Identifying and classifying

resources and capabilities

Session 2

1
 From the previous session
• Strategy- direction
• Growth
• Business model

2
 The reality of resources
• Resources come into play immediately after
the firm is formed
– There are a few resources within the firm, as
compared to that available outside in the market
– The firm becomes an owner- has some kind of
ownership right over different resources
– The nature of resources change with the evolution
of the firm

3
 Characteristics of a resource
• Classification- typology
• Location
• How do we measure/quantify it/identify it

4
 Creating value from resources
• Resource combinations- indicated by the
business model/value chain
• Leverage into new contexts where the
resource is relevant
• Use it commercially/sell it to realise value for
the firm

5
Assets

6
 Assets
• Human
• Non- Human-
– Financial
– Physical- plant and machinery, land
– Legal- IP
• Intangible vs tangible
– Knowledge, informal processes
• Organizational
– Culture, structure, processes, brand, networks

7
Types of competencies/capabilities

8
 Competencies and capabilities
• Threshold
• Non-core and Complementary
• Core

9
How to identify competencies

10
How to identify competencies/res
• Activity based- value chain, activity map,
business model
• Product/market based- product/market
matrix, Competency tree
• Resource Audit/Identify nuggets- functional,
• Use of internal/external capabilities for
resource identification
• Understanding micro linkages of cap-skills =>
task specific=>functional=> cross functional
11
 Identifying resources on the value
chain
• The value chain can be used to understand the
resources at each activity level
• Where is it used- at what level?

12
13
 Concept of business model
• Value proposition: the offering; the target
customer; the basic strategy to win customers
and gain competitive advantage
• Value Creation and delivery system: Resources
and Capabilities; Organization (the value
chain, activity system, business processes);
position in the value network
• Value capture- Revenue sources; the
economics of the business
14
Going from resources to resource
combinations

15
 Impact of resources
• Implications of combinations
– Eg. Impact of defense forced based on
• Skills: soldiering and weapon training
• Cultural traditions: Independent action, adherence to
mission
• Commitment to ideology- motivation
• General staff- overall coordination
• Combination of all the above
– Differences of team performances when the coach
changes
– Each resource- importance and relative strength

16
 Decisions after resource
identification
• What decisions does a value chain/business
model analysis enable you to take?

17
 Decisions after resource
identification
• Which resources in which activity?
• Vertical integration
• Scale/scope of operations
• Location of operations
• Linkages across different parts of the value
chain

18
• How do we go about identifying the
resources?- benefits/costs of audit vs activity
approach
• Using both approaches to identify resources
• Is there a pattern to the accumulation of
resources? What patterns can be identified?

19
20
 Resources and capabilities

• There are combinations of assets underlying

any capability
• Capabilities are also key in combining assets to
meet different requirements
• Combination of assets/resources lead to
capabilities

21
Using functional divisions to
approximate capabilities

22
 Functional capabilities of organizational capabilities
Functional area Capabilities Examples
Functional area Financial control Capabilities
CORPORATE Examples
ExxonMobil, PepsiCo,
Functional area Management development Capabilities Examples
General Electric, Shell,
FUNCTIONS
CORPORATE Financial control ExxonMobil,
CORPORATE Strategic
Financial Innovation
control Google, Haier, Unilever,
ExxonMobil,
FUNCTIONS Management development
Multidivisional coordination PepsiCo, General
Shell, Cisco Systems,
FUNCTIONS Management
Strategic
AcquisitionInnovationdevelopment
management PepsiCo, General
Electric, Shell,
Strategic
Multidivisional
International Innovation
coordination
management Electric,Haier,
Google, Shell,
Multidivisional
Acquisition coordination
management Google, Haier,
Unilever, Shell, Cisco
Acquisition management
International management Unilever,
Systems, Shell, Cisco
Management Comprehensive, integrated MIS network linked to
International management Walmart,
Systems, Dell
information managerial decision making computers
Management Comprehensive, integrated MIS network Walmart, Dell
RESEARCH
Management
information AND Research
Comprehensive,
linked to managerial integrated
decisionMIS network
making IBM, Merck,Dell
Walmart,
computers 3M, Apple
DEVELOPMENT
information Innovative new productdecision
linked to managerial developmentmaking computers
Fast
RESEARCH AND Research cycle new product development IBM, Merck, 3M,
RESEARCH AND Innovative
DEVELOPMENT Research new product development IBM, Merck, 3M,
Apple
OPERATIONS
DEVELOPMENT Fast Efficiency
Innovative in volume
newproduct manufacturing
product development Toyota,
Apple Harley
Continuous improvementsdevelopment
cycle new in operations Davidson
Fast cycleand
Flexibility new product
speed development
of response
OPERATIONS Efficiency in volume manufacturing Toyota, Harley
OPERATIONS
PRODUCT Efficiency
Continuous inimprovements
Design capability volume manufacturing
in operations Toyota,
DavidsonHarley
Apple, Nokia, P&G, J&J,
DESIGN Continuous
Flexibility improvements
and speed of response
Brand Management in operations Davidson
L’Oreal
MARKETING Flexibility
Building and speed
reputation of response
for quality
PRODUCT Responsiveness
Design capability to market trends Apple, Nokia, P&G,
PRODUCT
DESIGN DesignManagement
Brand capability Apple,
J&J, Nokia, P&G,
L’Oreal
DESIGN
Sales and
MARKETING Brand Management
Effective
Building sales promotion
reputation for and execution
quality J&J, L’Oreal
Pepsoco, Pfizer
MARKETING
distribution Efficiency and speed
Building reputation
Responsiveness to of processing
for
marketquality
trends
Speed of distribution
Responsiveness to market trends 23
Customer service
The hierarchical nature of capabilities

