European Management Journal Vol. 17, No. 4, pp. 348–355, 1999.docx

European Management Journal Vol. 17, No. 4, pp. 348–355,
1999
Printed in Great Britain
0263-2373/99 $20.00 1 0.00PII: S0263-2373(99)00015-8
Towards a New Model of
Strategy-making as
Serious Play
JOHAN ROOS, International Institute for Management
Development (IMD), Switzerland
BART VICTOR, Vanderbilt University, Tennessee
A new model of strategy-making as play is
presented in response to increasing calls for a
deeper theory of strategy-making. First an elabor-
ation of the construct of strategic imagination is
offered, describing three distinct, but interrelated
forms of imagination: descriptive, creative, and
challenging. Strategic Imagination is defined as an
emergent property of a complex interplay between
the three kinds of imagination. Then, extending the
work of the planning and design schools, the model
describes the complex social dynamic of strategy-
making itself. Applying the notion of play from
anthropology and cognitive development, the strat-
egy-making process is described as a three-phase
play process. The three
phases, constructing to
stimulate new
ideas,

story
European Management Journal Vol 17 No 4 August 1999348
telling to share meaning, and deep engagement to
assimilate new directions, are described. Finally
some directions for strategy-making practice
Ltd. All rights reserved
The Call for More Imaginative
Strategies
During the 90s many calls for more imaginative stra-
tegies have been heard from both academia and con-
sultants. For instance, Hamel and Prahalad urged us
to ‘… break out of old paradigms…challenge
received dogma…(and) have the courage to ask
new questions…’ (Hamel and Prahalad,
1996, p. 242). Along the same lines
many authors have recently
expressed their views of why it
is important to ‘rethink the
future’ and how to go about this
task (Gibson, 1998). The common
thread among these authors is
that the essential value of a
strategy is its originality, and
that such originality is des-
perately needed to navigate

the business landscape of
tomorrow. Only original
strategies will help compa-
nies achieve a strategic pos-
ition different from competi-
tors. Without originality a
strategy is a commodity
and any value would come
from implementation.1 Labeling
it strategy innovation, Hamel
(1998, p. 7) calls for strategy-makers
TOWARDS A NEW MODEL OF STRATEGY-MAKING AS
SERIOUS PLAY
to enhance their capacity to ‘re-conceive the existing
industry model in ways that create new value for cus-
tomers, wrong-foot competitors, and produce new
wealth for all stakeholders.’
At the heart of this issue is the observation that strat-
egy-making, while increasingly sophisticated,
efficient and rigorous, is apparently less and less
imaginative. Analysis and experience only prepare
the strategic mind for its work. Original strategies are
neither the mechanically-calculated outcome of an
algorithm, nor the lucky result of random accidents.
This raises the question ‘How can motivated strat-
egy-makers lacking an original strategy, yet pos-
sessing all the essential information and relevant
experience, come up with one?’

The purpose of this article is to suggest a model that
can be used to address the challenge of understand-
ing the dynamics of the 21st century strategy-maker.
First, an elaboration of the construct of strategic
imagination is offered, describing three distinct, but
interrelated forms of imagination: descriptive, cre-
ative, and challenging. Strategic Imagination is
defined as an emergent property of a complex inter-
play between the three kinds of imagination. Then,
extending the work of the planning and design
schools, the model describes the complex social
dynamic of strategy-making itself. Applying the
notion of play from anthropology and cognitive
development, the strategy-making process is
described as a three-phase play process. The three
phases, constructing to stimulate new ideas, story
telling to share meaning, and deep engagement to
assimilate new directions, are described. Finally some
directions for strategy-making practice improvement
are offered.
Three Kinds of Imagination
Throughout history the term ‘imagination’ has been
given many different cultural and linguistic conno-
tations. While all share the basic idea that humans
have a unique ability to ‘image’ or ‘imagine’ some-
thing, the variety of uses of the term imagination
implies not one but at least three meanings: to
describe, to create, and to challenge. It is the interplay
between these kinds of imagination that make up
what is Strategic Imagination — the source of orig-
inal strategies in companies.
Descriptive Imagination

The first kind of imagination is to evoke images that
describe a complex and confusing world ‘out there’.
This is the imagination that identifies the patterns,
finds and labels the regularities that associates
images so necessary to cut through and perceive the
European Management Journal Vol 17 No 4 August 1999 349
mass of data generated by analysis and to utilize our
judgment gleaned from experience.
The recognition of this need to mirror the world is
central in strategic management practice. The per-
ceived need to ‘see’ five industry forces during a
strategy-making process is a manifestation of the
descriptive imagination. Industry and competitive
analysis are often a structured way to evoke in our
imagination the factors that may determine attract-
iveness and profitability of industries. Often we claim
that successful entrepreneurs, like Richard Branson
of Virgin, ‘have a feel for the business,’ or posses a
‘special savvy’ that allow them to find an opport-
unity that everyone else passed by. What they saw,
the rest of us didn’t see. The strategic management
literature prescribes a wealth of techniques to stimu-
late our descriptive imagination through rigorous
and systematic diagnostics where the world is dia-
grammed and profiled. Value chains, 2-by-2 matrices,
and flowchart models, as well as more artistic pic-
tures of the business environment, its evolution and
possible future all belong to this category. Other tech-
niques to stimulate our descriptive imagination
include delineating future scenarios. The idea is that
we can expand our imaginations to see a wider range
of possible futures. In turn, these descriptions of

imagined futures would make us better prepared to
act on signals from the outside world. This is also the
basic assumption when Gareth Morgan encourages
us to use rich metaphors to describe our worlds in
different ways, so that we can remain open to mul-
tiple meanings.
Each of these methods have in common a focus on
revealing patterns, or seeing things in a new way —
descriptive imagination. The assumption is, that
without such imagination, strategy-makers have only
blind variation and ‘luck,’ or lack of it to rely on it
for success. In that sense we often use descriptive
imagination to explain the success of Crown, Cork &
Seal and other classical stories used in teaching stra-
tegic management. In each of these stories the stra-
tegic ‘hero’, typically the CEO, sees what others can-
not and with this insight seizes the advantage. It is
the failure of such imagination that is often laid at
the doorstep of the analysts who ‘misinterpret’ com-
monly shared observation — they just didn’t see it
coming.
The inherent trap of the descriptive imagination is a
never-ending plethora of new descriptions, like dif-
ferent industry analyses, different SWOT analyses,
different competence analyses, different portfolio
analyses, different scenario analyses, and so on. If a
newly-proposed strategy is not seen by key stake-
holders to help the company to achieve its goals or
intent, strategy-makers are often motivated to sug-
gest yet a different and this time an even more per-
fect world. Like those who imagined the paper clip,
those who imagine new strategies do so in a search
to make the strategy more perfect. The question for

SERIOUS PLAY
the strategic imagination is no longer ‘what is?’ — it
becomes ‘what can be?’ When description after
description is suggested, evaluated, and rejected the
strategy-making team risk becoming paralyzed by
the analysis required to develop the ‘perfect’ descrip-
tion of the world.
Creative Imagination
The second kind of imagination is often confounded
with the definition of imagination itself, creativity.
However, while critical for strategy-making, creativ-
ity ought not to be seen in isolation from other kinds
of imagination. The creative imagination is about
evoking truly new possibilities from the combination,
recombination or transformation of things or con-
cepts. The idea is that creativity generates new
opportunities that are inherent but heretofore
unrealized in the imagined strategy.
Creativity occupies a central role in many of the strat-
egy-making prescriptions. It is the essential feature
of ‘visioning, skunk works, brain storming,’ and ‘out
of the box’ exercises. The motivation for creativity
lies in the dissatisfaction people feel with current
choices. Many strategic management concepts and
techniques, like TQM, stimulate managers to inno-
vate new ways to being which are better (read: more
perfect) than the current state.
Creative imagination is associated with ‘innovative’

strategies where companies sought to make their
competitors irrelevant rather than just beating them,
in the spirit of what Hamel and Prahalad labeled
‘competing for the future,’ or what Kim and Mau-
borgne called ‘value innovators.’ These strategies
could not be ‘seen’ by others holding the same infor-
mation and experience but required the unique and
individual imaginations of smart people to see the
light. Cloaked in mystery, the creative imagination is
often described with terms like thunder bolts, ‘God
given’ talent, and genius. However, more sober
minds find creativity everywhere and in everyone,
the end result of lots of experience, and analysis
work.
The practical prescriptions in the strategy literature
for stimulating the creative imagination generally
recognize the role of experience and analysis as
sources of inspiration. Authors prescribe a pro-
gression through stages of market analysis, competi-
tive, and profitability analysis before attempting any
‘strategic creativity.’
For some companies there is a risk in pursuing a
strategy that is too different. If the strategy lies out-
side what is perceived as acceptable by stakeholders,
its legitimacy and reliability are often questioned.
Rejecting the conventional wisdom of an industry
may be problematic since current and potential cus-
tomers, suppliers, alliance partners and employees
may neither understand nor see the new strategy
as legitimate.2

