Knowledge that Transforms

This paper examines a role for applied decision analysis in the strategic management process. It is argued that decision analysis should be regarded both as a heuristic and a ‘thinking’ algorithm for decision structuring and problem diagnosis and, in addition, as an input to the process of policy dialogue. A policy dialogue paradigm using decision analysis is outlined, in which various viewpoints are reconciled by the questioning of analyses and assumptions. This dialogue paradigm is viewed as being compatible with approaches such as strategic assumptions analysis, which have been suggested in the literature as an aid for the processes of problem finding, formulation and solution.

A major challenge in strategy development is to deduce the consequences of the interacting programmes underlying strategy. The paper argues that behavioural simulation models can help meet this challenge by acting out the consequences of strategy proposals in their full organizational setting. However, the real key to effective strategy support is not simply having a model, but using it in a structured dialogue with executives. To illustrate the idea, the paper presents a system dynamics simulation model used to aid executives of an advanced office equipment firm in setting their marketing strategy. The paper describes the process by which the model was created and brought to the attention of executives. Several examples are provided of the dialectical use of the model, showing how differences in management intuition and model‐generated opinion led to improved insight into the consequences of strategy.

The paper explores the usefulness of analysing firms from the resource side rather than from the product side. In analogy to entry barriers and growth‐share matrices, the concepts of resource position barrier and resource‐product matrices are suggested. These tools are then used to highlight the new strategic options which naturally emerge from the resource perspective.