Cross functional capabilities

CFC

Broad functional Operations, R&D design, MIS

capabilities capability, Marketing & sales, HRM

Activity related Eg. Mft, materials mgmt.,

capabilities process engg, prod engg.
Eg. Manufacuring related-
Specialized capabilities assembly, production

Single activity capabilities eg. Assembly related only

Resources

24
 Strategic resource mapping?
• Trying to map individual resources to the
competencies

25
 Assessing quality of capabilities
• Identify the major capabilities you believe your firm needs to
have to "play" in your competitive environment

26
Dynamic capabilities
Session 7

27
What changes and what remains?
• Developing anchors for change
• What should not change
• Existing core competencies
• Core values

28
IBM- Identified reasons for struggling
business
• The existing management system rewards execution directed at short-
term results and does not value strategic business building.
“Breakthrough thinking” was not a valued leadership capability
• The company is preoccupied with current served markets and existing
offerings.
• The business model emphasizes sustained profit and EPS improvement
rather than actions oriented towards higher price/earnings.
• The firm’s approach to gathering and using market insight (fact based
analysis is inadequate for embryonic markets.
• The company lacks established disciplines for selecting,
experimenting, funding, and terminating new growth businesses.
• Once selected, many new ventures fail in execution
29
IBM- EBO revenue as a percent of total revenue

30
 Dynamic capability
• “capacity of an organization to purposefully create,
extend or modify its resource base’
• ‘Includes the capacity with which to identify the need or
opportunity for change, formulate a response to such a need or
opportunity and implement a course of action (different dynamic
capabilities may serve these different purposes)
• Capacitity to
• Sense and shape opportunities and threats
• TO seize opportunities and
• To maintain competitiveness through enhancing, combining,
protecting and where necessary- reconfiguring the business
enterprise’s intangible and tangible assets

31
Dynamic capabilties- not easily acquired
• IBM(1993-2004)
• Kodak
• Boeing

32
Percentage of Tires Shipped by Construction Type: 1961-1989

Sources: Rubber Manufacturers Association, “Tire Shipments by Construction,” Tire Industry Facts
(Akron, Ohio, 1990); Firestone Tire & Rubber Company, “Sales Forecasts,” Corporate Archives
(Akron, Ohio, 1980).
Citation:
Sull, Donald. “The Dynamics of Standing Still: Firestone Tire & Rubber and the Radial Revolution,” Business History Review, 1999, pp. 430-464. 33
 Disk Drive Industry Evolution
146 firms founded; 125 failures

2.5”
Prairietek, Quantum,
Market 3.5” Conner, Western Digital

Size Conner, Quantum, Maxtor,

Western Digital, Seagate
5.25”
Seagate, Miniscribe, Maxtor,
Micropolis, Computer Memories
8”
Shugart, Micropolis,
Priam, Quantum

