Global Strategy - blog

As an occasional observer and sometimes an adviser in public sector strategy processes, one may easily ask to what extent business strategy is applicable in the strategic management of, for example, universities? Or to be more specific: what kind of strategic management would be of any help in public sector strategizing? The specification is important as (a) firms generally are a rather bad benchmark for any activities meant to last longer than three years. A statistical fact is that most for-profit firms die young; die painfully; or otherwise cease to exist. In this sense, there is not much to learn from the sudden success stories which may be explained more by random evolutionary processes than skillful strategic thinking. Even less we may learn from the constant failures of small and large firms. Also, what organizations optimize (profit, survival, efficient public good production) already makes for-profit organizations entirely different relative to non-profit organizations. The specification is also important because (b) strategy practices differ considerably from firm to firm. To keep things simple: there is two ways (bad and good) for strategic management. (1) many firms still follow 'old-school' strategy based on belief that top management have super-human skills in seeing into future, and acting accordingly. This 'old-school' approach respects strategic planning, control, heavy administrative processes, and other activities meant to hamper innovativeness and emergence. From a performance and survival perspectives, this approach is like flipping a coin because we still not have managers with those super-human qualities (called as 'psyches'’ in science fiction).

On the contrary, the inherent problems in decision-making and strategy implementation in 'old-school' strategic management have catalyzed the emergence of highly sophisticated intra-organizational evolutionary techniques such as corporate venturing or automated budgeting systems that facilitate progress and innovativeness needed in the marketplace. This (2) type of strategic management represents the most recent wave in strategizing valuing variation, emergent processes, fine-grained interventions, architectural solutions (=structure+ incentives), and other things positively affecting business performance. Key mechanism in this 'modern-school' is survival competition inheriting to evolutionary thinking in social sciences. Now, the problem lies here: in the field of public administration, these techniques of innovativeness and renewal do not come naturally as organizations partaking in the production of public goods are ill-suited to use a competitive mechanism.

Despite the fundamental difference between business firms and public administration, the managerial ideas of the former field have crept into the latter. In the last couple of decades, European public administration has faced both corporatization (i.e. adaptation of private sector management techniques and ideologies of efficiency) and increasing homogenization of practices across national borders. Widely known problems in renewal programs have demonstrated that managing organizational dynamics without the competitive mechanism inherent in modern strategic thinking is extremely challenging.

The problem of strategic decision-making without the help of a competitive mechanism in public administration is something that seems to be totally forgotten in the strategic management of some recent public sector strategy processes (like we witness in the Finnish university sector). That is, when the competitive mechanism and sensitivity to existing patterns of development are ignored we have a situation in which universities are managed (in strategic terms) like companies were managed 20 years ago (some are still). Thus, would it be too much to even respect the state of the art in business strategizing if one feels compelled to imitate business strategy in a university context? Or would it be better to do nothing and allow systems to heal themselves?