Strategic Decision Processes in High Velocity Environments: Four Cases in the Microcomputer Industry Author(s): L. J. Bourgeois, III and Kathleen M. Eisenhardt Source: Management Science, Vol. 34, No. 7 (Jul., 1988), pp. 816-835 Published by: INFORMS Stable URL: http://www.jstor.org/stable/2632297 Accessed: 19/08/2009 16:26 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/action/showPublisher?publisherCode=informs. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit organization founded in 1995 to build trusted digital archives for scholarship. We work with the scholarly community to preserve their work and the materials they rely upon, and to build a common research platform that promotes the discovery and use of these resources. For more information about JSTOR, please contact support@jstor.org. INFORMS is collaborating with JSTOR to digitize, preserve and extend access to Management Science. http://www.jstor.org MANAGEMENT SCIENCE Vol. 34, No. 7, July 1988 Printed in U.S.A. STRATEGIC DECISION PROCESSES IN HIGH VELOCITY ENVIRONMENTS: FOUR CASES IN THE MICROCOMPUTER INDUSTRY* L. J. BOURGEOIS,III AND KATHLEENM. EISENHARDT Darden School, Universityof Virginia,Charlottesville,Virginia22906-6550 Departmentof IndustrialEngineeringand EngineeringManagement, Stanford University,Stanford,California94305 How do executivesmakestrategicdecisionsin industrieswherethe rateof technologicaland competitivechange is so extremethat marketinformationis often unavailableor obsolete, where strategicwindowsare opening and shuttingquickly, and where the cost of erroris involuntaryexit?How do top managementteams dividethe decisionmakingresponsibility? And how is riskof strategicerrormitigated?Whatwe reporthereis a set of hypothesesinduced froma fieldinvestigationof four microcomputerfirms,wherewe studiedhow each of the top managementteamswentaboutmakingmajordecisions.Ourgoalwasto extendpriorworkon strategicdecisionmakingto whatwe termhighvelocityenvironments.Ourresultsconsistof a set of paradoxeswhichthe successfulfirmsresolveandthe unsuccessfulfirmsdo not. We found an imperativeto make majordecisionscarefully,but to decidequickly;to have a powerful, decisiveCEOand a simultaneouslypowerfultop managementteam;to seek riskand innovation, butto executea safe,incrementalimplementation.Despitethe apparentparadox,effective firmsdo all of thesesimultaneously.Theseparadoxesarepresentedin the formof propositions and testablehypotheses. DECISIONMAKING;TOPMANAGEMENTTEAMS;ENVIRONMENTAL (STRATEGIC CHANGE;MICROCOMPUTER INDUSTRY;STRATEGYIMPLEMENTATION) Many approachesto developingstrategyrely on processingindustryinformationas partof the strategydevelopmentprocess(e.g., Hoferand Schendel 1978;Porter1980), and numerous studies on strategicprocesseshave been conducted in settingswhere marketdata wereplentifulenough to permitsuch analyses.For example,Fredrickson (1984) studiedpaintsand forestry;Miles and Snow (1978), book publishingand hospitals;Jemison(1981), food processingand banks. However, there are other industrieswhere the rate of change is so extreme that informationis often of questionableaccuracyand is quickly obsolete. The question addressedby this studyis: How do executivesmake strategicdecisionsin conditionsat this extreme,conditionswhich we term high velocity environments?By high velocity environmentswe mean those in which there is rapid and discontinuouschange in demand, competitors,technology and/or regulation,such that informationis often inaccurate,unavailable,or obsolete.' The microcomputerindustryis one such industry.At the time we startedour study (1984), it had an unusuallyhigh rateof change.The industrydid not exist sevenyears previously(Applewas founded in 1977) and the dominant player(IBM)had been in the marketfor only threeyears.Technologicalsubstitutionwas a frequentoccurrence. Between 1980 and 1985, the UNIX and DOS operatingsystemssupplantedCP/M; 16 and 32 bit microprocessorsreplacedthe standard8 bit; and the 64K RAM, the Win* Accepted by Arie Y. Lewin, former Departmental Editor; received November 22, 1985. This paper has been with the authors 13 months for 3 revisions. I In high velocity environments there is continuous "dynamism" (Dess and Beard 1984), or "volatility" (Bourgeois 1985), but these are overlaid by sharp and discontinuous change (Meyer 1982; Sutton et al. 1986). Using this definition, microcomputers, airlines, and banking are high velocity industries. In contrast, although they score high on dynamism and volatility indices (Dess and Beard 1984; Bourgeois 1985), cyclical industries such as forest products and machine tools are not. 816 0025-1909/88/3407/0816$01.25 Copyright ? 1988, The Institute of Management Sciences STRATEGIC DECISION PROCESSES IN HIGH VELOCITY ENVIRONMENTS 817 chesterdisk drive, and numerouscomputerarchitecturessuch as RISCemerged(Bell 1984, 1986). Growthrateswere explosive.The home computersegmentgrewby 805 percentin 1982 while the U.S. educationalsegment grew by 325 percent. Projectionsmade in 1984werefor a "slowing"of demandto a compoundannualgrowthrateof 29 percent (CreativeStrategiesInternational1983). Firms continuously entered and exited the industry,and their relative competitive positions fluctuatedconstantly. In order of decreasingsize, the leadingfirmsin 1983 were Texas Instruments,Commodore,Sinclair/Times,Atari, Apple, and IBM. By 1984, only IBM and Apple were still major players,Sinclairno longerexisted,and TI had exited the business.With these discontinuitiesin technologyand competitionand these extremesof growth,the information availablefor strategywas often of dubious quality (FutureComputing,Inc., personal communication,1985). Strategicdecision making is problematicin this kind of environmentnot only becausechangeis so dramatic,but also becauseit is difficultto predictthe significanceof a change as it is occurring(Sutton, Eisenhardt,and Jucker 1986). As a result, it is particularlyeasy to makepoor strategicjudgments.A traditionalway to avoid strategic errorsis to simply wait to see how events unfold, or to imitate others(Bourgeoisand Eisenhardt1987). However, in this environment,the "wait and see" and "me too" decisionstrategiesmay also resultin failure,as competitivepositionschangeand windows of opportunityclose. The dilemma of strategicdecision makingin this environment is that it is easy to make a mistakeby actingtoo soon, but equallyineffectiveto delaydecision makingor to copy others.So, how do decision makerscope? Based on our field investigationof four microcomputerfirms, we induced several hypotheses.We discovereda series of paradoxeswhich successfulfirms resolve and unsuccessfulfirms do not: We found an imperative(1) to make strategicdecisions carefully,but quickly;(2) to have a powerful,decisivechief executiveofficer(CEO)and a simultaneouslypowerfultop managementteam;and (3) to seekriskwhileexecutinga safe, incrementalimplementation.The empiricalderivationof these paradoxesis the subjectof this article. Background Therearetwo predominantviewson how executiveteamsshouldmakekeydecisions (Mintzberg1973; Bourgeois 1980; Fredricksonand Mitchell 1984). The "rationalcomprehensive"approachassumesthat top managementcan agreeon goal priorities, searchthoroughlyfor alternatives,and then integratethe optimal choice into existing strategy(Fredricksonand Mitchell 1984).The alternativeapproachis basedon "political incrementalism,"in whichthereis no necessarya priorigoal consensus(Lindblom 1959;Quinn 1978), searchis problemisticand constrained(Cyertand March 1963), and choice is either satisficing(Simon 1957) or delayed (Quinn 1980). Under this approach,strategyis made piecemeal,adaptively,and in small increments,ratherthan comprehensivelyand in large,purposefulchunks. The contrastsbetweenthesetwo approachessuggestseveralperspectiveswhichmight be takenwhen investigatingstrategicdecisionprocessesin high velocityenvironments. For example,the RationalActor model (Allison 1971) suggeststhat strategicsuccess dependson carefulanalysisand planningbeforeaction is taken.This suggestsa picture of a contemplative,deliberativegroupof managers.In his book on "groupthink,"Janis (1982) arguesthat extensiveconsiderationof goals and a wide rangeof alternativesis a prerequisiteto sound decisionmaking.George(1980) describessuperiordecisionmaking amongU.S. presidentsand theiradvisorsin termsof the rationalmodel. As all three studiesfocus on crisisand time-constraineddecisionmaking,one might concludethat "rational"processesare appropriatefor high velocityenvironments. 