Period 4

Bartlett and Ghoshal propose that firms should take a transnational approach wherein resources and capabilities that exist anywhere within the firm can be leveraged and deployed to exploit any opportunity that arises in any geographic market. They argue that this can be achieved by:

- Encouraging reciprocal interdependence among the divisions of the firm (that is, each division must recognise its dependency on the other divisions of the firm). - Utilising integration mechanisms across the divisions, such as division-spanning teams, rotating personnel across divisions, and so on. - Balancing the organisation's identity between its national brands and its global image.

What does "reaping increasing returns advantages" imply for a first-mover?

- In an industry with pressures encouraging adoption of a dominant design, the timing of a firm's investment in new technology development may be particularly critical to its likelihood of success. In industries that have increasing returns to adoption due to strong learning curve effects or network externalities, allowing competitors to get a head start in building an installed base can be very risky.

Sometimes the very things that a firm excels at can enslave it, making the firm rigid and overly committed to inappropriate skills and resources. What are the risks of core rigidities?

- Incentive systems may evolve that favour activities that reinforce the firm's core competencies. - The organisational culture may reward employees who are most closely connected to core competencies with higher status and better access to other organisation resources. - Rewards for engaging in core competency activities can discourage employees from pursuing more exploratory activities. - Firms that have web-developed knowledge sets along a particular trajectory may find it very hard to assimilate or utilise knowledge that appears unrelated to that trajectory, potentially limiting the firm's flexibility.

Monitoring and boosting the performance of core interactions becomes critical. Here are new metrics managers need to track:

- Interaction failure. If a traveler opens the Lyft app and sees "no cars available," the platform has failed to match an intent to consume with supply. Feedback loops can strengthen or weaken a platform. - Engagement. Healthy platforms track the partici- pation of ecosystem members that enhances network effects—activities such as content sharing and repeat visits. - Match quality. Poor matches between the needs of users and producers weaken network effects. Google constantly monitors users' clicking and reading to refine how its search results fill their requests. - Negative network effects. Badly managed plat- forms often suffer from other kinds of problems that create negative feedback loops and reduce value.

What does the "local-for-local" strategy entail?

- Is the opposite of the center-for-global strategy. Each national subsidiary uses its own resources to create innovations that respond to the needs of its local market. A local-for-local strategy takes advantage of access to diverse information and resources, and it customises innovation for the needs and tastes of the local market. Managers are likely to choose this strategy when divisions are very autonomous and when markets are highly differentiated. - It can result in significant redundancy in activities as each division reinvents the wheel. - Each division may suffer from lack of scale in R&D activities, and there is a risk that valuable innovations will not be diffused across the firm.

What is a company's "strategic intent"?

- It is a long-term goal that is ambitious, build upon and stretches the firm's existing core competencies and draws from all levels of the organisation. - Articulating the company's strategic intent enables the company to focus its development efforts and choose the investments necessary to develop strategic technologies and incorporate them into the company's new products.

Why do many markets coalesce around a single dominant design rather than support a variety of technological options?

- Many industries exhibit increasing returns to adoption, meaning that the more a technology is adopted, the more valuable it becomes. Complex technologies often exhibit increasing returns to adoption in that the more they are used, the more they are improved. A technology that is adopted usually generates revenue that can be used to further develop and refine the technology. - As the technology is used, greater knowledge and understanding of the technology accrue, which may then enable improvements both in the technology itself and in its applications. - As a technology becomes more widely adopted, complementary assets are often developed that are specialised to operate with the technology. These effects can result in a self-reinforcing mechanism that increases the dominance of a technology regardless of its superiority or inferiority to competing technologies.

What do the advantages of brand loyalty and technological leadership imply for a first-mover?

- May earn long-lasting reputation as a leader in the technology domain which can help sustain the company's image, brand loyalty, and market share even after competitors have introduced comparable products. - Enables to shape customer expectations about the technology's form, features, pricing, and other characteristics. - If aspects that customers have come to expect in a technology are difficult for competitors to imitate, being the technology leader can yield sustained monopoly rents.

In industries characterised by network externalities, the value of a technological innovation to users will be a function of:

- Stand-alone benefits and cost - The value created by the size of its installed base - The availability of complementary goods

What role does complements play as in an industry analysis?

- The availability, quality, and price of complements will influence the threats and opportunities posed by the industry. - It is important to consider (1) how important complements are in the industry, (2) whether complements are differentially available for the products of various rivals (impacting the attractiveness of their goods), and (3) who captures the value offered by the complements.

