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Exploring Environmental Context within the History of Strategic ManagementAuthor(s): Peter McKiernanSource: International Studies of Management & Organization, Vol. 36, No. 3, UnderstandingEnvironmental Context in Strategic Management (Fall, 2006), pp. 7-21Published by: M.E. Sharpe, Inc.Stable URL: http://www.jstor.org/stable/40397668 .

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Int. Studies ofMgt. & Org., vol. 36, no. 3, Fall 2006, pp. 7-21. © 2006 M.E. Sharpe, Inc. All rights reserved. ISSN 0020-8825 / 2006 $9.50 + 0.00. DOI 10.2753/IMO0020-8825360301

Peter McKiernan

Exploring Environmental Context Within the History of Strategic Management

Abstract: The different schools of thought that have dominated theory and practice in strategic management have treated the organization's environment differently. This paper investigates the stances of the planning, learning, positioning, and resource-based schools, tracing their heritage and key architects and seeking the reasoning behind their individual environmental treatments. Moreover, sometimes it seems that the nexus between organization and environment as explored by organization theorists has been in a parallel world and only interacted with the strategists at certain junctures in time. These interactions and the coevolution of the two approaches are examined using the impact of the changing Anglo-American context on their development. Finally, by introducing and explaining the influential issues in the environmental debate, the "context" for the collection of papers in this issue is created.

The role of environmental context within the genealogy of strategic management is both dominant and subtle. Schools of thought have either blessed it or ignored it or, in their own checkered chronology (e.g., organizational behavior), have accomplished both (Cappelli and Scherer 1991). Here, environmental context represents an outer environment within which, or to influence which, the elements of organizational strategy are blended. In positivist1 approaches (e.g., corporate planning), it has dominated as a distinct construct

Peter McKiernan is head of the School of Management at the University of St. Andrews, St. Andrews, KY16 9SS, Scotland, UK (tel.: +44 (0) 1334 462795; e-mail: peter @st-andre ws. ac.uk).

7



8 PETER MCKIERNAN (UK)

that is observable and analyzable and that plays a role of precedence and power in the linear process of creating deliberate strategy.

In interpretive2 approaches (e.g., cognitive psychology), its incorporation is subtle, as emphasis is placed upon perceptions over analysis when tackling its complexities and the turbulence of outer contexts; hence, environment is "sense- made" by human actors through acts of invention rather than discovery.

What are the reasons for this juxtaposition? Why do different schools place different emphasis on environmental context in terms of its control or its impact on strategy? The picture becomes more complicated if we consider that the study of context in management is not the sole domain of the strategist. Organizational theorists (see Hatch 1997) have explored the environment-organizational nexus in what seems like a parallel world, though these worlds coalesce at certain parts of history (e.g., see the Learning School below). How are these streams linked? What is their likely coevolution?

To answer these questions, this paper traces a history of the dominant form of strategic management in its Anglo-American capitalist setting from its early roots to contemporary thinking, explains the distinctiveness of each contribution, and explores the contingencies surrounding each school. Finally, it provides educated conjecture for the reasons why strategic context has been blessed or ignored, and offers a likely prognosis for its intellectual and practical development by linking organizational theory with strategic management.

The evolution of strategic management

The early era

In the West, the heritage of strategy can be traced from its 1950s appearance in organization theory to the democratic reforms of Kleisthenes (508 b.c.e.) in Athens, where "strategoi" heading the ten tribes sat collectively as the Athenian war council. Realpolitik was added, and the military prescriptions enlightened, by the "satanic" observations of Machiavelli3 in "The Prince" during the incessant and brutal warfare that surrounded the Florentine Re- public in medieval Europe.

In Asia, planning, directing, controlling, and leading techniques were honed on the hardest military battlefields and subsumed in Sun Zi's "Art of War" (500 b.c.e.) into an encyclopedia of military strategy and tactics. Musashi's "Book of the Five Rings," written in the early 1600s in Japan and incorporating lessons from the warrior's heroic victories against mass attacks, reflects much of Sun Zi's wisdom but places a deeper trust in intuition and perception.

