REGNER - Strategy Creation in the Periphery

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Journal of Management Studies 40; 1 January 2003
0022-2380
Strategy Creation in the Periphery:
Inductive Versus Deductive Strategy Making*
Patrick Regner
Institute of International Business, Stockholm School of Economics
ABSTRACT Although Strategy process research has provided careful and in-depth
descriptions and examinations of strategy, micro-level processes and activities
have been less commonly evaluated, especially as regards strategy creation and
development. This paper examines how managers create and develop strategy in
practice, A dual longitudinal case methodology, including a single in-depth study
combined with a multiple retrospective study is used, involving four multinational
companies. The findings show a twofold character of strategy creation, including
fundamental different strategy activities in the periphery and centre, reflecting their
diverse location and social embeddedness. Strategy making in the periphery was
inductive, including externally oriented and exploratory strategy activities like trial and
error, informal noticing, experiments and the use of heuristics. In contrast, strategy
making in the centre was more deductive involving an industry and exploitation focus,
and activities like planning, analysis, formal intelligence and the use of standard
routines.
INTRODUCTION
How do managers create and develop strategy? This simple question seems to be
fundamental for strategic management, but there are still surprisingly few answers
in strategy research. Strategy process research (e.g. Johnson, 1987; Johnson
and Huff, 1988; Mintzberg, 1978; Mintzberg and Waters, 1985; Pettigrew, 1985;
Quinn, 1980) has provided rich and systematic descriptions showing that strategy
making comprises a variety of actors and contextual influences. However, it seems
as if we still have an imperfect understanding of the particulars of these since
less attention has been devoted to the micro-level, including the actual activities.
Address for reprints: Patrick Regner, Institute of International Business, Stockholm School of Eco-
nomics, PO Box 6501, 11383 Stockholm, Sweden (patrick,regner@hlis,se),
© Blackwell Publishing Ltd 2003. Published by Blackwell Publishing, 9600 Garsington Road, Oxford, OX4 2DQ_,
UK and 350 Main Street, Maiden, MA 02148, USA.
58 P. Regner
practices and actors involved in strategy making (Johnson and HufT, 1998;
Whittington, 1996, 2002). This also raises the question of how different types of
managerial activities and actors influence macro strategic change and in the end
shape strategy content.
The specifics of managerial activities and actors seem particularly vaguely
defined regarding the development of entirely new strategies, in strategy creation,
where traditional planning and analysis practices and top management might play
a less significant role. It appears as if 'what managers really do' in terms of strat-
egy creation and development remains as a residue. If the question is addressed,
the answer is frequently ascribed to artistic, intuitive or vague leadership compe-
tencies (e.g. managers as 'architects' (Andrews, 1980); formulating strategy as a
'creative act' (Christensen et al., 1982); managers as 'craftsmen' (Mintzberg, 1975);
or strategy creation as 'craft thought and action' (Mintzberg, 1989)), or it is cate-
gorized into broad typologies (e.g. rational - comprehensive vs. political - incre-
mental strategy making, Fredrickson, 1983). A detailed investigation of diflerent
types of actors and activities and their specific role in strategy creation and devel-
opment could contribute to our understanding of how strategy actually is made
and how it relates to macro strategic change. The uncovering of this also seem
imperative for delineating the embedded, hard to imitate and often tacit activities
and behaviors that might generate competitive advantage (Barney, 1986, 1994;
Reed and De Filippi, 1990).
This study examines diverse categories of micro-level mechanisms and man-
agerial activities in strategy creation and development - what managers that are
involved in strategy making and what they really do. It follows recent calls for
research on managerial activities and practices; for example, regarding practices
of innovation (Dougherty, 1992); strategists' roles (Ericson et al., 2001); day to day
aspects of strategy (Johnson and Huff, 1998); routines of practice and learning in
dynamic capabilities (Teece et al., 1997), and strategizing and strategy practices
(Whittington, 1996, 2002).
The paper documents strategy activities on different organizational levels in four
multinational corporations. Two completely different forms of strategy activities
are identified, inductive and deductive strategy making, mirroring their diverse
location in the periphery and centre respectively. The former involves externally
oriented strategy activities of an explorative character directed at strategy creation
while the latter includes more industry and exploitation focused actions aligned
with the existing strategy.
STRATEGY ACTIVITIES IN STRATEGY DEVELOPMENT
Much of strategy process research includes descriptions of rather broad and aggre-
gate strategy categories (e.g. cultural, cognitive, political, symbolic influences), but
there are some specifications in terms of strategy process (Hart, 1992; Johnson,
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Strategy Creation in the Periphery 59
1987) and interpretation modes (Daft and Weick, 1984), routines in decision
processes (Mintzberg et al., 1976) and micro-politics in political process des-
criptions (Pettigrew, 1985). Single aspects of strategy processes have also been
described and analysed, for example, tactics in strategy implementation (Nutt,
1987), heuristics in fast strategic decision making (Eisenhardt, 1989a), pro-
grammed conflict approaches (Schweiger et al., 1989), and strategic issue
selling by middle managers (Dutton and Ashford, 1993). However, not much
systematic research has focused on the actual activities and actors involved in the
creation and development of completely new strategies. A model of corporate
resource allocation and entrepreneurship has been presented in research on
internal corporate ventures (Bower, 1970; Burgelman, 1983; Burgelman and
Sayles, 1986), but the specifics in terms of detailed characteristics of managerial
activities and reasoning, and their contextual embeddedness remain less well
understood.
While building on strategy process research, including internal corporate
venture studies, this study, in comparison, focuses on the micro-level and a deeper
and closer understanding of strategy activities (Johnson and Huff, 1998) and
their contextual origins (Brown and Duguid, 1991, 2001; Lave and Wenger, 1991;
Pettigrew and Whipp, 1991; Webb and Pettigrew, 1999). In comparison to earlier
examinations of the work and practices of strategy (Hendry, 2000; Jarzabowski
and Wilson, 2002; Whittington, 1996) it is specifically concerned with strategy
creation and development. This includes a focus not only on top management and
strategic planning staff, including traditional strategic management practices, but
also on middle and lower level managers and more irregular strategy activities.
The latter managerial category has been demonstrated to play a particularly
important role in strategy development and renewal (Burgelman, 1983; Fulop,
1991). The present study specifically examines basic characteristics of different
categories of strategy activities, including their direction and their
exploration/exploitation balance (March, 1991; Schumpeter, 1942). This
comprises a focus on knowledge assimilation activities, how managers inform
themselves about strategies, involving the ways they make sense of strategy or
sensemaking (Weick, 1969, 1995) and possible relationships to cognitive or knowl-
edge structures (e.g. Huff, 1982; Johnson and Huff, 1988; Lyles and Schwenk,1992; Walsh, 1995) and final strategy content. Hence, it involves an examination
of the linkages between activity, understanding and strategy outcome. Compared
to investigations of intentional or more or less institutionalized R&D and product
development projects, and new venture and new venture division efforts it is a
more extensive and fundamental inquiry. In this sense it follows Rumelt's (1987)
recommendation to extend the focus beyond technological invention in studies
of entrepreneurial innovation and strategy. The focus is on strategy creation, the
generation and development of radically new strategies, in terms of new markets,
new products or both (Schumpeter, 1934).
