WEEK 21

What are the benefits and drawbacks of taking an ‘emergent’ approach to strategy making?

The process of identifying unexpected results from the formulation and execution of a business strategy and learning to integrate those particular unexpected outcomes for the future references into the future corporate plans is emergent approach. (II, 2011)

It usually happens by chance without any well thought of plan and most often occurs from the day to day decisions that are made to run the firm smoothly at the tactical and routine level of that particular firm. One needs to scan for what will work the best for the firm and what will not. This strategy is more like nature where nothing is really planned but happens anyway by chance as businesses adapt to the changing environment and evolving with the circumstances as a response to certain problems.

The benefits of emergent strategy can be mentioned as:

• This type of strategy helps to keep the innovative and creative thinking and perception alive.
• It encourages informal type of communication for better flow of ideas and suggestions.
• It also uses a more pragmatic type of approach to solve problems so that newer strategies can be developed.
• It helps to encourage shared visions, values and feeling of belongingness within an organization.
• It is a result of different environmental factors that causes a firm to emerge through the obstacles and shine in a different way. (Rapid Business Intelligence Success, 2008)

There are a few drawbacks of using an emergent approach in making strategies as well. Not every plan is full proof. Since planning processes are more of a thoughtful process, there will be pros and cons in the making.

• This type of strategy is more like evolution and nature oriented where nothing is actually planned for long term. These strategies are more risk based where they can be adapted according to the needs of the business processes but there is equal chance of failure as well.
• These strategies are based on things that come out of the trial and errors basis where strategies cannot be pre planned but they will emerge out through experience and mistakes that may or may not happen again.
• There are many things that can work wrong in this particular field because it is not planned carefully and so there is room for many errors and it might cost a lot of money.

(II, 2011)

CASE STUDY – HONDA

Was Honda’s entry strategy in the US more deliberate or emergent?

 Honda’s entry strategy was a mixture of both Deliberate as well as Emergent strategy.

Looking at the first perspective - Honda looked at the major shift of the competitors in U.S motorcycle and also looked at all the bikes sold in the U.S prior 1960. But after the world war, motorcycles were named as Hell’s Angels and Satan’s slaves. This gave the bikes a bad kind of an image. They had a planned policy of selling the Honda bikes not only to the motorcyclists but rather to members of general public. The Honda was lightweight and easier to use as well.

They started with a deliberate plan of – the basic philosophy that high volumes per model provides the potential for high productivity as a result of capital intensive and highly automated techniques. This made them grow their market shares. It was a lower priced producer and utilized the dominant market position in Japan and forced its entry in the U.S. it expanded with the help of a deliberate strategy of redefining the leisure class segment and exploited its competitive advantage through the aggressive pricing and advertising strategy.

However, looking at the second perspective, we know that the company has struggled a lot from the leakages as well as fall of Honda’s image. The company underwent a lot of ups and downs where the executives slept in floors, they managed the stock but their entry looks emergent. They saw a market while visiting U.S. they wanted to test if the market would accept the Honda motorbikes. They did various experiments in terms of strategies. And finally since, 1963, due to a student’s Honda advertisement assignment, the brand has been inseparable. It was more like a trial and error kind of strategy i.e. emergent strategy according to the second perspective.

Which of the accounts seems more accurate and why? Why do you think the two accounts differ so much?

The second accounts seems more accurate in my view because based on interviews by Pascale with Honda Executives, there is more detailed and step by step experience explained in the perspective two. It shows the emotional attachment and primary information collected first hand. It seems more emergent because while travelling across United States, they looked at an opportunity that was just situational where they noticed facts and figures about the particular industry they are from. It was a risky decision as most of the citizens in US drove an automobile but was a new challenge and a new frontier. There were concerns made by the Ministry of Finance as well. They struggled and introduced larger bikes. But there were problems regarding oil leakage and clutch failure. But regardless of the cash reserve restrictions, they evolved through the problems using their minds not planning out everything deliberatively. They made changes and adopted and finally using a good advertisement campaign they were able to change the way how motorbikes were seen in the US market. (Rumlet, 1996)

Both the accounts differ so much due to the logical explanations of the events that happened in the process of capturing the US market. 1^st perspective encourages that the plan to go to the US was more deliberate but the second says it was a coincidence that they noticed a market that was not thought about by the Japanese Honda company.

1^st says, it used an intentional plan of high volumes and high productivity. But the other says it was a failure in the course of reaching there. There are two beliefs and two different strategies mentioned. If the strategy is more deliberate, the things they did would be all planed out beforehand. However, if it is an emergent strategy, everything just happened without planning. They adapted according to the needs and kept on struggling taking risks and finally reached there.

The first one is based on hard facts but the second one is based on attachment and emotional factor of the company. Thus, both the accounts differ distinctively.

Did the Honda’s entry strategy demonstrate the characteristics of ‘logical incrementalism?’

For me yes, the Honda has definitely demonstrated the characteristics of logical incrementalism because it demonstrated the management philosophy of achieving extraordinary goals by making proper, thoughtful and adaptive decisions in small times and in baby steps. They took several logical yet smaller decisions that were evaluated just through their learning and experiences in their process of growing and establishing themselves because, at first they had no idea that such a market existed. They tried and took risks to test the market and through their failures and remedies, they reached a step ahead. They were able to change the mindset of not hundred people but thousands and hundred thousands of people through their campaigning about their bikes. Even in cases of failures like oil leakages and clutch failure, they redesigned and tested the bikes for the sole satisfaction of their consumers even when they were on cash restriction.

Thus, due to logical incrementalism being reflected in their product, they were able to introduce Supercubs and this was because they then understood the market and the demands and took a logical small decision that created a huge difference for the company.

 Do you think Honda would have been more or less successful if they had adopted a more formalized strategic planning approach to the launch?

No, I do not think if Honda had adopted more formalized plan then they would have been more successful. They would have suffered a lot and possibly if everything was planned, they would have given up and moved out of the US market when they started destroying the Honda image due to leakages and failures.

Firstly, if it was a planned strategy, they would have made out a 2 year plan minimum. And no matter what, they would have to carry the project till the very end due to high cost factors. If they had decided to sell this many units of the larger bikes, they would have suffered a huge loss as they would have already manufactured that many units only. 

So, when they used a logical decision of redesigning and repairing the Honda, then only they could survive a little bit. Or else they would have destroyed the Honda name due to the technical failures and they wouldn’t have planned to introduce the 50cc supercubs into the market if it was more deliberate looking at the lifestyle of the people in the US and looking at the facts and figures.They took risks and adapted according to the situation and in my view that is the only reason it has become a legend in the international markets today.

(Pascale, 1984)

References

II, G.N.R., 2011. Demand Media. [Online] Available at: http://smallbusiness.chron.com/advantage-disadvantage-emergent-strategy-10070.html [Accessed 7 DECEMBER 2013].

Pascale, 1984. The real story behind Honda's Success. In perspectives on Strategy. california: California Management Review, Vol.XXVI, no, 3, Spring 1984.

Rapid Business Intelligence Success, 2008. SYD Stewart. [Online] Available at: http://www.rapid-business-intelligence-success.com/emergent-strategy.html [Accessed 7 december 2013].

Rumlet, 1996. The Honda Effect revisited. California: California Management Review. pp.103-11.