In India, Chanakya's (Kautilia) comprehensive volume on Statecraft ("The Arthashastra"), written around 150 ce., combines received wisdom



EXPLORING ENVIRONMENTAL CONTEXT 9

on monarchical governance and foreign affairs in a unique blend of military and political ideology. The teachings reflect the episodes from the strategist's victorious campaign in overthrowing the powerful Nanda dynasty and install- ing Chandragupta Maurya as king.

These early masterpieces are based on experience and practice, and much of their knowledge transfer is prescriptive and easily understood. Environmental context is about competitors, intelligence (including covert operations), physical topography, and supply lines and can be known and labeled in a positivist sense. A detailed understanding of these objective environmental elements is deemed a crucial ingredient of any successful strategy. The exception is Musashi, who advises against the fallibility of illogical subjectivity in perceiv- ing the external environment in a traditional manner, so praising alternative thinking, perception, and even enactment in an interpretivist4 way. Even in this case, the objective environment still exists as a distinct entity, but emphasis is placed on the way in which a fighter is encouraged to perceive of it in a different way so he can think the "unthinkable" in attack or defense.

The war-mongering conditions surrounding these early writings have constancy in territorial gain, ruler overthrow and succession, and attempts at domination and survival. Practice (especially in illiterate communities) required succinct, prescriptive advice, and consequently, the reflected wisdom was aimed directly at the user. Pragmatism was demanded of the pragmatists, and context was a real and identifiable weapon when the strategic objective, and its urgency, focused on life or death. Predictably, the language, metaphor, and instruction descending from this exciting body of knowledge became infectious when transferred to the commercial domain (probably as early as the industrial revolution in Western Europe) and helped lay the foundations for the contemporary discipline of strategic management. Interestingly, the

separate cultures underpinning these epistles construct environmental context in a similar vein. Perhaps here, the military underpinnings dominate individual culture and act as a generic in establishing the collective body of received wisdom.

The contemporary era

Interpreters hold different perceptions of the recent history of strategic man-

agement, making the construction of accurate family trees fruitless. However, most strategy historicists (McKiernan 1996) trace out the significant contributions from the planning, learning, positioning, and resource-based schools of

thought, each with long distinct lineages. Individually and as a composite, they represent the main scholarship that covers the evolution of modern stra-

tegic thought since the early 1960s. Their treatment of environmental context




differs markedly, and the reasons why this has occurred are assessed in the subsequent sections.

The planning school

Planning was the paramount paradigm that governed the structure and thinking behind the seminal text on business policy, authored chiefly by Kenneth Andrews at Harvard (Learned et al. 1965). The text dealt with what the firm might do (market opportunities) and what the firm should do (social respon- sibility) and coupled these external issues to the internal ones of what the firm could do (corporate competence) and what the firm wants to do (ambition), thus suggesting a "fit" between environment and organization. Though this schema was influenced by Chandler, it borrowed the notion of distinctive competence from Selznick (1957), so emphasizing competitive advantage from a heterogeneous resource set and laying some of the foundations for the resource-based view of the firm that developed later as a school in its own right. Ironically, Porter (1991), who fathered the influential positioning school two decades hence, recognized this salience.

The 1960s was a decade of relative growth and stability compared with the travails of contemporary environments, and the planning school thrived. This was true especially in the context of large U.S. corporations, about which and with which the majority of the published planning schémas were developed and applied. Such benign conditions meant that the analysis of external contexts was neither comprehensive nor systematic. There were some rudimentary techniques around, and these can be grouped as either general or specific. The former included the ubiquitous SWOT (strengths, weaknesses, opportunities, and threats) framework that, despite its visual simplicity, was encumbered in reality by gross subjectivity without countervailing evidence, so that strengths were stressed above weaknesses and opportunities above threats. The latter revolved around point forecasting by linear regression and simultaneous equation modeling driven by economics or around portfolio matrices.

The underlying assumption for the econometricians was that the future context could be assessed using probabilistic calculus in multivariate analyses. Anything not explained within the main variables was folded into a random error term representing uncertainty. The emphasis was on predicting what was certain rather than on understanding what was not. Interestingly, during the 1960s in the private domain, Herman Kahn at the Hudson Institute and Pierre Wack at Shell (Wack 1985) were developing the operational use of scenario planning. This technique, with its origins in systems thinking in World War II, was dedicated to embracing and understanding the elements of uncertainty




better as they played out over the long term. Unfortunately, it did not emerge for broader public consumption until the late 1980s.