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Even if strategy creation has not been at the centre stage of strategie manage-
ment research earlier, sources and methods of wealth creation (Moran and
Ghoshal, 1999) and strategy innovation (Baden-Fuller and Stopford, 1994) have
attracted researchers recendy. Similarly, sections of the resource based view
emphasizes the development of resources and capabilities in general (Dierickx and
Cool, 1989; Montgomery, 1995;Wernerfelt, 1984) or more specifically (Eisenhardt
and Martin, 2000; Teece et al,, 1997). Nevertheless, besides these conceptual and
economics approaches, it seems as if a behavioural and process based empirical
focus, as in this study, needs to be considered when details of strategic capabilities
and activities, including cognitive and belief patterns, are to be examined (Rumelt
et aL, 1991), The delineation of how strategy really is made and who is involved
in its making is also important more generally for managers and firms trying to
achieve new strategic directions and growth areas.
The purpose of the present paper is to document, describe and examine man-
agerial activities in strategy creation and development. It reports on the findings
obtained in an empirical study of strategy creation in four multinationals. The
study investigates and evaluates closely how managers handle and develop a
complex strategic issue such as strategy creation in terms of strategy activities. The
focus is on micro-level managerial activities on different organizational levels,
interactions between levels and the connection to macro-level strategic change. In
particular, the emphasis is on what managers actually do in strateg)' creation and
any differences between diverse organizational settings.
METHODOLOGY
Research Design
The study was based on an embedded longitudinal case-study methodology (Yin,
1989), which is a suitable approach for the purposes of the investigation, includ-
ing description and generation of theory (Eisenhardt, 1989b), The general prepar-
adigmatic status of research concerning managerial activities in strategy creation
pointed towards the chosen methodology. Moreover, the sensitivity of the subject
of study also contributed to the choice. Collecting information concerning strat-
egy activities, the creation of strategies and the ways in which managers inform
themselves about and interpret them turned out to be a very sensitive matter, ruling
out a sur\'ey-based method.
The research method was infiuenced by grounded theory (Glaser and Strauss,
1967; Strauss and Corbin, 1990) since the aim was description in an insufficiently
researched area in order to provide preliminary explanations or descriptive infer-
enee (King et al., 1994). The particular choice for the case-study design was a dual
methodology in which a longitudinal, single in-depth case, including real-time
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Strategy Creation in tfie Periphery 6f
examination, was combined witfi a longitudinaf muftiple retrospective case
study of tlie same pfienomenon. Whereas case studies generaffy are suited for
expforatory and hypothesis generation, this duaf methodofogy is particufarly rele-
vant for these purposes and especially for studying micro processes and activities,
since a synergy is gained through the two complementary approaches, which
enhances external, construct, and internal validity (Leonard-Barton, 1990). The
multiple retrospective study increased the external validity of the research design,
whereas the in-depth, single-case study enhanced its internal validity.
Selection Procedures and Cases
Based on theoretical sampling procedures (Eisenhardt, 1989b; Glaser and Strauss,
1967; King et al., 1994; Strauss and Corbin, 1990) four selection criteria were used
to identify four relevant strategy creation issues. First, the focal strategic issue had
to be a substantial change from prior strategy, restricting it to larger companies.
Second, the strategy should preferably have evolved within the past ten years
since it had to be neither too old nor too recent in order to avoid problems of
hindsight-rationalization and sensitivity, respectively. Third, strong assistance from
a supporter inside the company was necessary because of the delicate nature of
strategy creation issues. Finally, in order to increase generalizability, the firms and
strategy creation issues were intentionally selected in order to alter the context of
each. In addition to these selection heuristics, accessibility limited the focus to
Swedish companies only.
One strategy creation issue in each of four multinational corporations was finally
selected. The single in-depth case study focuses on Couplet (all names, figures, dates,
locations, technologies, etc. related to this company are disguised), formerly part
of the specialty mechanics company Scanmeck. The company started out as a
mechanical trailer coupling assembler and manufacturer in Sweden more than 40
years ago and consolidated the European market. The research focuses on Couplet's
entry into non-mechanical truck trailer coupling systems (electro mechanical and
electro-hydraulic systems) and the subsequent development of a truck trailer sur-
veillance business. In 1987 the US National Highway Traffic Safety Administration
required truck manufacturers to equip their trucks with truck-trailer non-
mechanical coupling systems gradually as standard equipment on all new trucks
sold in the USA. Scanmeck and the Couplet board had serious doubts concerning
electro-hydraulic systems since the technology was totally unfamiliar to the com-
pany. However, engineers, a technology unit and customers of Couplet were more
concerned and subsequently and gradually internal discussions started about a
possible electro-hydraulic system. This began a development that made Couplet
the number two player globally in electro-hydraulic systems and made them shape
an entirely new and huge truck trailer surveillance systems industry.
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The multiple retrospective study included strategy creation issues in Ericsson,
Pharmacia, and AGA. Theoretical saturation (Glaser and Strauss, 1967) or the
principle of redundancy (Yin, 1989), indicated that three cases were sufficient
in the multiple retrospective case design. Ericsson is a global supplier of telecom-
munication equipment and systems. The company produces wired as well as
mobile telecommunications in public and private network systems. The strategy
creation issue studied is Ericsson's entry into mobile telephony communications
systems. Ericsson showed a very limited interest when the Nordic PfTs (Post Tele-
graph and Telephone government monopolies) presented a proposal for a joint
automatic mobile telephone system in 1975. Mobile telephony had a history dating
back to the 1940s in the USA and several systems had been tried in Sweden, but
they had never taken off. At SRA, in Ericsson's small Radio Communications
subsidiary, enthusiasm for a mobile telephony venture was much greater and they
managed to position Ericsson as the largest mobile telephone systems company
globally.
Pharmacia is a Swedish—American pharmaceutical company which hasgrown out of a series of mergers and acquisitions during the past 20 years. The
examined strategy creation issue was Pharmacia's entry into smoking cessa-
tion products and the subsequent creation of an OTC (over the counter) and
consumer healthcare business. Based on a request from the Swedish navy,
which had problems with smoking on its submarines, a researcher at Leo, a
local pharmaceutical company (later part of Pharmacia) became interested in a
possible substitute product for smoking and started to research the area. However,
Leo's top management and the pharmaceutical industry in general were not
particularly interested since nicotine was considered to be an addictive poison
that did not belong in pharmaceuticals. The research was continued anyway
and a dedicated group subsequently developed the world's largest smoking
cessation brand, Nicorette, and one of the largest consumer health care businesses
globally.
