Six Actionable Canons for Rationality in Strategy Practice

Most issues in strategy are, in the final analysis, questions of judgment (Bennis and O'Toole 2005). In exceptional cases, strategic options are put forward by a single strategy maker but more commonly strategy making emanates from discussion and information exchanges between a group of people (Priem and Harrison 1994). Inevitably, strategists must make such judgments with incomplete data. The extent to which such data are incomplete will concomitantly impact on the likelihood the strategic decisions are optimal. Further, when the thinking itself is also messy, the possibility of sub-optimal or unwanted outcomes grows (Bennis and O'Toole 2005).

At the level of the firm, it is also important to remember that thinking is only strategic to the extent it is consequential for the outcomes, directions, survival, and competitive advantage of the firm (Johnson et al. 2003). For the purpose of this article, I adopt a narrow view, and only include thinking that is part of a formal process (Jarzabkowski et al. 2007). In doing so, it can be argued that the domain of strategy encompasses a firm’s initial conditions, managerial cognition, and choice.

In line with this, Fowler (2003) concludes that strategic effectiveness requires that the strategist develops a holistic, but also dynamic view of a firm and its competitive environment. To this end the focus of the strategist should not be on the development of a static mental model of reality, but on the deployment of his or her cognitive capabilities for near real-time decision making, rooted in concepts such as renewal and resilience (Hamel and Välikangas 2003). Combining holisticism and dynamism would then require a form of integrated thinking which, according to Kachra and Schnietz (2008), can only result from a rational and ongoing learning process.

The foregoing means that, in strategic thinking, the firm and its environment constitute the object of thinking that is linked to the subject of thinking, being the individual strategist and his or her thinking skills and activities. Within this micro foundational conception of strategy, the rational strategist needs to develop the thinking and learning paradigms that enable attainment of the said holistic and dynamic perspective. This means that the strategist must learn to do his or her own empirical research and sensemaking and, although it is impossible to fully know the surrounding landscape or the true value of various combinations, the strategist must at least try to imagine what it is like. To this end, strategists must draw from available firm- or industry specific data and information or prior experience and use this to develop a mental model of a firm and its surrounding landscape. Once developed, the mental model could then be used to hypothesize about where to find the best opportunities for value creation for the firm, or it could be used in a process that is ultimately not just about decisions, but also about the legitimating of particular choices or practices (Vaara and Whittington 2012).

Clearly, this demand for cognitive flexibility makes the effective use of language paramount; language is what is used to create meaning, to frame action, and to prompt creativity (Dougherty 1993). Vaara and Lamberg (2016) even state the actual practice as enacted by strategists involves, to a large extent, the constructing of strategic narratives. In turn, these narratives are constituted by statements which, in a technical sense are codable units of verbal protocol (Maani and Maharaj 2004).

Ideally, the strategist is able to construct, articulate, and combine all narratives that tell the past, present, and future ‘story’ of a firm. Statements that relate to past and present would then echo what could be termed organizational identity in the strategic cognition perspective.

In the words of Narayanan et al. (2011), this construct serves as the basis for answering the question “Who are we as an organization?”. This can be construed as a firm-specific version of the philosophical “Know Thyself”. This identity is ultimately socially constructed and its continuity is maintained by conversations within an organization, which emphasizes that strategy exists in people’s minds and in their theories about the world and their firm’s place in it (Gavetti and Rivkin 2007; Narayanan et al. 2011). Unfortunately, developments in this domain pursuant of rationally constructing such narratives are still in their infancy, and overcoming decision making biases is not yet a well-distributed skill (Teece 2007).

Within the context of this micro foundational conception of strategy this article intends to contribute to the quest for greater rationality in strategic management by inferring a set of canons for strategic rationality in practice. The utility of this offering is found in the presumption that, for a strategist, acquiring true knowledge about the business world is dependent on a rational process of collecting, organizing, and interpreting information. As such, strategists are posed here not as knowers, but as self-directing learners who want to counter naive or false beliefs, and who are intrinsically motivated to acquire, create, and apply new knowledge (De Déa Roglio and Light 2009; Rousseau 2012).

Like the vast majority of research, this investigation did not occur in vacuo, but builds on prevailing paradigms and fundamental models (de Jong et al. 2015). In this instance, the research is built on a theoretical base of conceptual truths and axioms regarding the nature of a firm, the nature of strategic thinking, and the nature of knowledge.