The inherent trap of the creative imagination is fan-
tasy. When our imagination takes flights of fantasy,
serious strategy-making could become a serious
problem. Fantasy is the domain of the impossible and
improbable, whereas imagination is about possible
realities and even the making of reality. Many crea-
tivity exercises result in too much fantasy and too
little imagination. Strategy-makers who lose touch
with their experience, and do not remember what
they know, risk fantasizing. Sometimes we refer to
them, or their strategies as ‘blue sky,’ ‘idiosyncratic,’
or coming out of ‘the ivory tower.’
Challenging Imagination
The third kind of imagination, the challenging
imagination, is completely different from the other
two kinds. It is with the challenging imagination we
negate, defame, contradict and even destroy the
sense of progress that comes from descriptions and
creativity. It is the challenging imagination that fuels
the fire in the angry, almost breathless assaults on
business strategy by such ‘main stream’ writers as
Tom Peters, Gary Hamel, and Michael Hammer, as
well as the popular Dilbert on Management Series by
Scott Adams.3 It is with our challenging imagination
that we find the disillusioning, the absurd and the
outrageous in everyday experience.
The methods of the challenging imagination include
deconstruction and sarcasm. An example deconstruc-
tion is when Mike Hammer attributes the failures of
re-engineering to people misunderstanding the truly
radical nature of his call for action. The whole idea
of re-engineering according to Hammer is not about
improving existing practices (read: descriptive or cre-

ative imagination). Rather it is about ‘throwing it
away and starting all over; beginning with the prov-
erbial clean slate and reinventing how you do your
work.’ (1995, p. 4).
Deconstruction is often paired with sarcasm. Sarcasm
is the recognition that there is no such thing as
‘truth’. The idea is that it is not enough to deconstruct
the descriptive and/or creative imagination pro-
duced but one must also demystify and disdain the
person or the group that advocate these images. The
most popular manifestation of this approach is
Dilbert. Scott Adam’s sarcasm has become a vital
force in the conversations amongst strategy-makers
across industries throughout the world.
The inherent risk of the challenging imagination is to
have nothing new to put on the slate, once it has been
wiped clean, i.e. an unending cycle of negation and
rejection. Tom Peters and Gary Hamel, two authors
that clearly use their challenging imaginations in
their writings, do not show an alternative truth, they
SERIOUS PLAY
can only affirm what truth is not. What is Peters’ sol-
ution to the absurdities he sees in corporations?
Don’t organize, don’t manage, don’t analyze, don’t
build, don’t grow, and to destroy and forget. What
is Gary Hamel’s prescription for strategy-making?
Labeled ‘strategy as revolution,’ he asks us not to
plan, but subvert the rules, overthrow the elite, rally
the radicals, raise hell, take off your blinkers, and

scrap the hierarchy. Like these examples, the chal-
lenging imagination is often expressed with outrage
and disbelief over the perceived absurdity and
insanity. Thus, the trap of the descriptive imagination
is a kind of strategic nihilism, in which all choices
are seen as flawed, all plans unfeasible or unjust, all
positioning seen as imprecise and deceptive.4
Strategic Imagination as an Emergent
Process
Original strategy results from the unpredictable and
rich interaction among the three kinds of imagin-
ation, in the context of individual and social judg-
ment and knowledge. Mintzberg has argued that
strategy-making is ultimately an emergent process.
As such, it must be viewed as both complex, in the
sense of being inter-woven, and complicated, in the
sense of being both ambiguous and opaque. When
viewed in this way, it is not surprising perhaps that
we have yet to develop an adequate theory of strat-
Figure 1 Strategic Imagination Emerging from Three Kinds of
Imagination
egy-making, which enables us to effectively describe
and proactively influence the act of generating an
original strategy (Hamel, 1998) (Figure 1).
The strategy literature has developed a fairly elabor-
ate set of theories regarding the preparations of indi-
viduals and top-management teams for strategy-
making. However, these theories effectively stop at
the point when the original strategy is set to emerge.

Our efforts in this article are to develop these theories
one stage further, following Hamel’s call for a ‘deep
theory of strategy creation.’
The primary theories in use have been organized
through a dialogue conducted in the Strategic Man-
agement Journal over the last decade into two categor-
ies — the design and the learning schools (for a fuller
discussion of this distinction see Mintzberg, 1990,
1991; Ansoff, 1991). The ‘design’ school of strategy
focuses on understanding the analytic activities that
prepare strategy-makers with the data essential for
their task. However, the design school does not offer
any suggestions on how data becomes original stra-
tegies. The process of human imagination that com-
bines, critiques, and selects from these data to inform
the mind is left as a black-box.
Similarly, the ‘learning’ school of strategy focuses on
the gathering of experience, which is, like data, an
arguably essential resource for strategy-making.
However, like the design school the learning school
SERIOUS PLAY
literature is silent as to how experience is ultimately
converted into an original strategy.
In our research at the Strategic Imagination Lab (see
Table 1) we have been looking closely at strategy-
makers in the act of making strategies. When we
observe closely this act of strategy-making we see a
process that is certainly creative, but also has other

critical characteristics. Strategy-making appears in
our observation to fit Mintzberg’s label of an emerg-
ent process.
An essential property of this emergent process is the
complex interplay among the three kinds of imagin-
ation in a social context. While this interplay of
imaginations is essentially not directly observable,
what we can observe are the manifested social dynamics
among strategy-makers from which the original strategy
emerges. This strategy-making dynamic has three
critical elements: (1) the construction of the knowl-
edge gathered from analysis and experience; (2) the
sharing of meaning emerging from that knowledge,
and (3) the transformation of identity assimilating the
new knowledge.
It is through the process of strategy-making that the
human imagination is employed to generate ideas, a
conversation is created to communicate meaning,
and socialization is engaged to develop commitment.
Strategy-making is a specific and in many ways
unique activity in the organization. While ultimately
the intention of strategy-makers is to direct the real
actions of the organization, until the strategy is
finally defined and promulgated, strategy-making
remains a conversation about ‘as-if’ or ‘make believe.’
Thus, social dynamics shares the essential character-
istics that anthropologists and social psychologists
generally label as ‘play’ (Geertz, 1973; Sutton-Smith,
1997; Vygotsky, 1978). Like play strategy-making is
a temporary and intentional period of make-believe.
During strategy-making a group of executives agree
Table 1 The Strategic Imagination Lab

The Strategic Imagination Lab at IMD is a research effort
sponsored by the LEGO Foundation to further the development
of the
science and practice of strategic imagination in business. This
includes developing and refining a conceptual framework,
developing and testing working hypotheses, and gathering data
through experimentation with strategy-making teams.
The starting point for our experiments is always real strategic
challenges faced by real strategy-makers. So far, these
challenges have included:
I Defining the future SBU portfolio for a large multinational
metals manufacturer;
I Redesigning the supply chain of a global consumer packaging
company;
I Envisioning breakthrough product concepts for a major
pharmaceutical company;
I Reinventing the organization of one of Europe’s leading
consumer product company;
I Responding to a significant competitive threat posed by a low-
cost upstart;
I Integrating complementary businesses after a merger in the
chemical industry.
In each of these cases two prior conditions were satisfied: (1)
the strategy-making team was experienced and directly
concerned, and (2) our efforts followed a long period of
extensive knowledge development. Our work was focused on
finding a
better way for them to use their imagination to make new
strategies. Strategies that are truly original, clear and cogent,
and
that mobilize all the stakeholders.