The last strategic issue in the multiple retrospective case study is AGA's entry
into Eastern Europe and the creation of an Eastern European industrial gas indus-
try business. Their primary markets were in Western Europe, Latin America and
the USA, and they deliberately did not make any efforts to enter Eastern Europe.
However, the complete opening of those economies after the fundamental politi-
cal changes during 1989-90 started a race among AGA's competitors to enter these
markets. In AGA a loosely defined and informal group started to 'look into' the
developments in Eastern Europe. It soon started to initiate investments at an
increasing pace all over the region, but corporate management and the board of
directors were quite hesitant. Nevertheless, AGA entered 14 new markets, set up
ten new subsidiaries and established a dominant position in the Eastern European
industrial Gas Industry. Table I presents an overview of the different cases includ-
ing basic company and collection data.
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Strategy Creation in the Periphery 63
Table I. Overview of cases
Company Industry Sales Employees Number Area of
MUSD (1998) of slralegy-
(1998) markets creation
Interviews Average Time
duration frame
interview examined
Ericsson Telecommunication 22,843' 103,667 140 Mobile 22
equipment telephony,
mobile
telephony
systems
Pharmacia Pharmaceuticals 6,758 30,000 >100 Smoking 16
cessation,
OTC/
Couplet
AGA
Truck-trailer
coupling
Industrial gas
industry
5,234 31,000 42
1,895 10,203 38
consumer
health care
Electro-
hydraulic
systems,
trailer
surveillance
systems
Eastern
Europe,
Eastern
European
business
120min 1978-
1998
lOOmin 1978-
1998
IO5min 1988-
1998
llOmin 1988-
1998
' 184,438MSEK (the figure has been eonvcrtcd into USD. The exehange rate as of 31 December 1998, USD 1 = SEK 8.0740, has been
used).
^Besides this other, more informal interviews, eonversations and discussions were performed during personal observation.
The Empirical Inquiry
The main sources of data were real time personal observation, semi-structured in-
depth interviews, company documents and archival data. In the single in-depth
case study real time personal observation was employed, including participation
in strategy related meetings, conversations and discussions, in addition to real time
and retrospective in-depth interviews and a survey of internal strategy documents
and various strategy-related secondary material on site. In the multiple retrospec-
tive study in-depth interviews and internal strategy documents were used. To
capture strategy activities and practices, but still avoid problems of sensitivity, this
study included an examination of strategy processes that were in different stages
and, thus, included real time and retrospective data. AGA was still in the midst of
their Eastern Europe entry, Pharmacia was at the end of a corporate acceptance
of the strategy and in Ericsson the strategy had been established as core corpo-
rate strategy. In those cases were some time had passed since strategy initiation,
formerly employed key managers were interviewed as well.
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The study made use of triangulation in using multiple methods and techniques
of data collection. Interviews were conducted with managers who were involved
in the strategy creation processes in different company sections and on different
organizational levels. Secondary data were gathered from a variety of sources, both
internally in the companies, including various business plans and policy statements,
and from public documents and archival records. In total, 58 interviews were
undertaken in addition to interviews, conversations and discussions through per-
sonal observation in the single in-depth case. The selection of interviewees was
made on the basis of including key figures involved in the strategy creation issues.
The total interview time was slightly more than 100 hours and the average length
was approximately one hour and 50 minutes per interview. The interviews were
generally taped and minutes were taken during the interviews to complement the
recordings. All interviews were transcribed from the tape recordings and approxi-
mately 500 pages of data resulted from them.^ '^
The data analysis involved an iterative approach of moving back and forth
between data, relevant literature and emerging theory (Eisenhardt, 1989b; Glaser
and Strauss, 1967). Theoretical propositions were not constructed prior to the
research. They were inductively uncovered and established through careful
within-case analysis of the interview and archival data. Between-case analysis,
assisted by qualitative data-analysis techniques (Miles and Huberman, 1994), was
later used to systematically determine the strength of evidence in order to be able
to claim replication (Yin, 1989). In order to increase construct validity and to verify
the case descriptions' strength, lead respondents reviewed the case descriptions
(Yin, 1989).
FINDINGS
Strategy Contexts: the Periphery and the Centre
The analysis of the outer contexts (Pettigrew, 1987) showed that the strategies
which emerged were highly ambiguous in terms of markets, legal frameworks and
technologies. Each industry was remarkably sceptical towards the ventures in ques-
tion. Couplet's electro-hydraulic systems and Ericsson's mobile systems were first
considered at best to be products for an up-scale and a limited long-haul segment
of the markets respectively, if marketable at all. Pharmacia's consumer health care
concept with its main, smoking cessation product was not really thought to be part
of the pharmaceutical market; and the marketability of smoking cessation was
considered doubtful in any case. For AGA the Eastern European markets were vir-
tually non-existent to begin with and later unpredictable in all aspects. Uncertainty
ranged from who and where the customers were, to whether and when they would
buy industrial gases. The strategic issues facing each company were very impre-
cise and undefined, and not even framed as specific 'issues' at all, let alone 'strate-
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Strategy Creation in the Periphery
Table II, Strategy contexts and eontent
65
Outer context:
complexity
Single in-depth study
Couplet Markets
Regulations (truck
trailer safety)
Technologies
(hydraulic pumps
& on, electronics,
sensors, etc)
Multipk retrospective study
Ericsson Markets
Regulations (radio
frequencies.
standards)
Technologies
(cellular, base
station, switch)
Pharmacia Markets
Regulations
(prescription to
non-prescription
switching)
Technologies
(bioavailability -
stability and
durability)
AGA Markets
Regulations
(transportation
and distribution.
competition and
company laws)
Strategy content:
vague
Non-mechanical
coupling systems?
Electro-mechanical
systems?
Electro-hydraulicalsystems?
Both?
Mobile telephony?
Mobile telephony
systems?
Mobile telephones?
Both?
Smoking cessation
(Nicorette brand)?
Over the counter (OTC)/
non-prescription
products?
Consumer health care?
Eastern European gas
industry?
Baltics?
Central Europe?
Russia?
Inner context:
Periphery
Development
units:
engineers.
technology
units
Subsidiary:
Radio
Communication
Division, SRA
Business unit:
Smoking
cessation and
OTC units
Informal team:
Eastern
European team
(with local
subsidiaries)
Centre
Headquarters:
Scanmeck
corporate
management.
the board.
division
management
Headquarters:
Corporate &
Public
Telecommunication
Division
management
Headquarters:
Corporate &
prescription
pharmaceutical
division's
management
Headquarters:
The board.
corporate
management
gic' ones. In sum, outer contexts were dominated by complexity and strategy
content was very vague, as shown in Table II (columns 2 and 3).