What does the advantage of "preemption of scarce assets" imply for a first-mover?

- The firm can preemptively capture scarce resources such as key locations, government permits, patents, access to distribution channels, and relationships with suppliers.

In essence, how is a stakeholder analysis undertaken?

- The firm identifies all the parties that will be affected by the behaviour of the firm. - For each party, the firm identifies what the stakeholder's interests are, what resources they contribute to the organisation, what claims they are likely to make on the organisation, and which will be most important from the firm's perspective.

What are the implications of the force "Threat of substitutes"?

- The more potential substitutes there are, and the closer they are in function to the firm's product or service, the greater the threat of substitution. - The threat of substitutes will be shaped by the relative price.

An industry's degree of rivalry is influence by a number of factors:

- The number and relative size of competitors. - The degree to which competitors are differentiated from each other. - Demand conditions. - Cost conditions. - Excess capacity and exit barriers.

Collaborating on development projects can offer a firm a number of advantages:

- can enable a firm to obtain necessary skills or resources more quickly than developing them in-house. A company may be able to gain rapid access to important complementary assets by entering into strategic alliances or licensing arrangements. - obtaining some of the necessary capabilities or resources from a partner rather than building them in-house can help a firm reduce its asset commitment and enhance its flexibility. This can be particularly important in markets characterised by rapid technological change. - collaboration with partners can be an important source of learning for the firm. By pooling technological resources and capabilities, firms may be able to expand their knowledge bases and do so more quickly than they could without collaboration. - to share the costs and risks of the project. This can be particularly important when a project is very expensive. - it facilitates the creation of a shared standard. Collaboration at the development stage can be an important way of ensuring cooperation in the commercialisation stage of a technology, and such cooperation may be crucial for technologies in which compatibility and complementary goods are important.

A firm might choose to engage in solo development of a project for a number of reasons:

- it may possess all the necessary capabilities and resources for a particular development project in-house. - the firm may prefer to obtain complementary skills or resources from a partner, but there may be no available partner that is appropriate or willing to collaborate. - it is concerned that collaborating would just put its proprietary at risk. - it seeks to have full control over the project's development and returns. - a firm's solo development of a technological innovation might give it more opportunities to build and renew its capabilities (solo development of a technological innovation challenges the firm to develop new skills, resources, and market knowledge).

For a strength (resource) to be a potential source of sustainable competitive advantage, resources must be:

- rare - valuable - durable - inimitable

It will be extremely difficult to imitate valuable resources (strength)s if they are:

- tacit (i.e., they cannot be readily codified in written form) - path-dependent (i.e., they are dependent on a particular historical sequence of events), - socially complex (i.e., they arise through the complex interaction of multiple people) - causally ambiguous (i.e., it is unclear how the resource gives rise to value)For example,talent is typically considered to be a tacit and causally ambiguous resource.

Two of the primary sources of increasing returns are...

...(1) learning effects and (2) network externalities.

The driving force behind the internet economy, conversely, is demand-side economies of scale, also known as network effects. In the internet economy, firms that achieve higher "volume" than competitors (that is, attract more platform participants) offer...

...a higher average value per transaction. That's because the larger the network, the better the matches between supply and demand and the richer the data that can be used to find matches. Greater scale generates more value, which attracts more participants, which creates more value—another virtuous feedback loop that produces monopolies.

An open architecture allows players to...

...access platform resources such as app developer tools, and create new sources of value.

In addition to resource fit and strategic fit, firms can also evaluate potential partners using many of the same tools used to evaluate the firm's own position and strategic direction. This includes...

...assessing how collaboration with the partner is likely to impact the firm's opportunities and threats in its external environment; its internal strengths, weaknesses, or potential for sustainable competitive advantage; and the firm's ability to achieve its strategic intent.

Once the strategic intent has been articulated, the company should...

...be able to identify the resources and capabilities required to close the gap between the strategic intent and the current position.

Being a first mover may confer the advantages of...

...brand loyalty and technological leadership; preemption of scarce assets; and exploitation of buyer switching costs.

A core competency arises from a firm's ability to...

...combine and harmonise multiple primary abilities in which the firm excels into a few key building blocks of specialised expertise.

Disruptive innovations originate in...