Portfolio matrices took inspiration from the work of Igor Ansoff (1965), a pioneer of formal planning, whose product-market matrix5 linked supply to demand, certainty to risk, and stability to growth. This tool was appropriate for single businesses and the divisions of multiple businesses and remains an evergreen contribution. These matrices benefited further from the conjoint work of finance professor Alan Zakon, grappling with the balance of personal investments in cash, stock, and bonds, and the Boston Consulting Group founder Bruce Henderson agonizing with the diversified businesses of the Mead Paper Corporation in the 1960s.

From the original Boston matrix, such techniques metamorphosed into the Shell Directional Policy Matrix and the GE Business Screen - an apparent simultaneous and noncollaborative process that, ironically, resulted in similar end products. Each had the beauty of linking the supply to the demand side, of separating the demand context into macro- and microcomponents, and of adding a dynamic strategic movement across their broad, but dangerously descriptive, terrains.

These techniques provided corporate planners with their first strategic toolbox. More importantly, they helped emphasize the distinction between the inner and outer contexts and assumed inherently that the latter existed in its own right to be appraised, monitored, and "fitted" to internal corporate strategy. Such a process of analysis, choice, formulation, and implementa- tion - as depicted by Andrews - meant that strategy could be metered, linear, stage-based, and designed, and that decision making was a rational act. Here, the type of strategy formulation was a captive of a relatively stable context and a pioneering but hard analytic paradigm. Modernist6 and positive epistemological stances were at its core. The perception was mainly "outside in." Most important, this work was the basis of modern strategic management. Much of what is taught and researched today has immediate and identifiable links to the originality of Chandler, Andrews, and Ansoff.

The learning school

In the 1970s, the macroeconomic and geopolitical picture differed starkly. A switch in the power base from the oil majors to the oil owners (one considered, ironically, by early Shell scenario planners) led to Organization of Petroleum Exporting Countries (OPEC)-driven oil price increases in 1974 and 1978. These wrought havoc on the supply chains of manufacturing firms and fueled consumer price inflation. Western nations plummeted in and out of economic recessions as macroeconomic policies were tested. Turmoil was deepened by




a growth in international competition and domestic disarray in management and labor union relations. Environmental context entered a dynamic and highly unpredictable phase made more complex by emergent technologies in telecommunications and information processing.

To cope, econometric forecasts were run more frequently, and their stochas- tic error terms grew exponentially. These were dampened only by an increasing sophistication of mathematical technique and the wider use of computer power. But such a pathway was constrained by the mindset upon which it was premised (i.e., that the future could be known as an extension of the past, as long as uncertainty is ignored). The dynamic and unpredictable context, rich in uncertainty, refused to yield to such quantitative armory.

Poignantly, academic observers noted that, in this environmental turbulence, practical strategists were not operating in the rational design manner presumed by the Andrews' s legacy, and they began questioning the assumptions of the planning approach and fertilizing the ground for alternative paradigms like symbolic interpretivism.7 These emphasized bounded rationality, the role of power, internal politics, and chance in strategic decision making. They focused on organizational adaptation in practice, because the rational planning process was constrained by both external and internal variables with unpredictable or simply unknown behavior. Strategy had become a survival game, full of instinct and enterprise. The strategy focus switched from the linear stage-based designs to the nimble adaptation of resources to external conditions with an emphasis on change management.

The learning school was eclectic in membership and drew inspiration from Darwinian natural selection. Lindblom (1959) had argued already that strategists had to "muddle through" such environmental complexity, and Wildavsky (1973) had warned that because planning had tried to include the totality of organizational activity, it had dissipated into nothing. The planner could no longer discern its shape; it was beyond control - "located everywhere in general and nowhere in particular" (Wildavsky 1973, 127).

In reality, corporate progression was through the more programmable form of "logical incrementalism" (Quinn 1980), with evolutionary adjustments to core business and venturing at the margin only. Strategy formation was purposeful and integrated the analytical components of planning with the behavioral elements of organizational politics (e.g., legitimacy, symbolism, rituals, and beliefs). Creditably, scholars tried to make sense of this milieu by searching for patterning in the series of corporate decisions, finding a judicious combination of the deliberate (planning) and emergent (learning adaptive), contingent upon culture and external context. So, planning was not rejected entirely but was used as one of several enablers of change.




