Strategic Dynamics:Conceptual

Frameworks

ROBERT A. BURGELMANStanford Graduate School of Business

I. Dynamic Forces Driving Firm Evolution

II. An Evolutionary Framework of the Strategy-Making Process in Established Firms

III. Four Strategic Leadership Challenges in Established Firms

Overview

Strategic Dynamics:Two Conceptual Frameworks

Robert A. Burgelman, Stanford Graduate School of Business

Basis of Basis of Competitive Competitive Advantage Advantage

in the in the IndustryIndustry

Internal Internal Selection Selection

EnvironmentEnvironment

Distinctive Distinctive CompetenceCompetenceof the Firmof the Firm

Official Official Corporate Corporate StrategyStrategy

Strategic Strategic ActionAction

I. Dynamic Forces in Firm Evolution

Robert A. Burgelman, Stanford Graduate School of Business

Basis of Basis of Competitive Competitive Advantage Advantage

in the in the IndustryIndustry

Internal Internal Selection Selection

EnvironmentEnvironment

Distinctive Distinctive CompetenceCompetenceof the Firmof the Firm

Official Official Corporate Corporate StrategyStrategy

Strategic Strategic ActionAction

I. Dynamic Forces in Firm Evolution

What it Takes to Win

What We DO

What We’ve Got

What We SAY

Robert A. Burgelman, Stanford Graduate School of Business

Basis of Basis of Competitive Competitive Advantage Advantage

in the in the IndustryIndustry

Internal Internal Selection Selection

EnvironmentEnvironment

Distinctive Distinctive CompetenceCompetenceof the Firmof the Firm

Official Official Corporate Corporate StrategyStrategy

Strategic Strategic ActionAction

I. Dynamic Forces in Firm Evolution: “The Rubber Band Model”

Intel skills in circuit design and process technology, but not manufacturing

INERTIA NEW OPPORTUNITIES

DRAM products become a commodity. Winning requires low cost and high quality which depends on manufacturing skills.

• MarketINDUSTRY FORCES• Non-Market

Robert A. Burgelman, Stanford Graduate School of Business

Basis of Basis of Competitive Competitive Advantage Advantage

in the in the IndustryIndustry

Internal Internal Selection Selection

EnvironmentEnvironment

Distinctive Distinctive CompetenceCompetenceof the Firmof the Firm

Official Official Corporate Corporate StrategyStrategy

Strategic Strategic ActionAction

Official STRATEGY is ahead of ACTION

Apple “Newton”: handheld product strategy

I. Dynamic Forces in Firm Evolution: “The Rubber Band Model”

ACTION is ahead of STRATEGY

Fab capacity allocation diverges from strategy

Robert A. Burgelman, Stanford Graduate School of Business

I. Diagnosis #1: Sources of Strategic Dissonance

Dissonance is Strategic if:

1. There is a divergence between Basis of Competitive

Advantage and Distinctive CompetenceExample: Silver Bullet Target Test:

Who is your most dangerous competition? Is it still clear?

Robert A. Burgelman, Stanford Graduate School of Business

Dissonance is Strategic if:

1. There is a divergence between Basis of Competitive

Advantage and Distinctive CompetenceExample: Silver Bullet Target Test:

Who is your most dangerous competition? Is it still clear?

2. There is a divergence between Stated Strategy and

Strategic ActionExample: We say that we provide customer solutions but we only sell

them our own technology

Note: Initially the signals are usually weak

I. Diagnosis #1: Sources of Strategic Dissonance

Robert A. Burgelman, Stanford Graduate School of Business

Basis of Basis of Competitive Competitive Advantage Advantage

in the in the IndustryIndustry

Internal Internal Selection Selection

EnvironmentEnvironment

Distinctive Distinctive CompetenceCompetenceof the Firmof the Firm

Official Official Corporate Corporate StrategyStrategy

Strategic Strategic ActionAction

I. Dynamic Forces in Firm Evolution

What it Takes to Win

What We DO

What We’ve Got

What We SAY Culture

Robert A. Burgelman, Stanford Graduate School of Business

1. Resource allocation reflects competitive reality

2. Strategic planning has forums for debating new opportunities

3. Capacity of top and senior managers for strategic recognition

4. Capacity for strategic leadership

II. Diagnosis #2: Organizational Capability to Adapt

* Note: Created by ourselves and/or by others

Characteristics of a Culture Ready for Strategic Change*:

