This and the following two entries (entries 42, 43 and 44) present the main conclusions obtained in an empirical research carried out with the aim of finding out how strategies are actually formed in recently created Technology-Based Firms with Accelerated Internationalization (TBFsWAI) (Roch 2020).
The specific characteristics of the companies included in this study are listed below:
- Technological base: Based on the use of new technologies and technological innovation.
- Accelerated internationalization: Internationalization from its inception or very shortly thereafter (in any case, within its first three years of existence), selling its products and/or services in several foreign countries and having a foreign turnover of more than 25% of its total turnover. Companies that have had previous experience in the market (corporate spin-offs, etc.) are excluded, since they will have undergone internationalization gradually, i.e. through longer learning processes (‘traditional model of the internationalization process’).
- Successful: Success (survival) once the company is consolidated, and in any case at least after the first five years from its creation.
- Newly created: Seniority less than or equal to 15 years.
- Independent ownership: Not be owned by outside investors or companies that have a combined stake equal to or greater than 50% of the shares, so that the founders continue to maintain control (and management) of their companies.
The following is a summary of the results obtained in this research.
Types of strategies observed
– An important part (almost 60%) of the strategies analyzed are partially deliberate and emergent strategies, with the following two main types being observed in this regard:
- Deliberate strategies in their overall perspective, as they are carried out in accordance with personal intentions or interests and/or aligned with the strategic visions of the company’s top management. And, at the same time, emergent in some of their details, which were not planned or foreseen in advance.
- Emergent strategies, since they were not planned or foreseen in advance but arose as a consequence of initial or totally emergent streams of actions. And, at the same time, deliberate, as they are aligned with the assumptions, beliefs, interests, desires and/or strategic visions of the company’s top management.
– Slightly more than a quarter (28%) of the strategies analyzed are emergent strategies, as they were not planned or foreseen in advance but arose:
- as a consequence of initially emergent streams of actions.
- as behavioral patterns in initial or totally emergent streams of actions.
- as behavioral patterns in streams of actions framed within, and/or motivated by, new strategic visions that originated in an emergent manner.
– Finally, only a small proportion (13%) of the strategies analyzed are deliberate strategies, as they are carried out as planned, contemplated or foreseen in advance by the company’s top management.
Types of strategic processes observed
– The majority (74%) of the strategies analyzed have arisen as a consequence of different streams of emergent and deliberate actions. The rest of the strategies analyzed have been generated by purely deliberate (15%) or purely emergent (11%) strategic processes.
Among the different streams of emergent and deliberate actions analyzed, the following two typologies were principally observed (94% of the cases):
- Strategic processes that arise emergently and continue to develop deliberately (44% of cases).
- Strategic processes that contain, among others, sequences of actions that arise emergently and continue to develop deliberately (50% of the cases).
These processes or sequences of actions contained within a given process, which arise emergently and continue to develop in a deliberate manner, originate from the occurrence of unexpected events from the environment (56% of cases) or from within the organization (44% of cases) (ideas or internal strategic initiatives that emerge from the ‘bottom up’, new strategic ideas or visions that arise as a consequence of ‘democratic’ type emergent actions, new strategic ideas or visions that emerge from non-conscious thought processes in the minds of top managers, other unexpected internal events,…), to which the company’s top management responds.
– Slightly more than a third (37%) of the strategies analyzed have arisen as behavioral patterns in streams of actions, the latter being of the following types:
- Streams of emergent and deliberate actions (71% of the cases).
- Streams of emergent actions (23% of the cases).
- Streams of deliberate actions (6% of the cases).
– Slightly more than half (54%) of the strategic processes analyzed have been developed totally or partially within the framework of broad action guidelines (strategic visions, personal interests, assumptions and beliefs, general criteria, etc.) of the company’s top management. In turn, it has been observed that 7% of the strategic processes analyzed have been carried out, in whole or in one of their parts, motivated or as a direct consequence of the implementation of broad action guidelines (strategic visions, personal interests,…) of the company’s top management. Finally, it can be seen that in approximately one fifth (22%) of the strategic processes analyzed, the two previous cases occur in unison, i.e., they are processes that are developed totally or partially motivated and framed by broad guidelines for action by the company’s top management.
