The strategy ceiling

by Philip Boxer

It is only with the full relational form that the ethos of action learning has to pervade the enterprise as a whole. Up to that point, the assumption the enterprise makes is that it can rely upon Faustian pacts with individuals operating at its edges to deal with demands that go beyond the complexity of its own business models.

An enterprise differentiates its behaviors in relation to its environment to create value, while at the same time trying to sustain its identity through retaining some form of competitive advantage. How successful it is depends on the kinds of competitive asymmetry it can sustain, which in turn depends on its ability to integrate differentiated behaviors. The strategy ceiling is a way of thinking about how an enterprise does this.

The strategy ceiling is that level above which it is “none of your business” how an enterprise competes – the assumptions above the strategy ceiling are the tacit taken-for-granted basis on which the enterprise determines its behavior built into the way the enterprise operates at ‘design-time’.[1]  Thus the four forms of ‘causal texture‘ described by Emery and Trist (1965) demand a progressive differentiation of layers of behavior for which there needs to be a corresponding progressive articulation of ‘run-time’ assumptions about how to differentiate behaviors, and therefore a progressive lifting of the strategy ceiling imposed at ‘design-time’. Lifting the strategy ceiling means making the tacit assumptions in any given layer explicit and dynamically responsive to demands differentiated at ‘run-time’.

These layers stratify the relation between the enterprise and demand, and as these layers are articulated, so the means of integrating the behavior of these layers needs to be articulated.[2]  At the same time, the basis of competition for each of the four forms is different, so that raising the strategy ceiling also involves choosing a different way of competing. The result is the above five-by-five, in which each move to the right enables an increasingly differentiated response to a demand for behavior at ‘run-time’ with its associated lifting of the strategy ceiling.  The result is four different organizations of the relationship between the enterprise and its competitive environment[3], the last of which is further divided by the nature of the good that it serves [4]:

  • task system integration – how, who for whom and why things are done as they are remain unquestioned.  It is sufficient to focus is on operating the business model as it is in order to deliver task-system dominance.
  • functional/professional integration – bodies of know-how have to be developed for how things are done in order to scale efficiencies through establishing category dominance, the customer still being defined by these ways of doing things.
  • positional integration – the relevant types of demand from customers, which define the market positioning through which the enterprise chooses to compete, are based on assumptions it makes about the customers FOR WHOM it is organizing the market. The WHAT, HOW and WHO of the enterprise are varied dynamically to achieve maximum competitive advantage in establishing market/channel dominance for its market positioning.
  • relational integration – all aspects of the way enterprise competes are capable of being aligned to the demands of a particular FOR WHOM, albeit still within its domain-of-relevance assumptions about the WHY. This form of integration delivers relational dominance and is distinguished from positional by the ‘squiggly line’ because to be effective, the enterprise has to move from a N-S dominant approach to one that is E-W dominant. The ultimate form of relational dominance arises when it is the client’s assumptions about the WHY that determines the approach to integration[5]

Of course the level of the strategy ceiling reflects the basis of authority assumed by those in control of the enterprise and the choices they have made about what its basis of competitive advantage should be.  So each move to the right involves a different balance of power. In all but the last two columns, top management reserves unquestioned ‘sovereign’ rights over these assumptions. In the last two columns,  however, aspects of this ‘sovereignty’ have to be surrendered to the client who must determine the assumptions about the FOR WHOM and ultimately about the WHY of the enterprise.  For top management to put the WHY assumptions of the enterprise over that of its clients is defined here as the supplier pursuing its ‘private’ good. [6]

Considering just the middle three columns, a specific version of these strategy ceilings is described in Meeting the Challenge of Health Care Reform.  The progression is from a professional (treatment-centric) through a positional (episode-of-care-centric) to a relational (through-the-life-of-the-condition-care-centric) approach, the changes in the way differentiated behaviors are integrated being expressed in terms of architectures.

[1] ‘Design-time’ is distinguished from ‘run-time’, the latter being the time of the dynamic operational interactions of the enterprise with its environment. Where there is a strategy ceiling there is an a priori constraint placed on the way the enterprise competes imposed at ‘design-time’ constituting the strategy of the enterprise as a whole. This is taken up latter in tempo, entanglement and east-west dominance.
[2] These strata emerge as a way of understanding the relationship of an enterprise to its edges – see finding the edge. They are further elaborated in the series of postings linked to by ‘So you say you want to put your clients first…’.
[3] An ecosystemic way of thinking is needed to understand how the different forms of competitive behavior relate to each other. With each raising of the strategy ceiling, the behaviors of enterprises competing in the previous form have to be embedded within its new form of competing. As an enterprise moves to the right, therefore, it becomes more and more of an ecosystem in its own right – to the extent that its component parts also remain competitive.
[4] Simon Western refers to ‘eco-leadership’ as an emerging characteristic of asymmetric leadership in his book on discourses of leadership. While he approaches leadership from the perspective of different kinds of social zeitgeist, eco-leadership is also a response to the leadership demands made by the need to sustain a relational culture, where the unit of analysis has to become the ecosystem and not the enterprise per se.  His other forms of leadership can usefully be seen as responses to the leadership demands of the lower strategy ceilings:

  • ‘controller’ leadership responding to the ‘task system culture’, instituting a taylorism applied to the way management is itself organised;
  • ‘therapist’ leadership responding to the resultant professional culture, in which the central concern becomes the ways individuals are able to take up their roles within the business model; and
  • ‘messiah’ leadership responding to the ‘positional’ cultures that emerge from sustaining the competitive advantage of business models with respect to their market positioning, the point being that to transform and realign these cultures to new definitions of ‘market’ is ultimately a center-driven choice.

Of course the only reason for an enterprise to increase the differentiation of its behavior is on order to maintain congruence with its environment. Thus while Simon approaches the discourses in terms of their progressive emergence in society, the above relates them to the particular way identities are invested in the enterprise.
[5] Thus the practice of a specialist in some field of medicine will target individual patients’ needs (the FOR WHOM) within the context of the specialism (the specialist’s WHY). The teaching hospital with its broad range of medical specialisms will start from an open-ended approach to diagnosing the patient’s condition, regardless of what specialisms might need to be involved (the patient’s WHY).
[6] Later versions of the ceilings included the row at the top for the domain of relevance (see why is a stratification not a universal hierarchy). Whether or not this level is open to questioning or not depends on whether the good of the enterprise is put before or after the good of the client. This is the distinction between ‘guild ethics’ (the good of the enterprise comes first) and ‘professional ethics’ (the good of the client comes first) respectively. See, for example, Kenneth Pope’s address: The Code Not Taken: The Path From Guild Ethics to Torture and Our Continuing Choices

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