...low-end or new-market footholds. Disruptive innovations are made possible because they get started in two types of markets that incumbents overlook. Low- end footholds exist because incumbents typically try to provide their most profitable and demanding customers with ever-improving products and services, and they pay less attention to less-demanding customers. In fact, incumbents' offerings often over-shoot the performance requirements of the latter. This opens the door to a disrupter focused (at first) on providing those low-end customers with a "good enough" product. In the case of new-market footholds, disrupters create a market where none existed. Put simply, they find a way to turn nonconsumers into consumers.

With platforms, while guarding against threats remains critical, the focus of strategy is to eliminate barriers to production and consumption in order to maximize value creation. To that end, platform executives must...

...make smart choices about access (whom to let onto the platform) and governance (or "control"—what consumers, producers, providers, and even competitors are allowed to do there).

Firms can "platformise" parts of their product, i.e. ...

...open up certain layers of their product to third party complementors and thus combine a pipeline and platform model.

The task of identifying the firm's strengths and weaknesses is sometimes organised by examining each of the activities of the value chain. In Porter's model of a value chain, activities are divided into...

...primary activities and support activities.

Open governance allows players other than the owner to...

...shape the rules of trade and reward sharing on the platform.

The threat of potential entrants is influenced by both...

...the degree of which the industry is likely to attract new entrants (i.e., is it profitable, growing, or otherwise alluring?) and the height of entry barriers.

1. What are the benefits of licensing to the licensee? 2. What are the benefits of licensing to the licensor?

1. - Licensing enables a firm to rapidly acquire a technology (or other resource or capability) it does not possess. - Licensing a technology from another firm is typically much less expensive for a licensee than developing a new technology in-house. New product development is both expensive and risky; through licensing, a firm can obtain a technology that is already technically or commercially proven. - Over time, licensees may gain valuable knowledge from working with the licensed technology that can enable them to later develop their own proprietary technologies. In the long run, the licensor's control over the technology may erode. 2. - Licensing can enable the firm's technology to penetrate a wider range of markets than it could on its own. - By licensing out the technology to potential competitors, the licensor gives up the ability to earn monopoly rents on the technology. However, doing so may prevent potential competitors from developing their own proprietary technologies.

1. What is an "ambidextrous organisation"? 2. What problem does it solve?

1. A firm with a complex organisational form that is composed of multiple internally inconsistent architectures that can collectively achieve both short-term efficiency and long-term innovation. It is the ability of an organisation to behave as two different kinds of companies at once. Different divisions of the firm may have different structures and control systems, enabling them to have different cultures and patterns of operations. 2. Most firms must simultaneously manage their existing product lines with efficiency, consistency, and incremental innovation, while still encouraging the development of new product lines and responding to technological change through more radical innovation.

Successful collaboration agreements typically have clear, yet flexible, monitoring and governance mechanisms. Not surprisingly, the more resources put at risk by the collaboration, the more governance structure partner firms are likely to impose on the relationship. There are three main types of governance mechanisms organisations use to manage their collaborative relationships:

1. Alliance contracts: Legally binding contractual arrangements to ensure that partners (a) are fully aware of their rights and obligations in the collaboration and (b) have legal remedies available if a partner should violate the agreement. 2. Equity ownership: When each partner contributes capital and owns a specified right to a percentage of the proceeds from the alliance. 3. Relational governance: Self-enforcing norms based on goodwill, trust, and reputation of the partners. These typically emerge over time through repeated experiences of working together.

1. What is a "loosely coupled structure"? 2. What are its pros and cons?

1. Development and production activities are not tightly integrated but rather achieve coordination through their adherence to sacred objectives and common standards. -Enables components of a product to be produced by highly autonomous divisions of the firm, or even by multiple independent firms. - Advances in information technology have enabled loosely coupled organisational structures to become more common. Information technology can enable a firm to access and process more information at a lower cost, vastly increasing the firm's options for development configurations. 2. Pros: - Less need for integration frees firms to pursue more flexible research and development and production configurations. For instance, firms can become more specialised by focusing on a few key aspects of technological innovation that relate closely to the firm's core competencies, while obtaining other activities through outsourcing or alliances. --> By focusing on those activities in which the firm has a competitive advantage, the firm can improve its chance of developing a product that has a price-to-value ratio that attracts customers while reducing the overhead and administrative complexity of maintaining a wide scope of activities. Cons: - Many activities reap significant synergies by being integrated. - Integrated firms also have mechanisms for resolving conflict that may be more effective or less expensive than those available in the market.