The data analysis of activity patterns in the inner contexts (Pettigrew, 1987)
revealed a clear dichotomy of strategy activities, both in the single in-depth and
multiple retrospective study. They differed significantly between a more peripheral
and a central setting. The more peripheral group, peripheral both in terms of its
hierarchical location and remoteness from dominant practices and beliefs, pri-
marily comprised technology units and engineers (Couplet), a subsidiary (SRA
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66 P. Regner
in Ericsson), a loosely defined team (AGA), and a business unit (Pharmacia). It
included lower and middle-level managers and entrepreneurs, outside top man-
agement and any strategic planning units. This group propelled the strategic issues
forward, often as secret projects, deliberately trying to keep the group in the centre
away. The group in the centre, in contrast, included corporate and divisional man-
agement and, in addition, the boards in two cases (Couplet and AGA), as illus-
trated in Table II. All were hesitant towards the strategic issues and rejected them.
The examination of the strategy creation issues and their development showed
that the strategy activities were deeply rooted in these two diverse managerial con-
texts and locations. For example, in the periphery of Couplet there was closeness
to customers and the primary influence was from engineers and technical units,
involving different signals, symbols and knowledge compared to in the centre. As
one of the managers in Couplet explained:
The knowledge is built in the laboratory . . . close to testing equipment. . . you
are in that environment. . . engineers that have daily discussions with the truck
trailer companies' trailer coupling and control engineers, we are part of the
gang, the coupling gang
Similarly, the peripheral location of the Radio Communication Division or SRA
differed from Ericsson's corporate and Public Telecommunication's contexts. The
two were located apart and provided separate settings in terms of colleagues,
competencies, data, testing equipment, tools, etc. As one corporate manager in
Ericsson commented the managers in SRA: 'They looked differently and they
behaved differently'. In AGA the peripheral team or 'skunkwork', as they named
themselves, spent considerable time together with subsidiaries in the local context
of the Eastern European markets as contrary to the centre, providing for a dif-
ferent strategy activity and learning context. Likewise, in Pharmacia the periph-
ery acted in a separate setting with different kinds of data, clues, representations,
etc. compared to the centre. An analysis of the strategy activities in each man-
agerial setting is given in the sections below.
Strategy Activities in the Periphery
The periphery and centre differed considerably in terms of their inherent strat-
egy activities. From the very start and throughout the entire process they used
disparate approaches of developing the strategy, of learning about it and of
interpreting clues and patterns. Strategy making in the periphery can be described
as externally and exploration oriented, including inductive reasoning or sense-
making (Weick, 1995) and efforts to generate and establish a new organizational
knowledge structure (Walsh, 1995). For an overview of these activities see Table
III, column 1 (quotes in the tables are provided for the single in-depth case,
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Strategy Creation in the Periphery 67
Couplet, and limited to one case in the multiple retrospective study, Ericsson, due
to space limitations).
First, it was observed that strategy activities and knowledge assimilation activi-
ties, how managers informed themselves about the strategies, in the peripheries
were externally directed towards industry consultants, competitors, customers, etc.,
and, above all, towards similar actors in entirely different industries and contexts
(see Table III, column 1, row 1). The managers in the periphery, described as
'hands-on guys', worked actively to probe into the new technologies and markets.
They continuously interacted and partnered with external aetors or simply
acquired firms and/or competences. Couplet engineers worked closely with
customers and later probed into entirely new core technologies in partnerships
with companies from such diverse industries as oil and chemicals, electronics and
sensors, and hydraulics, as illustrated in Table IIL As one Couplet manager put it:
'It was an intensive cooperation with customers and some subsuppliers, . . chemi-
cal, oil companies . . .'. Similarly, in Ericsson's SRA subsidiary, the activities were
externally focused, as shown in Table III. The Radio Communication Division
or SRA probed into and acquired new technologies and developed relationships
with new types of customers outside the traditional public telecommunications
business, as recounted by a couple SRA managers:
. . . [we] believed in walking the talk. . . worked in diverse directions to influ-
ence standards, authorities, companies, partners . . .
We had an advanced buying approach, buying companies, consultancy services,
technologies . . .
They relied on direct knowledge rather than reports and forecasts, which '. . . con-
tinuously and consistently under-estimated the market'. Likewise in Pharmacia a
small business unit worked externally towards new technologies, new markets and
new regulations for smoking cessation and later the OTC market. And at AGA
the loosely defined Eastern Europe team or 'skunkwork' proactively probed into
entirely new geographical markets. As the AGA team members put it:
We worked externally towards the diverse local monopolies, approached col-
leagues . . . received lists of clients... In Russia . . . we gathered all basic infor-
mation via a former monopoly employee for $50! We found out things, travelled
around, asked questions!
A second important feature was that the strategy activities in the peripheries were
based on explorative inquiry regarding the strategic issues (Table III, column 1,
row 2). In Gouplet it included experiments and procedural methods in trying
to find out more and learn about non-mechanical coupling systems and
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Table III, Strategy activities in Couplet and Ericsson
Periphery Centre
Externally focused
Couplet: ', . , we partnered up with a German
company in order to obtain hydraulic pump
knowledge , , , later same year acquired Saga to
learn truck electronics,'
SRA/Ericsson: 'It was individuals working
broadly on all frontiers - on everything from
individual components to specific laws and
regulations in the US , , , All of us traveled the
world , , ,'
Exploring new technologies and markets
Couplet: 'We found out what others had done
, , , studied patents in detail , , , did reverse
engineering, , , used consultants , , ,'
SRA/Ericsson:', , , Asian ministries, , , did not
have 450 MHz available , , , our people became
acquainted with these engineers , , . located
opportunities in their frequency plans. , , we
were very proactive,'
Inferences based on observations and experiences
Couplet: ', . , the strategy developed
incrementally , , , no particularly well planned
. , , we had a clear goal , , , and then added
knowledge , , , to know how it all fits together , , ,
commercially , , . technologically , , ,'
SRA/Ericsson: ', . . to enter the US was not part
of any plan , , , and taking England , , , both
these events were not part of any plan,' ', , ,
another event. , , not part of strategy was
Japan.' 'It [later] became the first strateg)', that is
my interpretation, to try to enter all markets, all
standards , , .'
Establishing new knowledge structure
Couplet: ', . , want to establish a common
picture of. , , technological changes,
electro-hydraulic s y s t e m s , , , ' ' , , , there is no
common view in the board to start from , , ,'
SRA/Ericsson: '. , , we could not follow the rules
of the game . , , we had difficulties to go by the
conventions , , ,'
Industry focused
Couplet: 'We did some preliminary studies , , ,
but came to the conclusion that there was no
market, the time was not ripe , , ,'
Ericsson: ', , , AT&T had asked McKinsey . , ,
concluded , , , no potential and strongly
advised against it.'
