Normann, 2001 Ch. 1 - Evaluation of Strategic Paradigms - quite good "deck" Flashcards
Explain the industrail paradigm, paradigm 1:
INDUSTRALISM: Customer viewed as reciver and the organisation as producer
Most business originally were based on dominance of some asset
• The asset could be a geographical position or it could be based on negotiated or coercively maintained privilege(.g. banks position based on quasi-monopoly)
• With the coming of industrialism the centre of gravity of the critical assets shifted from natural resources,
negotiated privilege, and geography to mastery of production technology and capital to back it up. Craft production could turn into mass production with standardized, specialized tasks.
• Already in the early industrial era we can see more of a power shift to the market – to customers.
• Idea of product differentiation and market segmentation; Movement from craft to industrialism was based thorough rethinking of the task at hand. It meant, first, unbundling the whole into parts. Analytically dividing
the whole into parts, standardizing the parts, and allocating the production of each part to highly but narrowly
specialized structures created a greater surplus of productivity (a value added) compared to craft technology.
The one best way could now uncompromisingly be searched for every task.
What happens in the 60 and 70’s, the paradgim 2?
Customer viewed as a source, and companies needed relation (CUSTOMER BASED MANAGEMENT).
In 1960s/70s the same principles applied to services; but when these principles were applied to certain types of services the results were sometimes absurd.
Demanding customers, Japan and its car industry and oil crisis -> growing personal wealth, the advent of new media and new habits of international travel = Customers had changed their world view = becoming more active and demanding.
Companies found that customers were no longer captive, they had to be seduced; relationships had to be based on loyalty
- Importance of achieving a financial return on customer relationships
- Business did not come from the asset of the company, but was generated by the customer relationship. The customer relationship, not the factory represented he decision business potential. The key flow was not from the factory outbound, but from the customer inbound. Skilful utilization of the customer relationship was the key. (Customers had faces they became individuals).
- ‘Value added’ of various activities by a company were measured not only in traditional production-related terms but also in terms of how activities affect the customers’ loyalty, increased likelihood to increase ‘share of wallet’ of each customer; customer satisfaction important
Business starting from the customer and flowing to the company. The market as a sink is replaced by the customer as a source.
Explain the model with “the view of the customer” and “Critical competencies”
Normann uses the term ecogenesis for a company not only creating new products and services, but shaping the business context.
For the companies and other institutions which are able to organize value creation beyond their own boundaries, thereby setting the rules for others by effectively creating not only new products and services shaping a new business context (what I will term ‘ecogenesis’) I receive the term Prime Movers.
The economy of reconfiguration: the context for a new strategic logic, the last and 3 paradigm.
Customer view as a co-producer and the organisation as a value creator.
The last few years once again have shift into a new era leading new strategy paradigm
- Business company as an organizer of value creation: crucial competence of business companies is the competence to organize value creation
- The new paradigm (reconfiguration of value-creating systems) also implies a dramatic conceptual change and a very real shift in how we view customers. The customer is no longer just a receiver, no longer just a source of business, but now actually a co-producer and a co-designer of value creation. The three stages of strategy logic depicted in this chapter are summarized in the figure.
