Summary Strategy and Change
Week 1
Tushman, M. L., & Anderson, P. (1986). Technological discontinuities and organizational environments
Administrative science quarterly, 439 - 465.
Technology evolves through periods of incremental change punctuated by technological breakthroughs
that either enhance or destroy the competence of firms in an industry. Competence-destroying
discontinuities are initiated by new firms and are associated with increased environmental turbulence,
while competence-enhancing discontinuities are initiated by existing firms and are associated with
decreased environmental turbulence. These effects decrease over successive discontinuities.
Technology= those tools, devices, and knowledge that mediate between inputs and outputs (process
technology) and/or that create new products or services (product technology). Technology seems to
evolve in response to the interplay of history, individuals, and market demand.
Major product / process technological breakthroughs are relatively rare and tend to be driven by individual
genius. As a new product class opens (or following substitution of one product or process for a previous
one), the rate of product variation is substantial as alternative product forms compete for dominance. A
dominant design reflects the emergence of product-class standards and ends the period of technological
ferment. Once a dominant design emerges, technological progress is driven by numerous incremental,
improvement innovations. Incremental technological progress occurs through the interaction of many
organizations stimulated by the prospect of economic returns.
Discontinuities offer sharp price-performance improvements over existing technologies. Major
technological innovations represent technical advance so significant that no increase in scale, efficiency, or
design can make older technologies competitive with the new technology. Product discontinuities are
reflected in the emergence of new product classes, in product substitution, or in fundamental product
improvements. Process discontinuities are reflected either in process substitution or in process innovations
that result in radical improvements in industry-specific dimensions of merit.
Competence-destroying: requires new skills, abilities, and knowledge in both the development and
production of the product. Product discontinuity either creates a new product class or substitutes for an
existing product. Process discontinuities represent a new way of making a given product (substitution); may
involve combining previously discrete steps into a more continuous flow or a completely different process.
Such major changes in skills, distinctive competence, and production processes are associated with major
changes in the distribution of power and control within firms and industries. Existing firms are bound by
traditions, sunk costs, and internal political constraints -> remain committed to outmoded technology.
Competence-enhancing: order-of-magnitude improvements in price/performance that build on existing
know-how within a product class. Product discontinuities represent an order-of-magnitude improvement
over prior products. Process discontinuities result in an order-of-magnitude increase in the efficiency of
producing a given product.
2 critical characteristics of organizational environments:
1. Uncertainty= the extent to which future states of the environment can be anticipated or accurately
predicted.
2. Munificence= the extent to which an environment can support growth. Technological discontinuities
drive sharp decreases in price-performance or input-output ratios. This fuels demand in a product class.
Environmental munificence (and demand) will be higher after a technological discontinuity.
Important dimensions of competitive conditions include entry-exit patterns and degree of order within a
product class (can be assessed by interfirm sales variability).
Competence-enhancing discontinuities consolidate leadership in a product class -> increased barriers to
,entry and minimum scale requirement -> fewer entries relative to exits and a decrease in interfirm sales
variability.
Competence-destroying discontinuities break the existing order. Barriers to entry are lowered; new firms
enter previously impenetrable markets by exploiting the new technology -> increased entry-to-exit ratios
and an increase in interfirm sales variability.
Anderson, P., & Tushman, M. L. (1990).Technological discontinuities and dominant designs: A cyclical model
of technological change. Administrative science quarterly, 604-633.
A technological discontinuity initiates an era of intense technical variation and selection, culminating in a
single dominant design. This era of ferment is followed by a period of incremental technical progress. Sales
always peak after a dominant design emerges. Discontinuities never become dominant designs, and
dominant designs lack behind the industry’s technical frontier (= will not be the best in technical terms,
because these are perceived as too unreliable or expensive).
Technological change can be characterized as a sociocultural evolutionary process of variation, selection
and retention. Social, political and organizational dynamics select dominant designs. Incremental change
leads to increased interdependence and enhanced competence.
The era of ferment is characterized by 2 distinct selection processes: competition between technical
regimes and competition within the new technical regime. Existing practitioners often increase the
innovativeness and efficiency of the existing technological order in response to new technologies. During
the era of ferment, variation and selection pressures are substantial due to both substitution and design
competition. The era of ferment will be longer after a competence-destroying discontinuity than after a
competence-enhancing discontinuity. It grows shorter in each of a series of consecutive competence-
enhancing discontinuities.
