The Control of Strategy in Dynamic versus Stable Environments

Executives formulate and implement strategy in complex and uncertain circumstances. They decide and act knowing that ignored or misinterpreted information may invalidate the premises underlying their strategic initiatives, and that future events may render even the best strategies obsolete (Schreyogg and Steinmann, 1987). To deal with the inherent ambiguity of strategic decision making, executives rely upon formal and informal control processes to generate feedback about the interim consequences of strategy so that mid-course corrective actions can steer the firm toward long-term objectives (Lorange, 1980). Recent studies have explored executive decision-making processes in contexts of rapid and discontinuous change, so-called "high-velocity" environments (Bourgeois and Eisenhardt, 1988). The preliminary findings of this line of inquiry suggest that executives follow a different logic than is described by traditional decision-making research. But what of executive-level control processes in these environments? Although some have argued that environmental context should be an important consideration in the design of strategic control processes (Goold and Quinn, 1990; Lorange and Murphy, 1984; Schreyogg and Steinmann, 1987), there is a notable absence of empirical research concerning the design of strategic controls. This article reports an exploratory study of the relationship between environmental context and the design of strategic control processes. A sample of firms from two industries, one representing a dynamic, high-velocity environment and the other a more stable environment, is used to address two fundamental questions: (1) do firms in different environments design their strategic controls differently, and (2) are these control processes differentially effective in different environments? This study contributes to the stream of strategic management research concerned with the relationship between environmental context and characteristics of strategic planning systems (e.g., Grinyer et al., 1986; Kukalis 1991). The findings provide preliminary insights about strategic control designs that may help executives manage strategic change in different environments. BACKGROUND Strategic Decision-making in Dynamic Environments The literature on strategic decision making follows two general streams. The synoptic perspective (e.g., Hofer and Schendel, 1978; Lorange, 1980) advocates the development of broad, integrative, and highly analytical processes that facilitate the formulation of strategy in one grand design so that the task of steering the organization can be programmed in detail prior to implementation. The incremental perspective argues for a rationality that incorporates the political and behavioral characteristics of the organization (e.g., March and Simon, 1958; Lindblom, 1959). Bourgeois and Eisenhardt assert that neither approach to strategic decision making will be effective in high-velocity environments "in which there is rapid and discontinuous change in demand, competitors, technology and/or regulation, such that information is often inaccurate, unavailable, or obsolete" (1988: 816). On the one hand, decisive action is more problematic in high-velocity environments, as executives lack the information or the time to process the information needed to make fully informed and analyzed strategic decisions. On the other hand, incremental approaches may also be ineffective, as windows of opportunity open and close before decisions can be completely implemented. Bourgeois and Eisenhardt (1988) articulated a different decision-making logic characteristic of successful firms in high-velocity environments. Still, no strategic decision process can by itself guarantee success in dynamic environments. Time pressures and information shortages make strategic mistakes more likely and implementation tasks more difficult, and soon make obsolete even well designed and implemented strategies. …