to engage in a collective learning experience. This
experience, like play, has intellectual, emotional, and
social elements (Figure 2).
Because strategy-making matters, and because strat-
egy-making is organizational, it is an activity that
draws upon the interrelated domains of intellectual,
emotional and social life of the organization. Since
the strategic imagination must be an organization-
wide imagination, the strategy process must not only
stimulate the individual’s imagination. The strategy-
making process must enable the transformation of
the individual imagination into something that is
shared.
As strategy-makers begin to apply data and experi-
ence to the problem of a new strategy they must con-
struct and deconstruct this knowledge using their
imagination. Interestingly, while this construction
and deconstruction seems to require both verbal and
cognitive activities, there is often a significant physi-
cal element as well. Psychologists and learning theor-
ists agree that our hands give us access to far greater
understanding, whether it is spiritual or down-to-
earth, than our minds alone can ever reach. With our
hands we have a potential to discover, to uncover
and to create something that is worth sharing
(Wilson, 1998).
In the strategy-making process there appears to be a
point at which the emerging strategic idea is ready to
be shared. Once they have something worth sharing
strategy-makers express to others the ideas and
insights that have sprung from their imaginations.
The meaning of these ideas is shared through show-

ing what they have constructed from their imagin-
ations and telling a story about possibilities. Scholars
in leadership and business increasingly recognize
this storytelling as the essential communication chal-
lenge in strategy development (Webber, 1994).
Finally, for strategy to be effective it must be assimi-
SERIOUS PLAY
Figure 2 Serious Play
lated into each individual’s work identity. This trans-
formation of identity is importantly a social process
which engages dissonance (Festinger et al., 1950),
attribution (Kelley and Stahelski, 1970), and the shar-
ing of role expectations (Katz and Kahn, 1966).
These elements of social dynamics work to stimulate
the emergence of a new strategic idea, share the
meaning of that new idea amongst a social group,
and give the members of this group the opportunity
to incorporate the new idea into their attitudinal
commitment.
A Model of Strategy-Making as Serious
Play
To address Hamel’s call for a deeper theory we have
extended strategy-making theories in use to examine
the emergence of strategic imagination. This has been
described as the product of the interplay between
three distinct kinds of imaginations fuelled by essen-

tial information and relevant experience. While this
interplay remains unobservable, the manifest activi-
ties of strategy-making may be directly described.
We have employed the notion of play to describe the
social dynamics of strategy-making. We have
described three phases of strategy-making as play.
These three phases function to enable the construc-
tion of imaginative ideas, the sharing of new mean-
ing, and the assimilation of this new meaning into
the participants’ work identity (Figure 3).
Hamel calls for a theory of strategy-making that
would enable the field to bring its innovation to the
‘practice of strategy.’ With the model outlined above
we can begin to investigate the determinants of effec-
tive strategy-making after the analysis is completed
and after the experience has been gained. With this
model we can observe that while all strategy-makers
‘play,’ many may not be playing well enough. They
may not be stimulating their imaginations effectively
enough during the construction phase. Perhaps the
two-dimensional charts and static representations of
data are not tactile or symbolic enough to enable the
imagination and hands to work their magic. They
may not be communicating the products of their
imaginations well during the story-telling phase. Per-
haps the voluminous and dry reports don’t tell the
story well enough for others to catch the true mean-
ing of an original strategic idea. Or, they may not be
personally and emotionally engaged enough during
the assimilation phase. Perhaps the participants are
too alienated or isolated from each other to engage
in a re-definition of their collective futures.

Up to now, practice and academia has overwhelm-
ingly focused their attention on the preparation of
executives for the making of strategy. Over the last
few years planning and organizational learning have
been refined into sophisticated and professional
activities. Despite all this good work we encounter
SERIOUS PLAY
Figure 3 Strategy-making as Serious Play
many leaders still searching for the original strategy
that will take them into the next century.
In response to their continuing challenge, our
research points to a very hopeful and exciting poten-
tial yet to be fully realized. These managers are not
at a dead end. Instead we find them, surprisingly
enough, ready for the serious work of play.
Notes
1. The theoretical argument is that a firm with a different
strategy benefits because it faces less competition for lim-
ited resources. These resources are divided among com-
petitors if their strategic positions require the same
resources, ultimately leading to ‘perfect’ economic compe-
tition where the economic rent is nil. See Baum and
Mezias (1992); Carroll (1985); Henderson (1981); Reed and
de Fillippi (1990) and/or Barney (1991) for a fuller dis-
cussion of this basic strategic management argument.

2. Grounded in resource dependency and institutional
theories the theoretical argument is that dissimilar firms
face legitimacy challenges that reduce firms’ ability to
access limited resources from its necessary others, like
customers and suppliers, and ultimately reduce profita-
bility. See DiMaggio and Powell (1983); Spender (1989);
Hirsch and Andrews (1984) or Baum and Oliver (1992) for
a fuller discussion of this argument. See also Deephouse
(1999) for a discussion of the inherent tradeoff between
the strategic differentiation and strategic similarity argu-
ments.
3. This kind of imagination has its roots in the post modern
literature. See, for instance, Lyotard (1984) or Derrida
(1988). In turn this movement has inspired organization
theory literature of, for instance, Gephart (1986); Rosenau
(1992); Calas and Smircich (1992); Kilduff (1993).
4. The danger in the parodic turn is clearly recognized by
its advocates. Hammer and Stanton (1995) labels his true
re-engineering method as potentially dangerous, Hamel
(1996) worries about the possibility for violence, and Pet-
ers (1997) complains that he is not trying to be an anarch-
istic.
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JOHAN ROOS, Inter- BART VICTOR, Owen
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Bart Victor is Cal Turner
Johan Roos is Professor of Professor of Moral Leader-

Strategy and General Man- ship at Vanderbilt Univer-
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Strategic Management in an Enacted World
Author(s): Linda Smircich and Charles Stubbart
Reviewed work(s):
Source: The Academy of Management Review, Vol. 10, No. 4
(Oct., 1985), pp. 724-736
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c Academy of Management Review, 1985, Vol. 10, No. 4, 724-
736.
Strategic Management in an Enacted World
LINDA SMIRCICH
CHARLES STUBBART
University of Massachusetts, Amherst
There is a debate within strategic management about
organizational
environments-are they objective, perceived, or both? Still
another
view of environments, derived from an interpretive worldview,
claims
that environments are enacted. This paper explores three major
impli-
cations of the enacted environment concept for strategic
management
theory and practice: abandoning the prescription that
organizations
should adapt to their environments; rethinking constraints,
threats,

opportunities; and considering the primary role of strategic
managers
to be the management of meaning.
A major debate within organization theory and
strategic management concerns whether environ-
ments are objective or perceptual phenomena.
This paper develops a third view-that environ-
ments are enacted through the social construc-
tion and interaction processes of organized actors.
Although this view has been mentioned in some
strategic management literature (Miles & Snow,
1978; Pfeffer & Salancik, 1978), its implications
have not been explored adequately. This paper
demonstrates that enactment implies distinctive
strategic management models, new research
questions, and different prescriptions for practi-
tioners.
According to most strategic management litera-
ture, an organization is an open system that exists
within an independently given environment
(Thompson, 1967). The objective environment
may be accurately or inaccurately perceived, but
in either case the task of strategic managers is to
maintain congruence between environmental
constraints and organizational needs (Lawrence
& Dyer, 1983).
According to another perspective, derived from
interpretive sociology, organizations are socially
constructed systems of shared meaning (Burrell
& Morgan, 1979; Pfeffer, 1981; Weick, 1979). Orga-
nization members actively form (enact) their envi-
ronments through their social interaction. A pat-
tern of enactment establishes the foundation of

organizational reality, and in turn has effects in
shaping future enactments. The task of strategic
management in this view is organization making
-to create and maintain systems of shared mean-
ing that facilitate organized action.
The purpose here is not to argue the veracity of
these differing perspectives on the organization-
environment relationship and on strategic man-
agement. Instead, it is to show how an interpre-
tive approach, with its different emphasis on what
is important, can enrich and expand the theory,
research, and practice of strategic management.
The potential contributions of an interpretive
perspective are well-timed: many of the prob-
lems in strategic management-for example-
failures in implementation (Kiechel 1982)-seem
to originate primarily in the field's inattention to
the fundamentally social nature of the strategy
formation and organizing processes.
Three Models for Knowing the
Environment
For any single "organization," the "environ-
mental" field contains an infinite number of
An earlier version of these ideas was presented at the Acad-
emy of Management meetings, Dallas, August 1983, under
the title "Implications of an Interpretive Perspective for Stra-
tegic Management Research and Practice." The authors would
like to acknowledge the helpful comments of Don DeSalvia
and Anne Huff in the development of this paper.
Requests for reprints should be sent to Linda Smircich,

Department of Management, University of Massachusetts,
Amherst, MA 01003.
724
192.168.72.223 on Mon, 3 Dec 2012 05:18:05 AM
situations and events, each of which could pro-
vide some material for environmental scanning.
(The authors are troubled by the connotations
that the terms "organization" and "environment"
carry in most discussions of theory. Quotation
marks around a word convey the authors' doubts
about meanings of these concepts even when the
terms are used in the senses that most readers
will readily understand.) Obviously, to consider
every situation, event, condition, and so on, and
furthermore, to evaluate the vast combinations
of environmental relationships is far beyond the
capacity of any imaginable method of environ-
mental analysis. Yet, this is what seems to be
required for effective strategic management.
Somehow, the tidal wave of environmental data
must be funneled down to a small pipeline of
information. It is like analyzing the world's
oceans using a glass of water. How can strategic
managers accomplish this feat? Three different
models that represent ideal types for explaining
how organized participants know their environ-
ments are offered here.

