Description
Substantivation by the feminine form of perspective of scholastic Latin perspectivus
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A NEW PERSPECTIVE ON STRATEGIC MANAGEMENT IN INTERNATIONAL BUSINESS IN THE LIGHT OF CONTEMPORARY SYSTEMS THINKING Pedro S. Hurtado, Texas A & M International University ABSTRACT This paper will take a fresh view of the problem of strategic management in International Business in the light of contemporary systems thinking. The emphasis will be in the role of the top strategy makers and the problem solving approaches they use in the process of formulating, choosing, and implementing competitive strategy. The traditional approaches to strategy formulation are briefly recounted and then a presentation is made of current trends in systems thinking which will be proved relevant to strategy making. The traditional approaches are then contrasted by perspectives from modern systems thinking, with an emphasis in autopoietic systems theory. Special emphasis is given to dimensions of the strategy formulation problem that highlight the additional complexities found in International Business. The main conclusions from the application of contemporary systems thinking are then summarized and recommendations for further research are offered. PROBLEM DEFINITION The traditional approach to strategy formulation has a strong cognitivist orientation wherein a strategy maker impersonally observes (directly or through primary or secondary data) the reality of the competitive situation and based on these observations and on theoretical frameworks of the relationship between the company as a system and its environment, a strategic diagnosis is made, alternatives are formulated and finally a strategy is chosen and eventually implemented and controlled. The traditional approach follows the scientific method, sometimes complemented with a systems approach which may even make use of some models from the field of management science. Regardless of the additions and complementations, however, the cognitivist orientation is pervasive in this approach, with the consequences that we now turn to explain. In regards to observation, the cognitivist understanding is grounded on the idea of purely objective knowledge that is inherent to the basic philosophy of modern science. One believes that information is something found in the "world outside", independent of the observer. This implies that in talking about human cognitive activities it is necessary to speak about mental representations and to posit a level of analysis wholly separate from the biological or neurological, on the one hand, and the sociological or cultural, on the other. This also leads to the de-emphasizing of affective factors or emotions, the contribution of historical and cultural factors, and the role of background context in which particular actions or thoughts occur [1]. In cognitivism, the cleavage between the observer and objective reality leads to a theory of perception where the perceiver must construct a mental representation of its environment. This is analogous to the development of a theoretical framework in research methodology, which could even take the form of a
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mathematical model connecting system and environmental variables. The primacy of this approach is given to the representation of the environment as objective reality, and often some type of causal modeling used in a pragmatic way, which somehow addresses the need to attain objectives, understood in the context of purposeful systems. From the theoretical framework or model, alternatives are generated which presumably will work towards the attainment of objectives. The Cognitivist orientation has created a variety of inadequacies in the traditional approach, which have been partly addressed in the literature but which as we will see do not in themselves address the fundamental epistemological deficiencies that gave rise to the problems. Let us now proceed to identify the main inefficiencies in the paragraphs that follow. First, let us consider the inefficiencies related to the strategy formulation stage. Here, since the cognitive structure of the strategy maker is not taken explicitly into account, the biases or distortions introduced by the covert structures show later on in the process when apparently logically chosen strategies do not perform well in the market place; this situation is prolonged until there is significant decline in organizational performance and the strategy makers are forced to consider the possibility of having distorted cognitive structures which are reflected on anachronic managerial cultures [2, 3]. These cognitive distortions will have an impact not only in the distorted informational inputs concerning system and environmental variables but also on the theoretical frameworks used by the strategy makers, for analyzing and evaluating alternative strategies. In this way, the inputs to the decisionmaking process are wrong, and the decision-making models are also wrong, in both cases due to an incorrect reading of reality on the part of the strategy makers. Second, the problem of the traditional approach is compounded when, once the strategy has been chosen, regardless of it correctness, the strategy makers are faced with the problems of implementation. At this stage use may be made of organizational development techniques to bring about an alignment between the ideal organizational culture as inferred from the needs of the selected strategy, or at some point, if the gap is insurmountable given the time constraints, the strategy itself may have to be reconsidered [2]. In both instances, the alluded problems at the formulation and/or implementation stages are compounded in the case of International Business. On the one hand, this is due to additional system complexities (more involved operations and difficulties in communication processes) and also to environmental complexities such as multiple environments and their interactions [4]. On the other hand, this is also due to the fact that drastic differences in both managerial and organizational cultures as well as stakeholder cultures (particularly consumer cultures) are exponentially increased in the case of International Business. Therefore, the likelihood of the presence of the two alluded problems brought about in part by the application of the traditional approach to strategy formulation and implementation, is likely to increase for multinational enterprises.
