The Characteristics Of An Effective Strategy Business Essay

There is no clear overview on the effectiveness of this strategy or its ensuing concepts. This thesis will try to provide such an overview, by first selecting criteria for an effective strategy and then evaluating the concepts on their compliance to these criteria. The main research question of this thesis is: is the use of blue ocean strategy and its ensuing concepts effective?

The four criteria for an effective strategy that were formulated in this thesis are: practice of flexible strategic planning, ability of learning for the collective system, a unique value proposition and the use of visionary leadership.

Blue ocean strategy is a strategy in which the competition is made irrelevant by creating a leap in value for customers (Kim & Mauborgne, 2005). This leap in value is created with the use of value innovation, a process in which the focus is on both differentiation and cost leadership (Kim & Mauborgne, 2005). This thesis has examined two ensuing concepts of BOS. First, purple goldfish strategy is a strategy in which organizations stay in ‘the sea of sameness’ and differentiate themselves by offering its customers unexpected little extras which they value (Phelps, 2012). The second ensuing concept is white space strategy, a strategy that reaches growth and renewal through business model innovation (Johnson, 2010).

The answer to the main research question is that blue ocean strategy is not labeled as an effective strategy because the strategy not complies with all four criteria for an effective strategy and therefore is not increasing the financial performance of an organization on all four points. BOS only complies with the criterion concerning the creation of a unique value proposition, by which the financial performance, including the sales performance and sales quota achievement (See Appendix B3), is supposed to be positively influenced.

In practice, the strategy is in most cases used to create a unique mix of value for the customers of an organization. This unique mix of value is often created by means of the strategy canvas and the four actions framework. These frameworks seem to be important when organizations apply BOS. Thus, in practice most organizations only formulate a blue ocean and the implementation is not guided by the frameworks of BOS. This could explain the fact that three out of four criteria, which are important during the implementation phase, are often not included when organizations use BOS in practice.

Both of the ensuing concepts of BOS do also not comply with all four criteria and therefore are not effective strategies that add value to BOS.

Figure 1. Histogram of the number of articles published around the BOS in the collection used in this thesisThis chapter will first introduce the subject of this thesis and the need for this thesis to be executed. Second, it will clarify the purpose of this research and the research model used in this thesis. Third, the research questions will be presented and an explanation will be given of frequently used terms. Fourth, the research strategy and the materials used will be summarized. Finally, the planning will be displayed by means of a Gantt chart.

In 2005 W. Chan Kim and Renée Mauborgne published the book Blue Ocean Strategy, in which a concept is formulated regarding "a strategy in which the competition is made irrelevant by creating a leap in value for customers" (Kim & Mauborgne, 2005). "Instead of staying in the oceans of fierce competition, an organization must focus on creating new value for their customers in untapped market spaces". Value innovation is the cornerstone of blue ocean strategy (BOS). Value innovation is a process in which the focus is on both differentiation and cost leadership (Kim & Mauborgne, 2005). Because of this simultaneously pursuit, a leap in value is created for customers.

Since its publication this book has become popular: It has been selected as Wall Street Journal bestseller, Business Week bestseller and Amazon.com’s top business book of the year 2005 (Parvinen et al., 2010). Next to this, in the collection of articles used in this thesis, 84,21% of the gathered articles were published between 2008 and 2012. This could be an indicator of the growing interest in BOS (Figure 1). In addition, new concepts are developed that built on the concept of BOS in which some elements are changed or even an idea that refutes BOS is recommended. From now on these concepts will be called ensuing concepts of BOS.

Despite many success stories provided by Kim and Mauborgne, critics have argued against BOS. The concept is based on a study in which 150 strategic moves over the last hundred years in thirty industries were examined (Kim & Mauborgne, 2005). However, this is also the main criticism researchers have: Kim & Mauborgne have looked back at successful organizations and predicted which strategy they could have applied to reach a blue ocean. On this basis they have developed their concept, but the conceptualization of BOS still lacks a theoretical foundation (Aspara et al., 2008). They give ex post evidence for their concept, by means of providing success stories, but no ex ante empirical studies were executed to test their concept.