An Objective Environment
The words "organization" and "environment"
create a dichotomy that profoundly shapes think-
ing about strategic management. This dichotomy
clearly underlies the objective environment
model which assumes that an "organization" is
embedded within an "environment" that has an
external and independent existence. "Environ-
ments" constitute some thing or some set of forces
to be adapted to, coaligned with, controlled, or
controlled by. Terms that seem to capture this
sense of "environment" include concrete, objec-
tive, independent, given, imminent, out there.
The open system analogy provides a common
way of thinking about the relationship between
an "organization" and its objective "environ-
ment" (Miller, 1978; von Bertalanffy, 1968). The
open system idea was originally derived from,
and applied to, plant and animal communities,
but the image of an organization-as-organism is
now strongly entrenched in organizational stud-
ies (Keeley, 1980; Morgan, 1980). Much of the
biologist's theory and language has been bor-
rowed by organization theorists and strategic
management theorists (e.g., adaptation, popula-
tion ecology, the life cycle approach).
Nearly all strategic management research and
writing incorporates the assumption that "organ-
ization" and "environment" are real, material,
and separate-just as they appear to be in the
biological world. Strategists search for opportuni-
ties or threats in the "environment." Strategists
search for strengths and weaknesses inside an

"organization." In the figures theorists draw, an
"organization"' and its "environment" occupy
opposite ends of the arrows. This view empha-
sizes recognition of what already exists. Environ-
mental analysis thus entails discovery, or find-
ing things that are already somewhere waiting to
be found. Strategy, naturally, is defined as the fit
between an "organization" and its "environment."
Given this set of concepts, research proceeds
directly to find the successful combinations of
organization-strategy-environment.
Within the strategic management literature
there is some disagreement about the nature of
the relationship between "organizations" and
their "environments." Child (1972) emphasizes
the importance of strategic choice-the powerful-
organization theory. Child argues that organiza-
tions can select their environmental domains, that
environmental forces are not so confining that
they cannot be outflanked or sometimes even
safely ignored. On the contrary, Aldrich (1979)
maintains that most organizations flounder help-
lessly in the grip of environmental forces-the
weak-organization theory. Aldrich believes that
"environments" are relentlessly efficient in weed-
ing out any organization that does not closely
align itself with environmental demands. He
doubts that many organizations self-consciously
change themselves very much or very often, or
that the conscious initiatives by organizations are
likely to succeed. Most researchers seem to place
themselves somewhere between these polar
views. Despite the heated discussion, however,
neither the strategic choicers, nor the environ-
mental determinists, nor those in between, ques-

tion the pivotal notion of environments as in-
dependent, external, and tangible entities.
Therefore, a strategist must look out into the
world to see what is there. Strategists function
(in theory) like perfect information processors
able to access, organize, and evaluate data with-
out mistakes. Strategists overcome the problem
of deciding what information is worth bothering
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192.168.72.223 on Mon, 3 Dec 2012 05:18:05 AM
about by using frameworks or lists (Glueck, 1980;
Hofer & Schendel, 1978; Porter, 1980). Within an
objective "environment," a strategist faces an intel-
lectual challenge to delineate a strategy that will
meet the real demands and real constraints that
exist "out there."
The Perceived Environment
The difference between objective "environ-
ments" and perceived "environments" is not
attributable to a change in the conception of envi-
ronment (which remains real, material, and ex-
ternal). Instead, the difference between objective
and perceived environments involves a distinc-
tion about strategists. Strategists are permanently
trapped by bounded rationality (Simon, 1957) and

by their incomplete and imperfect perceptions of
the "environment. "
The idea of a perceived environment raises new
problems. For now, research has to encompass
the real external "environment" and the partly
mistaken beliefs of organizational strategists
(Bourgeois, 1980; Paine & Anderson, 1975; Pfeffer
& Salancik, 1978). Acrimonious debates have
cropped up around questions about how accu-
rate perceivers are (or can be) and whether orga-
nization behavior is more responsive to the envi-
ronmental perceptions of strategists or to the real,
material, environment (Downey, Hellriegel, &
Slocum, 1975; Duncan, 1972; Lorenzi, Sims, &
Slocum, 1981; Tosi, Aldag, & Storey, 1973).
From a practical standpoint, the challenge for
strategists, who must labor within the confines
of flawed perceptions, is minimizing the gap
between these flawed perceptions and the reality
of their "environment."
The Enacted Environment
Recently, under the influence of interpretive
sociology (Schutz, 1967), the sociology of knowl-
eclge (Berger & Luckmann, 1967), and cognitive
social psychology (Weick, 1979), another perspec-
tive vies for attention. Supporting the work of
Mason and Mitroff (1981), Davis (1982), Huff
(1982), and Peters (1978) is an assumption that
organization and environment are created to-
gether (enacted) through the social interaction
processes of key organizational participants. From
an interpretive worldview, separate objective

"environments" simply do not exist (Burrell &
Morgan, 1979). Instead, organizations and envi-
ronments are convenient labels for patterns of
activity. What people refer to as their environ-
ment is generated by human actions and accom-
panying intellectual efforts to make sense out of
these actions. The character of this produced
environment depends on the particular theories
and frameworks, patterns of attention, and affec-
tive dispositions supplied by the actor-observers.
In an enacted environment model the world is
essentially an ambiguous field of experience.
There are no threats or opportunties out there in
an environment, just material and symbolic
records of action. But a strategist-determined to
find meaning-makes relationships by bringing
connections and patterns to the action.
The timeless practice of scanning the heavens
in search of constellations provides an analogy.
There is really no Big Dipper in the sky, although
people find it useful to imagine that there is.
People see the Big Dipper when they furnish
imaginary lines to cluster and make sense of the
stars. In finding constellations astronomers orga-
nize material reality (the stars) using their own
imaginations to produce a symbolic reality
(Orion, the Lion, etc.). The same is true for
strategists. Physical phenomena (like stars) in a
strategist's world are real and have an indepen-
dent existence. The automobiles that roll off the
production line in a day, the oil well that was
either dry or a gusher, the number of missiles
stockpiled by the enemy-these are surely mate-

rial elements in the material world. By them-
selves, however, automobiles, oil wells, and mis-
siles are meaningless, and they appear as ran-
dom as the stars appear to an untrained eye.
Strategists create imaginary lines between events,
objects, and situations so that events, objects, and
situations become meaningful for the members
of an organizational world. The majority of many
excellent top managers' time and effort goes into
this interpretive process-drawing some imaginary
lines so that the world of IBM, Hewlett-Packard,
or 3M, for example, makes sense to employees
and clientele (Peters & Waterman, 1982).
Enactment implies a combination of attention
and action on the part of organizational members.
Processes of action and attention differentiate the
organization from not-the-organization (the en-
vironment). The action component often is poorly
726
192.168.72.223 on Mon, 3 Dec 2012 05:18:05 AM
appreciated by theorists who discuss sense-
making processes. An enactment model implies
that an environment of which strategists can make
sense has been put there by strategists' patterns
of action-not by a process of perceiving the
environment, but by a process of making the
environment. Consequently, the analogy of find-

ing the constellations is partly an inadequate one
for capturing the full scope of enactment. The
analogy does not allow an emphasis on how the
material records of action (e.g., automobile pro-
duction, oil wells, missiles) have actually been
put there by activities of organizational par-
ticipants who subsequently interpret them. In
other words, managers and other organization
members create not only their organization, but
also their environment.
In summary, theories involving objective or per-
ceived "environments" envision concrete, mate-
rial "organizations" that are within, but separate
from, real material "environments." The relation-
ships between the two are expressed in terms of
cause and effect. On the other hand, enactment
theory abandons the idea of concrete, material
"organizations/environments" in favor of a largely
socially-created symbolic world (Winch, 1958).
Organization and Environment from an
Interpretive Perspective
If one accepts the notion that people under-
stand the world through bracketing and chunking
experience into meaningful units (Schutz, 1967;
Weick, 1979), it then follows that "organizations"
and "environments" provide convenient, but also
arbitrary, labels for some portions of experience.
But no inherent rationale compels researchers to
employ the everyday language and common sense
understanding of these terms in their analyses
(Bittner, 1965). In fact, doing so misdirects one's
attention. Misdirection occurs because analysts
investigate concepts such as strategy, organiza-