Prahalad and Hamel offer the following tests to identify the firm's core competencies:

1. Is it a significant source of competitive differentiation? Does it provide a unique signature to the organisation? Does it make a significant contribution to the value a customer perceives in the end product? 2. Does it transcend a single business? Does it cover a range of businesses, with current and new? 3. Is it hard for competitors to imitate?

What are the first-mover disadvantages?

1. Research and Development Expenses: - By the time a firm has successfully developed a new technology, it may have borne not only the expense of that technology but also the expense of exploring technological paths that did not yield a commercially viable output. 2. Undeveloped supply and distribution channels: The firm may face the daunting task of developing and producing its own supplies and distribution service or assisting in the development of supplier and developer markets. 3. Immature enabling technologies and complements: When firms develop technologies, they often rely on other producers of enabling technologies (component technologies that are necessary for the performance or desirability of a given innovation). 4. Uncertainty of customer requirements: A first mover to the market may face considerable uncertainty about what product features customers will ultimately desire and how much they will be willing to pay for them.

A number of factors can influence how well suited partners are to each other, including their relative size and strength, the complementarity of their resources, the alignment of their objectives, and the similarity of their values and culture. These factors can be boiled down to two dimensions:

1. Resource fit: refers to the degree to which potential partners have resources that can be effectively integrated into a strategy that creates value. Such resources may be either complementary or supplementary. 2. Strategic fit: refers to the degree to which partners have compatible objectives and styles. The objectives of the partners need not be the same as long as the objectives can be achieved without harming the alliance or the partners. Not knowing a partner's true objectives or form an alliance with a partner with incompatible objectives can result in conflict, wasted resources, and forfeited opportunities.

What are the four types of solutions for balancing exploitation and exploration?

1. Sequential alternation: • Involves deliberately vacillating between exploration and exploitation over time. •Decentralization is used to ignite innovation and change •Centralization is used to increase coordination and efficiency •Efficiency and innovation are addressed sequentially rather than simultaneously 2. Structural separation: • Involves placing exploration and exploitation activities into different organisational units •Flexible entrepreneurial units explore new areas for growth •More formal mainstream units ensure efficient operations in existing businesses 3. Spherical separation: •Organizations establish supplemental project structures to complement the formal primary structures •Employees switch between structures depending on their respective tasks •Efficiency and innovation are addressed at different layers of the same unit 4. Behavioural/ contextual integration: • Emphasises bringing the conflicting activities together in a single unit by designing a supportive behavioural context. It means pushing down decision making about tradeoffs between exploration and exploitation down to lower levels in the organisation where, arguably, those tensions can be best resolved. •Organizations combine the two dimensions at the front lines (behavioural rather than structural) •First dimension has a short-term orientation towards efficiency and profits •Second dimension has a long-term orientation towards innovation •Efficiency and innovation are addressed at different dimensions of the same unit

What are the five forces in Porter's model?

1. The degree of existing rivalry. 2. Threat of potential entrants. 3. Bargaining power of suppliers. 4. Bargaining power of buyers. 5. Threat of substitutes.

What are the benefits for a firm to have its technology chosen as a dominant design?

1. The potential to earn near-monopoly rents in the short run. 2. The firm is in a good position to shape the evolution of the industry, greatly influencing what future generations of products will look like.

1. What is "contract manufacturing"? 2. What are the benefits of contract manufacturing? 3. What are the downsides of contract manufacturing?

1. When a firm hires another firm (often a specialised manufacturer) to manufacture its products. 2. Contract manufacturing: - allows firms to meet the scale of market demand without committing to long-term capital investments or an increase in the labor force, thus giving the firm greater flexibility. - enable firms to specialise in those activities central to their competitive advantage while other firms provide necessary support and specialised resources the firm does not possess. - enables a firm to tap the greater economies of scale and faster response time of a dedicated manufacturer, thereby reducing costs and increasing organisational responsiveness to the environment. 3. - By not investing in development of in-house capabilities, a firm might not develop many of the skills and resources related to its products that enable the development of future product platforms. - Outsourcing can also impose significant transaction costs for a firm (lengthy contractual agreements).

What is "licensing"?

A contractual arrangement whereby one organisation or individual (the licensee) obtains the rights to use the proprietary technology (or trademark, or copyright, etc.) of another organisation or individual.

What is a "joint venture"?

A partnership between two or more firms involving a significant equity stake by the partners and often resulting in the creation of a new business entity.

How can the idea of "disruption" be described?