In the current situation of economic recession, fierce competition and uncertainty it is important for organizations to be informed about which strategies to apply. The question of how effective a particular strategy will be for an organization is from great importance. However, pieces of information on BOS are scattered among many articles, thus no clear overview of the effectiveness of BOS is found. In addition, there is limited information supplied about the ensuing concepts of BOS which could add value or new insights to BOS. Concluding, there is no overview on the effectiveness of BOS or its ensuing concepts. This thesis will try to provide such an overview, by first selecting criteria for an effective strategy and then evaluating the concepts on their compliance to these criteria.

1.2 research objective

The purpose of this research is to provide an overview on the effectiveness of blue ocean strategy and its ensuing concepts by means of a literature study. The first purpose of the literature study is to formulate criteria for an effective strategy. Next, BOS and its ensuing concepts will be explained. Finally, the effectiveness of BOS and its ensuing concepts will be determined, based on the earlier defined criteria. This process is displayed in the research model of this thesis, see Figure 2.

Figure 2. Research model of this thesis, based on the book Designing a research project (Verschuren & Doorewaard, 2007)

The main research question in this thesis is is the use of blue ocean strategy and its ensuing concepts effective?. This main research question will be answered by means of three research questions:

1. What are the characteristics of an effective strategy?

To answer research question one, first an explanation on different perspectives on strategy will be provided, by presenting the views of representative authors. Second, criteria will be constructed for the determination of an effective strategy, based on the earlier discussed different perspectives on strategy. Criteria will be adequate when the attribute of a criterion has a positive impact on the organization’s financial performance.

2. What is the meaning of BOS and its ensuing concepts?

To answer research question two, BOS and its ensuing concepts will be explained, along with its tools. The core and the point of view of each concept will be discussed, based on the literature.

3. Do BOS and its ensuing concepts fulfill the criteria for an effective strategy?

To answer research question three, the effectiveness of BOS and its ensuing concepts will be determined on the basis of compliance to the predetermined criteria that were set by means of the first research question. With this research question, the answer on the main research question will be given, by means of an overview.

1.3 methodology

This thesis will be executed by means of a desk research in which literature will be qualitatively analyzed. Articles are gathered with the use of the databases Scopus, Web of Knowledge, Wiley online library, JSTOR and Google Scholar. The search strings used for the collection of articles are shown in appendix A2.

To answer the first research question, articles about different views on strategy and its effectiveness are gathered. The purpose of these articles is to form an explanation on these different views regarding strategy and criteria for an effective strategy. Next to this, articles are collected in which the impact of an attribute of a criterion is empirically tested on its influence on the organization’s financial performance. The purpose of these articles is to evaluate the criteria and to conclude with an ultimate list of criteria for the use in this thesis.

To answer the second research question articles are gathered regarding the theory of BOS and its ensuing concepts. In these articles the explanation of BOS and its ensuing concepts will be reviewed for the formulation of these concepts.

The last research question will draw conclusions about the effectiveness of BOS and its ensuing concepts. Two different subsets are used, the book of Kim & Mauborgne and a collection of 30 articles. This collection of articles is describing and applying BOS. Of these 30 articles, 11 articles are describing BOS and 19 are describing a blue ocean idea; thus applying BOS. Because of these two different subsets, not only the compliance to the criteria is examined by means of the book but also the use in practice could be examined.

To provide an overview of the effectiveness of BOS and its ensuing concepts, the emphasis will be on researching the subject with a broad research strategy to create an overview on the effectiveness of BOS and its ensuing concepts.

1.4 Content of this thesis

Chapter 2 will give an answer to the first research question ‘What are the characteristics of an effective strategy?’. This chapter will use a frame as a starting point to define the term strategy and to formulate the criteria to evaluate BOS and its ensuing concepts on its effectiveness.

Chapter 3 will give an answer to the second research question ‘What is the meaning of BOS and its ensuing concepts?’. This chapter will explain the basics of BOS and its ensuing concepts, along with its principles and frameworks.

Chapter 4 will give an answer to the third research question ‘Do BOS and its ensuing concepts fulfill the criteria for an effective strategy?’. The strategy will be labeled effective when there is compliance with the four criteria that were set in chapter two.