14”
Control Data, IBM, Memorex,
Diablo, DEC, Ampex

1976 1981 1986 1991 1996

34
Dynamic capabilities visualized in three aspects
• Organizational processes
• Asset positions
• Evolutionary path

• From a different perspective, the ability to sense and to seize

opportunities

35
Paths
• Sub-optimal lock in: there are competing technologies and strong increasing
returns, "one technology will come to dominate the market, and it is not possible
to predict -ex ante- which of the technologies will do so. It is likely, however, that
the technology which first makes large advances along its learning curve will
emerge dominant"
• Path creation (mindful deviation) vs path dependency

36
Capabilities linked to modifying the
resources
• Sensing
• Seizing
• Reconfiguring assets

37
Effect of competitive environment on
performance
• Firms deploying dynamic capabilities in highly competitive markets
will benefit because “when rivalry is fierce, companies must innovate
in both products and processes, explore new markets, find novel ways
to compete, and examine how they will differentiate themselves from
competitors.” In highly competitive environments, responding to
competitive challenges through opportunity identification activities
should also prepare organizations better for survival.
• Thus, the effects of dynamic capabilities are enhanced when the
company faces some degree of competitive intensity, as otherwise the
organization may not require, or put to use, dynamic capabilities to the
same extent and, as a result, the development of such capabilities may
come at a cost that exceeds the benefits
38
Other important ‘routines’ that impact capabilities

• Knowledge creation routines for building new thinking

• Alliance and acquisition routines e.g. Cisco
• Biotech firms- alliance processing for accessing outside knowledge
• Exit routines for jettisoning resource combinations that are no longer
valuable

39
Dynamic capabilities: eg. Product
development
• Routines involve cross functional teams
• Routines that ensure concrete and joint experiences among team
members such as working together to fix specific problems or
brainstorming together
• Common consumer visits and feedback
• External communication facilitated by strong leaders

40
Thus , dynamic capabilities indicate
• Propensity to change the resource base
• Propensity to sense opportunities and threats
• Propensity to make timely decisions
• Propensity to make market oriented decisions

41
Fast response
• Mechanisms to increase speed
• Flexible organizational structures, peripheries and organizational
boundaries
• Organizational slack
• Flexible and agile organizational forms that can accommodate novelty and
innovation
• Modularity- organization, products
• Ambidextrous learning organizations- organizations that can change
as well as learn

42
‘Flexibility’
• Being agile- fast on one’s feet
• Ability to move rapidly
• Change course to take advantage of an opportunity or to side step a
threat
• Ability to be versatile- doing different things and applying different
capabilities depending on the needs of a particular situation

43
Event pacing: traditional response
• Response to events such as:
• Moves by competition
• Response to a new technology
• Follow a plan and deviate when performance begins to weaken

44
Time pacing
• Not to be confused with speed
• Counteracts the natural tendency of managers to wait too long, move
too slowly and lose momentum
• Helps set the pace for change
• Is regular, rhythmic and proactive

45
Time pacing
• Phased product/service introductions
(British Airways)
• Target of revenues from new products(3M, Gillette)
• Market expansion/entering new markets (Starbucks)
• Time paced capacity build up
• Launching new businesses

46
Time based performance metrics
• Measures based on time- such as elapsed time, speed, rate
• Measuring every critical transition process with at least some time
based measure such as
• Number of products per quarter
• Average time from concept to commercial launch
• Average downtime between products

47
Capabilities created- time pacing
• Managing transitions: shifts from one activity to the next
• Managing rhythm: pace at which companies change

48
Slack
• Extent of resource utilization
• Those resources that an organization possesses that are not
committed to a necessary organizational activity

49
Uses of slack
• Slack as an inducement
• Slack as a resource for conflict resolution
• Slack as a technical buffer
• As a facilitator for strategic behaviour

50
Organizational structure
• Advantages for less formal structures in sensing, seizing and
reconfiguration

51
‘Flexible’ organizational forms
• Multi functional multi unit teams
• Sub contracting
• Collaborative partnerships

52
‘Flexibility’
• Being agile
• Fast movement
• Able to change course
• Take advantage of an opportunity or side step a threat
• Resilience to shocks

53
Role of modularity in flexibility
• Modular products- incremental additions to basic platforms
• Satisfy changing customer demands by minor alternations in products
• Choice available to the firm- between a faster but partial design or a
slower but complete redesign

54
Unique processes
• E.g Intels system of overlapping project teams which ensures that
there is one project halfway through even when the previous version
of the product is being launched
• Cisco’s system of letting its customers decide on which technologies
(and hence firms) are important.