818 L. J. BOURGEOIS, III AND KATHLEEN M. EISENHARDT However, many authors criticize this model as unrealistic,particularlyin rapidly changing environmentswith their lack of information or time to process it. Both cognitive and resourcelimits force us to abandon comprehensive,rational analysis (Simon 1957;Cyertand March 1963).At best, viabilityof the rationalmodel is seen as contingent upon a stable environment and bureaucraticorganization (Mintzberg 1973), a view supportedempiricallyby Fredricksonand Mitchell (1984). Further, Fredrickson'ssubsequentresearchsuggestedthat incrementalprocessesshouldbe used in unstableenvironments(Fredrickson1984). If we generalizefrom this literature,we might expect incrementalismto be more effectivein high velocity industries. Our dilemma is that the literaturecited could suggesteither approach-rational or incremental-as appropriatefor high velocity environments. Another set of questions revolves around the role of the CEO. Should the CEO act as "commander"by dictatingstrategy;as a consensus-builderwho involves the entireteam in makingstrategicdecisions;or as a premise-setterwho standsbackafter articulatinggeneralguidelines,lettingthe top managementteam make strategy(Bourgeois and Brodwin 1984; Mintzbergand McHugh 1985; Mintzberg1987)?It is often suggestedin both the strategicmanagementand groupdynamicsliteraturesthat decisions shouldbe a productof managementteam involvementand consensus(Bourgeois 1980;Leavitt 1951;Bavelas 1951), and that firmswith consensusCEOswill be more successful,particularlyunder conditions of high uncertainty.In its treatmentof how organizationsshould be structured,the environmentalcontingenciesliteraturealso supportsthe idea that firms should be less centralizedand mechanisticunder conditions of high uncertaintyand change (Burnsand Stalker1961;Lawrenceand Lorsch 1967).However,buildingconsensustakestime, and conditionsof highvelocitysuggest a continual crisis orientation,a condition conduciveto centralized,CEO dominated decisionmaking(Mintzberg1979). The dilemma,again,is that whilethe literatureon decisionmakingand organization designis suggestiveof generalresearchquestions,it is a problematicsourceof hypotheses becauseit supportsa varietyof conflictingpredictions.Moreover,few field studies of actual corporatestrategicdecision making have been conducted in high velocity environments.This led us to pursuethe inductive,case studyapproachdescribednext. ResearchMethod ResearchDesign We chose to study the dynamics of strategicdecisions in their naturalsetting by investigatingfour microcomputerfirms.Our designwas what Yin (1984) has termed "embeddedmultiplecase"design.Embeddeddesigndenotes severalunits of analysis. We conducted our investigationat three levels: (1) the firm (its strategyand performance);(2) the top managementteam (personalitieswithinand interactionsamongthe group);and (3) the strategicdecision (tracinga recent decision). While an embedded designis complex, it providesgreaterrichnessand multipleperspectivesin explaining behavior. Multiplecase design allows a "replication"logic (Yin 1984)-that is, the logic of treatinga seriesof casesas a seriesof experiments-each case studyservesto confirmor disconfirmthe inferencesdrawnfrom previousones. While a multiple case design is more demandingthan a singlecase, it permitsinductionof more reliablemodels.2 2 A majorchallengein case study researchis to ensurethat data collection and analysismeet tests of reliability,constructvalidity,and externaland internalvalidity(Yin 1984). We promotedreliabilityby (1) usinga casestudyprotocolin whichall firmsandall informantsweresubjectedto the samesequenceof entry and exit proceduresand interviewquestions(see "Data Gathering"section),and (2) by creatingsimilarly STRATEGIC DECISION PROCESSES IN HIGH VELOCITY ENVIRONMENTS 819 Data Gathering In each firm,we tracedthe makingof a recentstrategicdecisionthroughdocuments, extensiveinterviewswith everytop managementexecutive,and, occasionally,observation of decision makingmeetings.AfteraskingCEOsto identifytwo or threerecentor ongoing major decisions, we would select one with the following characteristics:it should(1) involve strategicrepositioningor redirectionof the firm;(2) have highstakes, that is, outcomeswhichthe executivesbelieve will significantlyaffectthe firm'sperformance;(3) involve as many of the functionsof the firmas possible;and (4) the decision shouldbe consideredrepresentativeof "major"decisionstaken by the firm.The decisions we studiedincludedenteringa new productmarket,alteringa firm'sestablished identity,bettingthe firm on a totally new product,and going public. (These decisions will be describedfully in the next section.) By tracingthe decisionfromthe perspectiveof everyparticipant,usinga standardset of interviewquestions,we were able to constructwhat we call "stories"about each of the decisions.The questionswere orientedtowardsdevelopinga timeline for the decision (e.g., Neustadtand May 1987). The questionsconcentratedon facts and events, ratherthan on respondents'interpretations,using standardcourtroominterrogation (e.g., "Whatdid you do? When?Who said what to whom?"),and were pretestedwith executiveswho teach part-timeat Stanford.(The full interviewprotocol is available from the authors.) Each interviewwas conductedin tandem (two investigators),with one investigator primarilyresponsiblefor the interviewand the other responsiblefor takingnotes and filling in gaps in the questioning.Immediatelyafter the interview,the investigators recordedand cross-checkedfacts,as well as theirimpressions.We followedseveralrules forwithin-caseanalysis(Yin 1984).The "24-hourrule"requiredthatdetailedinterview notes and impressionswere completedwithin one day of the interview.A second rule was to includeall data. The thirdrule was to add our own impressions,but to separate them from the respondent'sstory. In addition, we asked ourselvesopen-endedquestions ("Whatdid we learn?""Howdoes this compareto priorinterviews?")to generate richerimpressions.Finally, when available,archivaldata documentingthe decision werealso collected. Ourcombinationof methodsandtandeminterviewingaddresssome of the criticisms of relyingupon executives'recollections(Huberand Power 1985).Althoughwe studied only one decision per firm, previousresearchershave indicatedthat a firm tends to make consequential,strategicdecisionsin an observablyconsistentmanner(Fredrickson and Mitchell 1984; Miles and Snow 1978). That is, althoughindividualstrategic decisions might differ in substance,executive teams will follow a consistent pattern acrossdecisions,patternswhichpersisteven as individualpositionsin the team experience turnover(Weick 1979). In additionto tracinga strategicdecision in each company, we obtainedextensive qualitativeand quantitativedata from each executive,includingdescriptionsof their colleaguesand theirinteractions,as well as descriptionsof decision-makingsessionsin termsof climate,conflicts,consensus,and so forth.3This providedus a sense of the top managementteam culture. organizedcase data bases for each firm we visited.Constructvaliditywas enhancedby using the multiple sourcesof evidencedescribed,and by establishinga chain of evidence as we concludedeach interview. Externalvaliditywasdealtwith by the multiplecase researchdesignitself,wherebyall caseswerefirmsfrom the sameindustryand relativelysimilarin size andage.Finally,we addressedinternalvalidityby the "pattern matching"dataanalysismethoddescribed(Yin 1984). 