21 years of textbook strategy

Exploring Corporate Strategy (details at the end of this article) is Europe's most popular book on strategic management - achieving sales of 650,000 copies since it was first published in 1984. It has profoundly influenced the teaching of strategy and has been translated into French, Spanish, Chinese and Czech. Editions in German, Portuguese and Russian are currently in preparation. It is the recommended strategy textbook for ACCA Qualification Paper P3, Business Analysis.

This article reflects on why Exploring Corporate Strategy has had such a long-lasting impact, and examines the changes that have been made to the book in the past 21 years. It is also interesting to learn how these changes are linked both to current theory and practice of strategic management, and to changes likely to occur over the next 10 years. Last, and certainly not least, we should acknowledge the ways in which the book explains the unique contribution accountants can make to the strategic management process. The commentary below results from a conversation between Professor Kevan Scholes, co-author of the book, and Ralph Bedrock, the assessor for Paper P3, Business Analysis.

Changes in Strategic Management - 1980 to 2005

The 1980s began with corporate planning in the ascendancy. Mainly the preserve of large companies with specialist corporate planning departments, the underlying assumption was that the future direction of a company could be planned rationally. Many of the models and methods familiar to today's strategic management students were developed at this time. But as the decade progressed, many of these models were criticised for being too simplistic, and for lacking relevance to the strategic challenges being faced by organisations of all shapes and sizes. Professor Scholes summarises the key changes to strategic management over the past 25 years:

Strategic management is now seen to involve managers at all levels in an organisation, to be a complex activity involving multiple processes, to have equal relevance to service and public sector organisations and, increasingly, to demand that managers have an international perspective. In summary, strategic management over the past 25 years has become a better understood, if more complex, activity.

Exploring corporate strategy - changes to the book

In order to maintain its relevance to managers, student and teachers, Exploring Corporate Strategy has necessarily undergone significant changes and developments. According to Professor Scholes: 'the book has become the "flag bearer" for many of the softer areas of strategy. For example, there is an increasing awareness of the need to manage the expectations of all key stakeholders. Corporate culture is seen as a major influence on the strategic choices made by today's organisations. Corporate governance, social responsibility and business ethics are now much higher on the strategic agenda of many organisations, reflecting the numerous high profile examples of where organisations have suffered when such concerns have been ignored. Exploring Corporate Strategy now reflects these emerging strategic issues in both its content and examples.'

Equally significant are the increased expectations of both students and teachers of strategic management texts. Both audiences now expect the book to clearly demonstrate the relevance of strategy theory to good management practice. As a result, the book now has some 85 illustrations of strategy in action, 11 case examples and 40 longer case studies. It is also supported by study assignments and comprehensive tutor materials, including 400 PowerPoint slides. The comprehensive resources available on the website supporting the book - Pearson Education website - clearly demonstrate the level of support material now required to ensure the book's relevance, and sustains its popularity.

Strategic management and accountants - changes to the role

Exploring Corporate Strategy argues that strategic management is now the concern of all managers. In particular, the book suggests as shown in Figure 1, that there is a two-way relationship between overall business strategy and strategies developed in separate resource areas such as people, finance, information and technology. There is a need for managers in these resource areas to recognise the particular contribution that their resource makes to the longer-term goals and objectives of the organisation. This is the classic view of strategy as the 'fit' between what the organisation wants to achieve and the resources it has at its disposal.

Figure 1: enabling strategic success

There is also a real need for managers to understand the strengths associated with a particular resource area, and the need to 'stretch' these resources by choosing the appropriate business strategy. In finance, for example, many organisations develop the skills and competences necessary to make acquisitions succeed. Clearly, such skills will profoundly influence the rate at which the organisation seeks to grow, and the methods used to achieve such growth. The key relationships between strategy and finance are shown in Figure 2.

Figure 2: strategy and finance

Accountants are ideally placed to understand where value is created and costs incurred in 'managing for value'. They can also assess alternative ways of funding strategy development, and can manage the financial expectations of different stakeholder groups. Many of the issues surrounding the governance of organisations are financial in nature. In 'The role of the accountant in new product development', which was published in the January 2005 issue of student accountant, I strongly argued that accountants need to understand and get involved with new product development processes within their own organisations. Exploring Corporate Strategy examines the accountant's contribution to other key areas of strategic decision making.

Professor Scholes expands on the four key roles the accountant could perform: 'First, as a service provider of activities such as invoicing, debt collection, and the provision of financial information to line managers making strategic decisions. Second, as a regulator, setting the rules within which strategic decisions are made (as these often require a significant understanding of governance or regulatory issues). Third, as an advisor to line managers, to ensure financial strategies are linked to business strategies. And finally, as a change agent, exploiting their unique understanding of strategic options (such as merger and acquisition, and franchising) to help set the strategic pace and direction of their organisation.'

Without understanding how the strategy process works there is a real risk that the accountant's contribution is limited to fairly narrow areas of financial expertise. The first two roles can be seen as a traditional view of the accountant's role, and the third and fourth as newer and much more strategic.

Strategy management over the next 10 years

Professor Scholes acknowledges the danger of being too prescriptive or predictive, but argues that many of these trends are already taking place. Many organisations now operate in a much more international context. Even public services, traditionally seen as immune from international pressure, will have to adjust to new competition and ways of competing. In addition, the top-down corporate planning processes of large, monolithic organisations will give way to the development of strategies where they are needed - typically at the business level and therefore relevant to the competitive conditions and context that the business faces. Strategic planning at the top of the organisation will focus more on setting the boundaries within which business strategies are developed.

Increasingly, strategic management will concentrate on the networks and partnerships the organisation chooses to work within. The emphasis will move from understanding an organisation's particular value chain, to understanding the value networks it is part of. The interface between business strategy and resource areas will grow in importance - the two-way relationship already mentioned.

Strategic leadership also needs to be better understood. An effective strategic leader will be able to identify the strategies which can deliver a winning position, and exhibit certain qualities which enable the right decisions to be made.

Above all, Exploring Corporate Strategy will continue to influence thinking and action on managing strategic change. Greater emphasis will be given to public sector strategy, and the role of resources in general (and finance in particular) in enabling change to be managed. Increasingly, the strategic management of change will, of necessity, be within an international context.

Exploring Corporate Strategy: Text and Cases, Kevan Scholes, Gerry Johnson, Richard Whittington, FT Prentice Hall, ISBN 0 273 68734 4

Ralph Bedrock is assessor for Paper P3