Anchored deep in the intellectual intelligentsia, theory took precedence over practice, and consequently, the learning school delivered few, usable pragmatic tools to the struggling strategic planner. As context was considered by many to be too complex to comprehend, and adaptivity and incrementalism were

premised on environmental jolts before strategic response, the approach to

strategy context was passive and reactive. Hence, the dominant contribution of organizational theorists was observation and research within firm bound- aries, and, perhaps as a result, the concepts of environmental enactment and

symbolic interpreti vism (Hatch 1997) took center stage. Much of this legacy stemmed from Weick's (1979) critical introduction

of enactment theory. The planner's objective context yielded to subjective interpretations as managers reified their organizations and socially constructed their domains. Individual organizational environments emerged as an output from the process of gathering and assessing appraisal data and from any consequent decisions, including any further construction ofthat context or its

imagery. Instead of an objectively identifiable entity that could be analyzed, environment context was treated as a socially constructed entity perceived cognitively and enacted by individuals or groups within the organization.

In reality, the world carries on in much the same way whether the viewpoint is positivist or interpretivist, but the latter exposition, by relaxing objectivity, readied the power of managers to reverse the polarity and began to influence events around them. In addition, the potential for individuals to construct and reconstruct organizations provided a greater flexibility for the design of environmental "fit."8 Therefore, in the learning school, the perception of environment was "inside out."

With such incremental approaches to strategy formation, many Anglo- American firms emerged with consequent short-term visions, and their poor performances were exacerbated by quality problems and delivery delays. This contrasted sharply with the longer-term strategic intents and superior quality assurance processes of their Japanese counterparts during the same

operating periods. Small Japanese firms, some sponsored by government policy through the Ministry of International Trade and Investment (MITI), set themselves ambitious long-term targets. Honda had promised to "over- take Ford," and Canon was determined to "beat Xerox." Their full function and reliable products encroached steadily into the Western marketplace with a price-quality positioning and an engaging reliability that were accepted gratefully by consumers who had been suspicious of the brands previously. Competition began to escalate, and embattled Western corporate planners, full of intellectual stimulation on learning but limited by the content of their contextual toolboxes, searched bravely for strategic sanity and support.




The positioning school

Help arrived at the end of the decade with, arguably, the most significant contribution to the shaping of the modern strategic management to emerge thus far. A rich vein of U.S. economic empiricism, driven by authors who had rejected the fundamental tenets of microeconomics as "remote and unreal" (e.g., Chamberlin's theory of monopolistic competition), argued that price determination was the result of monopolistic and competitive forces rather than one or the other. Quasi-monopoly rents could be earned through product differentiation in a competitive arena. Mason (1939) argued further that market structures and the way that firms react to particular market situations, together with product differentiation, better explain price control. So market structure drove company conduct, which, in turn, drove eventual performance (the structure-conduct-performance paradigm).

Systematic analysis followed in key U.S. sectors (e.g., aluminum, lead, petroleum, tobacco, and steel), where Bain (1959) identified entry barriers (and related, potential threats) as major determinants of firm performance. The Mason-Bain paradigm was reinforced by a string of empirical tests over several decades that legitimated its dominant position in industrial organization theory.

Harvard economists, including Caves and Hunt (Caves and Porter 1977), continued this thrust and focused on the changing contexts as firms shifted from unsuccessful diversifications in the 1960s and 1970s to leveraged buyouts and divestments in the 1970s and early 1980s. They incorporated firm behaviors and mobility into their analyses, breaking with conventional oligopolistic thinking by dropping the assumption of firm homogeneity. This led to the introduction of strategic groups within sectors and to the analysis of strategic decision-making patterns.

Unfortunately, the emergence of practical tools had to wait for the thesis of a young business economics scholar at Harvard - Michael Porter (1980). He provided managers with the engineering tools necessary to help them link the surrounding sector context to their indigenous strategy. This initial book was a watershed which suggested that the part of the environmental context (commonly referred to as micro or task) could be analyzed by tracing out the impact of five forces (including Bainesian entry barriers) and a market positioning choice made by selecting one of three generic strategies. Porter's five forces and three generic strategies became adopted language as well as strategic process and dominated much of the directional discussion in boardrooms throughout the 1980s and well into the 1990s. The gratitude of the old corporate (now strategic) planners was immeasurable.