Building current technologies and markets
Couplet: 'We were very hesitant; we saw great
difficulties, especially since we did not have
the technology. We did not have electronics
and hydraulics; both were necessary,'
Ericsson: ', , , technical strategy was to pursue
the industrialization and further development
of the AXE [a digital switch] system , , , on
the marketing side , , , to win as many tender
competitions as possible, and exploit the lead
that AXE had , , ,'
Inferences based on historical strategy
Couplet: 'We did not know how the market
would develop , , , and when we did we
realized that we had a small, but secure
mechanical coupling business , , . Should we
take this leap and enter? This was too
high-tech , , , we were low-tech , , , it was a
giant mountain to conquer , , ,'
Ericsson: 'Corporate management was always
closer to switching, influenced by he AXE fa
digital switch] success, , , the AXE people
demanded more resources , , , they did not
want anything else to grow bigger,'
Emphasizing current knowledge structure
Couplet: ', , , we were a modest truck sub-
supplier company , , , with one product,
mechanical truck trailer couplings . . , [and]
limited technological capacity'
Ericsson: ', . . Ericsson did not believe in it, no
one , , , saw the o p p o r t u n i t i e s , , , ' ' , , , they
were blind as concerns mobile telephony'
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Strategy Creation in the Periphery 69
electro-hydraulic systems, as illustrated in Table III. As one Couplet manager sum-
marized it: 'We used trial and error . . . tried out things, we never calculated . . . it
was an informal way to cope with it [electro-hydraulic couplings]'. In Ericsson
SRA explored mobile telephony developments by the Nordic telecommunication
operators early on and proactively explored new technologies and markets con-
tinuously (see Table III). As one SRA manager vividly stated:
We were independent entrepreneurs. . . hunting mobile telephone technology
. . . fighting over markets. . . and firing at everything we saw.
Similarly, the team in AGA was driven by exploratory activities and operated in
all directions and assimilated information through multiple means. New units and
subsidiaries were established early on, and new learning was acquired by so doing;
thus, knowledge of an explorative character was generated and assimilated, as the
AGA team managers put it:
We used plenty of trial and error . . . it was ad hoc and informal. . . not system-
atic at all to start with. We . . . used all kinds of informal contacts to acquire
information. We wanted to move faster. It was a race we just went ahead out
there . . .
At Pharmacia the managers in the peripheral unit 'went to conferences,
talked, travelled out in the world'. They developed ideas and explored new
competencies, for example knowledge about consumer product markets and
OTC regulations: 'It was extremely important to be ahead in terms of ideas and
knowledge . . .'
Another distinguishing factor, related to the explorative feature, was the way
managers in the peripheries made sense of the strategic issues, or the character
of their reasoning or sensemaking (Weick, 1995). Based on new observations and
experiences they tried out, adjusted and generated new strategy interpretations
over time. It was a process involving trial and error, informal inquiry, heuristics,
etc. and other forms of approximations rather than deductive methods. In Couplet
and in SRA clues and observations assisted in making sense of the strategic issues
over time. Informal, experimental and permissible knowledge based on obser-
vations and experiences in the flrst markets was assimilated and conclusions sub-
sequently drawn, as illustrated in Table III (column 1, row 3). In Couplet
observations of technology developments and customer behaviour led to electro-
hydraulic systems and, in the end, truck trailer surveillance systems. As one
manager summarized:
. . . it was not self evident to go for electro-hydraulic systems. . . but one thing
led to the other . . . into a whole trailer surveillance system . . .
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In SRA experiences in the first markets led to a focus on mobile telephony systems,
not mobile radio or mobile telephone handsets. As claimed by two Ericsson
managers:
The initial focus was on terminals . . . not [mobile] systems . . .
it took rather a long time before they realized what it was. . . that it was tele-
phony and not mobile radio . . .
In Pharmacia, as well, it was a question of inductively developing an under-
standing based on observations and experiences. As one Pharmacia manager
explained their reasoning and learning:
It was a goal oriented building, organically . . . out on the markets it was trial
and error . . . [and] handling FDA [Food and Drug Administration], switching
[prescription to non-prescription], we have learned along the way.
A fourth feature is related to making inferences based on new observations
and experiences or more inductive sensemaking. There was no firm or established
pattern or structure for strategy interpretation from the start. The frames or per-
ceptions of the managers and other actors involved were not focused on a par-
ticular industry, resource or market setting. In short, managerial frameworks or the
way in which the executives involved made sense and learned about the strategic
issues, or the organizational knowledge structures (Walsh, 1995), were not defined
or focused in accordance with the traditional strategy direction. Instead managers
generated new strategy interpretations and tried to establish these developing
knowledge structures in the rest of the companies. For example in Couplet, man-
agers tried to establish a common view of the electro-hydraulic system and later
truck trailer surveillance systems, as illustrated in Table III (column 1, row 4).
Similarly in Ericsson SRA managers did not follow the traditional knowledge
structure (see Table III, column 1, row 4) and instead tried to establish a view of
mobile telephones as a whole integrated system, including mobile telephony,
switches and wired telephony. As the President of SRA recalled:
Every time we met they [switching] sketched a picture were mobile was a very
small pa r t . . . I sketched a model of an integrated system [wired and wireless]
. . . emphasized the totality.
Likewise in Pharmacia the managers in the periphery struggled toestablish a new
knowledge structure. As one Pharmacia manager put it:
We had to work extremely hard to fight for our ideas. . . There was a long
period of explaining the importance of OTC [over the counter] until others
could understand it,
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Strategy Creation in the Periphery 71
Strategy Activities in the Centre
The analysis of the strategy actions and practices in the centres reveal quite dif-
ferent features and characteristics compared to those in the peripheries. Strategy
making in corporate and divisional management and in the boards can be por-
trayed as industry and exploitation focused, including a deductive reasoning and
an emphasis on the current knowledge structure (see Table III, column 2).
First, strategy activities and knowledge assimilation were confined more to the
existing organizaion and industry as illustrated in Table III (column 2, row 1). In
Couplet mechanical coupling and truck trailer industry reports and forecasts were
examined and some limited industry studies were conducted. As one manager
stated:
There are a lot of industry reports. . . specific forecasts and data . . . plenty of
information . . . we know what will happen two-three years ahead . . .
Similarly, in Ericsson corporate management and senior management in the
Public Telecommunications Division informed themselves about developments in
the mobile telephony area by means of reports and formal forecasts. Often these
reports were public telecommunication industry centred and they continuously
underestimated the potential of mobile telephony (see Table III). As one manager
recounted: '. . . reports indicated a limited . . . professional [mobile] market. . .'.
Likewise, the divisional management in AGA involved knowledge assimilation
activities in the form of industry intelligence reports and official government docu-
ments rather than externally focused ones. As one manager explained:
. . . [I] checked with colleagues in other companies . . . checked with the
Foreign Department reports and had contacts with the embassies here [Sweden]
to gather the more general economic conditions, but I was not out there.
Pharmacia was similar; formal industry reports and documents dominated over
more externally oriented knowledge and market activities as compared to the
peripheries.
