Strategic Management Dynamics

Chapter 4 - The strategic architecture

This Chapter adds to the ideas that performance depends on resources and that these accumulate and deplete the further observation that resource-building depends on existing resources – a rigorous, quantified perspective on the principle of ‘complementary resources’. It shows how combining these three basic causal principles enables the laying out of an integrated core business system for any kind of organisation. The basic math behind these principles is explained, and how this relates to a simple spreadsheet-perspective on modelling business performance. The Chapter shows how to use the resulting ’strategic architecture’ to both understand and anticipate organizations’ performance. It explains how interdependence creates feedback mechanisms that give rise to common phenomena of performance dynamics - escalation, collapse and limits-to-growth. Investigation of how strategic architectures behave shows that minimum resource levels are required for an enterprise to function at all, and that there is a maximum performance limit that can be extracted from a finite set of resources. The Chapter explains how tipping points of performance can arise, and shows links to the use of issue-trees for assessing strategy issues, to value-driver analysis, and to Balanced Scorecards and Strategy Maps

Includes connections to the following frameworks and concepts: The Bass Diffusion model, Tipping Points, Issue Tree Analysis, Value Drivers, Balanced Scorecard, Strategy Maps.

KEY ISSUES

• Complementary resources: why growth depends on existing and potential resources.
• How interdependence causes feedback that can both drive growth and constrain it.
• Mapping the interactions amongst resources to complete the ’strategic architecture’ that drives organisations’ performance over time.
• How different organisations in related industries exhibit common core architectures.
• The causes of discontinuities and tipping points
• Using strategic architectures with issue-tree analysis and value-drivers
• Using strategic architectures to support balanced scorecards and strategy maps.