tion structure, standardization, and technology
as if the concepts correspond to freestanding
material entities. Researchers often ignore the
metaphoric and symbolic bases of organized life
that create and sustain these organizational ideas.
An interpretive perspective places these pro-
cesses and symbolic entities at the center of
analysis.
To illustrate the differences in approach, con-
sider an interpretive definition of organization.
Organization is defined as the degree to which a
set of people share many beliefs, values, and
assumptions that encourage them to make mu-
tually-reinforcing interpretations of their own acts
and the acts of others. Organization exists in this
pattern of on-going action-reaction ("interacts,"
Weick, 1979) among social actors. For instance,
the organization of the music industry rests in
particular patterns of beliefs, values, and assump-
tions that support the ongoing creation, distri-
bution, and enjoyment of the various forms of
music. Thus, from an interpretive perspective,
such organization is different from the everyday
conceptualization of legally constituted "organi-
zation," and refers instead to a quality of inter-
action. Organization can extend across "organi-
zations." Some "organizations" are disorganized.
From an interpretive perspective the interesting
questions concern how patterns of organization
are achieved, sustained, and changed.
Similarly, environment takes on a different
meaning, and different questions are important.
From an interpretive view the term environment
refers only to a specific set of events and relation-

ships noticed and made meaningful by a speci-
fic set of strategists. An interpretive perspective
does not treat environment as separate objective
forces that impinge on an organization. Instead,
environment refers to the ecological context of
thought and action, which is not independent of
the observer-actor's theories, experiences, and
tastes. Multiple groups of people enact the eco-
logical context; neither historical necessity nor
the operation of inexorable social laws imposes
it on them. From the standpoint of strategic
management, strategists' social knowledge con-
stitutes their environment. An interpretive per-
spective on strategic management and the en-
vironment asks questions about the processes of
knowing-those social processes that produce the
rules by which an "organization" is managed
and judged.
Implications of an Interpretive Perspective
"Organization" and "environment" are key
concepts in the vocabulary of strategic manage-
ment. The reconceptualization of these building
block concepts that flows from an interpretive
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192.168.72.223 on Mon, 3 Dec 2012 05:18:05 AM
approach changes perspectives as well as words.

The language through which people understand
actions powerfully shapes future actions as well
as the questions they are likely to ask about those
actions. The logic of the interpretive perspective
on organization and environment leads to three
major implications for strategic management. It
also has implications for the way we write re-
search accounts. The editorial policies of jour-
nals work against interpretive modes of expres-
sion. A strong tradition in scientific writing has
been the insistence on the third person and the
passive voice. These depersonalize the arguments
and lend an aura of "objectivity" and "consis-
tency" to the research account. But the interpre-
tive perspective highlights personal involvement
with knowledge; it emphasizes that knowledge
is standpoint dependent. An interpretive perspec-
tive aims to put the author back into the text, as
one who authorizes the account. Our manuscript
has been systematically edited; this has the effect
of removing actors from the action and removing
the sense of responsibility that comes from being
included in the text-exactly what an interpretive
perspective seeks to avoid.
1. Abandoning the Prescription That Organiza-
tions Should Adapt to Their Environments. The
conventional wisdom of strategic management
urges organizations to adapt to their environ-
ments. This taken-for-granted maxim is more
problematic than it appears. It obscures a good
deal of the complexity, ambiguity, and abstract-
ness in the strategic management process.
A brief example drawn from the American steel
industry illustrates this point:

In 1950 America's steel industry was the most
powerful in the world. Accounting for nearly one
half of global steel output, it produced more steel
than all of Europe combined, nearly three times as
much as the Communist Bloc, and almost twenty
times as much as Japan. Moreover, the large Ameri-
cani steel firms enjoyed an undisputed position
that had gone virtually unchallenged by foreign
competitors during the preceding five decades
(Adanms & Mueller, 1982, p. 73).
By 1980, American steel producers lagged
behind the Soviet Union, Japan, and Europe. The
United States had become the world's largest
importer of steel. American integrated steel pro-
ducers increasingly suffer from outdated tech-
nology, inefficient plants, declining productivity,
labor unrest, and inadequate cash flow for facil-
ity investment needs. The integrated companies
vigorously called for import quotas or trigger-
pricing levels that would choke off the flood of
imports, imports said to be dumped at unfair
prices by companies subsidized by foreign gov-
ernments.
To the casual observer, the integrated steel com-
panies seem to be having difficulties in adjusting
to a hostile environment. The managers of the
Big Eight steel companies feel that their prob-
lems have been caused by foreign competitors
and government intervention ("Time runs out,"
1982). Big Steel claims helplessness in the face
of forces beyond their control and invites sympa-
thy for their plight. Industry analysts, on the other

hand, reproach steel executives for their conser-
vatism and resistance to creative thinking (Igna-
tius, 1979; Lawrence & Dyer, 1983).
Regardless of which explanations one accepts,
important questions remain: What should the
managers of Big Steel do now? Should the steel
companies build new facilities? Should they
diversify? Merge? Should they sell plants to the
workers? Should they import semifinished steel?
Which actions are the adaptive ones?
When one theorizes from the present into the
past as strategic analysts often do, one finds what
seems to be a powerful argument about adapta-
tion to an objective "environment." But the power
of this explanation ends in the present. Although
the argument about environmental adaptation
may initially seem appealing, it does not provide
much help for strategists in the here and now.
The advice from much strategic management lit-
erature that stresses fit, congruence, and align-
ment is not sufficient for dealing with issues in
day-to-day management. The executives in an
industry cannot simply stand outside the action
and adjust themselves to trends; their actions
make the trends. Thus, if every firm rushes to
take advantage of an opportunity, the opportu-
nity vanishes. Trends are complex functions of
multilateral behavior, making future outcomes
problematic. The nature of what constitutes
adaptation can be stated only retrospectively,
never prospectively. Accordingly, the admoni-
tion to adapt to trends and forces is not very
helpful.

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An interpretive perspective argues that strate-
gic managers can manage their organizations only
on the basis of their knowledge of events and
situations. But events and situations are always
open to multiple interpretations. The facts never
speak for themselves. If facts seem to "go with-
out saying," it is only because observers happen
to be saying very similar things.
For example, many commentators and partici-
pants in steel convey the impression that the
industry is a scene of unrelieved devastation,
using imagery reminiscent of The Alamo, Custer's
last stand, or The Apocalypse, but other views
can be brought to bear. To foreign steel produc-
ers the U.S. domestic market is a fragile oppor-
tunity. U.S. minimills are doing fine. The Presi-
dent of the United States views the situation as a
painful, but necessary, evolutionary step into the
golden age of techno-information, an era when
former steelworkers will repair home computers,
when kindly foreign governments will subsidize
the cost of U.S. domestic steel. None of these
views is dictated by the "environment." Each
view flows from applying certain preconceived,
limited frameworks to available contexts. Many
other guiding images or views are possible. It is

in terms of these multiple views that expecta-
tions and strategic action will congeal and shape
the future. Old visions of what the industry is,
how it works, who the participants are, and which
strategic avenues are open, are becoming unglued.
Out of this turmoil, new visions may emerge.
Will the future bring a rapprochement with labor?
Does the turmoil foreshadow the reawakening of
a sleeping giant? Can one hear the death knell of
steel? Whatever is possible depends on which
visions people believe in and act on-not on envi-
ronmental fiat.
Analysis of a firm's environment cannot aspire
to the status of a science, because there are no
independent, authoritative observers. Instead, the
choice of frameworks and interpretations be-
comes a creative and political art. Strategists need
to concentrate on their choices vis-A-vis frame-
works and interpretations. Novel and interesting
frameworks may stimulate novel and interesting
environments that could in turn preface novel
and interesting strategic initiatives.
2. Rethinking Constraints, Threats, Opportuni-
ties. Managers face a tidal wave of situations,
events, pressures, and uncertainties, and they nat-
urally resort to collective discussion (in the broad-
est sense) to negotiate an acceptable set of rela-
tionships that provide satisfactory explanations
of their social worlds. The scope and meaning of
events are funneled down to manageable dimen-
sions by formal and informal processes leading
to industry wisdom. Huff (1982) points out that
industry groups and other industry forums pro-

