To thoughtful managers, there is hardly another question more concerning than this: how do firms generate winning strategies? The question can be phrased in many ways: how is strategy formed; what lies behind successful strategies: cool analysis, entrepreneurial genius or pure luck? No wonder ‘strategy process’ has become such a ubiquitous topic that generates so many controversies, so much heat, occasional truces, then more controversies, more heat. What is the pragmatic view of strategy formation? Can the pragmatic spirits bring in some light, not more heat?

In this chapter, continuing our inquiry on what pragmatic strategies look like, we focus on the strategy-formation process. We first present a humanised evolutionary view that conceives of strategy as multi-path system emergence in which the environment selects strategies while strategic actions change the world. We then discuss what pragmatic strategy is and is not, stressing the important role of managers’ ideals, values, purposes and capabilities. Cases examined in this chapter include the Toyota Production System, the Chinese reformers and farmers who created household farming and Township-Village Enterprises, Wall Street and the Grameen Bank, Honda’s motorcycle and Master Kong Noodles, T.E. Lawrence and Mao Zedong. Together, this and the previous chapter are intended to create a descriptive platform for readers to proceed to Part III, where we will explore the normative question ‘what to do, how to do it?’ in the search for pragmatic strategies.