A second important feature of the activities in the centres was that they were
based on exploitation rather than exploration (March, 1991). The activities
included formal inquiring, models and algorithms, etc. and built on historical and
current technologies and markets (Table III, column 2, row 2). In Couplet the
centre was hesitant regarding electro-hydraulic couplings; they preferred to build
on their traditional mechanical coupling business rather than exploring the new
strategy. As one manager stated: 'After a l l . . . we have to invest and develop
our mechanical coupling business . . .'. At Ericsson the centre exploited public
telecommunication knowledge. The primary focus was on an historically success-
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ful digital switch (see Table III), but they also built on public telecommunication
in trying to merge it with computer technology into a new division, Ericsson Infor-
mation Systems (EIS). As a couple of managers described it:
. . . strategy was dominated by IT [EIS] . . . SRA could trot along undisturbed
. . . in the shadow of more important things. . . . strategic planning concerned
this [EIS] . . .
The character of the activities in the centres of Pharmacia and AGA was simi-
larly exploitation oriented. They built on current technologies and markets and
emphasized investments and developments of these. In AGA traditional Western
markets and a conservative protection of the home region was emphasized rather
than an exploration of the new Eastern European markets that had opened. As
one divisional manager summarized the first reaction and the planning that fol-
lowed when the Eastern European industrial gas market was inescapable:
It [the fall of the Iron Gurtain] came a litde too early for us, because we were
busy trying to achieve profitability in [Western] Europe and wanted to put
resources there when this appeared. We planned with the ambition to protect
our flank . . . There were beautiful maps . . . we went back to [king] Karl XII's
map, this domain should be our home market.. . it was natural to guard the
Baltic area.
Another characteristic of the strategy activities in the centre, related to the
exploitation focus, was that managers relied more on inferences based on the his-
torical strategy, or more deductive sensemaking, compared to the peripheries, as
illustrated in Table III (column 2, row 3). In Gouplet it was clearly easier for the
centre to relate to the historical strategy compared to the new one focused on
electro-hydraulic couplings (see Table III). Inferences were made from and deci-
sions based on prior experiences and strategy in mechanical couplings and when
the centre realized that they had to enter, they first went for the mechanical solu-
tion, close to the traditional products, rather than the hydraulic one. As one
manager described their reasoning: 'We believed in the electro mechanical solu-
tion . . .'. In Ericsson too, inferences rehed on the historical strategy and it was not
until mobile telephony became relevant for the traditional business that it was
approved. As one manager recalled:
. . . when mobile telephony became a profitable market for AXE [selling these
switches as part of the mobile system] . . . it became more accepted . . .
Inferences from the historical strategy and deductive reasoning based on it also
played the primary role for the centres in Pharmacia and AGA. The experience
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Strategy Creation in the Periphery 73
that was drawn on primarily related to prior strategies, focused on prescription
pharmaceutical products and Western industrial gas markets, respectively; in
neither case was it of specific use or relevance for the new strategic issues in ques-
tion. For example, in pharmaceuticals, prescription drugs operate with very high
margins, while margins for OTC products are considerably lower. However, these
latter products can often be more profitable since the capital turnover ratio is sub-
stantially higher. As one manager recounted a meeting:
People were fixed on a perspective based on margins. I simply emphasized that
we ought to study the capital turnover rate and make a profitability analysis.
They were stunned when I showed them the curves and figures.
The centre in AGA was driven by prior experience with internationalization in
the West, but this experience seemed less suitable for Eastern Europe, where the
company's entry was of a completely different character. For example, there was
a hypothesis that economic growth in Eastern Europe would be very slow and that
cylinders would remain the dominant form of gas distribution for the first five to
ten years. However, both the market and other distribution forms turned out to
be developing much faster.
A fourth characteristic of the centres was that there seemed to be firmer, more
established patterns and structures of strategy interpretations compared to the
peripheries. The managerial frameworks or knowledge structures appeared to be
more closely tied to the domain of the prevailing strategy in terms of industry,
resource and market settings, as illustrated in Table III (column 2, row 4), and
seemed to be more well-defined than in the periphery. In Couplet the center empha-
sized the current knowledge structure, including their limited technological knowl-
edge (see Table III), and instead believed, as many in the industry, that the oil and
chemical industry would take care of electro-hydraulic systems since competencies
regarding complex hydraulic oilswere crucial. Alternatively they stressed that even
if it would become a product in the truck trailer coupling industry 'the volumes
would be very limited'. In Ericsson the knowledge structure was dominated by values
and beliefs in the public telecommunication and switch business, which made them
ignore mobile telephony. As one corporate manager succinctly put it:
We [Public telecom] were the biggest, the most important, and the most beau-
tiful part of the Ericsson Group - and we knew it.
The actors in the centre of Pharmacia tended to stress the current knowledge
structure as well; one divisional manager recalled the following:
These consumer-oriented products [smoking cessation and other OTC prod-
ucts] were not considered sophisticated enough in the world of pharmaceuti-
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74 P. Regner
cals. They had lower margins, required more marketing efforts, you sold them
in different ways, etc. It was an oddity in that world.
Similarly, a corporate manager reflected on the strategy development of smoking
cessation and OTC (non-prescription) products and the centre's focus on pre-
scription drugs:
Well, I can admit that it is possible that we have been too stuck in an environ-
ment that has been prescription laden. Most of the guys . . . have a background
in prescription drugs. . . It is possible that we could have done more . . .
Everyday Activities, Tension and Macrochange
Strategy activities in the periphery developed and propelled the strategic issues
forward and, in particular, some critical events turned out to be crucial for final
macro strategic change (see Table IV, column 1). For example, in Couplet a recruit-
ment of two engineers from a customer in order to copy the electro-hydraulic tech-
nique and the development of a mini coupling, part of normal R&D effbrts for
electro-hydraulic couplings, turned out to be critical (Table IV, column 1, Couplet).
These were basically everyday activities at the time they happened, but they
were later conceived as crucial events for the realized strategies. Similarly in
Ericsson, rather ordinary business activities such as a cooperation with the Nordic
PTTs regarding mobile telephony and a deal in Holland later showed to be criti-
cal for the strategy (Table IV, column 1, SRA/Ericsson). As one manager in
Ericsson's SRA unit put it: '. . . what you experience after the fact as strategy is
often something for the moment'. Similarly, two managers in Pharmacia stated:
The most important thing for me has been all the everyday events . . .
Development is in the everyday business , , , it's a continuous development. It's
about socializing with markets and people. This develops competencies. That's
where it happens!
Still another manager in Couplet emphasized the importance of activities and
actions: '. . . one can have plenty of action as strategy and then take care of the
opportunities that appear , . .'.
The dissimilar strategy and knowledge assimilation activities in the periphery
and centre, rooted in disparate managerial contexts, resulted in considerate dis-
crepancies in strategic reasoning and sensemaking and, in the end, knowledge.