A process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others. Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more suitable functionality— frequently at a lower price. Incumbents, chasing higher profitability in more demanding segments, tend not to respond vigorously. Entrants then move upmarket, delivering the performance that incumbents' mainstream customers require, while pre- serving the advantages that drove their early success. When mainstream customers start adopting the entrants' offerings in volume, disruption has occurred.

What are "dynamic capabilities"?

A set of abilities that make a firm more agile and responsive to change; they enable it to quickly reconfigure its organisational structure and routines in response to new opportunities.

What is a "dominant design"?

A single product or process architecture that dominates a product category—usually 50 percent or more of the market. A dominant design is a "de facto standard," meaning that while it may not be officially enforced or acknowledged,it has become a standard for the industry.

What is the difference between a strategic stakeholder analysis and a normative one?

A strategic stakeholder analysis emphasises the stakeholder management issues that are likely to impact the firm's financial performance, while a normative stakeholder analysis emphasises the stakeholder management issues the firm ought to attend to due to their ethical or moral implications.

What is an "alliance"?

Alliance is a general term that can refer to any type of relationship between firms. Alliances may be short or long term and may include formally contracted agreements or be entirely informal in nature.

Why are "learning effects" a source of increasing returns?

Ample empirical evidence shows that the more a technology is used, the more it is developed and the more effective and efficient it becomes. As a technology is adopted, it generates sales revenues that can be reinvested in further developing and refining the technology. Furthermore, as firms accumulate experience with the technology, they find ways to use the technology more productively, including developing an organiza- tional context that improves the implementation of the technology. Thus, the more a technology is adopted, the better it should become.

What is a "mechanistic" structure?

An organisation structure characterised by a high degree of formalisation and standardisation, causing operations to be almost automatic or mechanical. Mechanistic structures achieve efficiency by ensuring rigid adherence to standards and minimising variation, potentially stifling creativity within the firm.

What is an "organic" structure?

An organisation structure characterised by a low degree of formalisation and standardisation. Employees may not have well-defined job responsibilities and operations may be characterised by a high degree of variation. Because much innovation arises from experimentation and improvisation, organic structures are often thought to be better for innovation despite their possible detriment to efficiency.

What is centralisation/decentralisation?

Centralisation is the degree to which decision-making authority is kept at top levels of management. Decentralisation is the degree to which decision-making authority is pushed down to lower levels of the firm.

What are the pros of centralisation and decentralisation, respectively, in R&D activities and in a firm's flexibility and responsiveness to technological change?

Centralisation pros: - May maximise economies of scale, enabling greater division of labour among the R&D specialists and maximising the potential for learning-curve effects through the development of multiple projects. - Enables the central R&D department to manage the deployment of new technologies throughout the firm, improving the coherence of the firm's new product development efforts and avoiding the possibility that valuable new technologies are under-utilised throughout the organisation. - Maybe better able to make a bold change in its overall direction because its tight command-and-control structure enables it to impose such change on lower levels of the firm in a decisive manner. Decentralisation pros: - Enables divisions to develop new products or processes that closely meet their particular division's needs. - Enables the firm to take advantage of the diversity of knowledge and market contacts that may exist in different divisions. - Maybe better able to respond to some types of technological and environmental change because not all decisions need to be passed up the hierarchy to top management; employees at lower levels are empowered to make decisions and changes independently and thus may be able to act more quickly.

What is "capability complementation"?

Combining ("pooling") the capabilities and other resources of partner firms, but not necessarily transferring those resources between the partners.

What does the "globally linked" strategy entail?

Entails creating a system of decentralised R&D divisions that are connected to each other. Each geographically decentralised division might be charged with a different innovation task that serves the global company's needs. Thus, while innovation is decentralised to take advantage of resources and talent pools offered in different geographic markets, it is also globally coordinated to meet companywide objectives. This approach also attempts to enable the learning accrued through innovation activities to be diffused throughout the firm. This strategy can be quite powerful in its ability to tap and integrate global resources, but it is also expensive in both time and money as it requires intensive coordination.

What is "capability transfer"?

Exchange of capabilities across firms in such a manner that a partner can internalise the capabilities and use them independently of the particular development project.

When it comes to platforms, competitive threats tend to follow one of three patterns:

First, they may come from an established platform with superior network effects that uses its relationships with customers to enter your industry. Products have features; platforms have communi- ties, and those communities can be leveraged. (e.g. Google). Second, a competitor may target an overlapping customer base with a distinctive new offering that leverages network effects (e.g. Airbnb and Uber). The final pattern, in which platforms that collect the same type of data that your firm does suddenly go after your market, is still emerging. When a data set is valuable, but different parties control different chunks of it, competition between unlikely camps may ensue (e.g. in American health care).

