Chapter XII
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Strategic Implications
of Causal Mapping in
Strategy Analysis and
Formulation
Douglas L. Micklich
Illinois State University, USA
Abstract
The formulation and implementation of effective strategy at every level within an
organization requires that those involved in the process have not only a good overall
understanding of the present situation, but also an understanding of the underlying
cause and effect relationships which underpin strategy at those levels. This includes
understanding the interactions, which occur between the levels of strategy in an
organization as well as the benefits of a firm’s executive information system. Using
various mapping techniques, e.g., concept mapping, cognitive mapping, causal mapping,
we investigate the factors that made WorldCom, Inc., a one-time leader in the
telecommunications industry, implode and find itself fighting in courts for its very
survival.
Introduction
The strategy formulation process for an organization can be described as consisting of
the integration of three perspectives of strategy: corporate, business, and functional
(Hax, 1996). The process begins at the uppermost level of an organization, usually with
the Board of Directors at the corporate level, and in conjunction with executive
management, down through the business level, and finally ending at the functional/
operational level. Corporate strategy deals with decisions that by their nature should be
addressed with the fullest scope encompassing the overall firm. Business strategy aims
at obtaining superior financial performance by seeking a competitive positioning that
allows the business to have a sustainable advantage over the firm’s competitors.
Functional strategies not only consolidate the functional requirements demanded by the
corporate and business strategies, but also constitute the repositories of the ultimate
capabilities needed to develop the unique competencies of the firm. According to Hax
(1996), strategy formulation for the organization is intended to frame all of the key
strategic issues of the firm through a sequential involvement of the corporate, business
and functional perspectives. The strategy formulation process can also be extended to
exist within these perspectives as resources and systems are marshaled to implement that
chosen strategy.
When beginning to formulate the overall strategy, concept/cognitive mapping can be
used to develop a general understanding of the relationship that exists both between
these perspectives/levels of the organization and within these perspectives. Within each
level we can use causal mapping to help identify cause and effect relationships that can
exist due to various courses of action or of inaction. By looking at these cause and effect
relationships that exist among the elements at each level for a given situation, changes
in the formulation of strategy (how these elements are used) can be undertaken to correct
any unwanted (negative) consequences of a chosen strategy.
In this respect, we use the mapping technique approach to accomplish two objectives.
The first is to frame the firm’s situations and the elements that surround it. The second
is to pinpoint the deficiencies by looking at specific cause and effects and determine a
course of action that would correct those deficiencies and allow for the proper allocation
of resources throughout the firm.
We begin by first framing the firm’s situation and the elements surrounding that
situation. We accomplish this by introducing the skills and concepts required in
analyzing and formulating a firm’s strategy through its various levels. The skills
introduced and developed are those of synthesis and analysis. These skills are important
both in decomposing strategy into its basic elements and in understanding the relationship
that exists between these elements. The concepts introduced are those of Critical
Success Factors and Critical Value Activities. These concepts are relative to competitive
conditions that exist and issues of the existence of organizational silos as they relate to
structure. These skills are important to the development of a general understanding of
the circumstances surrounding a given firm’s situation and the cause and effect
relationships that exist among the levels of strategy from the corporate level through the
functional level. Introduced, also, are the concepts of information symmetry and
dependence and an explanation how they affect the structural and reporting relationships
of the firm and the implementation of strategy through structure.
From here, we go onto our second objective, which is to see where strategy went awry
and to be able to diagnose the situation and determine a course of action which would
correct any deficiencies and allow for a reallocation of resources. Beginning with an issue
in narrative form, and using the concepts and skills, we can identify at the lowest possible
level, the point where the problem resides. This is accomplished by using as an example
WorldCom, Inc., (see Case in Point at the end of the chapter), where perceptions of these
general relationships as well as the specific cause and effect relationships at the various
levels will be shown.