55
Issues in dynamic capabilities
• Strategic learning and change
• Technological innovation and adaptation
• Microfoundations of dynamic capabilities
• Ambidexterity as dynamic capabilities
• Strategic alliances

56
Strategic learning and change
• knowledge assets that are leveraged into human capital and organizational
capabilities through learning mechanisms on multiple levels
• creation, recombination and integration of knowledge is crucial to the firm’s
overall innovation capacity
• the dynamization of the RBV- towards issues of strategic learning and change.

57
Technological innovation and adaptation
• Technological adaptation may be inhibited by organizational routines,
such as process management practices, that disadvantage incumbents
in the face of radical discontinuities
• In particular, pre-existing capabilities have an impact on the choice of
sourcing modes that, in turn, affect the acquisition of new capabilities

58
Microfoundations of dynamic capabilities
• Components of capabilities and to investigate how they interrelate across the
individual and the collective levels
• a knowledge-based view of corporate acquisitions
• integration capabilities and learning mechanisms that foster post-acquisition
knowledge spillovers.

59
Ambidexterity as dynamic capability
• Ambidextrous organizations are able both to explore new
knowledge domains and to exploit current ones.
• Factors that promote ambidexterity include integration
mechanisms at the senior team level, intellectual capital
architectures, total quality management, organizational
design, executive leadership and managerial cognition

60
Strategic alliances
• Learning from alliance partners- what enables firms to
source knowledge beyond their own boundaries and what the
outcomes of such processes are.
• what kind of experience a firm has gained from previous
alliances and how this is combined with internal sourcing
strategies
• how firms can retain knowledge that they have sourced
outside their boundaries and how they can use
interorganizational relations to extend their knowledge base
• Vertical scope- strategic outsourcing
61
 62

RESOURCE BASED STRATEGY

RESOURCE BASED STRATEGY AND CORE

COMPETENCIES
 63

Strategic management- dominant paradigm

• Dominant perspectives in strategy-
problems associated with that- changes,
corporate level, SBU Prism
 64

Alternative approaches to strategy

• Learning and cultural schools
according to Mintzberg
 65

Going out of fashion

• Core competence of the
corporation-
• competency tree,
• intent,
• planning for competencies vs
planning for opportunities or
customer requirements
 66

RBV- basic elements

• Why- research- focus on the firm-
pendulum in strategic management
• Resource similarity, and mobility-
contrasting with the SCP model
• Corporate level focus on strategy
• Tasks of the strategic manager
 67

Evolution of RBV
• Ricardian
• Selznick etc – distinctive capabilities
• Penrosean
• Demsetz etc- anti- trust studies
 68

Introduction stage

• Penrose, 1959 Theorized about how a firm’s

resources influence its growth;in particular,
growth is constrained when resources are
inadequate
• Lippman & Rumelt, 1982 Explained the concepts
of inimitability and causal ambiguity; these
concepts became core elements of the resource-
based view (RBV)
• Wernerfelt, 1984 Emphasized the value of
focusing on firms’ resources rather than on their
products; coined the term resource-based view
 69

Late 80s
• Barney, 1986 Theorized about how organizational culture
could be a source of sustained competitive advantage
• Dierickx & Cool, 1989 Developed the notion that
resources are especially useful when no effective
substitutes are available
• Barney, 1991 Presented and developed the core tenets of
RBV; presented a detailed definition of resources; and
articulated the full set of characteristics that make a
resource a potential source of competitive advantage (i.e.,
valuable, rare, inimitable, and nonsubstitutable)
 70

90s
• Harrison, Hitt, Hoskisson, & Ireland, 1991 Highlighted the
value of resources and synergy between resources in the
context of diversification
• Castanias & Helfat, 1991 Characterized CEOs as firm
resources that possess varying (idiosyncratic) qualities
and quantities of general, industryspecific, and firm-
specific skills
• Fiol, 1991 Organizational identity proposed as a core
competency leading to competitive advantage
• Conner, 1991 Juxtaposed the RBV with industrial-
organization economics in order to demonstrate that RBV
was developing as a new theory of the firm
 71