vide organized sense-making mechanisms.
A corresponding problem occurs, however,
when strategic managers, by holding untested
assumptions, unwittingly collude to restrict their
knowledge. They may suffer from "collective
ignorance" (Weick, 1979).
Evidence of the fragile nature of industry wis-
dom often draws attention (Cooper & Schendel,
1983). What everyone knows about an industry
translates into an opportunity for those who do
not know. Many, if not most, really novel and
exciting new strategies that invade an industry,
are perpetrated by outsiders who do not know
the rules. Consider the introduction of Lite beer
by the Miller Brewing unit of Philip Morris. Tra-
ditional companies knew that a diet beer could
not be sold, but a foolish interloper tested the
assumption and thereby enacted the most signifi-
cant product innovation in beer industry history.
These observations about the way social real-
ity is formed in organizational settings suggest a
powerful prescription for strategic managers.
They must look first to themselves and their
actions and inactions, and not to "the environ-
ment" for explanations of their situations. Indeed,
recent research on organizational crises (Nystrom
& Starbuck, 1984; Starbuck, 1983) reveals that in
many cases top managers' thinking patterns, not
external environments, cause crises. As Karl
Weick advises:
If people want to change their environment, they
need to change themselves and their actions-not

someone else.... Problems that never get solved,
never get solved because managers keep tinkering
with everything but what they do (Weick, 1979, p.
152).
Because of the temptation to assign convenient
blame, the contributions of strategic management
research should help managers reflect on the ways
in which managers' actions create and sustain
their particular organizational realities. With the
development of a greater capacity for self-reflec-
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192.168.72.223 on Mon, 3 Dec 2012 05:18:05 AM
tion, corporate officials, governmental policy
makers, and all organization members can exam-
ine and critique their own enactment processes.
By maintaining a dual focus of attention-an abil-
ity to transcend the momentary situation in which
they are entangled and to see and understand
their actions within a system of meanings that is
continually open to reflection and reassessment-
strategic managers can challenge the apparent
limits and test the possibilities for organizational
existence.
3. Thinking Differently About the Role of Stra-
tegic Managers. The enactment model places
strategy makers in an entirely different role from

that envisaged by the objective or perceived
models. Environmental scanning in those mod-
els sends managers "out" to collect facts and to
amass an inventory of information (King &
Cleland, 1978). A strategic manager is portrayed
as a decision-formulator, an implementer of
structure, and a controller of events who derives
ideas from information.
The interpretive perspective, on the other hand,
defines a strategist's task as an imaginative one, a
creative one, an art. In the chaotic world, a contin-
uous stream of ecological changes and discon-
tinuities must be sifted through and interpreted.
Relevant and irrelevant categories of experience
must be defined. People make sense of their situ-
ation by engaging in an interpretive process that
forms the basis for their organized behavior. This
interpretive process spans both intellectual and
emotional realms. Managers can strategically
influence this process. They can provide a vision
to account for the streams of events and actions
that occur-a universe within which organiza-
tional events and experiences take on meaning.
The best work of strategic managers inspires
splendid meanings (Davis, 1982; Peters, 1978;
Pfeffer, 1981; Pondy, 1976; Smircich & Morgan,
1982).
The juxtaposition of events and context, figure
and ground, is one mechanism for the manage-
ment of meaning. Through this process, strate-
gists work in the background to construct the
basis on which other people will interpret their
own specific experiences. The interpretive back-
ground makes a difference because people use it

to decide what is happening and to judge whether
they are engaged in worthwhile activities or
nonsense.
How can strategic managers generate the con-
text for meaning in organizational life? A grow-
ing body of literature explains how the manage-
ment-of-meaning can be accomplished through
values and their symbolic expression, dramas,
and language (Deal & Kennedy, 1982; Pfeffer,
1981; Pondy, Frost, Morgan, & Dandridge, 1983).
Although researchers are aware of the powerful
effects of some value/symbol systems (e.g., adver-
tising), research has only just begun to explore
how these processes occur in organizations, how
symbolic realities change, and how symbolic
realities may be manageable (Broms & Gahmberg,
1983; Peters, 1978). Nevertheless, many strategic
managers probably can sharpen their strategic
impact by gaining awareness of the less than obvi-
ous values/symbols that pervade their organiza-
tions.
For example, dramas include the standard cere-
monies and rituals of an organization (regular
meetings, socialization and training, the Christ-
mas party, etc.) as well as unique happenings
("campaigns," "challenges," "struggles to the
top," "takeovers," "the New XYZ Co."). The stan-
dard ceremonies provide continuity and reaffir-
mation of values, status, individual and collec-
tive achievements. The "big meetings" are
occasions for heightened awareness, re-
awakening, and sometimes for exciting changes.
Strategic managers should be aware of the impact

these dramas can have and realize that they (the
managers) exercise wide discretion in defining
what the dramas are and when and how they
will occur.
Powerful language and metaphors set a tone,
provide direction, and gain commitment (Edel-
man, 1977; Pfeffer, 1981; Smircich, 1983). Wise
strategic managers take advantage of language,
metaphors, and stories to convey their messages.
They also pay attention to language, metaphors,
and stories that originate elsewhere. This is one
reason why President Reagan is known as the
"great communicator"-to the enormous frustra-
tion of his "objective" critics.
Values, dramas, and language comprise the
symbolic foundations that support the everyday
prosaic realities of management information
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systems, hierarchy, incentive systems, and so
on-the surface architecture of organizations. Until
now, strategic managers have been taught to con-
sider organizational design problems exclusively
in terms of surface architecture. These conven-
tional approaches to designing organized activ-
ity have been further restricted by focusing nearly

all attention on intellectual (rather than emo-
tional) issues and on massive, unremittant con-
trol (rather than imagination).
An interpretive approach, probing the subjec-
tive process of reality-building, redirects the stra-
tegic manager's attention toward deep images of
organizational life. Strategic managers can im-
prove their efforts-make them more strategic-by
recognizing the powerful nature of those deep
images and by consciously approaching this
deeper level. The challenge to management re-
search is to understand that world and to make
such knowledge useful.
Following this advice would lead to a major
reorientation of some strategic managers' think-
ing and behavior. Rather than concentrating on
issues of product-market strategies, for example,
a strategic manager would concentrate on pro-
cess issues. Rather than concentrating on deci-
sions or design of decision making structures, a
strategic manager would concentrate on the
values, symbols, language, and dramas that form
the backdrop for decision making structures.
Rather than confining themselves to the techni-
cal/intellectual aspects of organizational struc-
tures, many strategic managers would learn to
express and to elaborate on the social/emotional
basis for organizational life.
Managing in an Enacted World
Given a world increasingly characterized by
organized, rather than individual action, what
guidelines can be derived from an interpretive

perspective to aid those responsible for manag-
ing human affairs?
Managerial Analysis
The idea of enactment underscores a view that
one's own actions and the actions of others make
an "organization" and its "environment." Be-
cause of this sequence, environmental analysis
is much less critical than managerial analysis.
Managerial analysis means challenging the as-
sumptions on which managers act and improv-
ing managers' capacity for self-reflection-seeing
themselves as enactors of their world (Litterer &
Young, 1981; Mason & Mitroff, 1981). This dual
(active-reflective) posture toward action is diffi-
cult for managers to maintain. In fact, consul-
tants often are called in to help organization mem-
bers get a different perspective on what members
are doing. Consultants state the obvious, ask fool-
ish questions, and doubt - all of which helps
organization members get outside of themselves.
Management groups can institutionalize the role
of "wise fool" (Kegan, 1981) in order to provoke
the capacity for critical self-examination.
Creation of Context
The answers to such questions as "Who are
we? What is important to us? What do we do?
and What don't we do?" set the stage for strategy
formulation. These questions elicit the values
framework within which activity becomes mean-
ingful. Current literature (Peters & Waterman,
1982) suggests that excellent companies have top

management groups who can articulate clear
value positions.
The creation of context is different from set-
ting objectives. Setting objectives implies that an
organization falls short in some way, needing to
move from point A to point B. This sort of striv-
ing characterizes many strategic management
models, suggesting that organizations have a place
at which to arrive. Objectives present a manage-
ment orientation of going-to-be instead of al-
ready-is (Davis, 1982). An interpretive perspec-
tive promotes managerial deliberations about the
present-especially about management values and
actions.
Encouraging Multiple Realities
An interpretive perspective urges the consider-
ation of multiple interpretations. But, in strate-
gic management, multiple interpretations often
are viewed as communication problems to be
overcome by more information, rather than as a
natural state of affairs.
Successful strategists have often contemplated
the same facts that everyone knew, and they have
invented startling insights (e.g., Ray Kroc and the
hamburger restaurant chain, or Gene Amdahl's
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insight into the strategic inflexibility of IBM's
pricing). Interesting enactments blossom when
strategists draw out novel interpretations from
prosaic facts. Quite often, novel interpretations
occur when companies enter an industry for
which they have no specific experience. They
try out novel strategies that run counter to con-
ventional assumptions (e.g., Philip Morris in the
beer industry, Honda in motorcycles, Wendy's
in hamburgers).
Companies might be able to enlarge their ca-
pacities for novel interpretations by systemati-
cally varying metaphors, by hiring in-house
experts from distant industries, and by encourag-
ing novel and conflicting viewpoints (e.g., a coal
company hires an environmentalist; Caterpillar
hires a top executive from Komatsu, who remains
outside the Caterpillar culture; or a company hires
a philosopher). These efforts legitimate and ex-
pand the managerial capacity for tolerance of
differences.
Testing and Experimenting
Every industry is saddled with a long list of
do's and don'ts. These stipulated limits should
be tested periodically. Enactment means action
as well as thinking. Exxon followed such a strat-
egy with the Reliance Electric deal and other
active attempts to discover whether it could push
its technical skills in certain directions (Kaufman,
1982). Proctor and Gamble seems to be experi-