Chapter 5 contains the conclusion and the discussion of this thesis. First, the answer to the main research question will be given. Next, the results, shortcomings and possible further research suggestions of this thesis are discussed.

The thesis will finish with the references used in this thesis and the appendix.

2. Effective strategy

This chapter will give an answer to the first research question ‘What are the characteristics of an effective strategy?’. This chapter will first start with an explanation on the frame used in this thesis, namely the 5Ps of strategy by Mintzberg. Second, the ten schools of thought by Mintzberg, which will be linked to these 5Ps, are summarized. Third, the choice for financial performance as an indicator for effectiveness will be explained. Fourth, each P of strategy by Mintzberg, with its corresponding school of thought, will be elaborated. This will start with an explanation of a particular definition of strategy and the corresponding school. Next, important authors and concepts will be discussed which are mentioned within the strategy definition and the particular school. Then, these important points of view or concepts will be tested if they increase the financial performance of an organization. When this is the case, the point of view of a certain author or a certain concept will be integrated in the list to evaluate BOS and its ensuing concepts on its effectiveness. This chapter will conclude with an overview on the criteria that will be used for the evaluation of the effectiveness BOS and its ensuing concepts.

Strategy is a popular term in the world of management and its meaning is provided by many different authors. Because this thesis has the focus on BOS and not on strategy at large, not every definition, judgment of an author or movement in the field of strategic management will be presented. Instead, a frame is used to define strategy and formulate the criteria concerning its effectiveness. The 5Ps of strategy, developed by Mintzberg in 1987, will be used as a starting point to look at the points of view of different authors and relevant concepts and ultimately to form the criteria which will be used in this thesis to evaluate BOS and its ensuing concepts. This frame, 5Ps of strategy, is chosen because it provides five different definitions of strategy, which gives a more comprehensive view than one definition from a particular point of view. Next to this, the work of Mintzberg is respected in the literature of strategic management. For example, his book Strategy Safari (1998), in which the 5Ps of strategy and the ten schools of thought are explained, is cited 2760 times with Google Scholar between 2000 and 2013.

Mintzberg argues that strategy could be seen as a plan, ploy, pattern, position and perspective (Mintzberg, 1987).

First, a strategy could be seen as a plan; some sort of conscious intended course of action, a guideline to deal with a situation (Mintzberg, 1987). The two essential characteristics of this definition are that strategies are developed in advance to the actions to which they apply and that strategies are developed consciously and purposefully.

Second, a strategy could be seen as a ploy; a maneuver intended to beat a competitor (Mintzberg, 1987).

Third, a strategy could be seen as a pattern in a stream of actions (Mintzberg, 1987). Strategy shows consistency in behavior, intended or not. Here Mintzberg makes a distinction between two types of strategies: deliberate and emergent strategies. Deliberate strategies are realized strategies that were formed as they were intended, while with emergent strategies there is consistency in action over time but there was no intention about it (Mintzberg & Waters, 1985). Mintzberg argues that most of the time strategies are a combination of these types, some more emergent and some more deliberate.

Fourth, a strategy could be seen as a position, a means of locating an organization in the external environment (Mintzberg, 1987). With a strategy, the activities of an organization in a part of the product or service sector are defined (Davies & West-Burnham, 2003).

Fifth, a strategy could be seen as a perspective; a way of conceiving the world, embedded and shared in the organization (Mintzberg, 1987). It is the way that the organization looks at itself and its broader context (Davies & West-Burnham, 2003).

Next to the 5Ps of strategy, Mintzberg has divided the literature on strategy in ten schools of thought. Not all schools will be discussed, only the ones that correspond with the five different definitions of strategy. These schools are the planning school, the power school, the learning school, the positioning school and the entrepreneurial school.

To measure the effectiveness of an attribute of a criterion, different financial indicators are used. In this thesis financial performance is chosen as an indicator for the effectiveness because its use is practical: a lot of empirical research exists on the influence of a particular attribute on the financial performance on an organization. Next to this, this thesis is done in the field of business studies, in which the emphasis also partly lies on financial impact, instead of social impact for example. Although this thesis could have used other measures, like growth or customer satisfaction, which also could have been influenced by the use of BOS, the focus will lie on the effect of an attribute of a criterion on the financial performance of an organization.

