the contributors to this special issue explicitly assume, however, that the competitive order is at least partially shaped by the cognitive representations of actors within it. This argument, which holds a special place in our own conceptions of strategy (Gavetti 2012, Porac et al. 1989), has a long history among management and organizations scholars. It can be traced back to Simon's (1947) cognitivist views of organizations and administrative decision making, early neoinstitutional approaches to organizational fields (e.g., Meyer and Rowan 1977), and the sensemaking perspective on organizing (e.g., Weick 1979). The commonality among these varied literatures is the argument that markets and industries cannot be reduced only to the material or technological substrates of action, but must also be understood as subjective fields characterized by cognitive representations that infuse markets with relatively shared meanings and knowledge. The strategy and organizations literature has identified a number of such representations over the years (e.g., Porac et al. 2002), including conceptions of firms' identities (e.g., What kind of company are we?), theories of value generation (e.g., What kind of business model works here?), market relationships and boundaries (e.g., Who are my competitors? Who are my customers?), firm reputations (e.g., What are we known for?), and status orderings (e.g., How do we compare with our competitors?). Because competitive orders are, at least in part, defined by the cognitive representations of the of the actors within them, strategists in particular, has important implications (Gavetti and Menon 2016, Cattani et al. 2016). Strategists and top management teams that vary in history and experience within the focal market can bring different representations to bear when interpreting the status quo. Even if an existing status quo has a certain stability to it, similar strategists may thus view the market order differently, and their foresight or imagining of new possibilities can be quite different. Moreover, to the extent that cognitive representations are more malleable than material technologies, they may evolve and change more quickly, leading to reframing and reconceptualizing material conditions in ways that open up previously unknown opportunities.Consistent with cognitivist precepts, many of the contributors to this special issue argue explicitly for grounding great strategies in the cognitive representations of strategists. The contributors differ, however, in important ways. In their paper "The Theory-Based View: Economic Actors as Theorists," Felin and Zenger (2017, p. 261) suggest a metaphorical distinction between viewing the strategic mind as a "generative organ" capable of autonomous imagination versus viewing it as a "camera" that captures elements of a "reality" being experienced. Some contributors are more inclined toward the former position (Brandenburger 2017, Schilling 2018, Felin and Zenger 2017, Rindova and Martins 2018, Barnett 2017, Eisenhardt and Bingham 2017), while others seem more inclined toward the latter (Levinthal 2017, Podolny 2018, Burt and Soda 2017, Rao and Dutta 2018, Powell 2018, Fink et al. 2017).Felin and Zenger (2017) locate themselves squarely in the former camp. They argue that "[o]ur physical reality and environment has a large if not infinite variety of features, characteristics, and possibilities, which remain latent or dormant" (Felin and Zenger 2017, p. 260). It is a strategist's "theory of value" that "allows for salience and unique observation" of environmental characteristics and possibilities (Felin and Zenger 2017, p. 260). For Felin and Zenger (2017, p. 260), "even mundane objects, events, occurrences or readily visible factors may take on completely new meaning and insight in light of the novel theories we possess." Similarly, in "The Cognitive Foundations of Visionary Strategy," Schilling (2018, p. 336) argues that because business environments are complex sets of stimuli, increasing specialization has led individual strategists to "have increasingly precise knowledge about how one part of the system works," but decreasing opportunity or reason to think about the broader market as a whole. For Schilling (2018), great strategies are rooted in three cognitive operations. Strategists are more likely to generate great strategies when they abstract away from mundane details "to identify a reduced set of essential characteristics" (Schilling 2018, p. 335) of a problem, when they pursue an ideal "that is unconstrained by what others deem as practical" (Schilling 2018, p. 338), and when they deploy "long paths of analytical reasoning" that follow "the sequence of causal logic out further than competitors" (Schilling 2018, p. 340).Several of the contributors build on this cognitive perspective with details about how the content of particular types of cognitive representations underpin great strategies. In "Where Do Great Strategies Really Come From?" for example, Brandenburger (2017, p. 221) argues that while mapping and classifying the status quo market game is a useful endeavor in strategy making, "successful strategy and performance come from looking beyond what is cognitively close to the status quo (therefore, easier to think about) to what is further out (therefore, harder to think about)." Brandenburger (2017) suggests that cognitively reframing and "changing the game," while cognitively more challenging, is also potentially more profitable. This same idea is taken up by Eisenhardt and Bingham (2017) in "Superior Strategy in Entrepreneurial Settings: Thinking, Doing, and the Logic of Opportunity." These authors assume a "strategic playing field" of various types of relationships among firms (Eisenhardt and Bingham 2017, p. 247). In their view, great strategies emerge from firm-level variations in conceptualizing and defining these market relationships in creative ways. This generalization is quite consistent with the position taken by Barnett (2017) in his paper "Metacompetition: Competing Over the Game to Be Played." According to Barnett (2017, p. 212), market orders are structured by "logics of competition," which he defines as "a system of principles in a given context that determines who can compete, how they compete, on what criteria they succeed or fail, and what are the consequences of success or failure." At times, different logics of competition are vying for dominance in a market, and true strategic innovations are valuable because they introduce a new logic of competition that reconceptualizes the actors, practices, and values around which a market coheres. Powell (2018) goes even deeper cognitively in his "Absence-Neglect and the Origins of Great Strategies." Similar to other cognitivists, Powell (2018) argues that great strategies are rooted in how individual strategists and/or top management teams conceptualize the business environment. Yet, Powell's (2018, p. 306) starting point is his argument that strategists tend to "neglect cognitive objects that do not make impressions on the five senses. In simple terms, people notice what is there and neglect what is not there, and regard the former as more important. I refer to this tendency as absence-neglect." For Pow
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