James W. Fredrickson

Are you sure you have a strategy

Executive Overview After more than 30 years of hard thinking about strategy, consultants and scholars have provided an abundance of frameworks for analyzing strategic situations. Missing, however, has been any guidance as to what the product of these tools should be—or what actually constitutes a strategy. Strategy has become a catchall term used to mean whatever one wants it to mean. Executives now talk about their “service strategy,” their “branding strategy,” their “acquisition strategy,” or whatever kind of strategy that is on their mind at a particular moment. But strategists—whether they are CEOs of established firms, division presidents, or entrepreneurs—must have a strategy, an integrated, overarching concept of how the business will achieve its objectives. If a business must have a single, unified strategy, then it must necessarily have parts. What are those parts? We present a framework for strategy design, arguing that a strategy has five elements, providing answers to five questions—arenas: where will we be active? vehicles: how will we get there? differentiators: how will we win in the marketplace? staging: what will be our speed and sequence of moves? economic logic: how will we obtain our returns? Our article develops and illustrates these domains of choice, particularly emphasizing how essential it is that they form a unified whole. ........................................................................................................................................................................

Top Management Team Coordination Needs and the CEO Pay Gap: A Competitive Test of Economic and Behavioral Views

The need for coordinated decision making bears on the pay gap between a firms CEO and its other top executives. A behavioral view suggests that because more equal pay promotes collaboration, greater coordination needs encourage smaller pay gaps, and the combination of greater needs and smaller gaps enhances firm performance. An economic view implies the opposite because larger gaps create tournament-like incentives that address monitoring problems associated with joint decisions. We found that although economic theory was a better predictor of the size of CEO pay gaps, there was a balance between the economic and behavioral views as predictors of firm performance.

Top management team agreement about the strategic decision process : A test of some of its determinants and consequences

The level of agreement among a firm’s top executives about how things are done in that firm has a variety of important implications. For example, agreement about a firm’s decision-making norms may allow members of the top management team (TMT) to focus on the substance of their most critical decisions and not get bogged down in debates about the process. In the present study, data from 65 firms in two industries were used to identify determinants and consequences of TMT agreement about the comprehensiveness of the strategic decision process. Results for consequences indicate that the level of TMT agreement was positively related to organizational performance. As for the determinants of agreement, organizational size was negatively related to agreement but past performance exhibited no association. Therefore, the results suggest that it is TMT agreement that influences performance, not the reverse. In addition, a surprising result was that firms in an industry with an unstable environment exhibited significantly more agreement about the process than did their counterparts in an industry whose environment was stable.

Path-dependent Routines in the Evaluation of Novelty: The Effects of Innovators’ New Knowledge Use on Brokerage Firms’ Coverage:

This paper examines how path dependencies in evaluation routines affect a brokerage firm’s decision to provide coverage to a company that builds on new knowledge. Companies depend on brokerage firms to gain access to external resources, as a brokerage firm’s coverage is a valuable form of recognition that may lower a company’s cost of capital and increase its value. Yet path dependencies in a brokerage firm’s evaluation routines may make it less likely to cover a company whose inventive activities build on different knowledge than it used in the past. Using data on 183 U.S. publicly traded medical device companies from 1993 to 2006, we examine how a company’s use of new knowledge affects a brokerage firm’s decision to cover the company. Our results suggest that a company may face a tension between exploration and resource dependence, as after it overcomes internal path dependencies that hinder exploration and successfully uses new knowledge, it may still fail to gain the attention of outside organizations on which it depends to access relevant resources due to externally borne path dependencies in the routines these outside organizations use to evaluate novelty. Also, in contrast with existing literature suggesting that brokerage firms have homogenous expectations for which strategies are appropriate for different types of companies, our results highlight that brokerage firms differ in how they respond to companies’ inventive activities based on factors such as their prior exposure to new knowledge, prior evaluation of the companies’ downstream product markets, and scope of technological expertise.