A significant part (59%) of these guidelines (strategic visions, personal interests, assumptions and beliefs, general criteria, etc.) originated before the creation of these companies:
- As a result of the previous experience of the top managers in a company in the same sector of activity (55% of the cases).
- Due to experiences, assumptions/beliefs, interests or personal attitudes of the company’s top management (45% of the cases).
The rest, 41% of these action guides, arose during the development of the activity of these companies, as a consequence of different types of emergent actions or sequences of emergent actions: strategic learning experienced by top management based on feedback from experience in the company, non-conscious thought processes in the minds of top managers, and other types of sequences of emergent actions.
– Practically all the emergent actions observed in the strategic processes analyzed are ‘top-down’, i.e., they involve the company’s top management. Only a few cases have been observed in which the emergent actions are:
- ‘Bottom-up’ (5 cases observed in total): Development of ideas or internal strategic initiatives by people at lower or middle hierarchical levels of the organization (employees or line managers) and, normally, promotion of these ideas or internal strategic initiatives by these people, trying to convince the company’s top management of their suitability (bottom-up convincing process).
- ‘Top + bottom’ or ‘democratic’ type (3 cases observed in total): Emergent actions carried out jointly by top management and others at lower hierarchical levels, whereby new ideas or strategic visions emerge.
The vast majority of these non-‘top-down’ emergent actions (all but one ‘bottom-up’ action) have occurred in one of the companies analyzed (Company 1). This could be primarily due to the following differentiating characteristics of this company:
- Greater size and complexity.
The growing size and complexity (internal and external) of this company makes it increasingly difficult for top management to address all aspects that influence the business, which encourages the emergence of ‘bottom-up’ and ‘democratic’ type strategic actions.
- Very open and participative management style.
A very open and participative management style encourages the emergence and development of ‘bottom-up’ and ‘democratic’ type emergent strategic actions.
Finally, it is important to highlight that in this empirical research (specifically, in the first case study conducted in this empirical research) the existence of ‘democratic’ type emergent actions has been noted for the first time. This type of actions had not been contemplated to date in this field of study, which only differentiated between ‘top-down’ and ‘bottom-up’ emergent actions.
– A quarter (26%) of the strategic processes analyzed show significant similarities with the type or model of strategic process promulgated by the ‘Entrepreneurial School’ (Mintzberg et al., 1998), fulfilling all or most of its fundamental premises:
According to Mintzberg et al. (1998), the strategic process promulgated by the ‘Entrepreneurial School’ usually occurs, among others, in the following business contexts:
- The start-up of a company, a situation that requires energetic leadership and a fertile vision.
- Small organizations, which may require a strongly personalized leadership.
As can be seen, both business contexts are largely present in the companies analyzed in this empirical research.
– On some occasions, new ideas or strategic visions have suddenly appeared, like sparks, in the mind of the company’s top manager.
This phenomenon, consisting in the emergence of new ideas, concepts or strategic visions suddenly, like sparks, in the mind of the leader, has been noted by Mintzberg and Waters (1984) in an empirical research on an ‘entrepreneurial’ type organization (Organization that conforms to what is prescribed by the ‘Entrepreneurial School’), describing the observed phenomenon as follows: it is“a kind of revelation – the confluence of different ideas to create a new mental set…All of a sudden the idea forms”. “Continuous bombardment of facts, opinions, problems, and so on, may have had to prepare the mind for the change, but one simple insight probably creates the synthesis – brings all the disparate data together in one sudden ‘eureka’ – type flash,…” by which the new strategic orientation (idea, concept or vision) emerges.
In order to understand this phenomenon, it may also be interesting to consider that from the perspective of the Knowledge Theory and the Complexity Theory, according to Bueno and Salmador (2005), the accumulation of actions and reflections on these actions may lead to reach a ‘critical state point’ from which a new action and its associated reflection would produce the emergence of a new strategic idea.