'We also obtainedquestionnairedata from each executive.We measuredgoals, interactionpatterns, politicalbehavior,and power.The powerquestionconsistedof a matrixin which key decisionareaswere 820 L. J. BOURGEOIS, III AND KATHLEEN M. EISENHARDT Data Analysis and Presentation Unlike positivist research,there is no acceptedgeneral model for communicating interpretiveresearch.Similarly,few guidelinesexist for conductingthe inductiveprocess centralto interpretiveresearch(Hudsonand Ozanne 1986).We usedthe following approach:havingcollectedboth qualitativeand quantitativedata from each firm,each authorindependentlyanalyzedone or the otherdatatype. In effect,we treatedthem as separatestudies. For each firm, one author calculatedgroup-levelscores of conflict, consensus,power,coalitionformationand so forth.He or she then analyzedthesedata for patterns.The other author combined the qualitativeresponsesinto narratives. Profilesfor each executiveweredevelopedfromthe descriptionsgivenby each member of the top managementteam, with traits mentioned by more than one executive includedin the narrative.For example,Don (CEOof AlphaComputers)was described as "extremelybright"by all of his colleagues,and "veryimpatient"and "caring"by 3 of 4. These traits were included in Don's profile, whereas other traits which were mentionedby only one person(e.g., "largeego")weredropped.This approachwas also used to profilethe decisionclimate and style. Decision "stories"weredevelopedby combiningthe accountsof each executiveinto a timeline beginningwith decision initiation. We included all events mentioned. In each story,therewas agreementaroundthe criticalissues of when the decisionbegan, when it was made, and how it was made. Again, using Alpha as an example, the executivesall agreedthat the impetus for the decision was a board meeting with the corporateofficers,that the CEOmadethe decisionalone, and that he did so just before the annual May planningconference.Also, all Alpha executives(includingthe President) agreedthat the decisionwas unpopular.Althoughthey were few, conflictsin the storieswere preserved.These usually concernedone person'sassumptionsabout anotherperson'smotives or opinions, and not observableactions and events. For example, as reportedin the Alpha story,the Vice Presidentof Salesperceivedthat the Vice Presidentof R&D supportedthe decisionwhen, in fact, he did not. Once each of us developedpreliminaryhypothesesfrom our respectivedata sets, we exchangedanalyses.We then posted our stories,profiles,and tabulationson the walls arounda small meetingroom, and searchedfor patternsin the data. The searchfor patternswas assistedby (1) takingpairsof firmsand listingsimilarities and differencesbetween each pair, and (2) by categorizingthe firms on a varietyof dimensions:public vs. privatelyheld; founder-runvs. professionalmanagement;size; firstvs. secondproductgeneration;and so forth.Althoughit wasnot our intentionto be normative,one variablewhich sorted both the quantitativeand qualitativedata into consistentpatternswas a crudemeasureof performance. We assessedperformanceby (1) marketacceptanceof eachcompany'smajorproduct (order backlog), (2) CEO's numerical self-reportof company "effectiveness"(0-10 scale) comparedto ratingsgiven to competitors,and (3) sales and profitability.In all listed down one side of the sheet and the executive titles were listed across the top. After indicating how important (0-10) each decision area was to the long-run health of their firm, executives were asked to assign scores to each manager on each decision in terms of how much influence that manager had on each decision. This item was introduced during the interview by stating that although most managers have titles that indicate their functional responsibility, many executive teams operate with managers influencing decisions in areas that are not strictly under their titular control. Power scores for each executive were computed by taking the mean of scores assigned to the executive by every other respondent. Two steps were taken: First, individual influence scores were multiplied by decision importance rating. Second, a mean power score for each person on each decision was computed. Decisions were then grouped according to functional area (e.g., marketing strategies and new product introductions were grouped under "marketing"), and a mean computed. (These scores appear later in Tables 2 through 5.) STRATEGIC DECISION PROCESSES IN HIGH VELOCITY ENVIRONMENTS 821 cases,marketsuccess(asjudgedby recentrevenuegrowth)paralleledCEOself-ratings. Recognizingthe tentativenessof conclusions regarding"performance"with such a smallsampleand beforean industryshakeouthas run its course,we neverthelesswere able to drawsome inferencesregardingstrategicdecision behaviorof effectivefirmsin this environment. Althoughspace preventsour providing"thick descriptions"of each case (McClintock et al. 1979), we will describe the four firms, their strategies, executives, and decisiondynamics,set within the context of a recentstrategicdecision. Four Companies and Their Strategic Decisions TheAlphaCompany:Should WeBe IBM-Compatible? The Alpha Company manufacturesa broad line of microcomputersand related softwarefor financialapplications.The firm has a nationwidedirectsales force and is privatelyheld. The Presidentof Alphais seen as dominatingdecisionmakingwithinthe firm.He is describedas extremelybright(perhapsbrilliant),very impatient,and yet a caring,nice person.Becauseof his pervasiveinfluenceoverall decisionareas,the prevailingattitude regardingmajor decisions at Alpha can be describedas "Let Don (the President)do it-he will anyway."This is consistentwith the fairlyrelaxedatmospherewe observed and the resignationto Presidentialdominationwhich we heardso often. Communicationcentersaroundthe President,who impartsinformationto the top managementexecutivesindividually.In frustration,the VPs set up Fridayafternoon "outlaw staff meetings"among themselvesto share informationand to get around Don's preferencefor condpictingbusinessin one-on-onesettings.Also apparentamong Alphaexecutivesarestablecoalitionsbetweenthe VPs of Salesand Operations,who are relativelynew to the firm,and the VPs of R&D and Finance,who havebeenwith Alpha for many years. The strategicdecisionwe tracedwas:ShouldAlphaexpandproductcompatibilityto IBM computers?The issue first surfacedat an off-site planning conferencein May 1983. Severalboard membersand the VP of Marketingexpressedinterestin tapping the large IBM market. Alpha was not doing as well financiallyas hoped and some thought that the move to IBM, with its large installed base, would help. The issue broughtmuch argument.The resultof the meetingwas that Don, personallyand alone, investigatedthe relevanttechnicalproblemsand marketpotential. The Presidentbecame knowledgeableespecially about the technical and market issues.However,he did&not attemptto gain informationfromhis functionalVPs about issues such as resourceavailabilityin R&D, nor did he explore other alternatives.In early 1984, he developeda plan by which the firm would expand its productline to IBM. Priorto announcinghis decisionin a groupsetting,Don solicited-and thought he had gained-individual supportfor the plan. To his surprise,the restof the officers (exceptthe VP of Marketing)opposedthe planwhen he presentedit to the group.Their objectionwas that the move to IBM would requirefar more R&D resourcesthan the firmhad. They also objectedto Don's dominatingmanneron this issue and in general. However,the MarketingVP stronglybackedthe switchto IBM. His stridentsupportof the move to IBMservedas a rallypoint forthe oppositionof others.