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As it has been stated above one of the main reasons for the alluded deficiencies lies in the epistemological basis of the cognitivist orientation which underlies the traditional orientation to strategic planning. There are, however, alternative perspectives from contemporary systems thinking that can be conducive to a better understanding of the strategic management process in general, and to their application in international business in particular. We now turn to an exposition of some of the alternative systems theories as a basis for subsequent contrasting with the traditional approach. AN OVERVIEW OF CONTEMPORARY SYSTEMS THINKING The approach currently used for problem-solving/decision-making has its basis in the traditional scientific paradigm. This paradigm is founded on Cartesianism, exemplified by the fundamental distinction between the mental and the physical, the mind and the world, the subject and the object. It is this Cartesianism that leads to the claim that cognition must be representational and that scientific knowledge is completely objective. In dealing with the complexity of systems, the fields of Systems Science and Cybernetics arose. From this context the so called Systems Approach originated, with a view to practical applications in the real world. While Systems Theory has focused more on the structure of systems and their models, that is to say how they control their actions, Cybernetics has focused more on how systems function, how they communicate with other systems or with their own components. Since structure and function of a system cannot be understood in separation, it is clear that cybernetics and systems theory should be viewed as two facets of a single approach. Cybernetics developed to what has become "second-order cybernetics", or the cybernetics of observing systems, with its emphasis on how observers construct models of the systems with which they interact. The epistemology of second order cybernetics is constructivist. Ernst Von Glaserdfeld defines radical constructivism by the following two basic principles: (1) Knowledge is not passively received either through the senses or by way of communication, but it is actively built up by the cognizing subject, (2) The function of cognition is adaptive and serves the subjects organization of the experiential world, not the discovery of an objective ontological reality [5]. The importance of constructivism is best understood by comparing it with the opposite, more traditional approach in epistemology or cognitive science, which sees knowledge as a passive reflection of the external, objective reality. The naive view is that our senses work like a camera that just projects an image of how the world "really" is onto our brain, and use that image as a kind of map, an encoding in a slightly different format of the objective structure "out there". Constructivism has its roots in Kant's synthesis of rationalism and empiricism, where it is noted that the subject has no direct access to external reality, and can only develop knowledge by using fundamental in-built cognitive principles to organize
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experience [5]. In cybernetics, constructivism has been elaborated by Heinz Von Foerster, who noted that nervous systems cannot absolutely distinguish between a perception and a hallucination, since both are merely patterns of neural excitation. The implications of this neurophysiological view were further developed by Maturana and Varela, who see knowledge as a necessary component of the processes of autopoiesis ("selfproduction") characterizing living organisms [6]. We will now consider in more detail, Maturana and Varela's Theory Of Autopoiesis, whose understanding will be used to subsequently infer its implications in the process of Strategy Formulation. The origin of Autopoietic Systems Theory goes back to Maturana's research in neurophysiology and perception, which resulted in his questioning the information-theoretic notions of cognition. Maturana's work began in the 1960's and continued until the early 1970's when the theory was given final form in the volume "Autopoiesis and Cognition: The Realization of the Living" which he co-authored with Varela [7]. What follows is a summarized statement of the main features of the theory. The starting point for conveying the basic tenets of the theory is to address the fundamental question of the observer. The "cognitivist" way of explaining the phenomena of observing is to posit the existence of things as independent of the observer. This leads to the belief that things or objects are transcendentally in themselves and that therefore all observers should see everything in the same way, that same way being the only way. This could be called the explanatory path of objectivity. Maturana, however, takes a drastically different path. Maturana's initial work on cognition emphasized individual living systems. He considers a living system as an observer who can make distinctions in the environment, enabling him to specify entities that are different from himself or herself that can be used for manipulations in interactions with other observers. Even though the observer is able to operate as if external to his environment, he is not actually standing apart from the environment, due to the fact that the entire and the only domain in which the living system operates is that of his/her closed, self-interconnected nervous system. This notion of the observer is fundamental, making autopoietic theory inherently relativistic with respect to the person of the observer. Thus, the precise forms and functions by which systems are distinguished are inevitably imposed by whatever observer is addressing them. Maturana considers Organization and Structure as fundamental system attributes. Organization is understood as the set of inter-component relationships which outline its form at any given moment and serve as the core identity which is maintained in spite of dynamic changes over time. The organization attribute does not specify the properties of the components but rather the relations which the components must generate to constitute the system as a unit. A systemic unit's organization is specifically realized through the presence and interplay of components in a given space. These comprise the units' Structure, that is, the actual components and the actual relations which these must satisfy in their participation in the constitution of a given unity.
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The key feature of a living system is maintenance of its organization, that is, the preservation of the relational network which defines it as a systemic unity. The theory's central concept is that of "autopoiesis", a term coined by combining the Greek auto (self-) and poiesis (production, creation). The concept is defined formally as follows [8]: "An autopoietic system is organized (defined as a unity) as a network of processes of production (transformation and destruction) of components that produces the components that: Through their interactions and transformations continuously regenerate and realize the network of processes (relations) that produced them; and constitute it (the system) as a concrete unity in the space in which they (the components) exist by specifying the topological domain of its realization as such a network. In other words, autopoietic systems are self-generating systems, operating as homeostatic systems that have their own organization as the critical fundamental variable that they actively maintain constant. As long as the relations between processes which produce the components remain constant, the actual structure (manifestation) of the physical components and topology can change; but if the relations between the processes are changed, the unity disintegrates. Since an autopoietic unit is primarily self-referential, it does not distinguish among variations in its environment except as differences in the way it interacts with that which is outside of itself. The range of ways that the unity interacts with that which is not itself is known as its "cognitive domain", which is defined as "the domain of all the interactions in which an autopoietic system can enter without loss of identity". An important corollary here is that cognition can not be separated from action. During the late 1970's, Varela delineated the concept of "autonomy," of which autopoiesis is a subset. Autonomous systems are: "...defined as a composite unity by a network of interactions of components that (i) through their interactions recursively generate the network of interactions that produced them, and (ii) realize the network as a unity in the space in which components exist by constituting and specifying the unity's boundaries as a cleavage from the background..." [8]. As can be seen, the difference between autonomy and autopoietic systems is that autopoietic systems must produce their own components in addition to conserving their organization. To formalize the activities among systems Maturana and Varela add the concepts of Domain and Space. The term Domain is used to signify a realm circumscribing: (1) the relations among observed systems and the unities (medium) with which they can be observed to engage (phenomenological domain) or (2) the foregoing plus all potential states of relation and/or activity among the given unities (domain of interactions). A Cognitive Domain is defined as the set of all the interactions in which an autopoieic system can enter without loss of identity. It is also said that an observer's cognitive domain circumscribes all the descriptions