menting within the soft drink industry (Smith,
1980). Assumptions about what is related to what,
what works (or doesn't), what we can do (or can't),
should be tested periodically by acting as if
counterassumptions are viable (Weick, 1979).
Strategists should learn to act ambivalently about
what they know, so that they do not become strait-
jacketed by what they know. Learning compels
forgetting. In fact, organizational wisdom may
require continuous unlearning (Nystrom &
Starbuck, 1984).
Managerial analysis, creation of context, en-
couraging multiple realities, and testing and
experimenting are managerial principles derived
from an interpretive worldview, recognizing that
people enact their symbolic world. These princi-
ples of variety are largely ignored by approaches
to strategic management that stress scanning of
an objective/perceived environment, setting ob-
jectives, and manipulating managerial controls.
Can Any Reality be Enacted?
This argument may seem to imply that people
can enact any symbolic reality that they choose.
In a limited sense the present authors are saying
precisely that. Individual people occupy per-
sonal, subjective space-space in which inten-
tions, meaning, and sensibility often are quite
idiosyncratic-what the world means to them.
And even those isolated lifeworlds can some-
times be transformed into social worlds (e.g.,
Hitler, Gandhi, Marx, Darwin). But in this paper
the special concern is with enactments in which

numerous people collectively participate, in
which people experience limits to what they can
enact.
First, organized people often struggle within
the confines of their own prior enactments. Pat-
terns of enactment rooted in prior personal,
organizational, and cultural experiences power-
fully shape ongoing organizational and cultural
options. Starbuck (1983) calls these patterns
"behavior programs" and emphasizes how past
thinking gets concretized into standard operat-
ing procedures, job specifications, buildings,
contracts, and so on that take on the aura of objec-
tive necessity. Behavior programs-institu-
tionalized as unwritten rules and taken for
granted assumptions-seem to dictate how things
are and must be done (Zucker, 1977). Changing
these patterns requires people to intentionally for-
get some of what they know and to disbelieve
some of what they believe. Depending on the
weight of prior commitments, changing may seem
risky, foolish, or taxing.
Second, enactment means thinking and act-
ing. Enactments test one's physical, informa-
tional, imaginative, and emotional resources.
Without sufficient resources (or without the abil-
ity to think imaginatively about what might con-
stitute resources), one simply cannot support
many conceivable enactments.
Finally, enactments may compete with each
other. In an election, for example, the candi-
dates struggle mightily to discredit an opposi-
tion candidacy. In a corporate context, various

strategic initiatives compete in a similar fashion.
For sizable organizational enactments to succeed,
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a critical mass of belief and acceptance must be
reached. But reaching the critical mass depends
on persuasion rather than objective factors.
For these reasons-prior enactments, problems
with resources, and competing enactments-
organizational enactment processes can be distin-
guished from fond hopes and castles in the air.
Research from an Interpretive
Perspective
The fundamental premises of an interpretive
worldview are different from those that support
much strategic management research. Just as the
assumption of an enacted environment implies a
different role for strategic managers, an interpre-
tive worldview suggests a different focus of atten-
tion for those who research the topic of strategic
management. One purpose of such work is to
encourage a more informed, more reflective, more
self-conscious practice of organization. From an
interpretive perspective, strategic management
consists of those processes through which pat-

terns of "organization" and "environment" are
created, sustained, and changed. Interpretive
research work examines the epistemologies of
organizing processes. It aims to make explicit the
knowledge (often taken for granted, but untested)
by which organization members construe their
situation and explore the multiple, often com-
peting, systems of knowledge existing within a
situation. Cause-effect logic is eschewed in favor
of examination of the rules that people follow,
people's reasons for their acts, and the meanings
people assign to events.
Conventional strategic management research
has come under increasing criticism partly be-
cause this research starts from a positivist, ratio-
nalistic model of the strategic planning process.
Critics suggest that this conventional model can-
not account for the way that strategies get formu-
lated. Critics have offered some empirical evi-
dence to support these claims ( Lyles & Mitroff,
1981; Mason & Mitroff, 1981; Quinn, 1980). Prac-
titioners complain that much of the research is
not organizationally useful (Kiechel, 1982). An
interpretive approach to strategic management
research is especially sensitive to the concerns
raised by these critics because interpretive stud-
ies try to get as close as possible to experience-
as-lived.
The key characteristics that distinguish an
interpretive approach to strategic management
research are:
1. Interpretive Research of an Industry or Orga-
nization is Done from the Point of View of the

Participants. Rather than seeking a detached
Olympian perspective on an industry or firm,
interpretive research explores what strategists
were thinking, why they acted as they did, what
they wanted to accomplish. Interpretive studies
seek to understand the strategists' thoughts and
actions at a personal level, not at the far removed
level of abstract, aggregate statistics. Interpretive
research asks: What is it like inside a strategist's
world?
2. Interpretive Research Embraces the Multi-
ple Perspectives Within any Organized Situation.
Rather than trying to merge the incompatible
views of multiple actors into a single objective
explanation, interpretive research recognizes that
differences are essential for understanding strate-
gic action and strategic change. For instance, an
interpretive analysis of the steel industry would
not be carried out solely from the standard per-
spective of the Big Eight American steel pro-
ducers. An interpretive analysis could begin with
a careful mapping of the existing organization of
the steel industry. The aim of such an analysis is
to discern the ways in which the various groups
acted, reacted, and interacted to bring forth the
situation that exists today. Here, a view that an
organization adapts to its environment gives way
to a need to study the complex shifting patterns
and configuration of organization that make up
an industry.
A consulting effort with strategic managers in
an industry from an interpretive perspective
would involve further steps. The core problem
for steel industry strategists is not how to adapt

to the apparent trends, but to become aware of
the ways that their ability to think critically about
events and relationships has become strait-
jacketed. If strategists understood how they had
inadvertently and unconsciously traded their
options for assumptions, they might begin to
invent new ways to understand present events
and to envision viable futures for their companies.
The effect of this intervention would be to de-
emphasize the current tendency to react to the
taken-for-granted "environment" and to highlight
733
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the role of autonomous action in creating en-
vironments.
3. Interpretive Research is Historical-Contex-
tual. Despite exhortations about open systems,
strategy research is often static, cross-sectional,
and seldom involves any significant evolution-
ary perspective. On the other hand, interpretive
studies are longitudinal. They record social-
political-cognitive-affective processes as these
unfold. What did strategic actors think and feel
at the time of the events? How did their prior
experiences affect them? To what societal or cul-
tural events did they pay attention?