Growth stage- 90s

• Mahoney & Pandian, 1992 Further delineated the RBV by
relating it to distinctive competencies, organizational
economics, and theory on industrial organization
• Kogut & Zander, 1992 Introduced the concept of
combinative capabilities; emphasized the importance of
knowledge as a resource
• Amit & Schoemaker, 1993 Split the overall construct of
resources into resources and capabilities
• Peteraf, 1993 Outlined the conditions under which
competitive advantage exists
• Hart, 1995 Introduced and developed a conceptual spin-
off from the RBV called the natural-resource-based view
of the firm
 72

• Grant, 1996 Articulated the knowledge-based view of the

firm as a spinoff of RBV
• Miller & Shamsie, 1996 Tested the resources–
performance link while measuring resources directly;
Conner & Prahalad, 1996 Identified situations where the
application of opportunism based arguments and
knowledge-based arguments may lead to opposite
predictions regarding the organization of economic activity
• Oliver, 1997 Theorized about how RBV and institutional
theory together can better explain sustained competitive
advantage
 73

• Teece, Pisano, & Shuen, 1997 Built on RBV ideas to

introduce the concept of dynamic capabilities; in
particular, explained competitive advantage as arising
from the confluence of assets, processes, and
evolutionary paths
• Coff, 1999 Initiated discussion of how the excess profits
derived from resources might be appropriated by various
stakeholders
• Combs & Ketchen, 1999 Examined how to reconcile
competing predictions from RBV and organizational
economics about the choice of organizational form
 74

Maturity stage- 2000 and ahead

• Alvarez & Busenitz, 2001 Explained the contributions of
RBV to entrepreneurship research and articulated further
contributions that could be made
• Priem & Butler, 2001a, 2001b; Barney, 2001 Debated the
usefulness of RBV as a theory of strategy and
organization
• Wright, Dunford, & Snell, 2001 Explained the contributions
of resource-based theory (RBT) to human resource
management research and articulated further
contributions that could be made
• Barney, Wright, & Ketchen, 2001 Identified the impact of
RBV on related subject areas
 75

---2000s--
• Makadok & Barney, 2001 Built theory about the
information firms should emphasize as they attempt to
purchase scarce resources
• Makadok, 2001 Synthesized ideas on excess profits
offered by RBV and theory on dynamic capabilities
• Lippman & Rumelt, 2003 Initiated discussion of the micro-
foundations of RBV by introducing a payments
perspective
• Ireland, Hitt, & Sirmon, 2003 Introduced strategic
entrepreneurship as recognizing the resources required to
exploit growth opportunities in order to create and sustain
competitive advantage
 76

-2000s--
• Winter, 2003 Introduced and explained the concept of
higher order capabilities
• Gavetti, 2005 Built theory about the micro-foundations of
dynamic capabilities by emphasizing the roles of cognition
and hierarchy
• Foss & Foss, 2005 Built conceptual bridges between RBT
and property rights theory
• Teece, 2007 Specified the nature and micro-foundations
of the capabilities necessary to sustain superior enterprise
performance in an open economy with rapid innovation
and globally dispersed sources of invention, innovation,
and manufacturing capability
 77

--2000s to 2010
• Sirmon, Hitt, & Ireland, 2007 Built theory about the
underexplored processes (i.e., the “black box”) that lie
between resources on the one hand and superior
profitability on the other
• Armstrong & Shimizu, 2007 Reviewed and critiqued the
research methods used in resource-based inquiry
• Crook, Ketchen, Combs, & Todd, 2008 Used meta-
analysis to establish that strategic resources explain a
significant portion of variance in performance across
extant evidence
• Kraaijenbrink, Spender, & Groen, 2010 Considered the
merits of prominent critiques of RBT
 78

Resources- key concepts/approaches

• Grant’s framework
• Concept of causal ambiguity
• Path dependence, complexity
• Bundles of resources,
• Core competence
• Learning and cultural schools
79
 80

Subgroups within RBV

• Traditional- wernerfelt, penrose, grant,
barney- different tasks of the strategy
manager
• Competence based view, Prahalad and
Hamel, Barney- vrio, competency tree
• Dynamic capabilities- strong vs weak-
permanent vs temporary advantages
• Focusing on key differences
 81

Way forward
• RB- strategy framework
• Problems- tautology etc
• Empirical support
• Integration with other perspectives- TC,
Agency etc- further swings of the pendulum
 82

Jury is still out

 83

Resource advantage theory

• R-A theory argues that a firm’s portfolio of resources can
mean ‘comparative advantage in resources’ leading to
production at higher profits (Hunt 2000).
• Superior value is achieved when resources are deployed
to provide a distinctive competency and relative sustained
advantage (Day 1994; Hunt 2000; Grewal & Tansuhaj
2001).
 84