This resulted in continuous tension and conflicts over time as illustrated for
Couplet and Ericsson in Table IV (column 2). Everyday activities that triggered
most disagreement often later turned out to be critical for the development of the
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Strategy Creation in the Periphery 75
Table IV Everyday activities, tension and macrochange
Tl: Everyday activities & events
(periphery)
T1&T2: Tension (between
periphery & centre)
T2: Macrochange (centre)
Couplet
Gustomer cooperation (1989-):
'We recruited two engineers
from [a truck company] simply
copied the technique , , ,'
'Gouplet had no technology
whatsoever,'
Mini coupling (1993—):
', , , an idea came up to develop
a mini coupling , , , we changed
our development e f f o r t s , , , ' ' , , .
it was our way to get into the
market, , , it created a market
in Europe,'
SRA/Ericsson
Entering Nordic PTT's mobile
telephony venture (1978-):
'We had a good cooperation
with the PTT, we cooperated
closely with them,' ', , , a vision
to eliminate the wire in
telephony.' ', . , we ceased a
chance , , , we were not good at
this, , ,'
Integrated systems (1981-):
', , , Dutch PTT . , , wanted
Ericsson switches and radio
from Motorola , , , I made it a
condition to buy everything
from us , . ,' 'This "Ericsson
package" was the big take-off,'
Entry:
'They [corporate
management] did not want
to allocate capital, to invest in
hydraulic couplings!' ', , , did
not believe that it would
become so big' ', , , thought
the volumes would be small,'
Mini coupling:
'. , , did not believe in it, , ,
there were intense discussions
, , .' 'I was hesitant if we
should go for the Mini
coupling , , . I was not
comfortable with the idea , , ,'
Entering mobile telephony:
'[Ericsson] . , , did not believe
in this . , , not , . , a major
business , . , a minor event in
future telecom,' 'We were
considered as lacking in
knowledge, stupid and
inexperienced,'
Cultural clashes:
Tl : '. , , two completely
different worlds, Ericsson was
ignorant, there was animosity
and competition,'
T2: ', , , a great lack of
understanding left, , , "those
damn cowboys" and at SRA
, , . "those damn bureaucrats",'
Gommitment to electro-
hydraulic systems (1996):
', , , electro-hydraulic systems,
we are working intensively on
developing complete systems
, , , ' (Gouplet, 1996,
catalogue)
Gore strategy (2001): 'Gouplet
has evolved from primarily a
mechanical coupling
manufacturer to a worldwide
truck trailer surveillance
systems company , , .'
(Gouplet, 2001, annual report)
One of many core products
(1986):
', , , defined , , , core products
, , , mobile systems were
among them! , , , first time it
was put on paper that it was
important!'
Business acknowledgement
(1994):
'Ericsson's success in mobile
telephony is based on the very
farsighted and advanced
development work , , , at a an
early stage within [SRA],'
(LME, 1994 annual report)
Strategy. For example, in Couplet the development of a mini coupling resulted in
tension (Table IV, Couplet, Mini coupling, column 2). Likewise, SRA's very first
exploration of mobile telephony technology together with the Nordic telephone
monopolies generated resistance at the center in Ericsson and subsequent confiicts,
but later proved to be a critical event for the final strategy (Table IV,
Ericsson, Entry, column 2). Also in AGA, where the Eastern Europe team had to
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fight hard for their strategy, conflicts were common. The friction between the
periphery and the centre was in some instances serious. At Ericsson there were
repeated suggestions to dismiss totally mobile telephony. Likewise, at Pharmacia
there were sharp conflicts and even proposals to divest the smoking cessation
product Nicorette in the beginning. As one manager in the OTG unit recounted
regarding the tension:
The resistance was incredible. We were looked upon as pariah in the beginning,
something that they tried to isolate, and if that did not work they tried to incor-
porate it and degrade it. Or else it was slandered.
The periphery and centre are not independendy sufficient to describe the strategy
changes. While the centre did not include the history and creation of the strat-
egies, they predominated more and more over the strategic issues in the later stages
in confrontation with the periphery. Interaction with and finally recognition within
the centres followed that produced strategic change. Essentially, the peripheries
generated certain ideas and goals at the outset (Tl) that were subsequendy imple-
mented as corporate strategic change in the centre (T2). This is illustratedin Table
IV for Couplet and Ericsson, critical everyday activities and events in the periph-
ery at time Tl (column 1), enduring tension and conflict between periphery and
centre (time Tl and T2; column 2) and macro strategic change in the centre at
time T2 (column 3) are all part of the macro strategy process. The strategies were
recognized and established in the centre in stages. For example, in Gouplet, first
electro-hydraulic systems were accepted and later truck trailer surveillance systems,
and in Ericsson mobile telephony was first accepted as one of several core prod-
ucts and later the whole business was acknowledged (see Table IV, column 3). This
acceptance of the strategies often involved retroactive rationalization and some
actors in the centre even claimed to have been involved in pushing them forward.
As two corporate executives in the centre of two different companies commended:
. . . there was a strategy to allocate resources and establish a position in these
markets . . . And it was a long-term strategic decision to allocate management
resources and knowledge and capital for i t . . . It was classical strategic thinking.
I would like to claim that this had not resulted in anything if I had not managed
it the way I did!
DISCUSSION
The aim of this study has been to move beyond strategy process examinations on
the macro-level and instead investigate managerial actions in detail; what man-
agers actually do in terms of strategy and knowledge assimilation activities in strat-
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Strategy Creation in the Periphery 77
egy creation and development. It can be concluded that the findings correspond
to earlier observations in some aspects, but the findings also reveal several char-
acteristics that have been less commonly noted in strategic management research,
A strategy making dichotomy was identified, including two completely different
types of strategy activities, rooted in disparate managerial contexts and knowledge
structures. The great divide between periphery and centre and the importance of
strategy activities in the former for strategy creation shows that micro-level
processes and practices need to be taken seriously in examining strategy making
and strategic change.
It was demonstrated how two diverse categories of strategy and knowledge
assimilation activities, sensemaking and knowledge structures were employed in
the periphery and centre, with divergent implications for strategic change and
content. Essentially strategy making can be described as inductive in the periphery
since strategy was developed through externally oriented and explorative activities
involving trial and error, informal contacts and noticing, experiments and heuris-
tics. Based on inferences from these activities new strategic knowledge, including
a new knowledge structure was established. The centre, in contrast, had a deduc-
tive approach in developing strategy, including an industry and exploitation focus
involving planning, analysis, formal reports and intelligence, and routines. Strate-
gic knowledge was generated on the basis of these activities and the existing knowl-
edge structure attached to them. Strategy activities in the periphery assisted in
assimilating, coordinating and combining to the companies' novel knowledge from
various external actors and industries into new strategic knowledge. It turned out
that this more inductive and explorative approach was paramount in developing
and progressing the strategies forward in the complex and ambiguous outer con-
texts that surrounded them. In contrast, the activities in the centre primarily
supported the adaptation, cultivation and perfection of prevailing knowledge,
while improving the existing strategy; this did not provide much help in terms of
developing the new strategic issues, A summary of the findings including a com-
parison of inductive vs. deductive strategy making and activities is provided in
Table V
The findings illustrate how specific activities, interactions, discussions and inter-
pretations were rooted in and refiected their separate settings and social embed-
dedness (periphery and centre, see Table V) and, hence, produced quite diverse
knowledge and strategies (cf. Brown and Duguid, 1991; Lave and Wenger, 1991).
