Description
Module 07: Industry Evolution and Change
Module 07: Introduction
Attached Files:
Chapter 8 PowerPoint slides (748.123 KB)
In this module, you will consider the systemic nature of change and change management in strategic planning. As we know, creating the strategic plan is just the beginning. Implementing the plan determines the strength of the plan’s ability to generate competitive advantage. Change is a feature of life and business and it’s also an inherent part of strategy and strategy implementation. It has a systemic nature that permeates all avenues of business and industry. Understanding the influences that drive industry evolution can assist with strategy planning, formulation, and implementation.
Learning Outcomes
Understand the factors that drive industry evolution.
Recommend strategies appropriate to the different stages of the industry life cycle.
Evaluate different approaches to managing strategic change including organizational ambidexterity, scenarios, crisis management, capability development, dynamic capabilities, and knowledge management.
ReadingsRequired:
Chapter 8 Industry Evolution and Strategic Change in Contemporary Strategy Analysis
Chapter 8 PowerPoint slides in Contemporary Strategy Analysis
Suárez, F. F., & Utterback, J. M. (1995). Dominant designs and the survival of firms. Strategic Management Journal, 16(6), 415–430.
Recommended:
Almansoori, S. H. (2020). Strategic change management: A transformative approach for sustaining change in UAE law enforcement. Police Thought, 29(113), 279–310. https://doi.org/10.12816/0055779
Module 07: Discussion
The Nature of Change
In this module, we learned that everything is in a state of constant change. This is a challenge of strategic management, as the industry environment is driven by technology, consumer needs, politics, economic conditions, and many other influences.
Case 8 Eastman Kodak’s Quest for a Digital Future
Discuss the key factors that drove the evolution of the photography industry, and how did these factors impact Kodak’s business model?
Based on your understanding of the industry life cycle, discuss the stage the photography industry was in during Kodak’s quest for a digital future.
Discuss the strategies that Kodak employed to adapt to the changing industry environment, and how effective were these strategies?
Discuss what strategies would have been most appropriate for Kodak to pursue at that stage?
How did Kodak’s organizational ambidexterity, or lack thereof, impact its ability to manage strategic change and respond to disruptive technologies?
Directions:
Discuss the concepts, principles, and theories from your textbook. Cite your textbooks and cite any other sources if appropriate.
Your initial post should address all components of the question with a 500 word limit.
Reply to at least two discussion posts with comments that further and advance the discussion topic.
Discussion Rubric
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3 to 4 points
1 to 2 points
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two other posts
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one other post
of substance.
Initial post only.
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5 to 6 points
3 to 4 points
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excellent
knowledge of
concepts, skills,
and theories
relevant to the
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and theories.
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and theories.
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Contemporary Strategy Analysis
Eleventh Edition
Robert M. Grant
Chapter 8
Industry Evolution and Strategic Change
Industry Evolution and Strategic Change
Outline
• The industry life cycle.
• The challenge of organizational adaptation and strategic change.
• Managing strategic change.
8-2
The Industry Life Cycle (1 of 8)
Stages of the Industry Life Cycle
Drivers of industry evolution:
• demand growth
• creation and diffusion of knowledge
8-3
The Industry Life Cycle (2 of 8)
Product and Process Innovation Over Time
8-4
The Industry Life Cycle (3 of 8)
How Typical is the Life Cycle Pattern?
• Technology-intensive industries (e.g. pharmaceuticals, semiconductors, computers) may
retain features of emerging industries.
• Other industries (especially those providing basic necessities, e.g. food processing,
construction, apparel) reach maturity, but not decline.
• Industries may experience life cycle regeneration, e.g. motorcycles, TVs:
• Life cycle model can help us to anticipate industry evolution—but dangerous to assume any
common, pre-determined pattern of industry development.
8-5
The Industry Life Cycle (4 of 8)
Innovation and Renewal over the Life Cycle: Retailing
8-6
The Industry Life Cycle (5 of 8)
Evolution of Industry Structure over the Life Cycle
INTRODUCTION
GROWTH
MATURITY
DECLINE
DEMAND
Early adopters
Rapid increase in market penetration
Replacement/ repeat buying;
price sensitive customers
Obsolescence
TECHNOLOGY
Competing technologies; rapid
product innovation
Standardization; rapid process
innovation
Diffused know how;
incremental innovation
Little innovation
PRODUCTS
Wide variety of features and
designs
Design & quality improve; dominant
design emerges
Commoditization; brand
differentiation
Differentiation difficult
MANUFACTURING
Short-runs, skill intensive
Capacity shortage, mass-production
Over-capacity emerges;
deskilling
Overcapacity
TRADE
——Production shifts from advanced
to emerging countries——
COMPETITION
Few companies
Entry, mergers exit
Shakeout & consolidation
Price wars & exit
KSFs
Product innovation
Design for manu-facture; Process
innovation
Cost efficiency (scale
economies, low cost inputs)
Low overheads;
rationalization
8-7
The Industry Life Cycle (6 of 8)
The Driving Forces of Industry Evolution
8-8
The Industry Life Cycle (7 of 8)
Changes in the Population of Firms over the Industry Life Cycle: US Auto Industry 1895-1960
Source: S. Klepper, Industrial & Corporate Change, August 2002, p. 654.
8-9
The Industry Life Cycle (8 of 8)
Strategy and Performance across the Industry Life Cycle
Note: The figure shows
standardized means for
each variable for
businesses at each stage
of the life cycle.
8-10
The Challenge of Organizational Adaptation and Strategic
Change (1 of 3)
Organizational Adaptation and Change: The Sources of Inertia
1. Organizational Routines: existing patterns of coordinated activity make it difficult to develop
new capabilities.
2. Social & political structures: change threatens existing social relationships and power
structures.
