Chapter XII

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.