2.1 Strategy is a plan

Figure 3. Premises of the planning school (mintzberg et al., 1998)According to the first definition of the 5Ps of strategy, a strategy could be seen as a plan; some sort of conscious intended course of action, a guideline to deal with a situation (Mintzberg, 1987). The school of planning is linked to this definition of strategy, which introduced formal quantitative procedures, training and analysis in the process of strategic planning (Mintzberg et al., 1998). The premises of this school of thought are displayed in Figure 3. Strategic planning is used to establish a clear direction and stability in an organization (Mintzberg et al., 1998). This process consists of six stages. The first stage is the objectives-setting stage, in which procedures are followed to explicate and quantify the goals of the organization (Mintzberg et al., 1998). In the second and third stage, the external and internal audit stages, the internal and external conditions of the organization are formalized. The external audit is for example done with forecasts about future conditions. In the fourth stage, strategies are evaluated by means of quantitative techniques like the ratio of return on equity or shareholders value. In the fifth stage, the strategy operationalization stage, the strategy is broken down into sub strategies which give rise to long-term, medium term, and short-term plans. In the last stage the whole process is scheduled by means of a timetable. When this sequence is followed and each component is formed, then the end product, a strategy, is the result (Mintzberg et al., 1998).

One academic that is frequently linked to this school of planning is Ansoff, one of the first academics that came up with the importance of strategic planning. He addressed how to design the processes of planning a strategy to enhance the quality of strategic decision making (Gavetti & Levinthal, 2004). For the first time, a systematically and coherent framework was available for the process of strategic analysis and formulation. This framework includes for example the portfolio analysis, growth vector, products-market matrix and the three levels process of decisions (Strategic, administrative and operational). Ansoff did not discover all these concepts but he was the first that combined them into a comprehensive framework. Despite that Ansoff was convinced that a deliberate strategy was necessary to achieve long-term performance, his work was criticised by other academics, for example by Mintzberg in the article ‘Rethinking strategic planning: pitfalls and fallacies’ (1994).

Next to this, there are concepts developed that are more focussed on the actual use of strategic planning. First, the concept of scenario planning was introduced, also by Porter, in which speculations about different future scenarios are formed (Mintzberg et al., 1998). Second, the concept of strategic control was introduced, which keeps organizations on their intended strategic tracks (Mintzberg et al., 1998). Mintzberg et al. (1988) argue that there are two types of planners: the so called right-handed and left-handed planners. So called Right-handed planners follow formal rules and programs in strategic planning, which suits when an organization is in a stable, predictable and controllable context. However, when an organization is in a less stable, predictable and controllable context and there is a need for change, then it is better to rely on more flexible procedures in strategic planning, which is executed by so called left-handed planners. Thus, strategic planning can be used for establishing a clear direction and stability and in this process flexible procedures are needed to adapt to the unstable, unpredictable and uncontrollable context of the organization.

Strategic planning

The importance of flexible procedures in strategic planning is also addressed in the article of Rudd et al. (2008) in which the impact of strategic planning on the financial performance of an organization was tested. 366 questionnaires were used in this analysis. These questionnaires were filled in by CEO’s, management directors and general managers of UK large to medium sized UK manufacturing organizations. The level of strategic planning in an organization was addressed by 11 different components (See appendix B1), for example internal analysis and on-going evaluation and control. The financial performance was measured via the profit growth, sales growth and market share of an organization. The flexibility of the formal procedures was divided into operational, financial, structural and technological flexibility. This article shows that the financial performance increases when an organization uses strategic planning with flexible procedures for operations and finance (p=.001). For BOS and its ensuing concepts to be effective, it will be important that attention is given to the process of strategic planning. Thus, the first criterion for evaluating BOS and its concepts is the practice of flexible strategic planning. BOS and its ensuing concepts will comply with this criterion when strategic planning is applied in their processes or tools; the strategy must use strategic planning to set a clear direction. However, the strategy must also include flexibility to adapt to the unstable, unpredictable and uncontrollable context of the organization.