The suggestion of an interpretive approach for
strategic management research does not mean
more conventional case studies. Typical case
studies are not conducted from an interpretive
perspective. First, the case writer is reporting from
his or her own perspective, or a synoptic perspec-
tive, and usually avoids the ambiguity associated
with multiple perspectives. Second, cases are
typically wrapped around an explicit or implicit
acceptance of a normative, rational model of
organizational decision making. Policy cases
often ignore the affective, symbolic, and linguis-
tic aspects of organizational processes. Third, case
writers often casually internalize the values,
purposes, and language of top managers they
study. Consider an anthropologist arriving at a
South Seas island and proceeding to launch
investigations designed to help the high priests
overcome bad kharma! Irony lies in recognizing
that research that tries too hard to be useful may
ultimately be less useful than research that does
not try so hard to be useful.
Conclusion
Several writers in the field of organizational
analysis and strategic management have raised
questions about how strategists come to know
their environments. Yet the implications of one
legitimate answer to these questions-enactment-
have not been fully examined. The implications
of the enactment perspective for strategic manag-
ers given here are extensive and provocative:
1. The eclipse of the "organization/environment"
dichotomy

2. A different mode of strategic analysis
3. An entirely different role for the strategist from
the role presently envisaged by most analysts
4. A different research focus
This message to researchers contends that more
resources should be devoted to the study of the
enactment processes of strategic managers, be-
cause these enactment processes form the invisi-
ble foundations supporting strategic choice. The
role of an analyst is to show the practitioner how
the practitioner's patterns for enacting environ-
ments can fundamentally alter the range of avail-
able choices. By displaying assumptions, beliefs,
and norms, consultants/researchers can uncover
practices trapping people in cycles of behavior
that prohibit scrutiny of enactment processes.
Researchers/consultants can facilitate examina-
tion of the reality-construction process and evoke
possibilities for change.
What prevents one from doing interpretive
analysis more frequently? Again, a general accep-
tance of a deceptively persuasive "organization-
environment" metaphor blinds one to the largely
symbolic, social nature of organized life. That
metaphor leads theorists to adopt the frame of
reference of a focal organization or industry,
rather than a perspective of an undisciplined
environment enacted by multiple interest groups.
Another contributing factor may be the tendency
of strategic management researchers to identify
closely with those whom they choose to study,
so that researchers unquestioningly accept man-

agement's commonsense understanding of the
environment as something that is "out there."
An acceptance of "organization-environment"
fundamentally establishes a frame of reference
guiding analyses along only certain paths.
This appeal to strategic managers asks that they
begin to think of themselves as playwrights more
than as heroes, as creators rather than as co-
aligners. They could begin to think more about
how they get to know what they know and think
less about what they know. In addition, strategic
managers may find that their most enduring stra-
tegic contributions rest with their unique roles
as background-generators and context-composers,
not on their direct roles as decision makers and
commanders.
It has been strongly argued here that a strategic
analyst should guide the strategic practitioner
toward critical self-examination. Similarly, the
contribution of this paper to the field of strategic
management guides the field toward a critical
examination of one of its major assumptions-the
734
192.168.72.223 on Mon, 3 Dec 2012 05:18:05 AM
nature of the "organization-environment" rela-
tionship. In either case, success should be mea-

sured only in terms of raising issues-not in terms
of settling them.
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http://www.jstor.org/page/info/about/policies/terms.jspArticle
Contentsp. 724p. 725p. 726p. 727p. 728p. 729p. 730p. 731p.
732p. 733p. 734p. 735p. 736Issue Table of ContentsThe
Academy of Management Review, Vol. 10, No. 4 (Oct., 1985),
pp. 655-914Volume Information [pp. 892 - 897]Front Matter
[pp. 655 - 662]Dialectical Inquiry in Strategic Planning:
Extending the Boundaries [pp. 663 - 675]Beyond Structured
Observation: Methodological Issues and New Directions [pp.
676 - 695]A Conceptual Framework for Describing the
Phenomenon of New Venture Creation [pp. 696 - 706]Politics
and Strategic Change across Organizational Life Cycles [pp.
707 - 723]Strategic Management in an Enacted World [pp. 724
- 736]Research Methods and Reporting Practices in
Organization Development: A Review and Some Guidelines [pp.
737 - 749]The Application of Population Ecology Models to the
Study of Organizations [pp. 750 - 757]The Evolution of the
Corporate Social Performance Model [pp. 758 - 769]The
Effects of Causal Attributions on Decision Makers' Responses
to Performance Downturns [pp. 770 - 786]An Evaluation of the
Use of Tests of Significance in Organizational Behavior
Research [pp. 787 - 793]University Budgeting: Administrative
Perspective, Budget Structure, and Budget Process [pp. 794 -
802]Organizational Learning [pp. 803 - 813]Ethical
Ambivalence and Organizational Reward Systems [pp. 814 -
822]Potential Predictors of Whistle-Blowing: A Prosocial
Behavior Perspective [pp. 823 - 836]Climate Formation: Issues
and Extensions [pp. 837 - 847]Organizational Behavior
Management in the Private Sector: A Review of Empirical
Research and Recommendations for Further Investigation [pp.
848 - 864]Book Reviewsuntitled [pp. 865 - 867]untitled [pp.
868 - 870]untitled [pp. 870 - 873]untitled [pp. 873 -
875]untitled [pp. 875 - 878]untitled [pp. 878 - 879]untitled
[pp. 879 - 881]Textbook ReviewManaging the Human
Resources Work: A Review of Personnel/Human Resource

Management Texts [pp. 881 - 888]Publications Received [pp.
889 - 891]Back Matter [pp. 898 - 914]
www.hbrreprints.org
The Five Competitive
Forces That Shape
Strategy
by Michael E. Porter
Included with this full-text
Harvard Business Review
article:
The Idea in Brief—the core idea
The Idea in Practice—putting the idea to work
1
Article Summary
2

The Five Competitive Forces That Shape Strategy
A list of related materials, with annotations to guide further
exploration of the article’s ideas and applications
18
Further Reading
Awareness of the five forces
can help a company
understand the structure of its
industry and stake out a
position that is more
profitable and less vulnerable
to attack.
Reprint R0801E
http://harvardbusinessonline.hbsp.harvard.edu/relay.jhtml?name
=itemdetail&referral=4320&id=R0801E
http://www.hbrreprints.org

The Five Competitive Forces That Shape
Strategy
page 1
The Idea in Brief The Idea in Practice
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You know that to sustain long-term profit-
ability you must respond strategically to
competition. And you naturally keep tabs
on your
established rivals
. But as you scan
the competitive arena, are you also looking
beyond
your direct competitors? As Porter
explains in this update of his revolutionary
1979 HBR article, four additional competi-
tive forces can hurt your prospective profits:
•
Savvy
customers

can force down prices
by playing you and your rivals against
one another.
•
Powerful
suppliers
may constrain your
profits if they charge higher prices.
•
Aspiring
entrants
, armed with new ca-
pacity and hungry for market share, can
ratchet up the investment required for
you to stay in the game.
•

Substitute offerings
can lure customers
away.
Consider commercial aviation: It’s one of
the least profitable industries because all
five forces are strong.
Established rivals
compete intensely on price.
Customers
are
fickle, searching for the best deal regardless
of carrier.
Suppliers
—plane and engine
manufacturers, along with unionized labor
forces—bargain away the lion’s share of air-
lines’ profits.

New players
enter the indus-
try in a constant stream. And
substitutes
are readily available—such as train or car
travel.
By analyzing all five competitive forces, you
gain a complete picture of what’s influenc-
ing profitability in your industry. You iden-
tify game-changing trends early, so you can
swiftly exploit them. And you spot ways to
work around constraints on profitability—
or even reshape the forces in your favor.
By understanding how the five competitive forces influence
profitability in your industry, you can
develop a strategy for enhancing your company’s long-term
profits. Porter suggests the following:
POSITION YOUR COMPANY W HERE THE
FORCES ARE WEAKEST
Example:
In the heavy-truck industry, many buyers

operate large fleets and are highly moti-
vated to drive down truck prices. Trucks are
built to regulated standards and offer simi-
lar features, so price competition is stiff;
unions exercise considerable supplier
power; and buyers can use substitutes such
as cargo delivery by rail.
To create and sustain long-term profitability
within this industry, heavy-truck maker Pac-
car chose to focus on one customer group
where competitive forces are weakest: indi-
vidual drivers who own their trucks and
contract directly with suppliers. These oper-
ators have limited clout as buyers and are
less price sensitive because of their emo-
tional ties to and economic dependence
on their own trucks.
For these customers, Paccar has developed
such features as luxurious sleeper cabins,
plush leather seats, and sleek exterior styl-
ing. Buyers can select from thousands of
options to put their personal signature on
these built-to-order trucks.
Customers pay Paccar a 10% premium, and
the company has been profitable for 68
straight years and earned a long-run return
on equity above 20%.
EXPLOIT CHANGES IN THE FORCES
Example:

With the advent of the Internet and digital
distribution of music, unauthorized down-
loading created an illegal but potent substi-
tute for record companies’ services. The
record companies tried to develop technical
platforms for digital distribution themselves,
but major labels didn’t want to sell their
music through a platform owned by a rival.
Into this vacuum stepped Apple, with its
iTunes music store supporting its iPod music
player. The birth of this powerful new gate-
keeper has whittled down the number of
major labels from six in 1997 to four today.
RESHAPE THE FORCES IN YOUR FAVOR
Use tactics designed specifically to reduce
the share of profits leaking to other players.
For example:
•
To neutralize
supplier power
, standardize
specifications for parts so your company

European Management Journal Vol. 17, No. 4, pp. 348–355, 1999.docx

European Management Journal Vol. 17, No. 4, pp. 348–355, 1999.docx

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European Management Journal Vol. 17, No. 4, pp. 348–355, 1999.docx