(TheMarketingVP was a "hot shot MBA"with prestigeconsultingfirmexperience,but the others,including Don, had little regardfor him, primarilydue to his constant need to collect and analyzeinformationbeyondthe time whena decisionwas needed.)The decisionstayed in limbo for severalmonths. Since Don scheduledfew group meetings,severalof the otherVPs used the time to lobby directlywith him. Althoughthe R&D and SalesVPs 822 L. J. BOURGEOIS, III AND KATHLEEN M. EISENHARDT were the major opponentsof Don's plan, they were unawareof each other'sopinion and thus made no attemptto form an alliance. The annual May planning conference forced the final decision. The President thoughtthat he needed to give the company focus and directionat that meeting.He chose not to move to IBM except for one PC-relatedproduct.The decisionwas made solely by the President.One VP describedthe decision as "pusheddown our throats," and as still representingtoo much of a commitment to IBM. All of the VPs were unhappywith the decision.However,they expressedreliefin havinga renewedsense of focusand thatDon did backdown somewhatin his thrusttowardsIBM.The Marketing VP (like many of his predecessorsin thatposition)waslet go and has not been replaced. The Alphadecisionwas made over a relativelylong time althoughfew optionswere actuallyconsidered.The Presidentdominatedthe decision from beginningto end. He formulatedthe problem,gatheredthe facts,and madethe choice.As Don said:"I made the final decision on my own, despite oppositionfrom most everyone.I decided 'the hell with it, let'sgo withthe PC interface.'" Naturalallianceswhichmighthave formed around this decision (e.g., VP Sales and VP R&D) cut across traditionalcoalition boundariesand did not occur.Rather,each VP usedthe familiarpatternof one-on-one influenceattemptswith the President,and each VP was unawareof the opinionsof the otherVPs. The stablecoalitionsblockedinformationflowwithinthe group.In the end, the Presidentjust decidedand the decision was unpopular. Alpha's performancehas not measuredup to the President'sexpectations.Alpha carriesa strongbalance sheet, but its growthhas been decliningand profitabilityhas droppedsteadilyoverthe pastfouryearsfrom 17%to 6%.In both markettests(growth) and CEOself-rating,Alphawas the lowest performerin our sample. First Corporation:Do WeNeed a New Name? The FirstCorporationis a manufacturerof supermicrocomputersfor professionals. The firmhas alwaysorientedits productstowardsthe sophisticateduser.Thus, the firm sells directlyto OEMsand systemsintegrators. The Chairmanand CEO is the founder of First. He is seen as both brilliantand volatile.As describedby one VP, "Geoffis sometimeslike a gun that goes off, but you neverknow in whatdirectionhe will fire."The 51-year-oldPresidentand COOplaysa complementaryrole to that of the Chairman.He appearsto mediatethe relationship betweenthe Presidentand the restof the officers.Severalrespondentsreferredto him as "Pop,"describinghim as controlled,organized-characteristicsoppositeto those of the Chairman.Several of the officerspass ideas through Pop ratherthan meeting with Geoffdirectly. Firstexecutivesplace a premiumon being decisiveand "gettingon with it," and (as in Alpha) criticizetheir big-corporation-oriented VP Sales for excessivedeliberativeness. As Pop said: "The VP Sales has to have all his facts in before anythingcan be done." By contrast,"I got ahead at FirstbecauseI act." As in Alpha, First has stable coalitions-between the VPs of Finance and Operations(school friends)and between the Presidentand Chairman.Also as in Alpha, the chief executive dominates every decision. The ambience at group meetings was describedto us as "violent"and frustrating. Severalof the officersview meetings with the Chairmanwith great trepidation,and claim that the meetingsare good for small issues,but that majorissues are avoidedas Geoffgoes off on tangents.Most arereluctantto disagreewith Geoffin frontof a group for fear of being dresseddown, but some are willing to do so "one-on-one."As in Alpha, the officersnow hold regularmeetings without the Chairmanin orderto get importantissues resolved,as well as to avoid his mercurialoutbursts.The dominant attitudeat Firstis: "It'sprettywild aroundhere-I hopethat Pop can keepus together." STRATEGIC DECISION PROCESSES IN HIGH VELOCITY ENVIRONMENTS 823 The focal strategicdecision at Firstwas:Shouldthe establishedname of the firmbe changed?Therehad been a long standingdislikeof the firm'sname by the officers.The issue had firstsurfaced20 months previouslywhen a study concludedthat the name wasdifficultto rememberand hardto spell. Some officersjust did not like it: as one VP told us, "The name is dumb." However,the final impetus for the decision was not its unpopularitynor the study,but a letterreceivedin Summer 1984. In it, the attorneys for anothercompany chargedFirst with servicemarkinfringementupon their name. Only a few months earlier,Firsthad problemswith a client who confusedthem with a bankruptcompany with a similar name. Although the service mark infringement chargedid not have a stronglegalbasis,it stimulatedthe Chairmanand Presidentto sit down in early Septemberand examine the benefit,costs, and risksof a name change (the cost was estimatedto be about 5 to 10%of annualsales).They reportedlydecided to changethe name at this meeting, but most officersbelieve that the Chairmanhad decidedto changebeforethis. Later,severalVPs, the President,and the Chairmanlined up meetings with three name change consultants to select a new name. The first consultantwas dismissedfor personalstyle reasons;the second appealedto Geoff, so the third was cancelled.Many names were discussedand everyone offeredopinions. The Chairmanchose his own favoredoption and placedthe Presidentin chargeof the implementation.The time fromthe initialconsultant'sstudyto finalchoice took about 20 months. All of the officers,including Pop, opposed the Chairman'sdecision to change the name at this time. Name recognitionis a very valuableasset for small firms in the industry,and Firsthad a strongname. The officersfearedthe loss of marketplacename recognitionat the crucialtime duringwhich the firm was switchingfrom one type of computerto another.Only the Finance VP made an effortto changethe Chairman's mind. However,as the Presidentsaid, "This is not a democraticcompany." First'slatest product line has met with only modest enthusiasmfrom the market. Financialperformancehas been steady,but unspectacular.Althoughits profitabilityis greaterthan Alpha's,Firstis a mediocreperformerin terms of sales growthand CEO self-report. First'sdecisionprocesshas some similaritiesto Alpha's.The decisionwasdominated by the Chairmanand therewas completeoppositionto the decisionamongthe VPs. As at Alpha,identifiablepoliticalcoalitionsand outlaw staffmeetingsemergedin defense againsta decision processwhich was dominatedby the CEO. Despite the important impact of the decision, there was almost negligiblediscussionamong the VPs themselves or the VPs with the Chairmanand the President.A name changewas the only alternativeconsideredand it was not extensivelyanalyzed.Also, executiveswho were describedas analytically-oriented(VPs of Marketingand Sales at Alpha and First, respectively)were the least appreciatedin each firm and were let go. In other words, both the constraineddecisionprocessitselfand the shortcareersof analyticalexecutives indicatea low value placedon "rational"or comprehensivedecisionprocessesin these two firms. Finally, both decisions were made over a relativelylong time period- 12 months at Alpha, 20 months at First. WhereasAlpha and First shared some similaritiesin their decision processesand managementstyles,these weredistinctivelydifferentfrom those at Maverickand Zap. MaverickComputerCompany:WhatIs OurNew BusinessStrategy? The MaverickComputerCompany manufacturesnetworkedmicrocomputersystems for small business. Maverick systems are marketedworldwidethrough value added resellers,and Maverickhas recentlyemergedwith an excitingproduct.As one VP told us, Maverick'sdistinctivecompetencewas expertisein its managementteam. Bill, the currentPresidentof Maverick,wasdescribedas "verycompetitive,verystrong, 824 L. J. BOURGEOIS, III AND KATHLEEN M. EISENHARDT a masterstrategist."All of the VPs had experienceat largecomputerfirmsand were relativelynew to Maverick.The presidentdid a "housecleaning"of the priormanagement and personallyhired each of the new VPs as part of the strategyformation process. Thereis a veryhigh level of agreementon policy issuesamong Maverickexecutives. As one executiveput it, "everyoneis workingon one common thing-to make that machinethe best thingin the market."Despitethe highlevel of agreement,thereis also relativelyactivechallengingof each other'spositionson policy.Unlike at Firsthowever, the policy challengesdo not occur in the open forum of exasperatinggroupmeetings. Accordingto our informants,the Maverickexecutivestended to disagreewith each other "off line" in private,usually aftergroup