Essentially, Porter provided an "outside-in" view of strategy formulation




along the heritage of classical-modernist management theories with rationality and linearity inherent in the modeling process. Under this "outside-in" perspective, analysis of the9 environmental context in a systematic manner was a prerequisite to a successful strategy process. External analysis was es- sential in determining effective positioning.

This brought environmental context back to the forefront of academic inquiry. Perhaps in ignorance of the parallel academic debate on enactment and interpretivism, or because the interpretivists failed to translate their rich intellectual grounding into usable tools, managers and consultants applied Porter's technique directly to an objective environmental construct. The technique was digestible and made sense when an industry or market sector could be defined well. This simplicity of analysis (the analogy with the masters from the early era is close) meant for clear classroom and textbook pedagogy, and its widespread adoption was accelerated through international business schools and executive training programs.

The technique's enduring popularity probably overshadowed the opposing interpretivist environmental view and slowed, or even prevented, its emergence to a larger audience. The influential market of business school students, hungry for "what works?" ideology, digested the five forces instantly. Consideration of whether the environment existed or whether it was socially constructed was rarely part of their dialogue. If it had been, some of the hard economic analysis would have had to be conditioned by a more subtle understanding of how individuals within organizations perceive relationships between events, objects, and situations to make sense of the "context" in which they operate. Careful research in exploring the latter takes time and is not guaranteed either to work or to provide usable techniques for the MBA appetite. A similar criticism can be applied to the resource school that follows.

The resource-based school

Despite providing prescriptions for strategic managers and executives, the positioning approach drew steady criticism from academics, not least for the lack of any stable definition of the industry or market to be analyzed on the outside. The convergence of industries in the contemporary era, driven by information and communication technologies, hypercompetition, and globalization, renders much individual-sector codification difficult if not impossible.

In addition, strategy researchers were busy proving that firm-specific factors were responsible for performance differences between firms in the same sector (Cool and Schendel 1988). The analysis of the success of large, international Japanese, Korean, and U.S. firms in the 1980s and




early 1990s pointed to their use and development of internal resources through skill acquisition and knowledge ("inside-out"), rather than market positioning ("outside-in"). These resources can be segmented into assets, competencies, and capabilities, and the focus is on building a resource set that is not capable of imitation by competitors (Wernerfelt 1986). Assets and, to a degree, functional competencies, can be copied eventually, but astute competitors can innovate quickly and compete directly with improved products or service features.

Capabilities represent the processes within firms that bind assets and competencies together into a unified whole. They can be overt or covert, but their operation tends to be unique to an organization and helps mark its cultural layers. As resource transfer between firms becomes tougher the more unique and bound this resource set becomes, rival replication is negated, and superior profits can result. Competitive advantage lies in "management's ability to consolidate corporate- wide technologies and production skills into competencies that empower individual businesses to adapt quickly to changing opportunities" (Prahalad and Hamel 1990, p. 82).

The resource-based view has a long history among economists who es- chewed the conventional teachings that resources (e.g., land, labor ,and capital) behaved according to diminishing returns to scale (e.g., Marshall, Coase, Andrews, and Penrose), which could be modeled relatively easily. Penrose's (1959) "bundle of resources" included management's increasing experience and knowledge of the external world, which could not be modeled with ease. Strategy is created by fostering this experience, premised upon the primary belief that resource development is a more robust base than dependence on the peculiarities of market positioning.

Resource-based (RB) players worry less about fickle markets and more about how to shape them or how to create new ones. Theoretically, the existence of a separate external environmental context and its analysis is therefore less of an issue. A powerful resource combination can shape external territory objectively or subjectively. Hence, in its purest form, the RB view is closer in theoretical terms to a social interpretivist paradigm contrasting with the positivist epistemological leaning of the positioning approach (see Frishammer in this issue).