Resource dependence theory

• An organization, such as a business firm, must engage in
transactions with other actors and organizations in
its environment in order to acquire resources. Although such
transactions may be advantageous, they may also create
dependencies that are not. Resources that the organization
needs may be scarce, not always readily obtainable, or under
the control of uncooperative actors. The resulting unequal
exchanges generate differences in power, authority, and
access to further resources. To avoid such dependencies,
organizations develop strategies (as well as internal
structures) designed to enhance their bargaining position in
resource-related transactions.
 85

Achieving coherence (Leinwand and Mainardi, 2010)

• How are we going to face the market-What
capabilities do we need- What are we going to
sell and to whom
• are we investing in capabilities that really matter
• Can we articulate the 3-4 things that we do better than
everyone else
• Do all our businesses draw from this superior
capabilities system
• Do all our products and services we sell fit with our
capabilities system
 86

Overview of the paper- Core competency of the

corporation
• Among most influential papers- for practitioners
• Intent, stretch and leverage
• Highly impressed by Japanese firms
• About harmonizing different streams of technology in line
with the intent.
• About communication- involvement and commitment to
working across organizational boundaries
• Going beyond SBU silos, driven by intent, competencies
• Examples- NEC Vs GTE (Competency vs customer focus)
• GE (SBU level thinking) vs others, Canon vs Xerox
 87

Core competence
• Core competence as: the result of the cumulative
learning process that takes place within an
organization about how to coordinate and deploy
assets and capabilities [from a macro level], and is
carried mainly by a superior technological
advantage.
• Unique combination of knowledge, capabilities,
structures, technologies and processes in an
organization, which makes it possible to provide
products or services which absolutely no other
organization can produce in the same way, at the
same moment and at the same speed.
 88

OPERATIONS/TECHNOLOGY
CAPABILITIES
Session 5
 89

Operational capabilities- types

• Operational improvements- resources for improving
current processes
• Operational innovation- capabilities for improving
processes and for creating new processes
• Operational customization- capabilities for extending and
customizing operations proceses
• Operational cooperation- capabilities for creating internal
and external linkages
• Operational responsiveness- capabilities for responding
quickly to changes in input or output requirements
• Operational reconfiguration- re-establish fit between
operations strategy and market environment if equilibirium
has been disturbed
 90

Technological capabilities
• Traditionally seen as a requirement to align technology to
the strategy- must for effective implementation
• “strategic management of technology”
 91

What is technology?
 92

Understanding the technology

• STOCK AND FLOW ASPECTS
• Product embodied aspect of technology
• Process related- how to use/make the product
• Knowledge related to the technology (tacit and explicit: explicit-
manuals, charts, formulae, theory-partly protected by
patents/copyright)
• Skills related to the technology
 93

How do we assess the technological level of firms?

 94

---Assessing technology
• Assessing costs and benefits of new technologies
(patents, annual contribution from new products/
processes)
• Life cycle position of new technologies
• Emergent technologies not yet used by the organization
• Phases (design, development, production, marketing,
post-marketing) where the top management spends its
time
 95

Markets Products Tech 1 Tech 2 Tech 3

Market 1 Product 1

Product 2

Market 2 Product 3

Product 4
 96

Identifying the CC tree

• Listing groups of related products
• Identifying the derivative technologies associated with
each group of products
• Identifying the core technologies associated with the
derivative technologies
• Identify the basic technologies that give rise to the core
technologies
 97

Canon: Products and Core Technical Capabilities

Precision Fine
Mechanics Optics

35mm SLR camera Plain-paper copier

Compact fashion camera Color copier
EOS autofocus camera Color laser copier
Digital camera Laser copier
Basic fax
Video still camera
Laser fax
Mask aligners Inkjet printer
Excimer laser aligners Laser printer
Stepper aligners Color video printer
Calculator
Notebook computer

Micro-
Electronics
 98

Technology influences: Customer value criteria

• Quality
• Service
• Cost
• Cycle time
 99

Customer value: Quality

• Meeting customer requirements
• Fitness for use
• Process integrity
• Minimum variances
• Elimination of waste
• Continuous improvement
 100

Customer value: service

• Customer service
• Product service
• Product support
• Flexibility to meet customer demands
• Flexibility to meet market changes
 101