meetingsadjourned.There was a concertedeffortby Maverickexecutivesto maintaina team congenialityin groupforums and to avoid challengesthat may appearto "assignblame".In concertwith this, Bill is knownto push for consensuson decisions.The feelingat Maverickis one of a committed team. The dominantdecisionclimate is "Analyze,get consensus,do it." The focalstrategicdecisionat Maverickwas:Whatis our new businessstrategy?As a glamour start-upin the late 70's, Maverickwas expected to have several years of dynamic growthfollowed by a public offeringwhich would allow all involved to become wealthy.It didn'thappen.Saleswent flat,the companymanagerspanicked,and they narrowedthe focus of the product.Maverickendedup with an obsoleteproductin a small market. Venturecapitalistsget impatientin scenarioslike this. They removedthe founders and hiredBill,the currentPresident,to developa new businessplanand a new management team. Bill took chargeof both. He quicklyinstitutedweekendplanningmeetings. As the executives describethe process,it was classic rational strategicplanning:(1) analyzethe competition,(2) identifythe firm'sstrengthsand weaknesses,(3) identifya targetmarket,(4) understanduser requirements,and (5) develop a productstrategy. Althoughwe initiallyinterpretedthis descriptionas retrospectiverationalizingon the part of the President(our firstinterviewat Maverick),we found all respondentsindependentlyprovidingsimilaraccounts. At the sametime, the Presidentsystematicallyassembleda new managementteam of experiencedprofessionals,severalof whom had workedtogetherbefore. The implementation of the strategywas worked out as each functional executive was brought on board. The groupmet each weekendover a three-monthperiod.As one officerdescribedit: People automatically bought into the plan because the meetings were held outside the normal work time and the group itself actually developed the plan. Bill directed us to the end, but we made the decisions. At each step of the way, Bill would achieve consensus before moving on. The output of the decision was the business plan for the new "Pineapple"line of networkedmicrocomputers.The pressureto reach a final decision came from the venturecapitalists.Maverickexecutivesused threemeetingswith most companymanagersto finalize the plan. The decision ended with a company-widemeeting of all employees. The resultingplan was risky. It called for a leap to an unproven microprocessor technology,adoption of an improved operatingsystem, and a non-IBM compatible system architecture.Nonetheless,all of top managementsupportedthe decision and each had a clearunderstandingof his role in implementation. Severalpoints areapparentfromthe Maverickdecision.One is that Maverickexecutives used a highly rationaldecision making process and a highly participativeone. They analyzedmany alternativesin detail.Ourinterviewswiththese executivesbecame tutorialson the alternativesavailablein the microcomputerbusinessin finance,mar- STRATEGIC DECISION PROCESSES IN HIGH VELOCITY ENVIRONMENTS 825 keting,and so on. The Pineappledecisiontook a relativelyshorttime (3 months),and had highmanagementsupport.Executionof the decision,however,is beingcarriedout over an extended period, with functional strategiesbeing decided by each VP in a sequentialmanner.For example,the distributionchannelwas chosen by the SalesVP severalmonths afterthe extent of verticalintegrationwas decidedby the Manufacturing VP. AlthoughMaverickhad been a mediocreperformerpriorto Pineapple,its current performancecan be characterizedas a turnaround:ordersfor the Pineappleare strong and accelerating.The CEO rated Maverick'sperformanceas superiorto that of his main competitors. Zap Computers:Should We Go Public? Zap manufacturessupermicrocomputersfor professionals.(Firstand Zap are competitors.)The firm sells directlyto a small number of large OEMs and universities. Zap'skey businessproblemis maintainingits marketposition throughtechnologyas majorcomputerfirmsenter Zap'sniche. The Presidentof Zap is very young and nontechnical.He holds an MBA from a prestigeprogram,and is regardedas bright, people-oriented,and a consensus style manger.The top managementteam hasbeen assembledduringthe pastthreeyearsand includesseasonedveteransfrom a varietyof corporations.The Sales and Engineering VPs apparentlygive "fatherlycounsel"to the Presidenton an informalbasis and the Presidentuses them as soundingboardsand as a proxy for experience.There are no identifiablecoalitionsamong Zap managers.Coalitions,when they arise,are decision specific.One VP describestheir meetingsas "veryvocal. We all bringour own ideas. The meetingsare constructive.We screama lot, then laugh,then resolvethe issue." Zap-executivesaredriven.Thereis an air of breathlessnessin the executivesuitethat is characterizedby burstsof energy,rapidcommunications,and shortsentences.There is a no-time-for-BSorientationamongZap executives,who placea premiumon getting consensusand actingin "realtime." Communicationis often by electronicmail. The focal strategicdecision at Zap was: Should the firm go public?Going publiceventually-has alwaysbeen partof Zap'sgame plan. However,Zap managersdid not begin to focus on this issue until May 1984 (threeyearsafterinitial financing),when they observedpotential cash flow problemsduringtheir budgetingprocess for fiscal 1985. Zap managers,especiallythe President,pay close, even daily, attentionto key performanceindicatorssuch as bookings and the status of important development projects. With his financebackground,the Presidentspearheadedthis decision.He discussed it over the courseof the summerwith Boardmembersand severalof the experienced VPs on an informalbasis.The Presidentused his staffmeetingsto outline the statusof the decision,but not reallyto discussit. The officersused the staffmeetingto question the Presidenton the status of the decision. Although most stood to gain substantial financialrewards,there were mixed feelingsabout the timing of a stock offering.One VP, an Osborneveteran,wantedto do it immediately.Boththe EngineeringVP andthe Treasurerwanted to remain private, as going public would have profound effects: revenuesand earningswould have to be smoothedfor reportingpurposes(Wall Street punishesvolatility),which would constrainmanufacturing,sales,and R&D operations and reduce flexibilitythroughout.The distinguishingfeatureat Zap is that everyone knew the positionsof othersand everyone backedthe President. In late summeron an airplanetrip,the Presidentand the Salesand EngineeringVPs came up with an alternativeto going public. The alternativewas to seek out either a majorsupplieror customerto buy a significantpiece of the firm.This was the so-called "strategicalliance"option. The Presidentused the Salesand EngineeringVPs to clarify 826 L. J. BOURGEOIS, III AND KATHLEEN M. EISENHARDT his ideas in subsequentmeetings. He laid out a calendar,convinced the Board, and negotiateda deal with a majorcustomerin rapidsuccession.Duringthe Fall the deal was consummatedon schedule.The firmstill plansto go public,but has structuredthe goingpublicdecisionon a quarter-to-quarter basis-depending upon specificearnings, market,and competitiveresults.In otherwords,the decisionis programmedto occur, given some key contingenciesand specifictriggers.In the eventualitythat the triggers are encountered,each officerhas been given a set of tasksto manageso that Zap could go publicvery rapidlyif that were appropriate. Zap'sdecisionwas triggeredby the formalbudgetingsystem,not be externalevents. The Presidentconsidereda relativelywide range of options for Zap's projectedcash flow problems-including additionalventurecapitalfinancingand bankloans. He also analyzedthe quantitativeas well as intangiblefactors. As he told us: "We tend to over-MBAit around here." The final decision was made quickly and was well-supportedand understoodby the top managementteam. Zap'sperformancehas been spectacular,with growthfluctuatingfrom 25%to 100% per quarter.Zapis consideredto be a starin the industry.Rightnow, Zaphas sold more computersthan it can make. Zap's decision processhas some similaritiesto Maverick's.The decision was analyzed extensivelyand several