2.2 Strategy is a ploy

Figure 4. Premises of the power school (Mintzberg et al., 1998)According to the second definition of the 5ps of strategy, a strategy could be seen as a ploy; a maneuver intended to beat a competitor (Mintzberg, 1987). This second definition of strategy is often linked with the power school which characterizes the strategy formulation process as an overt process of influence. This school emphasizes the use of power and politics to negotiate strategies favorable to particular interests (Mintzberg et al., 1998). The premises of this school of thought are displayed in Figure 4.

Two different types of power are described, micro and macro power. Micro power is the use of politics within the processes of strategic management inside an organization (Mintzberg et al., 1998). Here different actors or coalitions pursue their own interests. There are four advantages of the use of politics in strategic decision making. First, the use of politics can act in a Darwinian way by which the strongest members of an organization have positions of leadership (Mintzberg et al., 1998). Second, it promotes debating all sides of an issue by different voices within the organization (Mintzberg et al., 1998). Third, politics could stimulate the need for change when this is blocked by people high in the hierarchy of an organization (Mintzberg et al., 1998). Fourth, politics can facilitate the path of change by gaining acceptance for the decisions made (Mintzberg et al., 1998). Macro power is the use of power by the organization when they are in conflict or cooperation with other organizations in their environment (Mintzberg et al., 1998). An organization could approach politics in the external environment in different ways. First, an organization could do a stakeholder analysis, a rational approach to deal with political forces (Mintzberg et al., 1998). Freeman proposed a stakeholder strategy formulation process, which consists of a first analysis on the behavior of stakeholders, then an explanation of the behavior of stakeholders and finally an analysis for possible coalitions among stakeholders (Freeman, 1984). Second, an organization could use strategic maneuvers to control behavior of external actors and to reach their own objectives, also introduced by Porter. Third, an organization could use more cooperative strategies by engaging in networks, joint ventures or other strategic alliances (Mintzberg et al., 1998).

Power and politics

Despite the fact that power and politics have always been present in organizations, the number of articles on power and politics is rather small, also mentioned by Mintzberg et al. (1998). There are a few articles which describe the different definitions of power and how to measure it. However in none of the five databases used for this thesis, articles were found on the effect of power and politics in organizations on the financial performance. Thus there is no empirical evidence for the relationship between power, politics and financial performance available. Therefore, this criterion will not be included in the ultimate list of criteria to evaluate BOS and its ensuing concepts on its effectiveness.

2.3 Strategy is a pattern

Figure 5. Premises of the learning school (Mintzberg et al., 1998)According to the third definition of the 5Ps of strategy, a strategy could be seen as a pattern in a stream of actions (Mintzberg, 1987). Strategy shows consistency in behavior, intended or not. Here Mintzberg makes a distinction between two types of strategies: deliberate and emergent strategies. Deliberate strategies are realized strategies that were formed as they were intended, while with emergent strategies there is consistency in action over time but there was no intention about it (Mintzberg & Waters, 1985). The school often linked to this definition of strategy is the learning school. According to the learning school, strategies emerge as people collectively learn about a situation as well as their organization's capability of dealing with it (Mintzberg et al., 1998). Key to the learning school is that it is rather descriptive than prescriptive and that strategies emerge in small steps, as an organization learns. It is most important for the collective system to learn, following that successful initiatives can arise from everywhere in the organization (Mintzberg, 1998). The role of the leader is here to manage this process of strategic learning. The premises of this school of thought are displayed in Figure 5.

Many new concepts have been developed regarding organizational learning, including learning as knowledge creation, the dynamic capabilities approach and chaos theory (Mintzberg, 1998). Learning as knowledge creation, inter alia mentioned by Nonaka and Takeuchi in their book Knowledge creating organization (1995), emphasizes the importance of tactic knowledge, what an organization knows implicitly. This tactic knowledge is the opposite of explicit knowledge, which describes what an organization knows formally. Crucial in the process of knowledge creation is to convert tactical knowledge, of senior executives and important employees, into explicit knowledge to incorporate it into new products and technologies (Mintzberg, 1998). The dynamic capabilities approach argues that strategy is built on the process of collective learning and learning depends on capabilities (Mintzberg, 1998). Prahalad and Hamel (1990) argue that by developing and exploiting distinct competences, an organization can collectively learn, without competitors imitating the process (Mintzberg, 1998). Chaos theory asserts that an organization should welcome disturbances and crises to generate new knowledge (Mintzberg, 1998). This new knowledge and creative opportunities arise when managers try to fight against the disturbances.