– With respect to the management style and personality of the company’s top managers, the following has been observed:
- Open and participative management styles encourage the emergence and development of ‘bottom-up’ and ‘democratic’ type emergent strategic actions, as a result of which new strategic ideas or visions, or new strategies, and/or new strategic learning are produced, which may lead to the generation and/or exploitation of new opportunities. Thus, for example, in the company analyzed in which this casuistry occurs with greater intensity (Company 1), we can see how its third business unit was created from an internal strategic initiative generated by a person located at the lower levels of the organization (‘bottom-up’ emergent action), which was evaluated, ‘consented’ and finally implemented deliberately by the company’s top management.
- Personality types characterized by simplicity and open-mindedness (openness to learning and new ideas, wherever they come from), entrepreneurial spirit (openness to detecting and seizing new opportunities) and sociability and willingness to interact and collaborate with other actors in the environment, foster the emergence and development of new streams of strategic actions (usually emergent at the outset) as a result of which new strategic ideas or visions, or new strategies, and/or new strategic learning may be produced, which may lead to the generation and/or exploitation of new opportunities. Thus, for example, in the company analyzed in which this casuistry occurs with greater intensity (Company 1), it can be seen how its second business unit was created from the use of an idea or initiative of two people outside the organization, which was evaluated by the top management and was subsequently incorporated and developed within the company.
– Regarding the strategic learning generated in the strategic processes analyzed:
Bearing in mind that the companies analyzed are recently created companies immersed in turbulent environments (recently created companies, whose businesses are based on the use of new technologies and technological innovation, and which are exposed to international markets from their origin), it would be normal for strategic learning to play a relevant role in the strategic processes developed in these companies. However, other aspects of these companies that affect the generation of strategic learning must also be taken into account, such as: previous knowledge and experience of the top managers, management style and personality of the top managers, age of the company in question, etc.
Thus, the following behavior has been observed in this respect in the companies analyzed:
- In the first case study (Company 1), strategic learning has played a relevant role in the strategic processes analyzed. This is due to the recent creation of the company, the limited previous management knowledge and experience of the top managers, its very open and participative management style, the characteristic personality of the top managers (simple, open, very sociable and entrepreneurial), and the high level of turbulence of the environment in which this company is immersed.
In the other two case studies carried out, little strategic learning was generated in the development of the strategic processes analyzed, taking into account that these are recently created Technology-Based Firms with Accelerated Internationalization. In the second case study (Company 2), this is due to the significant strategic background of the company’s top manager from the very beginning, thanks to his extensive and relevant previous experience in a company in the same sector, which means that this person ‘had very clear ideas’ from the beginning. In the third case study (Company 3) this is due to the strategic background of the company’s top manager from its origin, thanks to his previous experience in a company of the same sector of activity, and to the reduced time period analyzed (only 5 years) because this company is so young (as time goes by, a greater strategic learning will be generated as a consequence of the strategic actions that will be developed).
- All the strategic learning observed in the strategic processes analyzed has been generated during the development of sequences of emergent actions.
- Finally, it can be seen that this strategic learning has not only influenced the content of the strategies (as new strategic concepts have emerged as a result of this learning) but also the way in which the strategic processes in which this strategic learning has been generated are developed, with the following being observed in each of these processes: Once the new strategic concept emerges as a result of the strategic learning experienced during the development of an emergent sequence of actions, it is deliberately implemented, which means that the strategic process in question goes from being initially emergent to subsequently deliberate.
– In one of the companies analyzed (Company 1) it has been observed that the top manager is aware that new strategic ideas and/or new opportunities may arise as a result of the development of streams of actions that he does not quite know where they are going. In general, these processes usually take the form of streams of deliberate and emergent actions framed within broad fields of action. As the company’s top manager literally comments:
In this regard, it should be noted that the fact of promoting action (on novel issues) as a source of rapid knowledge creation and, therefore, of strategy creation, has been found by Bueno and Salmador (2005) to be a practice carried out by company managers in rapidly changing environments.
– With respect to the use of processes, systems and tools for the deliberate creation of strategy, the following has been observed:
- In the three companies analyzed, little use is made of formal processes, systems and tools for the deliberate creation of strategy (strategic thinking, strategic analysis, strategic formulation, programming, implementation and control of strategies). As an illustrative example, it is worth noting that only one of the companies analyzed (Company 2) prepared a business plan at the beginning of the activity, which was prepared half a year after the company was established, not on the initiative of the founders but as a requirement of the Carlos III University in order to be able to enter its business incubator.
