This summary approaches how to adapt and survive change within the technological, relational and psycological dimension. It adresses themes as inertia, business inovation, strategic alliances, open inovation, transformational leadership, and much more. Here, you will find a content summary of all t...
Here I leave the links from the skills lectures as well as the respective workshops. Although
these lectures are not evaluated in the exam, they might be useful for some of you.
New technologies and businesses models change the competitive landscape in an industry by
redefining how customer value is created. So, firms need to adapt to the changing value
perceptions in order to stay competitive. When firms don’t adapt, they are on step closer to
downfall.
A successful adaptation has 3 dimensions:
Technological: Firms should be able to develop technological capabilities or access them
and use them in a way that addresses customer needs. (In-depth in lectures 05/10 and
07/10).
Relational: Companies must have relational capabilities to manage collaborations with
third parties. (In-depth in lectures 10/10 and 12/10).
Psychological: Managers and employees are mentally ready to change. (In-depth in
lecture 14/10 and in this one).
At first, it may be reasonable to think that successful companies, due to the large number of
resources and access are always able to adapt but that is wrong. Even though they have access
to the new technology, sometimes they are not able to adapt.
Example: Nokia. The organization although, invested 20 billion euros in
R&D between 2007-2010, continued to bet on their symbian operating
system and failed to realize that the future of mobile phones was
touchscreen.
So, when we see such big companies fail so miserably, two questions arise: (1) Why is it difficult
to adapt? (2) How can firms adapt?
(1) Why is it difficult to adapt?
INERTIA. Firms are too fixated on how they learned to create value and struggle when new
technologies or business models require them to revise the way they create value.
It is also important to know that this inertia can be present in 3 ways: through strategic
frame rigidity, routine rigidity, and resource rigidity.
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, Strategic Frame Rigidity: Strategic frames of managers are the mindsets that shape how
managers see the business world and how they believe customer value should be created.
So, strategic frame rigidity happens when managers of established companies are to fixated
on how they learned to do business in the past. They are shaped by the old ways of thinking
that brought success in the past.
Routine Rigidity: Organizations have established routines/procedures to deal with pretty
much every situation. This can be good in stable environments because enables more
efficient operations but, when new technologies appear it is bad since these routines are
very hard to change.
Resource Rigidity: Firms tend to invest in resources that allowed them to develop a
competitive advantage in the past. So, they hesitate to invest in new resources. This fear to
invest in new technologies has 3 main motives: Firms do not understand the importance of
these new technologies, are afraid that if they invest in them they will lose the current
customers and/or they are under constraints from investors.
Population Ecology Theory (PET) view on dynamic change
PET looks at rigidity and inertia as a double-edged sword. This theory states that, such as living
organisms, firms are born, grow and eventually die. To survive and grow firms need to be able
to replicate their outputs consistently and efficiently.
This refinement makes companies super-efficient but also rigid. But according
to PET that is not a problem as long as existing processes remain effective. For example,
McDonald’s has all its processes standardized and that makes it flawless in the fast-food market.
However, if the environment changes in a way that turns the previous effective processes
into ineffective processes, there is a problem. Example: Nokia, one of the biggest phone
companies in the world turned to an irrelevant company in a couple of years.
Side note: This process that turns effective processes into ineffective can only happen when
disruptive technologies emerge.
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