Learning

The influence of organizational learning on the financial performance is investigated in the article of López et al. (2005). 215 questionnaires were used in this analysis. These questionnaires were filled in by the main executives of large Spanish organizations in the industrial and service sector. Organizational learning was measured on the scale of the acquisition, distribution, interpretation of knowledge and organizational memory (See appendix B2). The financial performance was measured by the satisfaction level of the general manager with their firm’s performance in terms of profitability, sales growth, profit growth and sales margin. The conclusion of this article is that organizational learning significantly contributes to the financial performance of an organization (p=.001). Hence, the criterion of Mintzberg of the learning school, the practice of organizational learning, will be added to the list of ultimate criteria for the evaluation of BOS and its ensuing concepts. These concepts will comply with this criterion when learning is integrated in the strategy by which all employees, from all levels, can collectively learn.

2.4 Strategy is a position

Figure 6. Premises of the positioning school (Mintzberg et al., 1998)According to the fourth definition of the 5Ps of strategy, a strategy could be seen as a position, a means of locating an organization in the external environment (Mintzberg, 1987). With a strategy, the activities of an organization in a part of the product or service sector are defined (Davies & West-Burnham, 2003). The positioning school emphasizes the importance of the content of the strategy, not just the process by which strategies are formulated (Mintzberg et al., 1998). This school identifies generic strategies: chosen positions in the economic and competitive market place that are selected on the basis of analytic calculation. The premises of this school of thought are displayed in Figure 6. This school consists of three different ‘waves’. The first wave, describes the manners of selecting a strategy bases on the military practices, including Sun Tzu’s Art of war which is believed to be written around 400 B.C. (Mintzberg et al., 1998). The second wave proposed more techniques for the positioning of an organization (Mintzberg et al., 1998), including the growth-share matrix and the experience curve. The third wave has had a large influence on strategic management and contains empirical search for the relationship between external conditions and internal strategies (Mintzberg et al., 1998).

One important academic of this ‘third wave’ is Michael E. Porter. Porter argues that strategy is ‘the creation of a unique and valuable position, involving a different set of activities (2000). Trade-offs are made in competing and strategic fit among the organization’s activities is created.’ An organization develops a competitive advantage when the value that is created for its customers is greater than the costs of creating it (Porter, 1985). An organization has a sustainable competitive advantage when its strategy maintains above average performance in the long run. An organization with a sustainable competitive advantage is likely to gain market share and possess a higher profitability growth than competitors (Porter, 1980).

There are two different types of competitive advantage: low cost advantage and differentiation advantage, which are in line with the generic strategies formed by Porter. Porter argues that to create a difference to outperform competitors, an organization can choose between three generic strategies: differentiation, cost leadership or focus strategy (Porter, 1980). When an organization applies a differentiation strategy it offers its customers a product or service with unique attributes that are valued by customers and are perceived to be better than or different from the products of competitors (Porter, 1980). The value that is added by the uniqueness of the product may allow the firm to charge a premium price for it. Cost leadership is about being the lowest cost producer in an industry for a given level of quality (Porter, 1980). The firm can sell its products at average industry prices to earn more profit compared to its competitors. Next to this, an organization can sell its products below the average industry prices to gain market share. When an organization applies a focus strategy, it concentrates on a narrow segment and within this segment it attempts to achieve a cost- or differentiation advantage (Porter 1980). By using a focus strategy an organization often generates a high degree of customer loyalty, which discourages other firms from competing directly. Following from the literature, Porter has developed four criteria for an effective strategy by which an organization outperforms competitors. Subsequently, each of these criteria will be elaborated.

Value proposition

The first criterion of Porter states that an organization must develop a unique value proposition compared to its competitors, to ultimately reach a competitive advantage (Porter, 2000). By choosing activities that are different from competitors, a unique mix of value for customers is created. ‘Strategy is the process of competing to be unique rather than competing to be the best’ (Porter, 2000).