3. Conformity: imitation locks firms into common structures and strategies (“institutional
isomorphism”).
4. Limited Search: “bounded rationality” encourages local search; this is reinforced by managers’
contentment with satisfactory rather than optimal solutions.
5. Complementarities between strategy, structure, and systems: firms create unique
configurations of close-fitting organizational features–localized changes tend to be
dysfunctional, while systematic change difficult.
8-11
The Challenge of Organizational Adaptation and Strategic
Change (2 of 3)
The World’s Biggest Companies by Market Capitalization, 1912 and 2018
1912
$ bn.
2018
$ bn.
US Steel
0.74
Apple
876
Standard Oil NJ (Exxon)
0.39
Alphabet
737
J&P Coates
0.29
Microsoft
658
Pullman
0.20
Amazon
567
Royal Dutch Shell
0.19
Facebook
511
Anaconda
0.18
Tencent
496
General Electric
0.17
Berkshire Hathaway
488
Singer
0.17
Alibaba
441
American Brands
0.17
Johnson & Johnson
376
Navistar
0.16
JP Morgan Chase
371
British American Tobacco
0.16
De Beers
0.16
8-12
The Challenge of Organizational Adaptation and Strategic
Change (3 of 3)
The Threat of Technological Change
Some types of technological change are more difficult for established firms to adapt to
than others:
• Competence Enhancing versus Competence Destroying Technological Change—
established firms will have difficulty in adjusting if the new if technology requires
different resources and capabilities from those they already possess.
• Architectural versus Component Innovation—established firms have greater difficulty
adjusting to innovation that involve a new product architecture than those that relate
to particular components.
• Sustaining versus Disruptive Technologies—new technologies that augment existing
performance attributes are easier to adapt to that than those that incorporate different
performance attributes than the existing technology.
8-13
Managing Strategic Change (1 of 11)
Managing Strategic Change: Dual Strategies and Organizational Ambidexterity
Dual Strategies
Firms need.
(a) A strategy for today that exploits existing resources and capabilities and current market positions.
(b) A strategy for tomorrow that prepares the firms for the future.
Organizational Ambidexterity.
Firms need to.
(a) Exploit existing resources and capabilities and market positions.
(b) Explore new opportunities for the future.
Doing both simultaneously requires ambidexterity:
8-14
Managing Strategic Change (2 of 11)
Structural ambidexterity: exploration
and exploitation allocated to different
organizational units.
Contextual ambidexterity: same
organizational units and people perform
both exploration and exploitation.
8-15
Managing Strategic Change (3 of 11)
Combatting Organizational Inertia
• Creating Perceptions of Crisis—a crisis facilitates organizational change. If there’s no crisis—
create the perception of one!
• Establishing Stretch Targets—demanding performance targets can generate ambition and
mobilize effort.
• Organizational Initiatives—initiatives launched by the CEO can be vehicles for change.
• Reorganizing Company Structure—restructuring breaks down existing power bases and creates
openings for external hires.
• New Leadership—capacity of the existing leadership to initiate change is limited by investment
in the status quo and lack of cognitive flexibility—hence, the need for new leadership.
• Scenario Analysis offers a structured approach for managers to address the forces s that are
changing their business environment and to prepare for the future.
8-16
Managing Strategic Change (4 of 11)
Distinctive Capabilities as a Consequence of Childhood Experiences: The Oil Majors
Firm
Capability
Early history
Exxon
Financial management
RD/Shell
Coordinating decentralized global Shell a j-v formed from Shell T&T founded to sell Russian oil in China,
empire
and Royal Dutch founded to exploit Indonesian reserves
BP
“Elephant hunting”
Discovered huge Persian reserves, went on to find Forties Field and
Prudhoe Bay
ENI
Managing deals & relationships
in difficult political environments
Pioneering spirit of the founder, Enrico Mattei; the challenge of
managing government relations in post-war Italy
Mobil
Lubricants
Vacuum Oil Co. founded in 1866 to supply patented petroleum
lubricants
Exxon’s predecessor, Standard Oil (NJ) was the holding co. for
Rockefeller’s Standard Oil Trust
8-17
Managing Strategic Change (5 of 11)
Integrating Resources to Create Organizational Capability
8-18
Managing Strategic Change (6 of 11)
Hyundai Motor: Developing Capabilities through Product Sequencing
8-19
Managing Strategic Change (7 of 11)
Dynamic Capabilities
• Dynamic capability is a “firm’s ability to integrate, build, and reconfigure internal and
external competences to address rapidly changing environments”.
• Dynamic capabilities typically viewed as “higher order” capabilities that orchestrate
change among lower-level “ordinary” or “operational” capabilities.
• There are three types of dynamic capability:
1. sensing and shaping of opportunities and threats.
2. seizing opportunities.
3. maintaining competitiveness through enhancing, combining, protecting, and, when necessary,
reconfiguring the enterprise’s intangible and tangible assets.
8-20
Managing Strategic Change (8 of 11)
Gary Hamel: The New Foundations of Management
8-21
Managing Strategic Change (9 of 11)
Knowledge Management and the Knowledge-based View: Types of Knowledge
Type of Knowledge
Characteristics
Implications
Explicit: knowing about
Easy and cheap to transfer. A “public
good” (non-exclusive)
Easy to exploit within the firm—but difficult
to protect from rivals: hence, a weak basis
for sustainable advantage
Tacit: knowing how
Difficult to articulate or codify. Transfer is
slow and costly: requires observation and
practice
Sound basis for sustainable competitive
advantage; challenge is to replicate it
internally
8-22
Managing Strategic Change (10 of 11)
Knowledge Management Practices
8-23
Managing Strategic Change (11 of 11)
Knowledge Conversion and the Power of Systematization
8-24
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