alternativeswere considered.The CEOs of both firms appearedto apply "rational"or businesstextbook analysisto their decisions.Second, both decisionswere innovative-Maverick's technologyleapfrogand Zap'sdiscovery of whatis currentlytermeda "strategicalliance"wereboth bold. Third,both decisions weretaken over a relativelyshorttime period,three months. Fourth,the executionof both decisionswas delayeduntil eitherthe appropriatefunctionalVP could formulate his own strategy(Maverick)or until certainperformancethresholdswerecrossed(Zap). Finally, both decisions were fully supportedby relativelyapoliticaltop management teams. A summaryof these similarities,as well as those between Alpha and First, is given in Table 1. Propositionsand Hypotheses The decision to enter a new product-market(Alpha),alter a firm'sidentity (First), leapfroga technology(Maverick),and postponerelinquishingcontrolto public stockholders(Zap), were all criticaldecisions which had major impact on the firms. The patternswe observedacross these decisions allowed us to draw inferencesregarding strategicprocessesin highvelocityenvironments.Here,we presentfivegeneralpropositions, each of which summarizesa set of inferencesas a theme. We then developeach propositioninto specifichypotheses. 1. In high velocityenvironments,effectivefirms use rationaldecision PROPOSITION makingprocesses. Earlier,we cited researchsuggestingthat highperformingfirmsin fastpacedenvironments would use incrementalapproachesto strategicdecision making(e.g., Cyertand March 1963; Mintzberg 1973; Fredricksonand Mitchell, 1984). The argumentwas that,in conditionsof instabilityand informationscarcity,strategistswouldbe unableto engagein the structureddeliberationand analysisimpliedin formalstrategicplanning. Instead,they must react adaptively,dealingwith competitive situationsonly as they ariseand with informationonly as it becomes available. The picturethat emergesfrom our data is quite different.That is, as the speed of environmentalchangeaccelerates,effectiveexecutivesdeal with theirextremelyuncertain worldby structuringit. This is done by employinga thorough,analyticprocess.In our study, both Maverickand Zap searchedwell beyond a single alternativeand used 827 STRATEGIC DECISION PROCESSES IN HIGH VELOCITY ENVIRONMENTS TABLE 1 Summary of Four Firms' Decisions ALPHA FIRST Decision Expansion of product compatibility to IBM Change of company name during time of new product line intro Impetus Performance below aspirations Consultant study, then name infringement lawsuit 6 Numberof executives interviewed Extent of search for alternatives Type of analysis 5 MAVERICK ZAP New machine based on technology leapfrog to unproven microprocessor New CEO with turnaround mission Timing of going public and use of "strategic alliance" for funding Cash budget 6 7 Constrained Constrained Wide Wide Problemistic, Satisficing 12 months Dictated by CEO Problemistic, Satisficing 20 months Dictated by CEO Political behavior Strong CEO Weak VPs Stable coalitions Outlaw staff meetings Comprehensive, "rational" 3 months VPs decide, based on triggers Strong CEO and Strong VPs Coalitions around issues No time for politics Performance Declining Strong CEO Weak VPs Stable coalitions Mercurial Outlaw staff meetings Mediocre Comprehensive "rational" 3 months VPs decide, in sequence Strong CEO and Strong VPs Coalitions form around issues. Polite conflict off-line Taking off Stellar Duration Implementation Power computationalanalysesin their evaluationof strategies.The informationgatheringby Maverickwas a classic textbook strategicplanning effort. Maverick executives (1) analyzedtheir industry,(2) conducteda competitoranalysis,(3) identifiedthe firm's strengthsand weaknesses,(4) identifiedthe targetmarket,and (5) developedthe strategy. Similarly,Zap's Presidentoften commentedthat, perhaps,they "over MBA"the organization,fromcreatinga businessplan and hittingeverytarget,to measuringevery possibleactivityand performanceindicator.The going public decision arosefrom the formalplanningsystemand was the resultof a carefulanalysisof alternativefinancing plans. In more formalterms: H 1.1. In high velocityenvironments,the more analyticthe strategicdecision making process,the betterthe performanceof the firm. Ourargumenthasa parallelin psychoanalyticprescription,wherepersonsstressedby a fast,disorderedand unstablepersonalenvironmentare advisedto "puttheirworldin order"througha rationalprocessof identifyinggoals and settingpriorities,collecting information,and generatingand evaluatingalternatives,in order to gain a sense of control (deBoard 1978). Similarly, high velocity environments force executives to structuretheircognitivemapsand to formtheirtheoriesregardingwhich strategieswill succeed,as well as to cope psychologicallywith the instability. The differencebetweenour resultsand those of Fredricksonand Mitchell(1984) may be due, in part,to our differingmethods(theirswas a scenario-basedfield studyin the forestproductsindustry).Anotherexplanationmay be that the computerindustrymay have a highervelocitythan forestproducts,which, in turn, createsenhancedpressures for a more rationalapproach.Applyingthe Dess and Beard(1984) definitionof "dynamism,"which is basedon aggregateindustrydemandfigures,it appearsthat the insta- 828 L. J. BOURGEOIS, III AND KATHLEEN M. EISENHARDT bility of the forest productsindustryis caused largelyby cyclical demand for a commodityproductratherthan by the more extremeinstabilityof discontinuouschangein the microcomputerindustry.Possibly,then, rational-analyticprocessesmay be most appropriateat the extremesof industrystability(stablepaints,highvelocitymicrocomputers),while incrementalprocessesare more appropriateat the mid-rangeof instability (e.g., unstableforestproducts). As alludedto in our literaturereview,some authorsjuxtaposethe behavioraltheory of the firm as a majoralternativeto normative"rational"decision models (Cyertand March 1963; Bower 1970; Allison 1971). Our data also indicate that the behavioral model does indeeddescribestrategicdecisionmakingbehavior.However,in this environmentit characterizesthe behaviorof poor performers.Both Alpha and Firstexamined a constrainedset of options without much relianceon analyticdetail. In classic satisficingbehavior,Alphaconsideredonly two alternatives(IBMcompatibilityor not), and stopped gatheringinformationwhen the Presidentwas satisfiedwith whatever amount he had collectedat a point in time. In First,therewas no searchat all undertaken for alternativesto a name change.In fact, althoughthree consultingfirmswere contacted,a satisficingsearchpatternwas evidenced.First'sCEOrejectedthe firstfirm for emotional reasonsand acceptedthe second firm because it "looked reasonable," causingthe cancellationof any considerationfor the thirdfirm.Thus, H 1.2. In high velocity environments,the more comprehensivethe searchfor strategic alternatives,the betterthe performanceof the firm. Finally, the firms also differedin the extent to which the senior executives could articulatetheir companies'goals. In First, there was no particularstrategicgoal involved,just the chairman'sopportunisticreactionto a questionablelawsuit. By contrast,executivesmentioned Maverick'sgoal as the "Bestdamn machine on the market." Zap's goal was the "largestpossible warchest"with the fewest possible strings attached.In each firm, more than one executive volunteeredthe goal without our prompting.Note that both of thesegoalsareproactive,reaching("best,"and "largest"), whereasFirstand Alphawereboth reactingto negativestimuli(a lawsuitand declining profits,respectively)and did not articulategoals, let alone positive ones. In times of rapidchange,people need an anchorfor their actions,and clear,explicitgoals provide this. Thus, H 1.3. In highvelocityenvironments,the clearerand more explicitlyarticulatedthe institutionalgoal, the betterthe performanceof the firm. PROPOSITION2. In high velocityenvironments,effectivefirms try new things. The "threat-rigidity" hypothesisin organizationtheory suggeststhat under conditions of environmentally-inducedstress, firms will exhibit a tendency toward welllearnedor habitualresponses(Staw,Sandelandsand Dutton 