In regimes of low appropriability (= little intellectual property protection, e.g. patents), a single dominant
design will emerge. The focus of competition will shift from performance to cost and differentiation via
minor design variations and strategic positioning tactics.
The majority of potential adopters will await the emergence of an industry standard before purchasing a
new product / process technology. Sales of all versions of the new technology will peak after the
emergence of a dominant design.
Variation is generated by technological discontinuities and eras of ferment. If an accelerated rate of
variation speeds the pace of innovation, less technical advance will occur during periods of incremental
change than during eras of ferment.
Week 2
Birkinshaw, J., & Gibson, C. (2004). Building ambidexterity into an organization. MIT Sloan management
review, 45(4), 47-55.
Ambidexterity=a company’s ability to simultaneously execute today’s strategy while developing
tomorrow’s. Adaptability=the ability to move quickly toward new opportunities, to adjust to volatile
, markets and to avoid complacency. Alignment=a clear sense of how value is being created in the short
term and how activities should be coordinated and streamlined to deliver that value. Too much focus on
alignment will lead to good short-term results, but changes in the industry will blindside you sooner or
later. Too much attention to the adaptability side means building tomorrow’s business at the expense of
today’s.
Ambidexterity is highly correlated to performance.
A supportive organizational context – characterized by a combination of performance management and
social support – is associated with a higher level of ambidexterity.
Ambidexterity mediates the relationship between organizational context and performance: the influence of
organizational context on performance only occur through the creation of ambidexterity.
Structural and contextual ambidexterity are complementary, should use a combination of both approaches.
Structural ambidexterity=creating separate structures for different types of activities. Standard approach:
structural separation is necessary because the two sets of activities are so dramatically different that they
cannot effectively coexist. However, separation can lead to isolation -> R&D groups fail to get their ideas
accepted because of their lack of linkages with the core businesses. Alternatives are to create cross-
functional teams or to separate different activities within a single business unit. Remains top-down: relies
on managers to judge how to best divide employees’ time between activities.
Contextual ambidexterity=individual employees make choices between alignment-oriented and adaption-
oriented activities in the context of their day-to-day work. The systems and structures in ambidextrous
business units are more flexible, great level of attention must be paid to the human side of the
organization. There are 4 ambidextrous behaviors in individuals:
1. Take initiative and be alert to opportunities beyond the confines of your own job. Be motivated and
informed enough to act without seeking permission.
2. Be cooperative and seek out opportunities to combine your efforts with others.
3. Be a broker, always looking to build internal linkages.
4. Be a multitasker who is comfortable wearing more than 1 hat.
An individual’s ability to exhibit ambidexterity is facilitated/constrained by the organizational context in
which (s)he operates. At the organizational level, contextual ambidexterity can be defined as the collective
orientation of the employees toward the simultaneous pursuit of alignment and adoptability.
Context=the often invisible set of stimuli and pressures that motivate people to act in a certain way. Top
managers shape organizational context through the systems, incentives and controls they put in place, and
through the actions they take on a day-to-day basis. It is then reinforced through the behaviors and
attitudes of people throughout the organization. 4 attributes define organization context: stretch,
discipline, support and trust. Create 2 dimensions of organizational context: 1) performance management,
a combination of stretch and discipline, stimulating people to create high-quality results and making them
accountable for their actions; 2) social support, a combination of support and trust, providing people with
the security and latitude they need to perform. Are mutually reinforcing, the strong presence of each will
create a high-performing organizational context. High performance management + low social support ->
burnout context. High social support + low performance management -> country-club context. Low-
performance contexts should prioritize performance management over social support.
5 key lessons for building an ambidextrous organization:
1. Diagnose your organizational context.
2. Focus on a few levers, and employ them consistently. (best if they affect many employees)
3. Build understanding at all levels of the company. The erosion effect: the lower someone is in the
corporate hierarchy, the lower (s)he rates the organization’s ambidextrous characteristics. The magnitude
of this effect diminishes as performance increases. Depends on consistency and quality of communication.
4. View contextual and structural ambidexterity as complements. Structural separation might be essential,
