Part One: The Process of Strategic Change

Strategy guides and directs the firm's growth and change. A key to understanding strategy is a clear picture of the process of strategic change within the firm which expands and alters its product-market position. This process is described in the first reading. It is seen to take place on two levels: that of the productive or logistic activities in research and development, production, marketing, and the level of management activities which provides guidance to the former.

Concern with strategy competes for top management attention with direction of ongoing operations and, unless management makes a special effort, concern with operating matters is likely to receive priority.

Strategic change takes place in most firms, with or without explicit strategy formulation by management, but the nature of change is likely to differ. When left to itself, strategic change will follow an expansion strategy based on gradual extension of the past market and substitution of similar products for obsolete ones. The alternative diversification strategy requires direct management guidance.

But how does top management proceed about formulating such guidance? A common way is described by Lindblom in the second reading in this section. Although he uses 'policy' (until recently a more common term) for 'strategy', and his examples are drawn from government experience, a businessman would readily recognize the 'successive limited comparison method' as a prevalent one in practice. Lindblom asserts that this method is also the one which should be used in preference to the alternative 'root' method of management science. The reason is that the latter is 'of course impossible' to apply to complex problems; 'although (it) ... can be described, it cannot be practised'.

Lindblom is wrong when he claims the 'root' method to be `impossible'; this is demonstrated by the third reading in this section (and further demonstrated in later sections). The TRW reading shows how one of the world's most dynamic corporations goes about a methodical exploration of wide vistas of opportunities in the process of formulating its corporate strategy. Nevertheless, Lindblom's article is instructive, since it describes a widely prevalent state of practice in business and government organizations.