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which it can possibly make. The concept of "Space" in which unities are delineated, that is, a static referential background within which systems are defined. Another distinctive concept of Autopoietic Systems Theory is "Structural Determination," the principle that the actual course of change in a systemic entity is controlled by its structure rather than the direct influence of its environment. Thus, the behavior of the system is constrained by its constitution, and potential system changes are circumscribed by: (1) the system's range of potential structural transformations and (2) the set of potential perturbations impinging upon the system. Actual system change is compensable behavior by the system's structure under perturbation by the environment. While a given perturbation may "trigger" a change of system state, the particular change triggered is a function of the system's own organization and structure. Due to the primacy of self-reference and self-production therefore, an autopoietic system is not well characterized by input/output relations. Instead, an autopoietic unit responds to any "perturbation" from the environment by a "deformation" of its own structure in order to hold its process relationships constant. This constitutes a different mechanism of cognition than that which, is the focus of the information processing tradition in cognitive science. Given the principle of structural determination, interaction among systems is explained as "a history of recurrent interactions leading to the structural congruence between two or more systems." Structural coupling is the term for structureddetermined engagement of a given unity with either its environment or another unity. The term thus has connotations of both coordination and co-evolution. A system is attributed "Cognition" when it is able to discriminate (in terms of response) among unit phenomena in its medium. The evidence for this cognition is effectiveness of system behavior in response to the dynamics of its milieu. To Maturana and Varela, cognition is contingent on embodiment, because this ability to discriminate is a consequence of the organism's specific structure. From their perspective, cognition is what we attribute to systems exhibiting flexible and effective changes during structural coupling. Thus, "a cognitive system is a system whose organization defines a domain of interactions in which it can act with relevance to the maintenance of itself, and the process of cognition is the actual (inductive) acting or behaving in this domain." As can be seen, Maturana and Varela do not address cognition in the currently conventional sense as an internal manipulation of extrinsic "information" or "signals," as the traditional cognitivist viewpoint states. For them, cognition in the autopoietic view is equivalent to a living system's effective behavior within its domain of interactions. It is a matter of interacting in the manner in which one is capable of interacting, and not of processing what is objectively there to be seen. This reinterpretation of the concept of cognition grounds cognitive activity in the embodiment of the actor (decision-maker) and the specific context of activity. The new perspective enables autopoietic theory to fit well with current trends that emphasize "contextualization" and "auto-
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determination" studies of humans, their interactions and their social systems. Maturana starts from the concepts of structural determinism and structural coupling, and builds a model of "languaging" (activity in which interactors mutually orient themselves to each other and to a subject). Linguistic interaction is a venue for action, coupling the cognitive domains of two or more actors. The primary function of linguistic interaction is therefore not conveyance of "information messages," but the mutual orientation of the conversants within the consensual domain realized by their interactivity. By linking linguistic interaction with structural coupling, the context for signification is unified with the context of the interaction. The key understanding associated with cognitive domains is that self-organized systems interact with one another over time, the interaction affects each system's behavior, and eventually, behavioral patterns (human cultures for example) emerge. Humans, in Maturana and Varela's view, have developed a unique cognitive domain. The medium of our domain is language. It is in language that we influence one another's behavior over time, and in language that we have the capacity to reflect on these influences. It is this ability to reflect on our actions in language that opens the possibility of creating and augmenting knowledge, and language lets us pass that knowledge for others to reflect on. Language is consensual. We don't have to listen, or engage in conversation and interaction. Therefore, Maturana and Varela call this linguistic domain of interaction a "consensual domain." In contrast to traditional systems science, in Autopoietic theory, the system and the environment only act as a mutual source of triggering in which they change an adapt congruently in their interactions with each other. Both the environment and the system change and adapt together, congruently. When the system and the environment interact recurrently, a history becomes established through a process called structural coupling. As the interactions are repeated and repeated, a structural pattern of actions will become conserved through the process of change and adaptation. As a result, the system and the environment will act according to their respective histories of structural change and adaptation (ontogeny). As can be seen in the above summary, Autopoietic theory provides a theoretical basis for addressing people and the social systems in which they participate. The theory naturally supports attention to the issues of systemic perspective, autodetermination, and contextualization. We will now continue with the implications of contemporary systems thinking (emphasizing autopoietic theory) in the strategic management process, contrasting it with the traditional approach and it already identified inefficiencies. CONTRASTING THE TRADITIONAL APPROACH WITH THE IMPLICATIONS OF CONTEMPORARY SYSTEMS THINKING Let us consider the strategy formulation and the strategy implementation phases of strategic management and use them to contrast the differences in their meaning brought about by the
