Strategic decision-making is a key task for every senior manager of any sized company. Strategic decisions are characterized by highly uncertain conditions. Managing this uncertainty and anticipating the future, is seen as key to success and the measure for being a successful manager. In the opposite direction, if firms fail to anticipate how the future will be, it is then often called “bad luck”. However, if “failing to anticipate the future” were correlated with bad luck, this would mean that “anticipating the future right” should be directly linked with good luck. However, good luck is often ignored and seen as excellent management performance instead.
To reduce the influence of luck, this master thesis deals with the different approaches on strategy-formation and decision-making, to identify to what extent they differ in their methodology on how they manage the uncertainty and how they try to get control over the future. The aim is to identify best practice approaches that should lead to better performance on reduced risk and cost.
Table of Contents
1. Introduction
1.1 Problem description and research question
1.2 Aim of the paper
1.3 Methodology
1.4 Structure of the paper
2. Literature review and the general term definition
2.1 General Term Definition
2.1.1 Strategy
2.1.2 The market and competitive space
2.1.3 Uncertainty
2.1.4 Causation versus Effectuation
2.1.5 Prediction versus Control and Influence
2.1.6 Systemic Knowledge Management
2.2 Literature Review on different strategy approaches
2.2.1 Positioning as strategy formation
2.2.1.1 Classical Design-, Planning- and Positioning School
2.2.1.2 Typical causal strategy planning process
2.2.1.3 Adaptation and Learning in strategy formation
2.2.1.4 Critique and limitations
2.2.2 Construction as strategy formation
2.2.2.1 Entrepreneurial and visionary strategy formation
2.2.2.2 Effectuation
2.2.2.3 Critique and limitations
2.2.3 Agility as strategy formation
2.2.3.1 The Lean Startup
2.2.3.2 Business model instead of a business plan
2.2.3.3 The Experiment process
3. Framework to select elements to build an agile strategy
3.1 Evaluating the degree of control
3.1.1 Data set
3.1.2 Questions to evaluate the elements
3.1.2.1 Uncertainty levels
3.1.2.2 Control Levels
3.1.3 Evaluation results
3.1.3.1 Uncertainty Level at different strategy approaches
3.1.3.2 Controllability level at different strategy approach
3.1.3.3 Uncertainty level versus controllability level
3.1.3.4 Decision Matrix and Conclusion
3.2 Elements of an agile strategy framework
3.2.1 Evaluating status quo and competitive space
3.2.2 Transfer into a business model
3.2.3 The experimenting phase
4. A case study at “Connect”
4.1 Who is “Connect”?
4.1.1 The Founders
4.1.2 Description of the “Connect” business
4.1.2.1 The business process
4.1.2.2 Helper and Requestors
4.1.2.3 Service cost
4.1.3 Challenges and current status
4.2 Applying the agile strategy framework to “Connect”
4.2.1 Analysing status quo
4.2.2 Analysing competitive space
4.2.3 Analysing current business model
4.3 Analysing innovation accounting measures
4.4 Summary and next step proposal
5. Conclusion
6. Reference List
Research Objectives & Key Themes
The primary aim of this master thesis is to develop a robust framework for building an agile business strategy capable of navigating highly uncertain and complex market environments, addressing the research question: "How to develop an agile business strategy in an uncertain market environment?"
- Comparative analysis of causal, effectual, and agile (Lean Startup) strategy formation approaches.
- Evaluation of strategy methodologies based on their capacity to manage uncertainty and achieve control.
- Integration of systemic knowledge management principles into strategic planning processes.
- Empirical application and testing of the developed agile strategy framework through a case study of a startup.
Excerpt from the Thesis
2.1.4 Causation versus Effectuation
In this paper two major models and methods of strategy formation will be compared. The classical view is the so-called “Causation”, which starts with defining a goal as an effect to be created. In the following required means to achieve the preselected ends gets identified. In contrast, the effectual model starts with given means and is based on the view to find new ends. Effectuation is based on the premise that human beings cause the future and, therefore, the future can be controlled and/or created through human action (Sarasvathy, 2008), or as Sarasvathy wrote
‘A causal logic is based on the premise: “To the extent we can predict the future, we can control it.” An effectual logic is based on the premise: “To the extent we can control the future, we do not need to predict it’ (Sarasvathy, 2008, p.17).
Comparing effectuation with the causal procedure, the STP process starts with the definition of a market and potential customer as base for a potential product specification (Kotler & Keller, 2012). Information is collected by using techniques like focus groups and surveys, etc.. As a next step market gets segmented and assessed on revenue potential. Based on competitive analysis a generic strategy is developed and a product adequately positioned (Sarasvathy, 2008).
Summary of Chapters
1. Introduction: Outlines the challenges senior managers face with strategic decision-making in complex environments and introduces the research objective of developing an agile strategy framework.
2. Literature review and the general term definition: Provides foundational definitions of strategy, markets, and uncertainty, while critically comparing causal, effectual, and agile strategy formation streams.
3. Framework to select elements to build an agile strategy: Evaluates the efficacy of strategy approaches regarding predictability and controllability, forming the basis for an integrated agile framework.
4. A case study at “Connect”: Applies the developed agile strategy framework to a real-world Austrian startup to test its usability and effectiveness in a practical business context.
5. Conclusion: Synthesizes the research findings, confirming that while no single "holy grail" exists, an agile approach facilitates "failing fast" and pivoting in uncertain environments.
Keywords
Agile Business, Decision-Making, Start-up, Strategic Thinking, Strategy Development, Strategy Management, Uncertainty, Effectuation, The Lean Startup, Innovation Accounting, Competitive Space, Causal Logic, Business Model, Agile Framework, Entrepreneurship
Frequently Asked Questions
What is the core problem addressed in this master thesis?
The thesis addresses the difficulty senior managers encounter in maintaining control and making effective strategic decisions within highly uncertain and complex market environments.
What are the primary strategic approaches analyzed?
The author evaluates three major streams: the classical "Causal" approach (industry analysis and prediction), "Effectuation" (entrepreneurial control of endogenous factors), and "The Lean Startup" (agile hypothesis testing).
What is the main objective of this research?
The goal is to develop a practical framework for building an agile business strategy that enables organizations to manage uncertainty by choosing the right strategic approach at the right time.
Which scientific methodology is applied?
The thesis utilizes a literature review to identify strengths and weaknesses of different strategies, a quantitative evaluation tool to compare their predictability and controllability, and a qualitative case study to test the developed framework.
What does the main body of the work cover?
The main body bridges theory and practice by analyzing foundational concepts of strategy, performing a comparative evaluation of causal vs. effectual logic, and demonstrating the application of an agile framework through the case study of a startup named "Connect".
What keywords characterize the work?
Key terms include Agile Business, Effectuation, The Lean Startup, Uncertainty, Strategy Management, and Innovation Accounting.
How does the author define the "Effectual" approach?
Effectuation is defined as an entrepreneurial logic where, instead of predicting the future, managers focus on controlling the elements currently within their reach and leveraging available means to create new opportunities.
Why did the "Connect" startup struggle despite having a business plan?
The study reveals that "Connect" relied on speculative causal planning and missed key value validation, failing to iterate based on actual customer feedback or to establish a viral growth engine.
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- Hans-Peter Mutzel (Autor:in), 2014, Development of an agile business strategy in an uncertain market environment, München, GRIN Verlag, https://www.hausarbeiten.de/document/286607