Discussion

From these historical legacies, a number of contingent reasons can be identified that help explain the juxtaposition of environmental context in strategic thought and shed light on the linkage between organizational theory and strategic management-context stability, disciplinary paradigms and methodology, and pragmatic need and utility. These should not be seen as separate



EXPLORING ENVIRONMENTAL CONTEXT 1 7

or mutually exclusive components but as parts of a complex web, woven by the different schools and difficult to isolate individually.

Environmental stability

Stable environments facilitate formal planning by ensuring that futures

represent an identifiable form of the past and allowing established systems and processes to operate efficiently. Techniques from the planner's tool kit will work accurately, and there should be longevity to foresight that avoids short-term tactical switches.

Such stability can emerge from an outer context with changes that are either predictable (e.g., constant warfare) or where change is infrequent. In such conditions, experience-based prescriptions (e.g., the early era) and logical frameworks (e.g., as per the planning school) should work well, and this success will accelerate their adoption across sectors and institutional domains. More important, as the strategy context can be known, its components can be labeled and arranged and its totality analyzed. It becomes a logical precedent in new strategy exercises and an easy one to visit in any reformulation.

Disciplinary paradigms and methodology

Several disciplines have taken their turn at amplifying, theorizing, or empiri- cally researching environmental context in strategic management (e.g., an-

thropology, cognitive psychology, economics, and sociology). The dominance of one over the others can yield a specific "flavor of the month" (Mintzberg 1991, 464). For instance, industrial organization theory, with a long heritage of large-scale, hypotheticodeductive empirical testing, has focused mainly at the sector level. The strength of the Mason-Bain legacy in key U.S. industries and the "black box" assumptions about the firm in neoclassical economics

placed the strategic imperative soundly within the context of the firm's operations rather than within the firm itself.

This legacy significantly influenced the impactful contribution of Porter, and the Harvard marketing machine behind his industry codification ensured that the "outside-in" legacy endured for decades and shaped the field of con-

temporary strategic management almost irrevocably in some quarters. This

approach created the image of a distinct, analyzable context "out there" in the minds of generations of academics and executives. Further, the original and seminal business policy text (Learned et al. 1965), though probably influenced by evolutionary systems thinking (Bertalanffy 1956), emphasized that environmental analysis constituted the front end of a design schema whose

output was a comprehensive strategic plan.




As the tools of the positioning school became sterile in the face of converging sectors and turbulent markets, academic and practical strategists got closer to firm's activities and (re)identified the development and configuration of resources as key explanatory variables of corporate success. Through an "inside-out" perspective, the RB school did not jet- tison environmental context but altered its position in the strategy design schema. Fickle and converging markets could be shaped by proactive firm strategy rendering contexts as interesting but no longer important phenomena. In practice, smart strategic managers (the old strategic planners) combined the resource-based and market-positioning strategies in their search for competitive advantage, thus reflecting an ancient adage about the necessity of understanding both the supply and demand domains to enable strategic success.

Cognitive psychologists and sociologists continued with the firm as their unit of analysis. Their intellectual legacy, as long as that of the economists, had to wait until business climates in the 1970s began to destabilize until it came to prominence. In contrast to economics, attention focused on the political and social workings inside the black box, in particular upon how individuals and groups could perceive of, or enact, outer contexts in strategic thinking. This research was broad and deep, and, in theorizing about environmental context, it found a ready market among fellow academics, more so than with practicing managers. Recent developments in scenario planning and thinking (see Burt et al., MacKay and McKiernan, and Jacobs and Statler in this issue) have begun to incorporate environmental interpretive perspectives in revised scenario methods, especially where the scenarios are built for aspirational rather than for generic purposes, whereby the former represent a vision of the future that participants want to shape and achieve.

Pragmatic need and utility

Recipients of advice need to have trust either in the workings of techniques or in the prescriptive wisdom proffered. Simplicity of exposition, practical demonstration, case witness, and ease of use help build this belief. Schools with simple, demonstrable techniques hold an eminence above others, despite the depth of intellectual composition.

The masters of the early era and the positioning school adherents brought workable advice and tools to needy audiences. Their practical value could be witnessed at the point of use and, hopefully, in output measures later. In contrast, the learning school and RB school contributions, especially those of enactment and symbolic interpretivism, struggled to translate their rich heritage into practical hands. Patchy contributions and perhaps the lengthy



EXPLORING ENVIRONMENTAL CONTEXT 1 9

dominance of Porterian codification meant that their penetration was slower and more mooted.