1980).This is due, in part, to executives'tendencyto centralizeauthorityand tighteninternalcontrolwhen faced with environmentalchange or turbulence(Bourgeois,McAllisterand Mitchell 1978), which in turn leads to "rigidity"in response.These habitual,or rigid, responseswill be maladaptive if the environment is undergoing radical change (Gladstein and Reilly 1985). One form of environmental"threat"is severetime pressureassociatedwith decision making(Gladsteinand Reilly 1985)-a conditioncharacteristicof the microcomputer industry.Underthese circumstances,the "natural"responseof executivesis to centralize authorityand to continue previousstrategies,not to pursuenew strategiesor innovative alternatives.In Cyert and March (1963) terms, firms engage in problemistic search- i.e., they searchfor solutionsto problemsin the neighborhoodof old solutions beforesearchingfor untestedones. STRATEGIC DECISION PROCESSES IN HIGH VELOCITY ENVIRONMENTS 829 The evidence from this study suggeststhat the effectivefirms are able to resistthe rigidity response and to experiment-sometimes at high risk-with their environments. For example,Zap pioneeredthe concept of strategicalliance,in which a much largerexternal partneris sought as an alternativeto traditionalexternal financing. Similarly,Maverickpioneereda new technologyin the Pineapple.In contrast,lowerperformingAlpha followed an imitation strategyby examiningan alternative-IBM compatibility-alreadyprevalentin the industry. H2. 1. In high velocity environments,the more innovative and risky the set of strategicalternativesexaminedand chosen, the betterthe performanceof the firm. Taken together, Propositions 1 and 2 seem to present something of a paradox. Effectivefirmsact rationally,but seekinnovationand risk.Severalauthorssuggestthat rational and analytical planning often suffocatesinnovation and creativity (Weick 1979;Petersand Waterman1982;Mintzbergand Waters1982).How are these reconciled?One answerlies in Proposition3. PROPOSITION 3. In high velocityenvironments,effectivefirms make strategicdecisions quickly. Whatwe found seems counter-intuitive.Essentially,in high velocity environments, the need for rationalplanningseems critical,in that it sets a generaldirectionfor the firmand allowsthe top managementteam and the restof the organizationto focus on execution, or, at least, on watchingfor decision thresholdtriggers(see Proposition4 below). In both Maverickand Zap we found the Presidenttaking and announcinga dramaticdecision with execution involvingthe adaptationand sometimesreformulation of strategyby the rest of the top managementteam as events occurredand new informationwas availableto the firm. This contrastswith Quinn's (1978, 1980) conclusionthat effectiveCEOsmake majorstrategicdecisionsprivately,and subsequently revealthese decisionsover a possiblylong periodof time as subordinatesexpose "corridorsof indifference"throughtheir own proposals.Quinn'smodel probablyholds in verylargecorporationsin more matureindustries(his sampleincludedChrysler,GM, Xerox). However,our data indicatethat a high velocity environmentleaves no room for this wait-and-nurturestrategy. H3. 1. In high velocity environments,the shorterthe time framein which strategic decisionsare made, the betterthe performanceof the firm. The key to resolvingthe paradoxof rationalplanningversusinnovation (Propositions 1 and 2) is the relationshipof time to decision and implementation.Effective executivesmake decisionsrapidly.For example,the CEOsof Zap and Maverickmade major,strategicdecisionsin less than threemonths. Eachhad a tight cycle of analysis, planningand decision making.Zap was characterizedby an atmosphereof breathless paceand intensefocus.Maverickexecutivesdedicatedtheirthreemonthsto developing a new strategy.By contrast,the decision at Alpha (the lowest performer)lasted 12 months, while First took 20 months from initial sensingto final decision. The more effectivefirms use a short, focused and intensive planningprocessin which an often bold, overall decision is set. This short, intensive process may well induce a kind of "risky shift" in the decision making which encourages innovation. But this also presentsanotherparadox:How can firmsdo careful,rationalplanning(Proposition1), which suggeststime investedin searchand analysis,yet act boldly (Proposition2) and swiftly(Proposition3)? 4. In high velocity environments,effectivefirms build in decision PROPOSITION executiontriggers. Effectivefirmsappearto put structureonto a streamof unstructureddecisions.The CEO makes an initial, decisive choice, but also lays out subsequentdecisions to be 830 L. J. BOURGEOIS, III AND KATHLEEN M. EISENHARDT triggeredby a schedule, milestone, or event. Zap would go public only after certain quarterlyresultswereattained;the going-publicdecisionwouldbe postponedwhenever strategicalliances(financialinfusions from corporatepartners)could be found. The MaverickCEOhad set in place a grandstrategyand had programmedthe recruitingof top functionalmanagersand the criticaldecisionsin those functions.In both cases,the execution decisionswere to be postponeduntil the appropriatemanagerialresources could be focusedon them. By contrast,neitherAlpha nor First used decisiontriggers, althoughtheir decisionswere amenableto them. H4. 1. In highvelocityenvironments,the greaterthe articulationof implementation triggers at the time a strategic decision is taken, the better the performance of the firm. Execution triggersallow firms to keep implementation options open as long as possiblewithoutdivertingmanagementattentionfrom otheractivities.Executiontriggers help to control the risk of innovativedecisionsmade quickly.What emergesis a model of swift and rational planning with adaptive execution. Analyticalthinking ordersa fast-movingworld(Proposition1),and providesa psychologicalcopingmechanism. Threshold-triggered executiondecisionspreventprematurecommitmentsto irretrievableaction (thisproposition),whichprovidesa behavioraladaptationmechanism. The formerprovidesorder,the latterpreventserror.Certaintyis attainedat a meta, or intellectuallevel;while uncertaintyis maintainedat the action, or behaviorallevel. In highvelocityenvironments,the latterallowsthe piecesof a strategyto be changedas the environmentor the requirementsof the situationchange. PROPOSITION 5. In high velocityenvironments,effectivefirms vestpowerto implementstrategyin the top managementteam. Vroom and Yetton's (1973) model of effectivedecision makinglinks fast decisions with autocraticleadership.So it was not surprisingthat,in this fastpacedenvironment, all four of the decisionswe studiedwere made by the CEO.Althoughthere was a fair degreeof consultationwith the top managementteam in Maverickand Zap, the CEO was alwaysin charge,and actedas somethingof a "dictator".Moreover,in all firmsthe decisivenessprovideda "let'sget on with it" attitudeon the partof the top management team, accompaniedby a sense of reliefand focus. So, althoughthe CEOseemedto be dictatorialon occasion,the top managementteam saw some benefitsin this. Whatdiffersacrossfirmswas the extent to which execution of the decision was put squarelyin the hands of the functional vice presidents.In Maverickand Zap, the execution triggersdescribedabove were identifiedand planned for by the functional executives,not the CEO.For example,Maverick'sVP Softwarechose the Pineapple's operatingsystem, the VP Marketingdecided on the distributionchannel,and the VP Manufacturingdecidedthe extent of verticalintegration.Thus, H5. 1. In highvelocityenvironments,the greaterthe delegationof executiontriggers the top managementteam, the betterthe performanceof the firm. This conclusionis furthersupportedby our quantitativedata on powerdistribution within the executiveteams. As shown in the power matricesgiven in Tables2 and 3, Alphaand First(the low performers)centralizedall policy-leveldecisionmakingin the CEO.