Processual, Rational, Fuzzy, Evolutionary 1. Processual approach: Strategy is produced in an incremental fashion, as a 'pattern in a stream of decisions'. Fuzzy approach: Companies sometimes adopt an incremental approach to change. What's different between these two approach?

The Processual approach is really talking about strategy emerging from the many different day-to-day decisions taken by the staff. It’s incremental, in that it is occurring by being added to with each decision taken. Each decision taken is based on what seems like the best thing to do at the time; and really, only by looking back can you see the pattern – the strategy – being followed by the organisation.
The Fuzzy approach is really when a firm has a stated strategy. It is likely to be following a rational approach to strategy, and it may be doing it very successfully. However, at the same time, it might also be doing something outside of its stated strategy too. This is the “fuzzy” aspect. The example on Page 3.28 is of Macquarie Bank, who had a stated strategy of being the leading investment bank in Australia, but was also involved in 6 different overseas countries at the same time. The idea is that there are reasons why this is a good idea – first, the business might want to change their strategy, but rather than trying to change everything at once they take an incremental approach to making the change – changing some things, and then more later etc. A second reason is that opportunities arise, which the business might want to take advantage of – so an excellent acquisition opportunity arises in NZ and Macquarie take advantage of it, despite it not being part of their stated strategy, for example.
Clearly, the two ideas overlap somewhat, as it is not that clear to the observer if maybe a new strategy is just kind of emerging (Processual) or whether it is quite intentionally not following the stated strategy as it is slowing changing the strategy or simply taking advantage of an opportunity too good to pass up (Fuzzy).

2. Would you please clarify if the Rational and Processual approaches are used to "understanding/explain" or "setup" strategy? And can I say - "Organization has a vision/mission (i.e. who we are and what we do) and we should have strategy to fulfill this vision/mission".

Strategy is really the actions taken by a business. The rational approach to strategy is a deliberate attempt to decide on the best actions for the firm to take and implement them. That is, the firm would have some objectives in mind, assess the external and internal factors that impact on the business, evaluate their options as to how to achieve those objectives given the internal and external assessment it has made, and then implement the best options. Then of course, monitor what’s happened in light of desired and reality, and do it all again, with some changes as necessary. A deliberate, intended, rational method to achieve the best outcomes it can. An example would be, after following the rational methodology, the firm decides to achieve revenue growth through exporting to a new market, with their efforts directed to purposefully going about achieving that aim.

The processual approach is an emergent approach to strategy – rather than intended, designed and forethought, the direction that the firm is going in emerges from the everyday decisions that are taken at the time. The strategy is really something you can see that has emerged from the previous actions the firm took; rather than decisions being taken under the guidance of the strategy, the decisions are taken and when you look back, you can see the decisions took you in this direction. Example would be the firm starting to export their product to a new market because a series of events and issues occurred that led to a series of decisions that took you into an export market.

Both approaches are used by business – the former through a planning process, and the latter because firms may believe the environment they operate in is simply too uncertain and unpredictable to implement a planning process in a vain attempt to find the optimal strategy – the incremental adjustments of the business over time are a better approach.

The idea of having a vision and mission statement, and then saying that the organisation should set into place strategies to achieve it is very much a rational approach to strategy – so yes, from the rational approach perspective, that is true.

3. The study guide introduces the strategy process based on the rational approach. I am not sure of the strategy process based on the processual approach. Could you advice? (I know processual strategy would be fragmented and almost bottom-up, vague, complex and form lower lever start. In my opinion, the strategy process base on the processual approach should be: Implement, analysis the outcome, then set up strategy temporarily, then adjust base on environment and condition, then implment again...) Am I correct?

The organisation is constantly moving through time, and the external environment, internal environment and the issues the organisation faces change. Strategy is really the actions the organisation takes moving forward. You can do that by using a rational approach to strategy, which is about consciously, formally and systematically reviewing the important elements and formulating and implementing the best choices for the organisation. Or, there are arguments for the processual approach to strategy, which argues that the rational approach is unrealistic and not really workable (see this discussion in Module 1). Strategy really is occurring everyday “in action” – an outcome of the external environment, internal environment and the issues that the organisation needs to take action on. The strategy therefore emerges from those day to day decisions rather than from some great planning exercise handed down from top level management. An example would be – the rational approach to strategy might formulate the plan to grow sales through targeting export markets, and the organisation would implement that through the various decisions of which markets to target and how they are going to implement the plan. The processual approach would see the exporting emerge through various, ad hoc circumstances and decision making – maybe an overseas customer enquiry, or a contact made between an employee and an overseas customer, or simply an employee taking an advantage of an opportunity noticed. The processual approach could possibly result in exactly the same outcome as the rational approach.

4. Both Processual and Evolutionary approach state that the markets are too uncertainty & precarious for strategy. The strategy is not formed by managers able to observe and analyse their organisation in an abstract and detached manner. How can I distinguish these two approaches?

The difference is that processual implements strategy, not as in the rational approach does, but through a stream of incremental decisions that are made in response to market conditions. Strategy and implementation are entangled; not a separate planning-implementation approach. They focus on competencies in the organisation to build skills and resources so they will be able to be called upon in these in response to the market.

Evolutionary approach regards the market as deciding which organisations will succeed or fail, and it has little to do with what management does. In the short run, management should focus on efficiencies, and also generate a whole range of possible ideas because the market is hard to predict, and the more innovations put out there, the greater chance the market will select one as successful. Forget about long term strategies – a waste of resources as the environment is too unpredictable.