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. EISENHARDT
supportedby the data from our next researchphase,we think that a normativetheory
of strategicdecision makingin high velocity environmentscan be built.4
4 Support for this research was provided in part by the Strategic Management Program, Stanford Graduate
School of Business, and by the Sponsors of the Colgate Darden Graduate School of Business Administration.
We would like to thank our graduate assistants, Teresa Lant, Anita Callahan, and Dave Ellison, for their
invaluable help as well as the executives of Alpha, First, Maverick and Zap computer companies. We would
also like to thank Dave Anderson, Arie Lewin, and our three anonymous reviewers for their helpful
comments.
References
ALLISON, GRAHAM T., Essence and Company of Decision: Explaining the Cuban Missile Crisis. Little,
Brown, Boston, 1971.
BAVELAS,ALEX,"Communication Patterns in Task Oriented Groups," in Daniel Lerner and Harold Lasswell (Eds.), The Policy Sciences, Stanford University Press, Stanford, CA, 1951.
BELL,C. GORDON,"The Mini and Micro Industries," IEEE Trans. Comput., (October 1984).
, "RISC: Back to the Future," Datamation, (June 1, 1986).
BOURGEOIs,L. J., "Performance and Consensus," Strategic Management J., 1, 3 (July-September 1980),
227-248.
, "Strategic Goals, Environmental Uncertainty, and Economic Performance in Volatile Environments," Acad. Management J., 28, 3 (September 1985), 548-573.
, D. W. McALLISTERAND T. R. MITCHELL, "The Effects of Different Organizational Environments
Upon Decisions About Organization Design," Acad. Management J., 21, 3 (September 1978),
508-514.
AND DAVID R. BRODWIN, "Strategy Implementation: Five Approaches to an Elusive Phenomenon,"
Strategic Management J., 5, 3 (July 1984), 241-264.
AND KATHLEEN M. EISENHARDT, "Strategic Decision Processes in Silicon Valley: The Anatomy of a
'Living Dead'," California Management Rev., 30, 1 (Fall 1987), 143-159.
BOWER, JOSEPH, Managing the Resource Allocation Process, Division of Research, Graduate School of
Business Administration, Boston, 1970.
BURNS, T. AND G. STALKER, TheManagementof Innovation,Tavistock, London, 1961.
CREATIVE STRATEGIES INTERNATIONAL, The Microcomputer
Industry,private industry research report,
August 1983.
CYERT, RICHARD M. AND J. G. MARCH, A BehavioralTheoryof the Firm. Prentice-Hall, Englewood Cliffs,
NJ, 1963.
DEBOARD, ROBERT, ThePsychoanalysisof Organizations,
Tavistock, London, 1978.
DESS, GREGORY D. AND DONALD W. BEARD, "Dimension of Organizational Task Environments," Admin.
Sci. Quart., 29 (1984), 52-73.
FREDRICKSON, JAMES W., "The Comprehensiveness of Strategic Decision Processes: Extension, Observations, Future Directions," Acad. Management J., 27, 3 (September 1984), 445-466.
AND TERENCE R. MITCHELL, "Strategic Decision Processes: Comprehensiveness and Performance in
an Industry with an Unstable Environment," Acad. Management J., 27, 2 (June 1984), 399-423.
GEORGE, ALEXANDER L., Presidential Decision Making in Foreign Policy, Westview Press, Boulder, CO,
1980.
GLADSTEIN, DEBORAH L. AND NORA P. REILLY, "Group Decision Making Under Threat: The Tycoon
Game," Acad. Management J., 28, 3 (September 1985), 613-627.
HOFER, CHARLES W., AND DAN SCHENDEL, StrategyFormulation:AnalyticalConcepts,West Publishing
Co., St. Paul, 1978.
HUBER, GEORGE P. AND DANIEL J. POWER, "Retrospective Reports of Strategic-Level Managers: Guidelines
for Increasing Their Accuracy," Strategic Management J., 6, 2 (June 1985), 171-180.
HUDSON, LAUREL A. AND J. L. OZANNE, "The Role of Guiding Assumption in Research: In Search of
Method," Working Paper, University of Virginia, November 1986.
JANIS, IRVING L., Victims of Groupthink, Rev. ed., Houghton Mifflin, Boston, 1982.
