Content M-1: Changing environment and intertia Flashcards
What are the three dimensions of successfully adapting a business to changing competitive landscapes?
- Psychological. Managers and employees need to be psychologically convinced that change is needed, and ready to implement necessary change actions.
- Technological. Companies need to be able to develop necessary technological capabilities or otherwise access them. They need to configure them in a way that addresses customer needs.
- Relational. Companies need to have relational capabilities to develop and manage their collaborations with external partners.
What is intertia?
A tendency to do nothing or to remain unchanged (resisting change)
What could be reasons for intertia?
- Managers’ mindsets are shaped by old ways of doing business which made them successful so far.
- Organizational processes evolved to run the current business efficiently are difficult to change.
- Investing in new resources to embrace the new technologies or business models involves difficult trade-offs in resource allocation decisions.
–> Existing players are too fixated on how they learned to create customer value, and struggle when new technologies or business models require them to revise the way they create value.
Intertia (resistance to change) can be explained with population ecology.
Organizations, like living organisms, are born, grow, and die…
In order to survive and grow, organizations, need to be able to replicate their outputs (products and services) consistently and efficiently.
Population ecology & adaptation.
In order to adapt to their environment, organizations develop processes (specific ways of doing tasks) that allow the to replicate their outputs (products and services) consistently and efficiently.
Efficiency: doing things right.
Design of a process –> Application of the process –> Refinement of the process (how can the process be enhanced).
As a result: refinement and perfection cycle makes organizational processes more efficient, but also more rigid! (difficult to change or adapt).
Why does the design, application and refinement cycle of designing a process become more rigid?
- Conflicts of interest among organizational members make agreements about how to change existing processes difficult.
- Environmental changes, which require new processes, also create uncertainty, which makes it difficult to understand how existing processes should be changed to make them more effective.
Rigidness of process is not necessary a big problem, as long as the existing processes remain effective. How does this lead to inertia?
When the environment changes radically, existing processes are no longer effective! Replacing them with more effective processes is difficult due to their rigidity! This leads to organizational intertia.
What are the sources of (organizational) intertia?
- Strategic frame rigidity
- Routine rigidity
- Resource rigidity
What are strategic frames? (In the context of strategic frame rigidity)
Strategic frames are mindsets that shape how individuals see the world and how they believe satisfactory outcomes will be achieved.
–> For managers who have been successful by relying on their strategic frames to make decisions, it is difficult to accept that they need a new mindset!
What are organizational routines? (In the context of routine rigidity)
Established procedures to carry out organizational tasks. More casually: how things work in an organization.
- Organizations learn how to deal with situations and develop practices and procedures.
- Over time these practices and procedures are perfected and become automated responses to business situations –> become organizational routines.
- Routines are useful because they enable efficient operations. However, they are also hard to change! –> Rigid.
What is resource rigidity? What are the causes?
Incumbents tend to invest in resources that have been useful to develop a competitive advantage in the past. They hesitate investing in new resources that have become important as a result of new technologies and business models.
Why?
- Failure to realize the importance of new resources
- Fear of losing current customers
- Constraint placed by investors and capital markets
—> Stocks of incumbents lose value when they invest in new technologies.
How to overcome inertia? (Four ways)
- A new business unit with decision-making authority focusing on new technology or business model that works separately from the rest of the organization.
- Open innovation: Getting input for innovation processes from outside of the organization.
- Strategic alliances with other organizations to develop new products based on the new technology or business model.
- Acquiring smaller and innovative companies (like startups) can help to quickly inject fresh perspectives and ideas into the existing organization.
Why open innovation?
Open innovation enables access to:
- New product and business model ideas
- New technological solutions
- New commercialization capabilities
This results in:
- More efficient innovation
- Faster time-to-market
(Only internal R&D for innovation results in old ways of thinking (intertia) and effort spend on solutions that already exist elsewhere; this results in ineffective innovation and thus lower competitiveness).
What is the difference between sustaining technologies and disruptive technologies in light of business models?
- Sustaining technologies: technologies that allow for better products and services to be produced and marketed using the same business model! (e.g. telephony, changed a lot but value derived from the product was the same. The business model was to sell a phone).
- Disruptive technologies: require new business models to be utilized commercially! (e.g. smartphones; was disruptive because they brought internet software to be an indispensable component of mobile phone. It wasn’t about a physical device anymore, but rather how well the physical device was embedded into the mobile phone ecosystem).
What are the four hallmarks of active intertia?
- Strategic frames become blinders
- Processes harden into routines
- Relationships become shackles
- Values harden into dogmas (rules)