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use of Autopoietic Systems Theory, in reference to the traditional understanding of these phases from a traditional cognitivist perspective. In regards to observation, the traditional approach to strategy formulation is grounded on the idea of purely objective knowledge that is inherent to the basic philosophy of modern science. One believes that information is something found in the "world outside," independent of the observer. This implies that in talking about human cognitive activities it is necessary to speak about mental representations and to posit a level of analysis wholly separate from the biological or neurological, on the one hand, and the sociological or cultural, on the other. This also leads to the de-emphasizing of affective factors or emotions, the contribution of historical and cultural factors, and the role of background context in which particular actions or thoughts occur [1]. On the other hand, as described in the theory's summary, the Autopoietic understanding of observation gives primacy to selfreference, auto-determination, the history of interactions, language and emotions, and contextualization. According to Maturana and Varela, an Autopoietic system does not receive information in an objective physical sense and responds to the stimuli or information as it would be understood in a mechanistic paradigm. The system rather is a closed organization whose main concern is to stay organized, to survive. It does so by changing its organization when its coherence is threatened by perturbations from outside. The concept of objective reality therefore no longer applies. The system then "brings forth" its own world by languaging and social practice [1]. Nevertheless, while this highlights the relativity of social concepts, beliefsystems and institutions, it is very difficult to reconcile with the experience of material things. So, others like von Foerster, a leading exponent of second order cybernetics, seem to accept a great deal of independent reality to "things" including living "things" and living languaging "things" as part of the basic distinctions which are prerequisites of the human knowing on which science is built [9]. Let us consider now the alternative understandings of the Strategic Problem Definition and the Generation of Alternative Strategies. In the traditional approach, the cleavage between the observer and objective reality leads to a theory of perception where the perceiver must construct a mental representation of its environment. This is analogous to the development of a theoretical framework in research methodology, which could even take the form of a mathematical model connecting system and environmental variables. The primacy of this approach is given to the representation of the environment as objective reality, and often some type of causal modeling used in a pragmatic way, which somehow addresses the need to attain objectives, understood in the context of purposeful systems. From the theoretical framework or model, alternatives are generated which presumably will work towards the attainment of objectives. In contrast, in autopoietic theory, what characterizes autopoietic systems are the recursive activities of selfreplication underlying their persistence, that actively and
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continually create the conditions for their persistence. However, there is no ascription of intrinsic intentions or goals in the definition of autopoietic systems. Nevertheless, the recursive activities of self-replication can be seen as some form of goal-seeking [10]. Furthermore, if we recall that for the autopoietic system, cognition is equivalent to the living system's effective behavior within its domain of interactions, and that the behavior patterns result from historical interactions between the system and its environment, the adjusting response/behavior of the system to environmental perturbations is "chosen" from the cognitive domain. And this cognitive domain is constrained by languaging. So we see that in terms of Strategic Problem Definition and Generation of Alternative Strategies, the primacy in the autopoietic approach is given to the available repertoire of interactions drawn from past managerial behavior patterns of the strategy maker and reflected in the languaging the strategist engages in while in the process of strategy formulation. Again, we see the emphasis on self-reference, history, and contextualization. So far, based on the above observations, it can be inferred that in an autopoietic perspective, the inner world of the observer (the strategy maker) is paramount. This means that the possibility of outmoded patterns of interaction with the environment based on the strategist's past history and the associated managerial cognitive structure is brought to the forefront because of the preeminence given to the observer/decision-maker in autopoietic theory. This is translated in pragmatic terms as a need for strong skills in self-awareness and self-knowledge on the part of the strategist, including what is termed as knowledge of the self-reference criterion in the context of International Business. Also, the autopoietic perspective highlights the fact that any set of observations become meaningful when associated with a given cognitive structure. This has two immediate consequences in International Business. First, the design of marketing research activities should also follow the autopoietic perspective, in designing data gathering methods that take into account the peculiar characteristics of the cognitive structures of the consumers under study, because only then would there be a possibility of arriving at valid data untainted by cultural biases. Second, the strategist is forced to come to grips with the possibility of having an obsolete pattern of structural coupling with its environment, becoming more open to activities such as a cultural audits and stylistic planning on an ex-ante basis, prior to the actual construction of theoretical frameworks and generation of strategic alternatives. These two consequences serve as strong antidotes to the inefficiencies of the traditional approach in the strategy formulation phase. Let us now turn our attention to the implications of autopoietic systems thinking in the implementation phase of strategic management. Here, the cognitive structures of the organizational members are explicitly taken into account, making explicit the several layers of culture (ethnical, organizational) that impinge upon the problem of the gap between the ideal organizational culture in relation to the needs of the selected strategy. This results in a chosen strategy that carries within it the possibility of a good structural coupling between the
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organizational members and the needs of the strategy, thus voiding or minimizing the need to have solution patches or implementation delays as it was the case in the traditional approach. Finally, given the fact that the autopoietic perspective takes into account historical aspects (both of the evolution of the system/decision-maker, and the environment), it forces the consideration of the unique factors arising in the present context as a result of past originating conditions, thus avoiding the trap of generic strategic solutions that may not fit the realities of the organization or the management orientation of the decision-makers. Additionally, since it gives preeminence to individuals and their interactions with themselves and with their environment, autopoietic theory provides a strong theoretical foundation to argue in favor of the development of strategic factors such as human capital and organizational learning, which are more difficult to attain in the context of International Business but that nevertheless once attained are extremely difficult to replicate by the competition, thus providing the basis for a truly sustainable competitive advantage. CONCLUSIONS AND RECOMMENDTIONS FOR FURTHER RESEARCH The primary conclusion of this paper is threefold: (a) that the traditional approach to strategic management has serious deficiencies that lead to distortions and inefficiencies in the strategy formulation and strategy implementation phases of the planning process, and (b) that autopoietic systems thinking addresses these deficiencies by highlighting the role of the strategist and other human stakeholders such as organizational members and consumers, facilitating the inclusion of different ethnical and organizational cultures from the outset of the strategy formulation process, and (c) since the problems of different managerial, organizational, and ethnic cultures are compounded in the multiplicity of domestic environments and their interaction, the application of the autopoietic perspective to strategy-making is International Business is particularly appropriate. In terms of further research several possibilities could be mentioned. For instance, contemporary systems thinking, in terms of constructivism and autopoietic systems theory, could be fruitfully cross-fertilized with recent developments in organizational learning. Also the concept of competitive advantage as embodied in human capital could be further operationalized using autopoietic theory. Finally given the drastic differences in infrastructure and stages in market development found in the different countries in which a multinational enterprise operates in, a hybrid approach could be postulated, that would take into account the dimension of objective physical and economic realities, and the subjective dimensions of the cognitive structures of strategy makers and other observers and human participants in the strategic management process in International Business. REFERENCES Brier, Soren, Information and Consciousness: A Critique of the Mechanistic Concept of Information, Journal of Second Order