What are the pros and cons of formalisation and standardisation, respectively, when it comes to development activities?

Formalisation: + By creating formal processes for choosing and managing development projects, one may improve the overall efficiency and coherence of a firm's many decentralised development activities. - If a firm codifies all of its activities with detailed procedures, it may stifle employee creativity. Employees may not feel empowered or motivated to implement new solutions. Standardisation: + Can ensure that activities within the firm run smoothly and yield predictable outcomes. + May be used to ensure quality levels are met and that customer and suppliers are responded to consistently and equitably. - By minimising variation, standardisation can limit the creativity and experimentation that leads to innovative ideas.

Multinational firms face significant challenges in determining where and how to conduct their R&D activities. One primary challenge is to balance the need to tap the knowledge and resources of local markets while also achieving coherence across the corporation and ensure that technological innovations are diffused and leveraged throughout the organization. What four strategies can a multinational use to resolve this dilemma?

Four primary strategies used by firms: - Center-for-global strategy - Local-for-local strategy -Locally leveraged strategy - Globally linked strategy

Why is a fair reward system key on platforms?

If managers open the architecture but do not share the rewards, potential platform participants (such as app developers) have the ability to engage but no incentives. If managers open the rules and rewards but keep the architecture relatively closed, potential participants have incentives to engage but not the ability.

In Birkinshaw, Zimmermann & Raisch study, how were the different forms of "reconfiguring" capability observed in practice? (Nestlé, GSK and BMW)

In order to make structural separation work, Nestlé developed a resource-linking capability for orchestrating the interplay of sensing and seizing capabilities across its operation units. To adapt through behavioural integration, GSK developed a context-shaping capability that enables its operating units to sense and seize opportunities at the same time. To make sequential alternation work effectively, BMW build a focus-shifting capability which allowed it to shift its relative emphasis on sensing and seizing activities over time.

What does the "center-for-global" strategy entail?

It entails conducting all innovation activities at a centralised hub. These innovation are then deployed globally throughout the company. The centralisation of innovation activities enables management to: - Tightly coordinate R&D activities. - Achieve greater specialisation and economies of scale in R&D activities while avoiding duplication of activities in multiple divisions. - Develop and protect core competencies. - Ensure that innovation are standardised and implemented throughout the company.

What is the notion of "dynamic capabilities"?

It is defined as the ability to continuously create, extend, upgrade, protect, and keep relevant an enterprise's unique asset base. Dynamic capabilities can be broken down into three categories: sensing (the identification and assessment of opportunities and threats), seizing (is about making the right decisions and executing, what others have referred to as strategic insight and strategic execution) and reconfiguring (also called transforming; the continuous renewal of a firm's tangible and intangible assets).

What are the disadvantages if a firm supports a technology that is not chosen as the dominant design?

It may be forced to adopt the dominant technology, effectively forfeiting the capital, learning, and brand equity invested in its original technology. Even worse, a firm may find itself locked out of the market if it is unable to adopt the dominant technology.

What are "skunk works"? What problem does it solve?

It refers to new product development teams that operate nearly autonomously from the parent organisation, with considerable decentralisation of authority and little bureaucracy. When multiple teams interact closely, there is a risk that a solution that appear to have an advantage (at least at the outset) will be too rapidly adopted by other teams. This can cause all of the teams to converge on the same ideas, thwarting the development of other creative approaches that might have advantages in the long run.

What is "modularity"? What are the benefits of it?

It refers to the degree to which a system's components may be separated and recombined. Making products modular can exponentially increase the number of possible configurations achievable from a given set of inputs. - By standardising a number of common components and using flexible manufacturing technologies that can quickly shift from one assembly configuration to another, companies can produce a wide variety of product models just by changing which components are combined, while still achieving economies of scale and efficiency in the individual components. - Modular products become more valuable when customers have heterogeneous demands and there are diverse options for meeting them. - Enables the entire production system to be made more modular. The standard interfaces reduce the amount of coordination that must take place between the developers of different components, freeing them to pursue more flexible arrangements than the typical organisational hierarchy.

What is the relationship between large size and structure?