Using an axiomatic foundation and logical inference follows from the argument that when the aim of a study is to discover guidelines for improving firm performance through increased rationality, one should reject a nomothetic view of causation. The fact that firms are dynamic and adaptive simply makes them ill-suited for this. Hence, an investigation that aims to improve strategic rationality in practice cannot rely on empirical investigation but must result from theoretical exploration. As a consequence, what is designed cannot claim scientific objectivity, and cannot qualify as a theory regarding firms or firm behavior. However, this shortcoming is not fatal because the investigation is aimed at formulating a theory about how a strategist should think about firms, not about how firms work, or how strategists actually think. The interest lies in a purposeful conceptualization of strategic rationality itself, not on the empirical content that is considered when it is applied.

Naturally, a conceptual model for strategic rationality that is based on a theoretical, normative research paradigm is merely an opinion unless it can claim authority in some way. This authority must come from justification that relies on a priori reasoning alone, or analytic philosophy. Resorting to philosophy in this way is not gratuitous because the theorizing that is part of this research relies necessarily and heavily on critical thinking and on the logical analysis of concepts and language. Based on these presumptions, the design of the proposed conceptual model for strategic rationality largely entailed a theoretical investigation into the possibility for and the, either inevitable or logical, boundaries of what is strategic rationality.

The next sections describe and substantiate the design of a new conceptual model for strategic rationality. This first design step entails the establishment of five fundamental axioms regarding the nature of the object of strategic thinking, the nature of strategic thinking, and the nature of knowledge (Table 1). All subsequent theorizing is based on these axioms. From these axioms, four boundary references for strategic rationality are inferred. As will be argued, the axioms and references reflect a justification approach to strategy practice.

The second design step entails the establishment of a novel conceptual frame of reference for strategic rationality (Fig. 1). This frame uses the boundary references identified in the previous step. The fundamental importance of this conceptual frame of reference can be illustrated by highlighting that it guides thinking about strategic rationality in four ways. Firstly, it reminds us that, in strategy practice, rationality combines thinking content with a thinking process. Secondly, the four boundaries present six canons for strategic rationality which correspond with the mutual interconnections of the boundaries (see dotted lines in Fig. 1). Thirdly, the interconnections between the three content-related boundaries (see dotted lines 1 through 3 in Fig. 1) further guide thinking by indicating it takes three assessment sub steps to establish the meaning of the knowledge that strategists need to generate. In lay terms, this assessment entails a more fundamental approach to the asking and answering of the ‘So what?’ questions that underlie much of the rigor versus relevance debate in strategy. Fourthly and finally, the frame of reference informs thinking about strategic rationality by offering the ingredients to formulate a holistic yet actionable definition of strategic rationality, which is also presented. This definition is inferred from the frame of reference and describes what a strategist should do to ensure strategic thinking is rational.

A total of five axioms are formulated. This includes two axioms regarding the nature of the object of strategic thinking, being the firm; and one regarding the nature of knowledge. This particular set of axioms is deemed necessary because when establishing knowledge about an aspect of reality, one must make specific assumptions about the nature of reality under investigation (i.e., ontology) and about the nature of knowledge (i.e., epistemology) (Sandberg 2005). Next, two fundamental assumptions are added regarding the nature of strategic thinking itself: one regarding the purpose of that thinking and one regarding the corresponding goal for an individual strategist’s thinking. The axioms, several implications, and the conceptual boundaries they set for strategic rationality are presented in Table 1 and discussed below.

After the axioms and corresponding boundaries are used to form the intellectual foundation for the development of a conceptual model for strategic rationality that can instruct thinking, two overall conceptual implications can be formulated. First, the axioms represent an approach to strategy that herein is termed a justification approach. This follows from a logical inference when cascading down the axioms. Such an exercise would tell us that strategy always concerns a firm, and that such a firm is a social construct that exists because of the statements that are made about it (axiom 1). Axiom 2 then informs us that, to prevent firm death, the construction of statements pertaining to value creation is needed. Axiom 3 subsequently tells us that this statement making requires a strategy actor to go through a thinking process, and the goal (axiom 4) of this process is to obtain the knowledge that is needed to construct the strategic narratives that form the core of all understanding pertaining to a firm, and which precede strategic decision making. Axiom 5 finally informs us that the statements that comprise these strategic narratives are propositional and must be justified. Hence, when it comes to strategic rationality there can be no truth or accepted reality without justification. Unfortunately, it is not always clear what is meant by justified and business remains a world without provable truths because it is impossible to replicate what happened in the past. This, however, does not mean that the strategist is left to guess, speculate or have unfounded opinions. Rather, it means that the notion of reasons provides the most adequate view of justification and this makes that justification become a matter of finding enough good reasons to make a decision whose outcome cannot be predicted. This is comparativism, the essence of which holds that justification comes in degrees; a strategist can have more or less justification to believe something (Silva 2017). In such a context, a rational view simply demands one seeks truth as best one can, because the more truth, the less uncertainty. And because the very seeking of justification in itself is already truth-conducive this argument holds even when soundness cannot be validated (Roche 2014). In other words, the very act of justification reduces uncertainty, and that is what rational strategists aim for.