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Cybernetics & Cyber-Semiotics, Vol. 1 no. 2/3, 1992 Pearce, John A., Robinson Richard B., Formulation, Implementation and Control of Competitive Strategy, Irwin, 1997 Schein, Edgar H., Organizational Culture and Leadership, JosseyBass, 1992 Deresky, Helen, International Management, Harper Collins, 1994 Glasesfeld, Ernst von, Radical Constructivism: and Learning, London: Falmer Press, 1995 Way of Knowing
Maturana, Humbert., and Varela, Francisco J., The Tree of Knowledge: The Biological Roots of Human Understanding, Boston: Shambala, 1987. Maturana, Humberto R., and Varela, Francisco J., Autopoiesis and Cognition: The Realization of the Living, Boston Studies in the Philosophy of Science, D. Reidel Publishing Co. Varela, Francisco J., Principles of Biological Autonomy, New York: Elsevier, 1979 Whitaker, Randall, Autopoiesis and Social Systems, The Observer, Issue 9 (March 1994) Gaines, Brian R., The Collective Stance in Modeling Expertise in Individuals and Organizations, Knowledge Science Institute, University of Calgary, Alberta, Canada, 1995
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doc_929143107.pdf
Substantivation by the feminine form of perspective of scholastic Latin perspectivus
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A NEW PERSPECTIVE ON STRATEGIC MANAGEMENT IN INTERNATIONAL BUSINESS IN THE LIGHT OF CONTEMPORARY SYSTEMS THINKING Pedro S. Hurtado, Texas A & M International University ABSTRACT This paper will take a fresh view of the problem of strategic management in International Business in the light of contemporary systems thinking. The emphasis will be in the role of the top strategy makers and the problem solving approaches they use in the process of formulating, choosing, and implementing competitive strategy. The traditional approaches to strategy formulation are briefly recounted and then a presentation is made of current trends in systems thinking which will be proved relevant to strategy making. The traditional approaches are then contrasted by perspectives from modern systems thinking, with an emphasis in autopoietic systems theory. Special emphasis is given to dimensions of the strategy formulation problem that highlight the additional complexities found in International Business. The main conclusions from the application of contemporary systems thinking are then summarized and recommendations for further research are offered. PROBLEM DEFINITION The traditional approach to strategy formulation has a strong cognitivist orientation wherein a strategy maker impersonally observes (directly or through primary or secondary data) the reality of the competitive situation and based on these observations and on theoretical frameworks of the relationship between the company as a system and its environment, a strategic diagnosis is made, alternatives are formulated and finally a strategy is chosen and eventually implemented and controlled. The traditional approach follows the scientific method, sometimes complemented with a systems approach which may even make use of some models from the field of management science. Regardless of the additions and complementations, however, the cognitivist orientation is pervasive in this approach, with the consequences that we now turn to explain. In regards to observation, the cognitivist understanding is grounded on the idea of purely objective knowledge that is inherent to the basic philosophy of modern science. One believes that information is something found in the "world outside", independent of the observer. This implies that in talking about human cognitive activities it is necessary to speak about mental representations and to posit a level of analysis wholly separate from the biological or neurological, on the one hand, and the sociological or cultural, on the other. This also leads to the de-emphasizing of affective factors or emotions, the contribution of historical and cultural factors, and the role of background context in which particular actions or thoughts occur [1]. In cognitivism, the cleavage between the observer and objective reality leads to a theory of perception where the perceiver must construct a mental representation of its environment. This is analogous to the development of a theoretical framework in research methodology, which could even take the form of a
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mathematical model connecting system and environmental variables. The primacy of this approach is given to the representation of the environment as objective reality, and often some type of causal modeling used in a pragmatic way, which somehow addresses the need to attain objectives, understood in the context of purposeful systems. From the theoretical framework or model, alternatives are generated which presumably will work towards the attainment of objectives. The Cognitivist orientation has created a variety of inadequacies in the traditional approach, which have been partly addressed in the literature but which as we will see do not in themselves address the fundamental epistemological deficiencies that gave rise to the problems. Let us now proceed to identify the main inefficiencies in the paragraphs that follow. First, let us consider the inefficiencies related to the strategy formulation stage. Here, since the cognitive structure of the strategy maker is not taken explicitly into account, the biases or distortions introduced by the covert structures show later on in the process when apparently logically chosen strategies do not perform well in the market place; this situation is prolonged until there is significant decline in organizational performance and the strategy makers are forced to consider the possibility of having distorted cognitive structures which are reflected on anachronic managerial cultures [2, 3]. These cognitive distortions will have an impact not only in the distorted informational inputs concerning system and environmental variables but also on the theoretical frameworks used by the strategy makers, for analyzing and evaluating alternative strategies. In this way, the inputs to the decisionmaking process are wrong, and the decision-making models are also wrong, in both cases due to an incorrect reading of reality on the part of the strategy makers. Second, the problem of the traditional approach is compounded when, once the strategy has been chosen, regardless of it correctness, the strategy makers are faced with the problems of implementation. At this stage use may be made of organizational development techniques to bring about an alignment between the ideal organizational culture as inferred from the needs of the selected strategy, or at some point, if the gap is insurmountable given the time constraints, the strategy itself may have to be reconsidered [2]. In both instances, the alluded problems at the formulation and/or implementation stages are compounded in the case of International Business. On the one hand, this is due to additional system complexities (more involved operations and difficulties in communication processes) and also to environmental complexities such as multiple environments and their interactions [4]. On the other hand, this is also due to the fact that drastic differences in both managerial and organizational cultures as well as stakeholder cultures (particularly consumer cultures) are exponentially increased in the case of International Business. Therefore, the likelihood of the presence of the two alluded problems brought about in part by the application of the traditional approach to strategy formulation and implementation, is likely to increase for multinational enterprises.