Conclusion

Child (2000), when theorizing about organization cross-nationality, identified both high- and low-context approaches, with the former occupied by economists and embracing economic universalism and technology-based theory, and the latter occupied by sociologists embracing cultural and institutional theory. This approach reflects Weber's material and ideational concepts that together shape society's institutional fabric. Within this fabric, strategic choices are conditioned by the constraints of rules and regulations and the countervailing actions of groups, for example, concerted lobbying (Redding 2005).

Sculptured by economists, the positioning school reflects material conditions, while the learning school is rooted in ideational content. To Weber, each is part of a system that codetermines social development. Recent developments to reintegrate organization theory and strategy research have utilized

coevolutionary theory and reflected Giddens's (1984) notion of structuration, whereby the shaping of societal order in turn shapes its determinants. The RB view is closer both theoretically and practically to this approach, and its evolution through the learning organization and knowledge management provides perhaps the brightest prospect for the future.

Contexts have changed markedly in recent years. Technology push, demand

pull, hypercompetition, and significant geopolitical changes have created a

confusing terrain for organizations to navigate. Ironically, the academic attention paid to them has not been on a commensurate level. Their treatment has wandered between prominence and obscurity in the literature. The development and application of new modes of sense making in these contexts (e.g., scenario

planning as it now transforms into scenario thinking) have appeared as scattered and fragmented contributions both within the literature and within the debate. The workings of individual and group environmental perceptions and a better

understanding of individual probes and senses as they synthesize the complex forces and their impact on the organization, require systematic investigation before they can contribute effectively to the toolbox of the next generation of

analysts and so to the gradual evolution of strategic management.

Notes

1. Positivist epistemological assumptions in the social sciences embrace Popper's empirical falsification of scientific theory. In this context, the environment is assumed to be an object, external to actors within organizations that can be defined by inde- pendent, measurable properties.




2. Interpretative epistemological assumptions in the social sciences stem from hermeneutics and phenomenology. In this context, interpretations of the environment are socially constructed in communities of practice via language, symbols, conscious- ness, and shared value systems.

3. See 'The Prince," whose first English translation appeared in 1640, some 150 years after Machiavelli had observed and written, and long after the legend of his depravity had become established.

4. See note 7. 5. Ansoff's product-market matrix considers supply-side products as existing

and new and demand-side markets as existing and new. The resultant two-by-two matrix explores a firm's strategy from the existing/existing cell and labels this market penetration. As the firm grows, it can explore adjacent cells of product development (new market-existing product), market extension (existing product-new market), and diversification (new product-new market). Growth is then controlled and logical, based upon minimizing the downside risk at each strategic turn. More important, the emphasis is on linking knowledge of the supply side with that of the demand side and so equating to a simple economics formula.

6. The historical evolution of organizational theory identifies four eras - classical (1900s onward), modern (1950s onward), symbolic interpretative (1980s onward), and postmodern (1990s onward). The modernist view holds that science is the best means of sorting out which theories are better than others at explaining organizational phenomena. Social science mimics the natural sciences and engineering in pitching empirical evidence at each theory to help determine predictive power. Incorrect or poor predictive theories can then be jettisoned from the collective body of knowledge.

7. The symbolic interpretive approach assumes that cultures and environments are socially constructed realities. These realities are not formed by conditions in the physical world but are defined by interpersonal association and agreement. Socially constructed entities exist only as long as members regard them as existing and behave accordingly. Hence, environments can be built, altered, and demolished by different social groupings. Clifford Geertz, the esteemed cultural anthropologist, reflects the position in his widely quoted and memorable phraseology: "man is an animal sus- pended in webs of significance he himself has spun, I take culture to be those webs, and the analysis of it to be therefore not an experimental science in search of law but an interpretative one in search of meaning" (1973, 5).

8. "Fit" between the organization and the environment suggests a tight interlocking between two defined entities. It has become the generic parlance in the literature. In practice, such fit is impossible, and we prefer the term "harmony." This suggests more fluidity than tightness, and it has a spiritual dimension, allowing for actor enactment.

9. The word "the" before environment depicts a distinct environmental space beyond the organization and suggests it can be observed and analyzed in an objective fashion.

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