Industry Evolution and Strategic Change 2015 Robert M

Learning Objectives By the time you have completed this topic you will be able to: • recognise the different stages of industry development and understand the factors that drive the process of industry evolution; • identify the key success factors associated with industries at different stages of their development and the strategies appropriate to different stages in the industry life cycle; • appreciate the sources of organizational inertia that act as barriers to change; • be familiar with different approaches to strategic change, including the quest for ambidexterity and the use of tools of strategic change management; • be familiar with the concept of ‘dynamic capabilities’ and how firms can anticipate change and shape their futures; • be aware of different approaches that firms have taken in developing organizational capabilities. © 2015 Robert M. Grant & Judith Jordan www. foundationsofstrategy. com 2

The Industry Lifecycle The two major forces that drive industry evolution are: • Demand growth • The production and diffusion of knowledge © 2015 Robert M. Grant & Judith Jordan www. foundationsofstrategy. com 3

Product and Process Innovation Over Time Once a dominant design emerges, the focus of innovation shifts from product innovation to process innovation © 2015 Robert M. Grant & Judith Jordan www. foundationsofstrategy. com 4

Innovation and Renewal in the Industry Life Cycle: US Retailing © 2015 Robert M.

Industry Structure and Competition Over the Life Cycle Introduction Growth Maturity Decline Demand Early adopters Rapidly increasing 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 & designs Design & quality improve; dominant design emerges Commoditization; brand Differentiation difficult Manufacturing & Distribution Short runs; skill intensive Capacity shortage, mass- production Over-capacity emerges; deskilling of production Trade Over-capacity ------Production shifts from advanced to developing countries Competition Few companies Entry, mergers and exits Shakeout & consolidation Price wars & exits Key Success Factors Product innovation Design for manufacture Process innovation Cost efficiency (scale economies, low-cost inputs) Low overheads; rationalization; buyer selection

Why is Organizational Change So Difficult? Organizational routines Complementaritie s and fit Limited search © 2015 Robert M. Grant & Judith Jordan www. foundationsofstrategy. com Social and political structures Conformity 7

Coping With Technological Change • Competence-enhancing and competencedestroying technological change (Tushman & Anderson, 1986). • Architectural and component innovation (Henderson & Clark, 1990). • Disruptive technologies (Christensen, 2000). © 2015 Robert M. Grant & Judith Jordan www. foundationsofstrategy. com 8

Tools of Strategic Change Management Tool Creating perceptions of crisis Establishing stretch targets Creating organizational initiatives Reorganization and new blood © 2015 Robert M. Grant & Judith Jordan www. foundationsofstrategy. com Example Jack Welch at General Electric Paul O’Neill at Alcoa Intel’s product development turnaround Dave Lewis succeeding Philip Clarke as CEO of Tesco 9

Dynamic Capabilities • A firm’s ability to integrate, build and reconfigure internal and external competences to address rapidly changing environments (Teece et al. 1997 p. 516). • The organizational and strategic routines by which firms achieve new resource configurations as markets emerge, collide, split, evolve and die (Eisenhardt & Martin. 2000 p. 1107). © 2015 Robert M. Grant & Judith Jordan www. foundationsofstrategy. com 10

Scenario Planning Identifying driving forces © 2015 Robert M. Grant & Judith Jordan www. foundationsofstrategy. com Identifying critical uncertaintie s Developing plausible scenarios Considerin g implication s 11

Shaping the Future © 2015 Robert M. Grant & Judith Jordan www. foundationsofstrategy. com

Developing New Capabilities • Key issues include: o Path dependency o Integrating resources to create capability o Developing capabilities sequentially © 2015 Robert M. Grant & Judith Jordan www. foundationsofstrategy. com 13