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As it has been stated above one of the main reasons for the alluded deficiencies lies in the epistemological basis of the cognitivist orientation which underlies the traditional orientation to strategic planning. There are, however, alternative perspectives from contemporary systems thinking that can be conducive to a better understanding of the strategic management process in general, and to their application in international business in particular. We now turn to an exposition of some of the alternative systems theories as a basis for subsequent contrasting with the traditional approach. AN OVERVIEW OF CONTEMPORARY SYSTEMS THINKING The approach currently used for problem-solving/decision-making has its basis in the traditional scientific paradigm. This paradigm is founded on Cartesianism, exemplified by the fundamental distinction between the mental and the physical, the mind and the world, the subject and the object. It is this Cartesianism that leads to the claim that cognition must be representational and that scientific knowledge is completely objective. In dealing with the complexity of systems, the fields of Systems Science and Cybernetics arose. From this context the so called Systems Approach originated, with a view to practical applications in the real world. While Systems Theory has focused more on the structure of systems and their models, that is to say how they control their actions, Cybernetics has focused more on how systems function, how they communicate with other systems or with their own components. Since structure and function of a system cannot be understood in separation, it is clear that cybernetics and systems theory should be viewed as two facets of a single approach. Cybernetics developed to what has become "second-order cybernetics", or the cybernetics of observing systems, with its emphasis on how observers construct models of the systems with which they interact. The epistemology of second order cybernetics is constructivist. Ernst Von Glaserdfeld defines radical constructivism by the following two basic principles: (1) Knowledge is not passively received either through the senses or by way of communication, but it is actively built up by the cognizing subject, (2) The function of cognition is adaptive and serves the subjects organization of the experiential world, not the discovery of an objective ontological reality [5]. The importance of constructivism is best understood by comparing it with the opposite, more traditional approach in epistemology or cognitive science, which sees knowledge as a passive reflection of the external, objective reality. The naive view is that our senses work like a camera that just projects an image of how the world "really" is onto our brain, and use that image as a kind of map, an encoding in a slightly different format of the objective structure "out there". Constructivism has its roots in Kant's synthesis of rationalism and empiricism, where it is noted that the subject has no direct access to external reality, and can only develop knowledge by using fundamental in-built cognitive principles to organize
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experience [5]. In cybernetics, constructivism has been elaborated by Heinz Von Foerster, who noted that nervous systems cannot absolutely distinguish between a perception and a hallucination, since both are merely patterns of neural excitation. The implications of this neurophysiological view were further developed by Maturana and Varela, who see knowledge as a necessary component of the processes of autopoiesis ("selfproduction") characterizing living organisms [6]. We will now consider in more detail, Maturana and Varela's Theory Of Autopoiesis, whose understanding will be used to subsequently infer its implications in the process of Strategy Formulation. The origin of Autopoietic Systems Theory goes back to Maturana's research in neurophysiology and perception, which resulted in his questioning the information-theoretic notions of cognition. Maturana's work began in the 1960's and continued until the early 1970's when the theory was given final form in the volume "Autopoiesis and Cognition: The Realization of the Living" which he co-authored with Varela [7]. What follows is a summarized statement of the main features of the theory. The starting point for conveying the basic tenets of the theory is to address the fundamental question of the observer. The "cognitivist" way of explaining the phenomena of observing is to posit the existence of things as independent of the observer. This leads to the belief that things or objects are transcendentally in themselves and that therefore all observers should see everything in the same way, that same way being the only way. This could be called the explanatory path of objectivity. Maturana, however, takes a drastically different path. Maturana's initial work on cognition emphasized individual living systems. He considers a living system as an observer who can make distinctions in the environment, enabling him to specify entities that are different from himself or herself that can be used for manipulations in interactions with other observers. Even though the observer is able to operate as if external to his environment, he is not actually standing apart from the environment, due to the fact that the entire and the only domain in which the living system operates is that of his/her closed, self-interconnected nervous system. This notion of the observer is fundamental, making autopoietic theory inherently relativistic with respect to the person of the observer. Thus, the precise forms and functions by which systems are distinguished are inevitably imposed by whatever observer is addressing them. Maturana considers Organization and Structure as fundamental system attributes. Organization is understood as the set of inter-component relationships which outline its form at any given moment and serve as the core identity which is maintained in spite of dynamic changes over time. The organization attribute does not specify the properties of the components but rather the relations which the components must generate to constitute the system as a unit. A systemic unit's organization is specifically realized through the presence and interplay of components in a given space. These comprise the units' Structure, that is, the actual components and the actual relations which these must satisfy in their participation in the constitution of a given unity.
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The key feature of a living system is maintenance of its organization, that is, the preservation of the relational network which defines it as a systemic unity. The theory's central concept is that of "autopoiesis", a term coined by combining the Greek auto (self-) and poiesis (production, creation). The concept is defined formally as follows [8]: "An autopoietic system is organized (defined as a unity) as a network of processes of production (transformation and destruction) of components that produces the components that: Through their interactions and transformations continuously regenerate and realize the network of processes (relations) that produced them; and constitute it (the system) as a concrete unity in the space in which they (the components) exist by specifying the topological domain of its realization as such a network. In other words, autopoietic systems are self-generating systems, operating as homeostatic systems that have their own organization as the critical fundamental variable that they actively maintain constant. As long as the relations between processes which produce the components remain constant, the actual structure (manifestation) of the physical components and topology can change; but if the relations between the processes are changed, the unity disintegrates. Since an autopoietic unit is primarily self-referential, it does not distinguish among variations in its environment except as differences in the way it interacts with that which is outside of itself. The range of ways that the unity interacts with that which is not itself is known as its "cognitive domain", which is defined as "the domain of all the interactions in which an autopoietic system can enter without loss of identity". An important corollary here is that cognition can not be separated from action. During the late 1970's, Varela delineated the concept of "autonomy," of which autopoiesis is a subset. Autonomous systems are: "...defined as a composite unity by a network of interactions of components that (i) through their interactions recursively generate the network of interactions that produced them, and (ii) realize the network as a unity in the space in which components exist by constituting and specifying the unity's boundaries as a cleavage from the background..." [8]. As can be seen, the difference between autonomy and autopoietic systems is that autopoietic systems must produce their own components in addition to conserving their organization. To formalize the activities among systems Maturana and Varela add the concepts of Domain and Space. The term Domain is used to signify a realm circumscribing: (1) the relations among observed systems and the unities (medium) with which they can be observed to engage (phenomenological domain) or (2) the foregoing plus all potential states of relation and/or activity among the given unities (domain of interactions). A Cognitive Domain is defined as the set of all the interactions in which an autopoieic system can enter without loss of identity. It is also said that an observer's cognitive domain circumscribes all the descriptions