The impact of value creation competence was tested on the financial performance of an organization in the article of Sullivan et al. (2012). 1502 questionnaires were used in this analysis. These questionnaires were filled in by respondents with a job with revenue generating roles, with different function and from different industries. In this questionnaire six questions were included about the perception of the degree to which ‘their’ organization delivered value to its customers (See appendix B3). Financial performance was measured with 8 questions, including questions about the sales forecasts and the sales quota achievement (See appendix B3). Value creation competence was found to be significantly related to firm sales performance (beta=.28, p=.0001). Thus, this article has proven that the ability to create value for its customers has a positive influence on the firm’s financial performance. For this reason this criterion of Porter, the creation of A unique value proposition, will be added to the list of criteria to evaluate the value of BOS and its ensuing concepts. BOS and its ensuing concept will comply with this criterion when the strategy tries to develop a unique mix of value for the customers of an organization.

Value chain

The second criterion of Porter stated that an organization must be in a tailored value chain with activities that fit together and reinforce each other to create real economic value (Porter, 2000). This value chain involves a whole system of activities, not just a collection of its parts. In this way strategic fit contributes to the achievement of a competitive advantage.

With the search for empirical evidence for this criterion, studies were found on the dimensions of ‘strategic fit’, for example the article of Venkatraman (1988). Next to this, a lot of articles were written about the strategic alignment within the context of IT practices and strategy. However, no articles were found about the impact of activities of a value chain that fit together on the financial performance of an organization and for this reason this criterion is not added to the ultimate list of criteria to evaluate BOS and its ensuing concepts.

Trade-offs

The third criterion of Porter states that an organization must make clear trade-offs in what they offer, and do not offer, to its customers (Porter, 2000). These trade-offs create the need for choice and protect against imitators. A valuable position of an organization will likely attract imitators: repositioners that try to match the superior performance or straddlers that seek to match the benefits of the successful position while maintaining its existing position (Porter, 2000).When an organization with superior performance has made clear trade-offs, they are protected against these two groups of imitators because competitors that engage in those approaches undermine their own strategies and degrade the value of their existing activities (Porter, 2000).

This concept of making trade-offs is moderately presented in the field of empirical research. There are some studies about trade-offs/priorities in manufacturing, including: Szwejczewski et al (1997) and Boyer & lewis (2002). However, both of these studies did not test the impact of trade-offs particularly on the financial performance of an organization. Because there is no empirical evidence on the impact of making trade-offs on financial performance found, this criterion will not be included in the list of ultimate criteria in this thesis.

Continuous improvement

The fourth criterion of Porter states that the continuity of the strategy is important with the focus on continuous improvement in implementation and execution (Porter, 2000). A strategy must be able to continuously adapt to changes in the competitive environment and in this way putting together a strategy is an ongoing process (Porter, 2000).

When collecting information, only a few articles were found on the subject of continuous improvement in strategy. Savolainen (1999) does confirm with a longitudinal case study that an organization can create a competitive advantage by continuous improvement (CI). The case study shows that CI increases the innovativeness of an organization and deepens managerial commitment. However, this and other studies about CI have not proven the impact of CI on the financial performance of an organization. Therefore this fourth criterion of porter will not be added to the list of criteria for the evaluation of BOS and its ensuing concepts.

2.5 Strategy is a perspective

Figure 7. Premises of the entrepreneurial school (Mintzberg et al., 1998)According to the fifth definition of the 5Ps of strategy, a strategy could be seen as a perspective; a way of conceiving the world, embedded and shared in the organization (Mintzberg, 1987). It is the way that the organization looks at itself and its broader context (Davies & West-Burnham, 2003). The school of thought that is linked to this fifth definition of strategy is the entrepreneurial school. With this school there is one important leader who creates and/or expresses a vision; a mental representation of strategy (Mintzberg, 1998). This vision serves as an inspiration and as a guide for what needs to be done in the organization. This entrepreneurial strategy is likely to be deliberate and emergent because there is a deliberately chosen, overall vision however the details of this vision can emerge over time (Mintzberg, 1998). The premises of this school of thought are displayed in Figure 7.