(Footnote3 explainshow we computedpowerscores.)By contrast,Maverickand Zap exhibit power patternsin which the CEO is frequentlyonly the second most powerfulexecutive on several decisions. The greatestpower over a functional area generallyresidesin the functionalvice president(see Tables4 and 5). The picturecapturedby our power matricesshows an empoweredgroup of senior executives among the high performers,and an emasculatedtop managementteam among the low performers.In formalterms, STRATEGIC DECISION PROCESSES IN HIGH VELOCITY ENVIRONMENTS 831 TABLE 2 Alpha Power Matrix President VP Sales VP Finance VP Ops VP R&D Marketing R&D Finance Operations Organization 8.8** 8.0** 4.2** 4.8** 7.1** 6.7 3.8 2.0 2.0 4.7 4.7 3.7 3.6 2.7 4.6 2.7 2.9 2.1 3.3 2.8 4.1 5.6 1.5 2.9 3.6 Total Power 6.6 3.8 3.9 2.8 3.5 Conclusion: CEO (President) is the most powerful executive in every decision area, with functional VPs being second-most powerful in their respective fields. ** = highest power score in top management team on each decision area. H5.2. In high velocityenvironments,the more the powerto make functionalstrategy decisionsis delegatedto the functionalexecutives,the betterthe performanceof the firm. Thus, while we see the autocraticdecision patternsuggestedby Vroom and Yetton (1973) for fastpaceddecisions,we also see the decentralizedpatternof decisionauthority advocatedby contingencytheorists(Burnsand Stalker1961;Lawrenceand Lorsch 1967) for highlyuncertainenvironments.The effectivefirmsare able to operatewith both patternsof decision makingsimultaneously. As exhibitedby the less effectivefirms,one consequenceof keepingpowerfrom the top managementexecutivesis compensatingbehavior:Alpha and First seemed more inclined to either engage in behind-the-scenepolitical behaviorthroughstable coalitions (Alpha), or to vent emotions in psychologicallydestructiveways (First's"gun about to go off"). Also, both top managementteams formed "outlaw meetings"to circumventtheir CEOs'power-centralizing tendencies,exhibitingclear self-preserving politicalactions. H5.3. In high velocity environments, the greater the power centralization in the chief executive,the greaterthe level of politicalbehavioramong the top management team. But in high velocity environments,politicalbehavioris associatedwith poor performance. Thus, TABLE 3 First Power Matrix Chairman VP Sales VP Finance VP Ops President Marketing R&D Finance Operations Organization 8.1 ** 8.5** 3.0** 3.4** 5.2** 6.3 6.0 1.2 0.7 1.2 3.4 1.7 3.0 2.3 3.2 3.2 1.3 1.4 2.6 1.1 3.3 2.0 1.9 1.5 3.4 Total Power 5.6 3.1 2.7 1.9 2.4 Conclusion: CEO (Chairman) is most powerful executive in every decision area. ** = highest power score in top management team on each decision area. 832 L. J. BOURGEOIS, III AND KATHLEEN M. EISENHARDT TABLE 4 Maverick Power Matrix President VP Sales VP Finance VP Manuf VP Engr Marketing R&D Finance Operations Organization 9.7** 8.7 7.8** (tie) 5.0 8.4** 8.7 7.5 2.8 2.0 5.1 6.0 4.8 7.8** (tie) 4.7 6.2 5.5 7.2 3.5 5.7** 4.2 8.0 9.7** 3.4 4.9 3.8 Total Power 7.9 5.3 5.9 5.2 6.0 Conclusion: except for Sales VP, functional VPs are the most powerful in decision areas associated with their major function. ** = highest power score in top management team on each decision area. H5.4. In high velocity environments,the greaterthe politicalbehavioramong the top managementteam, the poorerthe performanceof the firm. Taken together, Propositions4 and 5 have similaritiesto the logical incremental model proposedby Quinn (1978, 1980), in which the details of a strategybecome knownto the organization(andto the CEO)as eventsunfold.The primarydifferencein our conclusionslies in the locus of controlover the details.In Quinn'smodel, the CEO is alwaysthe master,but a masterof subtlety.The CEOis tentative,suggestingpartial solutions,opportunisticallybroadeningsupport,awaitingthe emergenceof champions. The formalcommitmentto a strategyand its announcementcome as the last actionin his model (see 1980, Diagram 3, p. 104). By contrast,our data suggestthat formal commitmentand explicit announcementare made earlyby the CEO (Proposition3), but the detailsof executionfollowfrom this ratherthan build towardit. Our effective CEOsmake a strongand clearlyarticulatedstrategicchoice earlyon. And, the locus of authorityfor implementationdecisionsis delegatedto the functionalvice presidents, not retainedby the CEO.The effectiveCEO's"letgo" of theirstrategiesafterthe major decisionhas been made. Conclusion We beganthis paperwith the question:How do executivesmake strategicdecisions in high velocity environments?Many scholarsof decision making have focusedtheir effortson largecorporationsin stableenvironments(e.g., Quinn 1980;Mintzbergand Waters 1982) or on nonprofitorganizations(Pfefferand Salancik 1974; March and TABLE 5 Zap Power Matrix President VP Sales VP Finance VP Ops VP Engr Marketing R&D Finance Operations Organizations 5.9 5.7 5.1** 5.7 5.6** 7.8** 5.5 2.1 3.5 2.8 3.4 3.2 4.1 4.2 2.6 4.1 3.7 2.7 7.1** 2.6 7.5 9.2** 3.5 5.4 4.9 Total Power 5.6 4.3 3.5 4.0 6.1 Conclusion: except for Finance, functional VPs are the most powerful in their respective fields. ** = highest power score in top management team on each decision area. STRATEGIC DECISION PROCESSES IN HIGH VELOCITY ENVIRONMENTS 833 Olsen 1976; Mintzbergand McHugh 1985). But the constraintsfacedby businessfirms in highvelocityenvironmentsare different.Strategicdecisionmakingis difficultin this environmentbecausemistakesand delaysarecostly.Once behind,it is difficultto catch up. Imitationis often not viableeither,as it implies both waitingandjumpinginto an occupied niche. Thus, this environmentputs a premium on high quality, fast, and innovativedecisions. Severalof our propositionsfocus on the quality of decision making. For example, rationalanalysis serves this function (Proposition 1), as do decentralizingpower to functionalVP's (Proposition5) and establishingdecision thresholdtriggers(Proposition 4). Rationalanalysisimprovesthe initial qualityof the decision,while decentralized powerand decision triggersfosterqualitythroughflexibilityto changingcircumstances. At the same time, delays are avoided through the CEO's willingnessto be decisive and to move quickly (Proposition3). Innovativenessis achieved by experimentationin the face of threat(Proposition2), and by keepingthe strategicdecision cycle short,intense,and focused(Proposition3). The overalllessonsarea seriesof apparentparadoxes:Plancarefullyand analytically, but move quicklyand boldly. CEOsshouldbe decisive,but also delegate.Choose and articulatean overallstrategyquickly,but put it in place only as it becomes necessary. Althoughsome authorshave describedtrade-offsbetweendecisionqualityvs. speed vs. implementation (Vroom and Yetton 1973; Janis 1982), such trade-offs are less accessi- ble to managersin high velocityenvironments.Rather,these executivesmust attainall threesimultaneously. We offerthese paradoxesas propositionsand hypothesesinducedfrom our data.As presentlyconstituted,these propositionsand hypothesesare at least one step short of theory formation. At minimum, they are what Merton (1957) and Wallace (1971) refer to as empiricalgeneralizations-they summarizeobserveduniformitiesof relationships between variables.At best, they suggest a rudimentarymodel of strategicdecision makingin high velocity environments,a model we have summarizedin Figure 1. The fast-movingnatureof the microcomputerenvironmentpresentsthe firmsin this industrywith unique challenges.Given the recenttrendtowardtechnologicaldiscontinuity,deregulation,and globalcompetition,it is possiblethat otherindustrieswill soon be facing similarrates of change. To the extent that our resultsare valid and can be First Order Effects Nature of Environmental Change Innacurate, incomplete, and obsolete information Rapid Frequent Discontinuous - Easy to make mistakes Rational Analysis(Pl)* \ \ r Decision triggers for for delayed execution(P4) Empowered top Management team( P5) \ \ Need to assert Shifting set of competitors->niche position (cannot imitate)\ and technologies Closing strategic windows *Associated Strategy Making Imperatives Strategic Effects proposition - Cannot wait > to see what what happens oBold decisions(P2) 1 Decisive CEO(P5) Decision Speed (P3) number FIGURE1. A Model of Strategic Decision Making in High Velocity Environments. High Performance 834 L. J. BOURGEOIS, III AND KATHLEEN M. 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