Large firms often make greater use of formalisation and standardisation because as the firm grows it becomes more difficult to exercise direct managerial oversight. Formalisation and standardisation ease coordination costs, at the expense of making the firm more mechanistic. Many large firms attempt to overcome some of this rigidity and inertia by decentralising authority, enabling divisions of the firm to behave more like small companies.

How does a firm decide whether to attempt to pioneer a technology category or to wait while others do so? The answer will depend on several factors (questions): Market acceptance Enabling technologies Competitive entry Complementary goods Increasing returns Losses Reputation Improvement Preferences

Market acceptance - Does the firm have resources to accelerate market acceptance? Enabling technologies - Does the innovation require enabling technologies, and are these sufficiently mature? Competitive entry - How high is the threat of competitive entry? Complementary goods - Does complementary goods influence the value of the innovation, and are they sufficiently available? Increasing returns - Is the industry likely to experience increasing returns to adoption? Losses - Can the firm withstand early losses? Improvement - How much improvement does the innovation provide over previous solutions? Reputation - Is the firm's reputation likely to reduce the uncertainty of suppliers, distributors and customers? Preferences - How certain are customer preferences?

What are the different modes of development and what trade-off aspects are there?

Modes of development: - Solo internal development - Strategic alliances - Joint ventures - Licensing in - Licensing out - Outsourcing - Collective research organisations Trade-off aspects: - Speed - Cost - Control - Potential for leveraging existing competencies - Potential for developing new competencies - Potential for accessing other firms' competencies

What is one primary method of making a large firm feel small?

One primary method is to break the overall firm into several smaller subunits, and then encourage an entrepreneurial culture within these subunits. Multiple studies have observed that in industries characterised by high-speed technological change, many large and hierarchal firms have been disaggregated into networks of smaller, often more specialised, autonomous divisions or independent firms.

What's classified as "primary activities" according to Porter?

Primary activities include: - Inbound logistics (all activities required to receive, store and disseminate inputs) - Operations (activities involved in the transformation of inputs into outputs) - Outbound logistics (activities required to collect, store, and distribute outputs) - Marketing and sales (activities to inform buyers about products and services and to induce their purchase) - Service (after-sales activities required to keep the product or service working effectively).

What are the pros and cons of big organisations with regards to innovation?

Pros: - Better able to obtain financing for R&D projects - firms with larger sales volume over which to spread the fixed costs of R&D would experience higher returns than firms with lower sales volume - better-developed complementary activities such as marketing or financial planning that enable them to be more effective innovators - Likely to have a greater global reach to obtain information and other resources. - Might reap economies of scale on R&D spending. - Through investing more in R&D, the firm develops competencies in the new product development process and thus may improve its development process. - In a better position to take on large or risky innovation projects than smaller firms. Cons: - R&D efficiency might decrease because of a loss of managerial control (difficult to effectively monitor and motivate employees) - Becomes increasingly difficult for individuals to appropriate the returns of their efforts; therefore incentives diminish. - Size can make them less nimble and responsive to change (they have more bureaucratic inertia due to many layers of authority and well-developed policies and procedures. - High numbers of employees, large fixed-asset bases, and a large base of existing customers or supplier contracts can also be sources of inertia, making it difficult for the firm to change course quickly. -Strategic commitments to customers and suppliers can tie the firm to its existing businesses and technologies. - Communication and coordination may become more difficult and prone to decision-making delays.

What is "absorptive capacity"?

Refers to the phenomenon whereby as firms accumulate knowledge, they also increase their future ability to assimi- late information. A firm's prior related experience shapes its ability to recognize the value of new information, and to utilize that information effectively.

What's classified as "support activities" according to Porter?

Support activities include: - Procurement (the acquisition of inputs, but not their physical transfer, as that would be covered in inbound logistics) - Human resource management (activities such as recruiting, hiring, training, and compensating personell) - Technology development (activities involved in developing and managing equipment, hardware, software, procedures, and knowledge necessary to transform inputs into outputs) - Infrastructure (functions such as accounting, legal counsel, finance, planning, public affairs, government relations, quality assurance, and general management necessary to ensure smooth functioning of the firm).

What are "sustaining innovations"?

Sustaining innovations make good products better in the eyes of an incumbent's existing customers. The improvements made can be incremental advances or major breakthroughs, but they all enable firms to sell more products to their most profitable customers.

How does Teece's view on dynamic capabilities differ from the authors' (Birkinshaw, Zimmermann & Raisch)?