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which it can possibly make. The concept of "Space" in which unities are delineated, that is, a static referential background within which systems are defined. Another distinctive concept of Autopoietic Systems Theory is "Structural Determination," the principle that the actual course of change in a systemic entity is controlled by its structure rather than the direct influence of its environment. Thus, the behavior of the system is constrained by its constitution, and potential system changes are circumscribed by: (1) the system's range of potential structural transformations and (2) the set of potential perturbations impinging upon the system. Actual system change is compensable behavior by the system's structure under perturbation by the environment. While a given perturbation may "trigger" a change of system state, the particular change triggered is a function of the system's own organization and structure. Due to the primacy of self-reference and self-production therefore, an autopoietic system is not well characterized by input/output relations. Instead, an autopoietic unit responds to any "perturbation" from the environment by a "deformation" of its own structure in order to hold its process relationships constant. This constitutes a different mechanism of cognition than that which, is the focus of the information processing tradition in cognitive science. Given the principle of structural determination, interaction among systems is explained as "a history of recurrent interactions leading to the structural congruence between two or more systems." Structural coupling is the term for structureddetermined engagement of a given unity with either its environment or another unity. The term thus has connotations of both coordination and co-evolution. A system is attributed "Cognition" when it is able to discriminate (in terms of response) among unit phenomena in its medium. The evidence for this cognition is effectiveness of system behavior in response to the dynamics of its milieu. To Maturana and Varela, cognition is contingent on embodiment, because this ability to discriminate is a consequence of the organism's specific structure. From their perspective, cognition is what we attribute to systems exhibiting flexible and effective changes during structural coupling. Thus, "a cognitive system is a system whose organization defines a domain of interactions in which it can act with relevance to the maintenance of itself, and the process of cognition is the actual (inductive) acting or behaving in this domain." As can be seen, Maturana and Varela do not address cognition in the currently conventional sense as an internal manipulation of extrinsic "information" or "signals," as the traditional cognitivist viewpoint states. For them, cognition in the autopoietic view is equivalent to a living system's effective behavior within its domain of interactions. It is a matter of interacting in the manner in which one is capable of interacting, and not of processing what is objectively there to be seen. This reinterpretation of the concept of cognition grounds cognitive activity in the embodiment of the actor (decision-maker) and the specific context of activity. The new perspective enables autopoietic theory to fit well with current trends that emphasize "contextualization" and "auto-
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determination" studies of humans, their interactions and their social systems. Maturana starts from the concepts of structural determinism and structural coupling, and builds a model of "languaging" (activity in which interactors mutually orient themselves to each other and to a subject). Linguistic interaction is a venue for action, coupling the cognitive domains of two or more actors. The primary function of linguistic interaction is therefore not conveyance of "information messages," but the mutual orientation of the conversants within the consensual domain realized by their interactivity. By linking linguistic interaction with structural coupling, the context for signification is unified with the context of the interaction. The key understanding associated with cognitive domains is that self-organized systems interact with one another over time, the interaction affects each system's behavior, and eventually, behavioral patterns (human cultures for example) emerge. Humans, in Maturana and Varela's view, have developed a unique cognitive domain. The medium of our domain is language. It is in language that we influence one another's behavior over time, and in language that we have the capacity to reflect on these influences. It is this ability to reflect on our actions in language that opens the possibility of creating and augmenting knowledge, and language lets us pass that knowledge for others to reflect on. Language is consensual. We don't have to listen, or engage in conversation and interaction. Therefore, Maturana and Varela call this linguistic domain of interaction a "consensual domain." In contrast to traditional systems science, in Autopoietic theory, the system and the environment only act as a mutual source of triggering in which they change an adapt congruently in their interactions with each other. Both the environment and the system change and adapt together, congruently. When the system and the environment interact recurrently, a history becomes established through a process called structural coupling. As the interactions are repeated and repeated, a structural pattern of actions will become conserved through the process of change and adaptation. As a result, the system and the environment will act according to their respective histories of structural change and adaptation (ontogeny). As can be seen in the above summary, Autopoietic theory provides a theoretical basis for addressing people and the social systems in which they participate. The theory naturally supports attention to the issues of systemic perspective, autodetermination, and contextualization. We will now continue with the implications of contemporary systems thinking (emphasizing autopoietic theory) in the strategic management process, contrasting it with the traditional approach and it already identified inefficiencies. CONTRASTING THE TRADITIONAL APPROACH WITH THE IMPLICATIONS OF CONTEMPORARY SYSTEMS THINKING Let us consider the strategy formulation and the strategy implementation phases of strategic management and use them to contrast the differences in their meaning brought about by the
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use of Autopoietic Systems Theory, in reference to the traditional understanding of these phases from a traditional cognitivist perspective. In regards to observation, the traditional approach to strategy formulation is grounded on the idea of purely objective knowledge that is inherent to the basic philosophy of modern science. One believes that information is something found in the "world outside," independent of the observer. This implies that in talking about human cognitive activities it is necessary to speak about mental representations and to posit a level of analysis wholly separate from the biological or neurological, on the one hand, and the sociological or cultural, on the other. This also leads to the de-emphasizing of affective factors or emotions, the contribution of historical and cultural factors, and the role of background context in which particular actions or thoughts occur [1]. On the other hand, as described in the theory's summary, the Autopoietic understanding of observation gives primacy to selfreference, auto-determination, the history of interactions, language and emotions, and contextualization. According to Maturana and Varela, an Autopoietic system does not receive information in an objective physical sense and responds to the stimuli or information as it would be understood in a mechanistic paradigm. The system rather is a closed organization whose main concern is to stay organized, to survive. It does so by changing its organization when its coherence is threatened by perturbations from outside. The concept of objective reality therefore no longer applies. The system then "brings forth" its own world by languaging and social practice [1]. Nevertheless, while this highlights the relativity of social concepts, beliefsystems and institutions, it is very difficult to reconcile with the experience of material things. So, others like von Foerster, a leading exponent of second order cybernetics, seem to accept a great deal of independent reality to "things" including living "things" and living languaging "things" as part of the basic distinctions which are prerequisites of the human knowing on which science is built [9]. Let us consider now the alternative understandings of the Strategic Problem Definition and the Generation of Alternative Strategies. In the traditional approach, the cleavage between the observer and objective reality leads to a theory of perception where the perceiver must construct a mental representation of its environment. This is analogous to the development of a theoretical framework in research methodology, which could even take the form of a mathematical model connecting system and environmental variables. The primacy of this approach is given to the representation of the environment as objective reality, and often some type of causal modeling used in a pragmatic way, which somehow addresses the need to attain objectives, understood in the context of purposeful systems. From the theoretical framework or model, alternatives are generated which presumably will work towards the attainment of objectives. In contrast, in autopoietic theory, what characterizes autopoietic systems are the recursive activities of selfreplication underlying their persistence, that actively and