JEMISON, DAVID B., "Organizational versus Environmental Sources of Influence in Strategic Decision Making," Strategic Management J., 2, 1 (January-March 1981), 77-89.
and Environment,Harvard Business School, Division of
LAWRENCE, PAUL AND JAY LORSCH, Organization
Research, Boston, 1967.
LEAVITT,HAROLD J., "Some Effects of Certain Communication Patterns in Group Performance," J. Abnormal and Social Psychology, 46 (1951).
LINDBLOM, CHARLES E., "The Science of 'Muddling Through'," Public Administration Rev., 19 (1959),
79-88.
STRATEGIC DECISION PROCESSES IN HIGH VELOCITY ENVIRONMENTS
MARCH,
JAMES G. AND JOHAN
P. OLSEN,
835
Ambiguity and Choice in Organization, Universitetsforlaget,
Bergen, Norway, 1976.
MCCLINTOCK, CHARLES C., DIANE BRANNON AND STEVEN MAYNARD-MOODY, "Applying
the Logic of
Sample Surveys to Qualitative Case Studies: The Case Cluster Method," Admin. Sci. Quart.,24, 4
(December 1979), 612-629.
MERTON, ROBERT K., Social Theory and Social Structure, rev. and enlarged, The Free Press, Glencoe, IL,
1957.
MEYER, ALAN D., "Adapting to Environmental Jolts," Admin. Sci. Quart., 27 (December 1982), 515-537.
MILES, RAYMOND E. AND CHARLES C. SNOW, Organizational Strategy, Structure, and Process, McGraw-
Hill, New York, 1978.
MINTZBERG,
HENRY,
"Strategy-Making
in Three Modes," California Management Rev., 15,2 (Winter 1973),
44-53.
, "Organizational Power and Goals: A Skeletal Theory," in Dan E. Schendel and Charles W. Hofer
(Eds.), Strategic Management: A New View of Business Policy and Planning, Little, Brown and
Company, Boston, 1979, 64-80.
"Crafting Strategy," HarvardBusinessRev., 87, 4 (July-August 1987), 66-75.
AND JAMES A. WATERS, "Tracking Strategy in an Entrepreneurial Firm," Acad. Management J., 25, 3
(September 1982), 465-499.
AND ALEXANDRA MCHUGH, "Strategy Formation in an Adhocracy," Admin. Sci. Quart., 30 (1985),
160-197.
NEUSTADT, RICHARD E. AND ERNEST R. MAY, Thinking in Time, The Free Press, New York, 1986.
PETERS, THOMAS J. AND ROBERT H. WATERMAN, JR., In Search of Excellence, Harper & Row, New York,
1982.
PFEFFER, JEFFREY AND GERALD R. SALANCIK, "Organizational Decision Making as a Political Process: The
Case of a University Budget," Admin.Sci. Quart.,19, 2 (June 1974), 135-151.
PORTER, MICHAEL E., Competitive Strategy, The Free Press, New York, 1980.
QUINN, JAMES BRIAN, "Strategic Change: 'Logical Incrementalism'," Sloan Management Rev., 20, 1 (Fall
1978), 7-21.
, "Strategiesfor Change,Dow Jones-Irwin, Homewood, IL, 1980.
SIMON, HERBERT A., Administrative Behavior, The Free Press, New York, 1957.
STAW, B. M., L. E. SANDELANDS AND J. E. DUTTON, "Threat-Rigidity Effects in Organizational Behavior: A
Multi-Level Analysis," Admin.Sci. Quart.,26 (1981), 501-524.
SUTTON,
ROBERT,
KATHLEEN
EISENHARDT
AND JAMES JUCKER,
"Managing Organizational
Decline: Les-
sons from Atari," Organizational
Dynamics,(Spring 1986).
VROOM, VICTOR H. AND PHILLIP YETTON, Leadership and Decision Making, University of Pittsburgh Press,
Pittsburgh, PA, 1973.
WALLACE, WALTER L., The Logic of Science in Sociology, Aldine-Atherton,
Chicago, 1971.
WEICK, KARL E., The Social Psychology of Organizing, Addison-Wesley Publishing Co., Reading, MA, 1979,
2nd ed.
YIN, ROBERT K., Case Study Research: Design and Methods, Sage Publications, Beverly Hills, 1984.