Teece proposed that dynamic capabilities could be broken down into three categories, namely, sensing, seising, and reconfiguring. The authors' case studies show how sensing and seizing are typically front-line capabilities, developed and implemented by those managing operating units, while reconfiguring is typically a higher-order, developed and implemented by top executives as a way of getting the right level of coordination and balance between sensing and seizing across the operating units.

What are "monopoly rents"?

The additional returns (either higher revenues or lower costs) a firm can make from being a monopolist, such as the ability to set high prices, or the ability to lower costs through greater bargaining power over suppliers.

What does "standardisation" mean?

The degree to which activities are performed in a uniform manner.

What are the implications of the force "Bargaining power of suppliers"?

The degree to which the firm relies on one or a few suppliers will influence its ability to negotiate good terms. If there are few suppliers or suppliers are highly differentiated, the firm may have little choice in its buying decision, and thus have little leverage over the suppliers to negotiate prices, delivery schedules, or other terms. - Switching costs and threats of forward integrate increase the supplier's bargaining power. - Ability to backward integrate lessens supplier bargaining power.

What does "formalisation" mean?

The degree to which the firm utilises rules, procedures, and written documentation to structure the behaviour of individuals or groups within the organisation.

Yves and Hamel argue that it is useful to categorise a firm's alliance strategy along two dimensions:

The first dimension is the degree to which alliances practice capability complementation versus capability transfer. The second dimension is whether the firm manages each alliance individually or manages a collective network of alliances.

What is "installed base"?

The number of users of a particular good.

Though they come in many varieties, platforms all have an ecosystem with the same basic structure, comprising four types of players:

The owners of platforms control their intellectual property and governance. Providers serve as the platforms' inter- face with users. Producers create their offerings, and consumers use those offerings.

What are the six different utility levers that are important to consider, as well as six stages of the buyer experience cycle, to understand a new technology's utility to a buyer?

The stages they identify are purchase, delivery, use, supplements, maintenance, and disposal. The six utility levers they consider are customer productivity, simplicity, convenience, risk, fun and image, and environmental friendliness.

What is "incumbent inertia"?

The tendency for incumbents to be slow to respond to changes in the industry environment due to their large size, established routines, or prior strategic commitments to existing suppliers and customers.

Some platforms encourage producers to create high-value offerings on them by establishing a policy of "permissionless innovation." What does it mean?

They let producers invent things for the platform without approval but guarantee the producers will share in the value created.

What does the "locally leveraged" strategy entail?

When each division or subsidiary of the firm conducts its own R&D activities, but the firm attempts to leverage resulting innovations through the company. - This strategy enables the firm to take advantage of the diverse ideas and resources created in local markets while leveraging these innovations across the company. - Can be very effective if different markets the company serves have similar needs.

What are "network externalities"?

When the value of a good to a user increases with the number of other users of the same or similar good.

What are the new rules of strategy when it comes to platforms?

With a platform, the critical asset is the community and the resources of its members. The focus of strategy shifts from controlling to orchestrating resources, from optimizing internal processes to facilitating external interactions, and from increasing customer value to maximizing ecosystem value.

In building an alliance portfolio, managers should think carefully about...

competitive effects, complementing effects, and network structure effects. First, if multiple alliances are serving the same strategic needs, there is a risk of redundant resources investment, or competitive conflict between partners. The costs and benefits of this should be carefully weighed as alliance partner could become adversaries. Second, complementary alliances can be super-addidative if carefully managed. Finally, managers should consider how their portfolio of alliances positions them in the web of relationships that connects their firm, their partners, and their partner's partners. Such networks can be very influential in the diffusion of information and other resources, and being positioned well in an alliance network can confer significant advantages.

Network externalities also arise when ... are important.

complementary goods.

Entrants are often divided into three categories:

first movers (or pioneers); early followers; and late entrants.

Disruptive innovations are initially considered...

inferior by most of an incumbent's customers. Typically, customers are not willing to switch to the new offering merely because it is less expensive. Instead, they wait until its quality rises enough to satisfy them. Once that's happened, they adopt the new product and happily accept its lower price. (This is how disruption drives prices down in a market.)

One example of learning effects is manifested in the impact of cumulative production on cost and productivity—otherwise known as the...

learning curve.

In industries characterised by increasing returns, early entrants...

may accrue learning and network externality advantages that are self-reinforcing over time.

With platforms, a critical strategic aim is...

strong up-front design that will attract the desired participants, enable the right interactions (so-called core interactions), and encourage ever-more-powerful network effects.