Visionary leadership

The impact of visionary leadership on the financial performance of an organization is evaluated in the article by Daniel Gulman (2000). Visionary leadership is described as the ability to take charge and inspire people with a compelling vision. This skill is part of authoritative leadership, by which people are motivated by making clear how their work fits into the larger vision of an organization (Gulman, 2000). This article tested the influence of six different leadership styles on drivers of climate and financial performance. They based their article on the research of consulting firm Hay/Mcber in which 3871 questionnaires were used. These questionnaires were filled in by executives of worldwide, large organizations. The six leadership styles were coercive, authoritative, affiliative, democrative, pacesetting and coaching. The drivers of climate were flexibility, responsibility, standards, rewards, clarity and commitment. Financial performance was measured by means of revenue growth, return on sales, efficiency and profitability. They concluded that the authoritative leadership style, which uses visionary leadership, had the highest positive impact on the climate with a correlation of 0.54. Next to this, the outcome of this research was that the climate had direct correlation with the financial performance of an organization. Thus, the use of visionary leadership, a skill of authoritative leadership, increases the

financial performance of an organization. For this reason the criterion, the use of visionary leadership, is added to the ultimate list of criteria to evaluate BOS and its ensuing concepts. These concepts will comply with this criterion when the strategy uses authoritative leadership and when the vision of the organization in clearly communicated to its members.

2.6 overview on the criteria for the evaluation of the effectiveness BOS and its ensuing concepts

With the use of the frame 5Ps of strategy, the ten schools of thought and the points of view of corresponding authors, four criteria are formed (See table 1). Each P of strategy by Mintzberg with its corresponding school of thought is elaborated. Next, important authors and concepts are discussed which are mentioned within the strategy definition and the particular school. Then, these important points of view or concepts are tested if they increase the financial performance of an organization. When this is the case, the point of view of a certain author or a certain concept is integrated in the list to evaluate BOS and its ensuing concepts on its effectiveness. When BOS and its ensuing concepts comply with all of these criteria, the strategy will be considered as effective because then the financial performance of an organization is supposed to be positively influenced.

The first criterion is that BOS and its ensuing concepts must address the importance of strategic planning and also apply this in their process. By applying flexible strategic planning a clear direction is set and stability is fostered. By means of flexible procedures in this process the organization adapts to changes in the unstable, unpredictable and uncontrollable environment. This criterion is based on the definition of strategy as a plan and the corresponding planning school. When strategic planning is applied, this has a positive influence on the profit growth, sales growth and the market share of an organization. BOS and its ensuing concepts will comply with this criterion when strategic planning is applied in their processes or tools; the strategy must use strategic planning to set a clear direction. However, strategic planning must also include flexibility to adapt to the changing environment.

Second, BOS and its ensuing concepts must use organizational learning. In this way, people can learn about situations and how the organization deals with them. Next to this, because of learning successful initiatives can come from everywhere in the organization. This criterion is based on the definition of strategy as a pattern and the corresponding learning school. When learning is integrated in the processes of an organization, it increases the profitability, sales growth, profit growth and sales margin of an organization. BOS and its ensuing concepts will comply with this criterion when employees, from all levels, can collectively learn.

Third, BOS and its ensuing concepts must create a unique value proposition compared to its competitors. By doing this, a unique mix of value is created for customers and a competitive advantage can be formed. This criterion is based on the definition of strategy as a position and the corresponding positioning school. When an organization develops a unique value proposition, the financial performance, including the sales performance and sales quota achievement (See appendix B3), is supposed to be positively influenced. BOS and its ensuing concepts will comply with this criterion when the strategy tries to develop a unique mix of value for the customers of an organization.

Fourth, BOS and its ensuing concepts must include visionary leadership in their process. The vision expressed by a leader serves as an inspiration and a guideline for what needs to be done in the organization. This criterion is based on the definition of strategy as a perspective and the corresponding entrepreneurial school. When an organization includes visionary leadership in their process the revenue growth, return on sales, efficiency and profitability are positively influenced. BOS and its ensuing concepts will comply with this criterion when the strategy uses authoritative leadership and when the vision of the organization is clearly communicated to its members. These four criteria will be used in the fourth chapter for the evaluation of BOS and its ensuing concepts.