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Samenvatting Paper 5 Evolution strategic management
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- Vrije Universiteit Brussel (VUB)
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Paper 4 Evolution of strategicmanagement: the need for new
dominant designs By Herrmann
Introduction
How do firms achieve sustainable competitive advantage? Strategic management has developed theories examining
environment and looking inside firm to predict management practice transformation. Evolutionary perspective of
variation, selection and retention and also lessening larger significance and need for integration with managerial
practices of theories.
dominant design Ford T stressing process developments allowing time decline and production cost while product
innovations augmented and after a century developing next dominant design using renewable sources. Objective
paper showing current directions of strategic management need new paradigms, need for awareness to develop
dominant designs helping firms cope with complexity. General acceptance of generic strategies marked beginning of
new paradigm, then idea of strategy examined effect of environment on strategy of firms (attention to resources and
core competencies). Focus of research to content (what are outcomes, positions, scope of firms and ways of
competing) and process research (how systems of firms lead to those outcomes). Over time both complement each
other to generate foundations of the field. Most important focus now is how firms gain knowledge and learn to
achieve sustainable competitive advantages based on continuous generation of innovations.
Technological Discontinuities and dominant designs
Technological process driven by interaction with community
dynamics. Technological change part of cycle where
technological discontinuities and dominant designs mark
transitions between eras of ferment and incremental change.
Technological advance characterized by sociocultural
evolutionary processes like variation (outcome of chance
events, driven by technological discontinuities departing from
innovations and initiating eras, characterized by technological
uncertainty and product technologies and competition for
industry dominance), selection of industry standard and
retention via incremental change. Eras of ferment end when
social, political and organizational dynamics select standard
setters of industry from technological opportunities.
Dominant design -> scientific maturity and acceptance of
standards and evolve through retention eras. Emphasizes on
product and process technologies represented by separation strategy process and strategy content researches.
Combination chance events and experimentation driven by unpredictable innovative concepts becoming
technological discontinuities. Selection of dominant designs not technical merit by social and organizational
dynamics select ideas driving the field.
Emergence of strategic management
1960s begin with strategic adaptation. Researches favored contingent design over universalistic principles of
administration. Information-processing metaphor of management, organic mechanistic types and description of how
organizations make decisions in process-oriented behavioral theory of the firm (coalition in which goal conflicts
never permanently solved) have laid foundation of management theories. Others hypothesized that ORG whose
structures subsystems matching environment perform better -> contingent theory: organizations dependent on
environmental uncertainty and appropriateness of different strategies depends on competitive setting of business
(theory advanced idea of fit, match resources with environmental opportunities & threats).
, Definition of Strategy: the first era of ferment
Chandler’s definition conforming basic definition of technological discontinuity (unpredictable innovation advancing
technological frontier by fundamentally different product or process). Definition: planning and executing company
growth, deciding long term objectives and adoption of courses of actions. Andrews added distinct competence and
company mission and business definition, developing SWOT (uncertain environment presents threats and
opportunities and firm must adapt strengths and weaknesses). Objective of firm to maximize economic return.
60s & 70s adaption of multidivisional structures by diversified firms and managers had to allocate resources over
several business so Growth/Share Matrix (for portfolio planning) was introduced.
The Process-Content Division
70s separation process researches (describing strategy determination, and strategy content researchers
(understanding strategy antecedents and outcomes). Process research caused by dissatisfaction of strategic planning
failing prediction of contingencies of environment (and sophistication in planning made implementation more
difficult). Mintzberg: strategy result of different activities of different member of a firm, rather than product of
strategic planning. Quinn: logical incrementalism (ORG refine general strategic course with new info environment).
Strategy content
Harvard examined relationships between corporate diversification strategy, organizational structure and firm
performance. Rumelt found relatedness between different business affected financial performance. Challenge of
assumption homogeneity within industries, relationship of performance with strategy and environment mattered
and was foundation for research focused on strategic groups. Harvard gave explanations of performance based on
differences in competitive advantage of firms.
Strategy Process:
First focus on practices of top managers and then seeking cause-and-effect relationship. From business policy to
strategic management for more empirically oriented discipline (name change). More focus on firm and integrate
with economics.
Generic Strategies: the era of incremental change
Porter provided first dominant design with book competitive strategy importing ideas of industrial organizational
economics: 5 Forces Framework. Firm performance determined by industry attractiveness depending on 5 essential
forces: threat of entry, intensity of rivalry among existing competitors, pressure from substitute products, bargaining
power of buyers and suppliers (profit is combination). Intense forces = low returns and moderate = high returns. 3
strategies for superior returns: overall cost leadership, differentiation and focus. Dominant design signals scientific
maturity, agreed-upon standards and the end of technological ferment. Then product dimensions of merit are
settled, uncertainty decreases, technical change shifts from variation to incremental innovations. Concept of generic
strategies started new era in 80s with attention to environment to fit strategy environment to influence of strategy
and structure on performance.
Content Research
After porter research of entry/exit barriers, competitive effects of learning curve, relationship market share to
performance, multi-point & market retaliation, strategy-environment relationship. Other researches integrated
environmental determinism & strategic choice perspective focusing on fit between strategy and environment: fit
between strategic choices & environment combining organizational characteristics with individual characteristics of
managers; influence of CEOs on main strategic decisions. This stream focused on corporate strategy and
diversification most researched topics but evidence show inconclusive conclusions for relationship between
diversification and performance. Most firms diversified around resources for competitive advantage and share them
across settings. Research in relationship strategy, structure and performance: multidivisional structure was
innovative administrative solution for problems of managing large firms (cooperative m-form associated with
performance using unrelated constrained strategy and competitive m-form using unrelated diversification strategy).
Cost theory came from Williamson (M-form): appropriate governance structure for transaction is one minimizing
total transaction and production costs. Coase’s agency theory: assumption of divergent goals between manager and
firm’s owners creating agency conflict as managers act in self-interest when having incentive + information
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