Summary Strategic Scenarios and
Business Models articles
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,Article 1: Agarwal, R. and Helfat, C.E. (2009), Strategic Renewal of Organizations, Organization
Science, 20(2): 281-293
This article is about strategic renewal and its important characteristics. Strategic renewal is critical for
the sustained success of organizations but has received little attention.
Defining strategic renewal
Strategic = that what relates to the long-term prospects of the company and has a critical
influence on its success or failure
This definition shows that some factors might be critical to long-term but are relatively unimportant
to its current well-being. And because critical success factors can’t be predicted on beforehand with
certainty, they have the potential to affect an organization’s long-term prospects. There are many
factors that may be potentially critical to an organization’s future: goals, products, services, policies,
organization structure, scope, administrative systems, critical resources (tangible and intangible
assets), capabilities, routines and other processes, people (individuals and teams). Many resources
and capabilities provide opportunities for the future, but also constraints. Strategic opportunities for
the future therefore depend on an organizations current state and quality of resources.
Renewal is hard to define. It’s not the same as change, because change doesn’t necessarily mean to
add something new. Renewal is one type of change and can be defined as refreshment/replacement.
Some points about this:
1. Refreshment or replacement doesn’t necessarily imply restoration to the original state
2. Refreshment of replacement can be partial or full
3. Refreshment or replacement may extend beyond the original attribute in size or scope
4. Refreshment or replacement can be undertaken with or without additions or deletions
5. Refreshment or replacement can be about attributes that were useful in the past or present
but not anymore in the future
6. Strategic renewal often connotes momentum
We can also see strategic renewal in process, content and outcomes (Webster dictionary):
1. The act or process of renewing (process)
2. The quality or state of being renewed (content)
3. Something renewed (outcome)
Strategic renewal = the process, content and outcome of refreshment or replacement of
attributes of an organization that have the potential to substantially affect its
long-term prospects
This definition consists of four characteristics:
1. Strategic renewal relates to that which has the potential to substantially affect long-term
2. Strategic renewal encompasses the process, content and outcome of renewal
3. Strategic renewal involves refreshment or replacement of attributes of an organization
4. This refreshment or replacement aims to provide a foundation for future growth
There are many different approaches to strategic renewal and this definition allows for this variety.
Also, attempts at strategic renewal may vary in the degree of success and this definition doesn’t
presuppose a particular outcome. Reasons why organizations undertake strategic renewal vary too.
Discontinuous transformations and incremental strategic renewal
There are two basic types of strategic renewal:
1. Discontinuous transformations (receive most attention in literature)
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, Major changes in technology, customer demand, mature or declining market are
causes for organizations to fundamentally change parts of the strategy and org.
2. Incremental renewal
Undertaking related innovations and a sequence of path-dependent opportunities in
pursuit of persistent advantage, proactive.
Competence-destroying change = external change renders the core of the firm useless in its
current market, makes strategic renewal very difficult
Nowadays the pace of globalization and technological change places significant pressure on
organizations to adapt. Major transformations can be very difficult because of the extent of change
that is required and that is why organizations are seeking ways to continuously renewing themselves
in incremental ways. Incremental change can include experimentation outside the core business, for
example corporate venturing.
Not all incremental renewal is in response to change in the external environment. Firms can also
conduct activities on a regular basis, like research and development (R&D). To do this, underlying
processes, rules, routines and resources are required, including dynamic capabilities.
Dynamic capability = the capacity of an organization to purposefully create, extend or modify its
resource base
Thus, strategic renewal contains a role for dynamic capabilities through modification of the resource
base of the organization. So, why would organizations still use major transformations instead of
incremental change? This might be because some changes in the external environment are difficult
to predict and to anticipate on. Or because continual adaptation is hard for organizations, because it
conflicts with the routines in current tasks.
Strategic renewal is not only applying to mature firms, but also to young ones. In organizations
change can be led by top management, but also by middle management or employees. Finally,
strategic renewal applies to several levels of analysis: within firms, across firms (partnerships,
alliances), within industries, across industries and within a network of firms. This potential scope for
strategic renewal indicates that it has a wide and deep impact.
Impact of strategic renewal
Strategic renewal can defend organization’s own performance but also the future of entire
industries, which has a huge impact. Firms also account for a significant share of economic growth,
often because of strategic renewal. This is mostly due to established firms, but entrants also have a
share. Existing market leaders can be replaced by new entrants because of strategic renewal.
Entrants can be both startups and diversifying entrants (firms diversifying from other industries),
where the latter often has more impact on destroying the status quo than startups. This is because
they can do more investments and have more experience. Both play a significant role in creating new
industries. Most studies focus on an organization’s own performance, but there are also social and
economic welfare consequences. Entire regions and economies benefit from knowledge spillovers
and investments. Creative construction: strategic renewal investments result in the creation of
spinouts, which are new ventures founded by employees of established firms.
Strategic renewal at IBM
An example of a company that has successfully renewed itself more than once is IBM. We focus on
their successful efforts to provide concrete examples of the content and process of strategic renewal
that can lead to positive outcomes. IBM changed itself from an electromechanical accounting
equipment company to an electronic computing company during 1940-1965. Recently, IBM has
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, transformed from a hardware-based computing company into a business computing services
company. In between these (successful) transformations, IBM moved into PC’s, which was not a
success, due to it being poorly managed.
The first strategic transformation was taken in response to a technological advance in the external
environment. In table 1 we can see were the success in this transformation came from: they used
strategies that responded to the opportunities and threads in the environment like the early
knowledge of and access to technology of electronic computing. This early access was combined with
proactive development of new capabilities in electronic computing and by doing so, IBM obtained an
early mover advantage. Other helping things were their strong sales relationships with customers,
extensive communication and coordination and involving middle managers. Finally, top management
facilitated all of this, which also had a critical impact.
The recent successful transformation was also based on historical strengths, including its reputation
for customer service, relationships with customers and R&D experience. They also identified some
weaknesses within existing capabilities, like deficiencies in software and consulting expertise and
they addressed these through external development.
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