Robert A. Burgelman, Stanford Graduate School of Business

I. Dynamic Forces in Firm EvolutionBasis of Basis of

Competitive Competitive AdvantageAdvantage

Internal Internal Selection Selection

EnvironmentEnvironment

Distinctive Distinctive CompetenceCompetence

Corporate Corporate StrategyStrategy

Strategic Strategic ActionAction

Robert A. Burgelman, Stanford Graduate School of Business

I. Dynamic Forces in Firm EvolutionBasis of Basis of

Competitive Competitive AdvantageAdvantage

Internal Internal Selection Selection

EnvironmentEnvironment

Distinctive Distinctive CompetenceCompetence

Corporate Corporate StrategyStrategy

Strategic Strategic ActionAction

Robert A. Burgelman, Stanford Graduate School of Business

I. Dynamic Forces in Firm EvolutionBasis of Basis of

Competitive Competitive AdvantageAdvantage

Internal Internal Selection Selection

EnvironmentEnvironment

Distinctive Distinctive CompetenceCompetence

Corporate Corporate StrategyStrategy

Strategic Strategic ActionAction

II. An Evolutionary Framework of the Strategy-Making Process in Established Firms

Robert A. Burgelman, Stanford Graduate School of Business

Concept of Concept of Corporate Corporate StrategyStrategy

I. Dynamic Forces in Firm EvolutionBasis of Basis of

Competitive Competitive AdvantageAdvantage

Internal Internal Selection Selection

EnvironmentEnvironment

Distinctive Distinctive CompetenceCompetence

Corporate Corporate StrategyStrategy

Strategic Strategic ActionAction

II. An Evolutionary Framework of the Strategy-Making Process in Established Firms

Robert A. Burgelman, Stanford Graduate School of Business

Concept of Concept of Corporate Corporate StrategyStrategy

I. Dynamic Forces in Firm EvolutionBasis of Basis of

Competitive Competitive AdvantageAdvantage

Internal Internal Selection Selection

EnvironmentEnvironment

Distinctive Distinctive CompetenceCompetence

Corporate Corporate StrategyStrategy

Strategic Strategic ActionAction

Induced Induced Strategic Strategic

ActionAction

II. An Evolutionary Framework of the Strategy-Making Process in Established Firms

Robert A. Burgelman, Stanford Graduate School of Business

Concept of Concept of Corporate Corporate StrategyStrategy

I. Dynamic Forces in Firm EvolutionBasis of Basis of

Competitive Competitive AdvantageAdvantage

Internal Internal Selection Selection

EnvironmentEnvironment

Distinctive Distinctive CompetenceCompetence

Corporate Corporate StrategyStrategy

Strategic Strategic ActionAction

Induced Induced Strategic Strategic

ActionAction

II. An Evolutionary Framework of the Strategy-Making Process in Established Firms

Structural Structural ContextContext

Robert A. Burgelman, Stanford Graduate School of Business

Concept of Concept of Corporate Corporate StrategyStrategy

I. Dynamic Forces in Firm EvolutionBasis of Basis of

Competitive Competitive AdvantageAdvantage

Internal Internal Selection Selection

EnvironmentEnvironment

Distinctive Distinctive CompetenceCompetence

Corporate Corporate StrategyStrategy

Strategic Strategic ActionAction

Induced Induced Strategic Strategic

ActionAction

II. An Evolutionary Framework of the Strategy-Making Process in Established Firms

Structural Structural ContextContext

Autonomous Autonomous Strategic Strategic

ActionAction

Robert A. Burgelman, Stanford Graduate School of Business

Concept of Concept of Corporate Corporate StrategyStrategy

I. Dynamic Forces in Firm EvolutionBasis of Basis of

Competitive Competitive AdvantageAdvantage

Internal Internal Selection Selection

EnvironmentEnvironment

Distinctive Distinctive CompetenceCompetence

Corporate Corporate StrategyStrategy

Strategic Strategic ActionAction

Induced Induced Strategic Strategic

ActionAction

II. An Evolutionary Framework of the Strategy-Making Process in Established Firms

Structural Structural ContextContext

Autonomous Autonomous Strategic Strategic

ActionAction

Strategic Strategic ContextContext

Robert A. Burgelman, Stanford Graduate School of Business

Concept of Concept of Corporate Corporate StrategyStrategy

I. Dynamic Forces in Firm EvolutionBasis of Basis of

Competitive Competitive AdvantageAdvantage

Internal Internal Selection Selection

EnvironmentEnvironment

Distinctive Distinctive CompetenceCompetence

Corporate Corporate StrategyStrategy

Strategic Strategic ActionAction

Induced Induced Strategic Strategic

ActionAction

II. An Evolutionary Framework of the Strategy-Making Process in Established Firms

Structural Structural ContextContext

Autonomous Autonomous Strategic Strategic

ActionAction

Strategic Strategic ContextContext

VariationVariation SelectionSelection RetentionRetention

Robert A. Burgelman, Stanford Graduate School of Business

II. An Evolutionary Framework of the Strategy-Making Process in Established Firms

ACHIEVE ALIGNMENT

eemerging environments E

the existing environment

1. Distinctive Competence

2. Product Market Domain

3. Core Values4. Objectives

OrganizationalLearning

Top Management Beliefs about:1. Organizational Structure2. Planning & Control Systems3. Resource Allocation Rules4. Measurement & Reward Systems. . . Principles of Behavior

Radical Innovation(initially not necessarily large)

Autonomous Autonomous Strategic Strategic

ActionAction4

Middle/Senior Mgt

Strategic Strategic ContextContext

5

Structural Structural ContextContext

3

amend

CREATE LINKAGE

Induced Induced Strategic Strategic

ActionAction2

Incremental Innovation(not necessarily small)

Concept of Concept of Corporate Corporate StrategyStrategy

1

1. Conceptual Skills2. Political SkillsBut: Complement or Substitute?

: Increase Scale

Robert A. Burgelman, Stanford Graduate School of Business

III. Four Strategic Leadership Challenges in Established Firms

1. Exploiting the opportunities associated with the current strategy: DISCIPLINE #1

2. Exploiting new opportunities spontaneously generated from within: DISCIPLINE #2

3. Creating the adaptive organization: balancing the emphasis on existing and new opportunities

4. Stimulating strategic renewal (when new opportunities are no longer spontaneously generated)