As an exception to the above, one of the companies analyzed (Company 3) holds a semi-annual meeting of the board of directors, where the company’s situation is analyzed, important decisions are approved and the business objectives for the next six months are set, and a budget is drawn up. This meeting, in short, constitutes a formal process in which different actions can be carried out for the deliberate creation of strategy (strategic thinking, strategic analysis, strategic formulation, programming and/or control of strategies), making use of various tools for this purpose (minutes of the meeting, where the decisions taken and the objectives established are recorded; budget; etc.).
This low use of formal processes, systems and tools for deliberate strategy creation may be due to the following aspects:
· Origin of the companies analyzed.
The three companies analyzed originated from the entrepreneurial efforts of several individuals, without the help of the organizations in which they previously worked. If these companies had originated in the University or in other Public R&D Organizations (technology centers, science parks,…), or as corporate spin-offs, their founders, most likely, advised and influenced by these institutions, would have made greater use of formal processes, systems and tools for the deliberate creation of strategy, such as, for example, the following: preparation of the business plan, preparation of an internal strategic analysis (resources and capabilities, value chain,…) and external strategic analysis (markets-customers, competitors, suppliers,…), SWOT analysis, etc.
· Profile of the founders of the companies analyzed.
In two of the three companies analyzed (Company 1 and Company 2), the founders have a markedly technical profile, with no specialized training in business management. This fact does not encourage the use of formal processes, systems and tools for the deliberate creation of strategy, more typical of ‘technocrats’ in business management. In the other case study (Company 3), one of the three partners has training and experience in business management (the family of the head of the company, who are economists by training and entrepreneurs), which has had a decisive influence on the fact that the board meeting mentioned above is held for executive purposes (decision making and goal setting) and not merely for information purposes or with the sole intention of complying with the legal obligation to be held.
- In the oldest company analyzed (Company 1 (15 years old)) it has been observed how, as the complexity of the business increases over time (increase in the size and internal complexity of the company (increase in the number of business units, departments, functions, sales figures, number of employees,…) and increase in the external complexity of the company (increase in the number of markets and customers, competitors, collaborators,…)), the top manager tries to establish a series of formal processes, systems and tools for the analysis, formulation, programming, implementation and control of the strategies, which will help to address the growing complexity.
This behavior has not been observed in the other two companies analyzed in this empirical research (Company 2 and Company 3), due to their small size and low complexity.
– In two of the three companies analyzed (Company 2 and Company 3) there is explicit evidence that the top manager or managers carry out an informal strategic analysis of the company. As these people literally comment:
In the other case study (Company 1) there is no explicit evidence of this fact, but taking into account the vision, attitudes and personality of its top manager, as well as the deep knowledge he demonstrates to have about his company and its environment, it could be stated without a doubt that this person also carries out a strategic analysis of his company in an informal way.
– No hint of the exercise of internal influence (internal power or politics) has been observed in the strategic processes analyzed. This is due to the fact that certain characteristics of the companies analyzed in this empirical research (small size, existence of strong leadership and organizational culture,…) inhibit the appearance of this phenomenon.
In this regard, it is also worth mentioning that one of the companies analyzed (Company 1) has been increasing its complexity and decentralization over time (going from having one business unit initially to having three business units at present, etc.), which could lead to the appearance in the future of the phenomenon of internal power or politics in the strategic processes developed in this company.
NOTE: A preliminary and reduced version of the results of this empirical research can be found by clicking on the following document (in Spanish language):
Roch, C. J. (2016). El proceso estratégico en empresas de base tecnológica de internacionalización acelerada (The strategic process in technology-based firms with accelerated internationalization). Madri+d Collection. Madri+d foundation for knowledge, Madrid. NEBTS 4, pp. 95-134. Link to access the complete publication through the website of Fundación madri+d: http://www.madrimasd.org/uploads/informacionidi/biblioteca/publicacion/doc/nebts4.pdf.
If you are interested in going deeper into the strategic process, allow me to recommend you: - Book: "The strategic process of the firm: Theory and cases" (Roch, 2024). - Courses and consulting program on the strategic process.