They demonstrate how information action (strategy and knowledge assimilation
activities), authoring (sensemaking) and use (strategic knowledge/action) are inter-
woven, as illustrated in Table V Sensemaking (Weick, 1995) in the periphery were
derived from new observations and experiences gained through the inductive and
explorative strategy activities. In contrast, the centre used inferences primarily
based on deductive and exploitation oriented activities related to a well defined
and shared knowledge structure (Lyles and Schwenk, 1992), including values and
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Table V An overview of strategy contexts, activities and contents for the periphery and centre
Inner context
Outer context
Strategy making
Action direction
Basic action mechanisms
Sensemaking
Knowledge structure
Strategy content
Periphery: subsidiaries, projects.
business and technology units
Complexity
Inductive
Externally focused: trial &
error, probing environment, and
heuristics use
Exploration of new resources
and industries
- Informal contacts and
encounters
- Technology and market
experiments
Trying out, adjusting and
generating new strategy
interpretations
Establishing new knowledge
structure
New combinations of old and
new resource and industry
factors: strategy-creation
Centre: corporate and divisional
management, board of directors
Order
Deductive
Industry focused: planning.
analysis, and expertise use
Exploitation of prevailing
resources and industry
- Formal reports, documents.
intelligence
- Industry experience and
routines
Established strategy
interpretation patterns and
structures
Emphasizing current knowledge
structure
Refinement of existing resource
and industry factors: perfection
of prevailing strategy
believes tied to the historic strategy. The intrinsic strategy activities, sensemaking
and knowledge structures in the two separate settings produced quite different
types of strategic knowledge and, in turn, different strategy content (see Table V).
These observations provide insights by delineating connections between settings,
activities and strategy and, thus, specify a relationship between strategy context,
practice and content.
The identification of qualitatively different strategy and knowledge assimilation
activities provides an empirical illustration and specification of organization's
tradeoff between exploration and exploitation in strategic and organizational
change (March 1991; Schumpeter 1942). The study suggests that while traditional
exploitation focused and deductive practices are important for refining and
improving prevailing strategy, exploratory and inductive everyday activities seem
crucial for strategy creation and development (cf. Johnson and Huff, 1998). Fur-
thermore, it appears as if everyday activities that triggered most opposition within
the firms turned out to be most criticial for strategy outcomes. Besides illustrating
the importance of conflict as a way to clarify and develop strategic issues (Johnson,
1987; Pettigrew, 1977), the study shows that how managers practically handle
strategic issues might of itself further enhance conflict and, in particular, it illus-
trates two completely different roles of conflict in strategy development. For the
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Strategy Creation in the Periphery 79
periphery it mobilized energy, furthered the coordination and combination of
knowledge and sharpened arguments. For the centre, it forced an adaptation over
time of the historic strategic views andfinally triggered macro strategic change.
Apart from contributing to research on strategy process and practice the study
has gone some way towards illustrating, specifying and understanding different
categories of dynamic capabilities (Teece et al., 1997). It illustrates detailed strat-
egy activities and capabilities, and how they might differ depending on the char-
acter of outer (cf Eisenhardt and Martin, 2000) and inner contexts.
CONCLUSIONS
This study has empirically identified and examined strategy activities in strategy
creation and development and specified 'what managers really do'. The study
provides a unique revelation of how managers develop strategy through inductive
and deductive strategy making, originating from diverse managerial settings, the
periphery and the centre. Strategy creation grew out of everyday activities in the
periphery in sharp conflict with the centre, which finally triggered strategic
change.
A normative recommendation based on this study is to take strategy activities
and strategic knowledge generated from them as point of departure in strategic
management - a focus on knowledge activities and assimilation in contrast to the
traditional emphasis on knowledge analysis. In general, inductive and exploratory
strategy actions are likely to be more applicable than deductive and exploiting ones
in a strategy context characterized by ambiguity and complexity and vice versa.
Hence, both types of strategy making and both periphery and centre play impor-
tant roles in strategy. Often, however, companies react in the complete opposite
way. In times of uncertainty and turbulence they tend to use more of traditional
and deductive strategic management techniques and hire various forms of man-
agement consultants, business intelligence experts and the like. Given the sharp
differences observed between the two settings it is doubtful that the centre delib-
erately could initiate or develop radically new strategies. However, top manage-
ment could be receptive to critical everyday activities in the periphery, especially
if they clash with historical and existing business and strategy since this might
indicate a more fundamental shift in products, markets and business logic. Be-
sides managing the general context in which strategy develops (Bower, 1970;
Burgelman, 1983), a more precise recommendation is to carefully manage strat-
egy and knowledge assimilation activities and also the creation of meaning as sug-
gested by Dutton and Ashford (1993).
The investigation of strategy-creation presented in this study has several limi-
tations and clearly provides an incomplete exploration and examination of the
subject. First, given the restriction of the empirical data to four organizations, the
usual caution in making generalizations is clearly recommended. Another limita-
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80 P Regner
tion of the study might be a lack of sophisticated psychology techniques in order
to discover more detailed differences in sensemaking and knowledge structures
over time. Finally, this study is limited, as many comparable studies, in that it exam-
ined only strategies that actually were implemented and were successful to a certain
degree.
This study is a modest empirical contribution to research on micro-level strate-
gic management activities in strategy creation and development. Clearly, these
factors need to be examined more in detail in future research. If there are funda-
mental differences between inductive (periphery) and deductive strategy making
(centre) such as the description of the strategic management activities seem to
suggest, their detailed differences, their diverse managerial requirements and their
interactions need to be examined more in-depth. The fact that strategy practice,
process and content appear to be interdependent rather than independent sub-
jects, as suggested by the findings, presents another line of future research and
implies that strategic management might benefit from a further integration
between strategy content and process research directions.
NOTES
*The author would like to thank two anonymous reviewers and the editors of this issue for their
many helpful and constructive comments on earlier versions of this paper.
[1] There were, however, some exceptions to the use of tape recorder. Firsdy, the interviews regard-
ing Ericsson's outer context were conducted together with research colleagties in the course of
a related research project and were not taped, but several interviewers took careful notes. Sec-
ondly, in four other cases, due to the sensitivity of the matters under investigation it was out of
the question to use a tape recorder. In those cases, either the interviewee requested that the inter-
view would not be taped, or it was strongly sensed that taping would not be appropriate.
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