The second implication is that once the boundary references are connected to form a model it becomes insightful to explore interconnections between the references, most notably to discern what they can provide in terms of criteria by which strategic rationality can be judged, both content wise and process wise. The four boundary references logically yield six interconnections and, when presented in the order as per Fig. 2, they reflect a content (left) and process (right) component, these interconnections can inform us of criteria by which both rational statement content and a rational statement generation process could be judged. First, the three content related canons are discussed. Next, it is illustrated how they, combined, offer an actionable framework for assessing the elusive ‘So what?’ question in strategic management. Subsequently the remaining canons are discussed, and an illustration is provided concerning what their combination could imply for strategic rationality.

At this point, three canons for the content of strategic rationality are identified and discussed that can be distilled from the conceptual frame of reference for strategic rationality. These three canons have prescriptive value, but not just in a conceptual sense. This becomes clear when they are viewed as guidelines for the assessment of the elusive meaningfulness of statements. Meaning is what strategists seek when the infamous “So what…?” question is posed. Asking for meaning is important for any strategist because it aligns the activity of thinking with the foreseen outcome of thinking and with the intent of that thinking. Somewhat surprisingly, when combined, the first three content-related canons provide a valuable instrumental framework for assessing meaning in strategic thinking. To understand this, it is important to recognize that meaningfulness in strategy is of a type that is discussed as part of the philosophy of language. In this field of study, theories of meaning are in fact synonymous with theories of truth. An important definition for meaning in this field is agreed upon by several important philosophers, including Aristotle, Augustine, and Aquinas. Effectively they state that meaning is a relationship between signs and the kinds of things these signs mean to express, intend or signify. This definition is useful in business thinking as it emphasizes the context-driven nature of meaning. Fig. 2 illustrates that inquiry into meaning can in fact be operationalized by asking a “So what?’ question that corresponds with an interconnection between the three content-related boundary references. This is suggestive of the idea that when all three questions are, or can be, answered satisfactorily in a strategic thinking process, this would indicate that propositional knowledge is aligned with the purpose of strategic thinking. All three questions can be asked to oneself to question and refine one’s own beliefs or to others for the same reasons. They are discussed below.

The resulting combination of content- and process-related canons portrays strategic rationality as something that can only be demonstrated by a strategist who is somewhat of an analytic philosopher-researcher. The philosopher dimension in this typology reflects the analytic philosophical approach that is demanded by the inclusion of axioms 4 and 5; bounded by cognition and esteem for truth.

As Fig. 2 shows, all axioms are covered by the boundary references. Conceptually, this indicates that strategic rationality is possibly ‘found’ where all boundary references overlap. Put differently, when the boundary references and canons are combined, it may be concluded that a strategist’s rationality is dependent on his or her ability to find the information that is required to construct the propositional statements that deliver the justified true beliefs that help form the discourse that improves the decision making that aims for value creation.

Figure 3 shows every boundary reference from Table 1 is included in this sentence, as is every canon from Fig. 1, albeit implicitly in some cases. For instance, the multiplicity of the justified true beliefs covers the ‘necessity and sufficiency’ of these statements, and the ‘phronesis’ canon is elementary to the discourse that improves strategic decision making. Of course, this sentence does not prescribe what a practical model for strategic rationality looks like in practice. This conceptualization can only tell us that if the information is the right information used to form the right justified true beliefs, they will deliver the knowledge that is needed to form a sound strategic thinking process. Whether the information, statements, or decisions are right, however, can never be established. For one thing, there is no absolute norm for correctness in business. This is caused by the fact that value creation is a relative phenomenon. Besides that, it is beyond the bounds of anyone’s cognitive capacities to examine all imaginable information and then discard what is not needed. Further, there will never be an identical control firm to compare the outcome of the decision to. Hence, it is not possible to conclude that a decision that was made at some point was the best possible decision at that time. It is simply unknowable. The consequence of this fundamental truth is that in practice, making the right decisions actually means making decisions in the right way. Of course, the second ‘right’ refers no longer to an outcome, but to the meeting of the canons of strategic rationality itself.