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continually create the conditions for their persistence. However, there is no ascription of intrinsic intentions or goals in the definition of autopoietic systems. Nevertheless, the recursive activities of self-replication can be seen as some form of goal-seeking [10]. Furthermore, if we recall that for the autopoietic system, cognition is equivalent to the living system's effective behavior within its domain of interactions, and that the behavior patterns result from historical interactions between the system and its environment, the adjusting response/behavior of the system to environmental perturbations is "chosen" from the cognitive domain. And this cognitive domain is constrained by languaging. So we see that in terms of Strategic Problem Definition and Generation of Alternative Strategies, the primacy in the autopoietic approach is given to the available repertoire of interactions drawn from past managerial behavior patterns of the strategy maker and reflected in the languaging the strategist engages in while in the process of strategy formulation. Again, we see the emphasis on self-reference, history, and contextualization. So far, based on the above observations, it can be inferred that in an autopoietic perspective, the inner world of the observer (the strategy maker) is paramount. This means that the possibility of outmoded patterns of interaction with the environment based on the strategist's past history and the associated managerial cognitive structure is brought to the forefront because of the preeminence given to the observer/decision-maker in autopoietic theory. This is translated in pragmatic terms as a need for strong skills in self-awareness and self-knowledge on the part of the strategist, including what is termed as knowledge of the self-reference criterion in the context of International Business. Also, the autopoietic perspective highlights the fact that any set of observations become meaningful when associated with a given cognitive structure. This has two immediate consequences in International Business. First, the design of marketing research activities should also follow the autopoietic perspective, in designing data gathering methods that take into account the peculiar characteristics of the cognitive structures of the consumers under study, because only then would there be a possibility of arriving at valid data untainted by cultural biases. Second, the strategist is forced to come to grips with the possibility of having an obsolete pattern of structural coupling with its environment, becoming more open to activities such as a cultural audits and stylistic planning on an ex-ante basis, prior to the actual construction of theoretical frameworks and generation of strategic alternatives. These two consequences serve as strong antidotes to the inefficiencies of the traditional approach in the strategy formulation phase. Let us now turn our attention to the implications of autopoietic systems thinking in the implementation phase of strategic management. Here, the cognitive structures of the organizational members are explicitly taken into account, making explicit the several layers of culture (ethnical, organizational) that impinge upon the problem of the gap between the ideal organizational culture in relation to the needs of the selected strategy. This results in a chosen strategy that carries within it the possibility of a good structural coupling between the
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organizational members and the needs of the strategy, thus voiding or minimizing the need to have solution patches or implementation delays as it was the case in the traditional approach. Finally, given the fact that the autopoietic perspective takes into account historical aspects (both of the evolution of the system/decision-maker, and the environment), it forces the consideration of the unique factors arising in the present context as a result of past originating conditions, thus avoiding the trap of generic strategic solutions that may not fit the realities of the organization or the management orientation of the decision-makers. Additionally, since it gives preeminence to individuals and their interactions with themselves and with their environment, autopoietic theory provides a strong theoretical foundation to argue in favor of the development of strategic factors such as human capital and organizational learning, which are more difficult to attain in the context of International Business but that nevertheless once attained are extremely difficult to replicate by the competition, thus providing the basis for a truly sustainable competitive advantage. CONCLUSIONS AND RECOMMENDTIONS FOR FURTHER RESEARCH The primary conclusion of this paper is threefold: (a) that the traditional approach to strategic management has serious deficiencies that lead to distortions and inefficiencies in the strategy formulation and strategy implementation phases of the planning process, and (b) that autopoietic systems thinking addresses these deficiencies by highlighting the role of the strategist and other human stakeholders such as organizational members and consumers, facilitating the inclusion of different ethnical and organizational cultures from the outset of the strategy formulation process, and (c) since the problems of different managerial, organizational, and ethnic cultures are compounded in the multiplicity of domestic environments and their interaction, the application of the autopoietic perspective to strategy-making is International Business is particularly appropriate. In terms of further research several possibilities could be mentioned. For instance, contemporary systems thinking, in terms of constructivism and autopoietic systems theory, could be fruitfully cross-fertilized with recent developments in organizational learning. Also the concept of competitive advantage as embodied in human capital could be further operationalized using autopoietic theory. Finally given the drastic differences in infrastructure and stages in market development found in the different countries in which a multinational enterprise operates in, a hybrid approach could be postulated, that would take into account the dimension of objective physical and economic realities, and the subjective dimensions of the cognitive structures of strategy makers and other observers and human participants in the strategic management process in International Business. REFERENCES Brier, Soren, Information and Consciousness: A Critique of the Mechanistic Concept of Information, Journal of Second Order
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Cybernetics & Cyber-Semiotics, Vol. 1 no. 2/3, 1992 Pearce, John A., Robinson Richard B., Formulation, Implementation and Control of Competitive Strategy, Irwin, 1997 Schein, Edgar H., Organizational Culture and Leadership, JosseyBass, 1992 Deresky, Helen, International Management, Harper Collins, 1994 Glasesfeld, Ernst von, Radical Constructivism: and Learning, London: Falmer Press, 1995 Way of Knowing
Maturana, Humbert., and Varela, Francisco J., The Tree of Knowledge: The Biological Roots of Human Understanding, Boston: Shambala, 1987. Maturana, Humberto R., and Varela, Francisco J., Autopoiesis and Cognition: The Realization of the Living, Boston Studies in the Philosophy of Science, D. Reidel Publishing Co. Varela, Francisco J., Principles of Biological Autonomy, New York: Elsevier, 1979 Whitaker, Randall, Autopoiesis and Social Systems, The Observer, Issue 9 (March 1994) Gaines, Brian R., The Collective Stance in Modeling Expertise in Individuals and Organizations, Knowledge Science Institute, University of Calgary, Alberta, Canada, 1995
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doc_929143107.pdf