Customer value: cost

• Design and engineering
• Conversion
• Quality assurance
• Distribution
• Administration
• Inventory
• Materials
 102

Customer value: cycle time

• Time to market
• Concept to delivery
• Order entry to delivery response to market forces
• Lead time (initiation to completion of a process)
• Design
• Engineering
• Conversion
• Delivery
• Materials inventory
 103

How can we operationalize/classify technological

capabilities?
 104

Technological capability: elements

Strategic technological capability
Tactical technological capability
Supplementary technological capability
Steering capability
 105

Strategic Technological capability

• Creation capability
• Design and engineering capability
• Construction capability
 106

Tactical Technological capability

• Production capability
• Marketing and selling capability
• Servicing capability
 107

Supplementary technological capability

• Acquiring Capability
• Strategic Planning Capability
• Training Capability
• Information Support And Networking Capability
• Technology Selling Capability
 108

Steering Capability
• Path Finding Capability
• Decision Making And Implementing Capability
• Integrating Capability
 109

Operationalising capabilities
• Deciding indicators for different levels for each capability
• Rating the organization on each of these capabilities
• Understanding the gap and resources required for
reaching the desired level
 110

‘World class’ production

• Stage 1. Internally neutral: by own standards, supply
without ‘surprises’
• Stage 2: Externally neutral: meet standards of main
competitors
• Stage 3: ‘Internally supportive’- no longer appropriate to
copy competitors, actions related to organizational
strategies
• Stage 4: ‘Externally supportive’- Best in the world in
anything important it does
 111

Distributed technological capabilities

• Across large and increasing number of
technological fields
• In different parts of the organization- eg in
corporarte R&D units for exploring new and
emerging opportunities and in the
subsidiaries for sustaining the distinctive
competencies
• Among different strategic objectives of the
organization
HR CAPABILITIES
Session 6
 113

How would HR capabilities be linked to

organizational performance?
• Links to other capabilities?
• Links to performance?
 114

Linked to organizational capabilities-

• Capability audit- understanding underlying people skills
 115

What are the key HR assets/resources?

 116

Levels of capabilities
1. The linkage between the HR policies, tools
and practices
2. HR capabilities that are indicated by a
reputation (with a lag)
3. Indicated by outcome measures such as
metrics of HR performance
if the firms do well in the HR variables, they would be able to
manage organizational performance as well as ensure maximum
performance from the individuals in the organizations
 117

Resources
• Human capital
• HR Practices,
• Organizational routines and processes- including
learning routines
• Intellectual capital including knowledge
• Organizational climate
 118

Desired outcomes
- Best places to work
- High employee productivity
- High employee engagement
- High organization performance induced by improvement in
innovation and efficiently and other metrices
- Manage performance of a firm, leverage technology and
maintain levels on parameters such as safety and
sustainability, and also create resources across both
permanent and temporary and full time/ at home employees
 119

Human capital
• Individual competencies- to innovate, network,
perform required tasks
• Attitude
• Types of employees- temporary vs permanent,
generalists vs specialists, ability to manage at
different scales, top management team- Infosys
• Employee capabilities impacted by variables such
as job satisfaction and training that are impacted
by HR practices
 120

People management practices- systems

• Formal vs informal
• Stock vs flow
• Standard systems- staffing, training, rewards, appraisal,
participation, recognition, communication,
121
 122

Standard systems- staffing

• Employer brands
• Cost per Hire: (Advertising + Agency Fees + Employee
Referrals + Travel cost of applicants and staff +
Relocation costs + Recruiter pay and benefits) ÷
Number of Hires
• Time to fill: Total days elapsed to fill requisitions ÷
Number hired
 123

Standard systems- training

• Training Investment Factor: Total training cost
÷ Headcount
• Resources- linkage with external training
bodies, internal training structure/resources
 124

Standard systems- rewards

• Health Care Costs per Employee -Total cost of health
care ÷ Total Employees
• HR Expense Factor- HR expense ÷ Total operating
expense
• Workers’ Compensation Cost per Employee: Total WC
cost for Year ÷ Average number of employees
• Capabilities for rewarding compensation at
different levels
 125

Standard systems- appraisal

• Human Capital ROI: Revenue − (Operating Expense −
[Compensation cost + Benefit cost]) ÷ (Compensation
cost + Benefit cost)
• Human Capital Value Added: Revenue − (Operating
Expense − ([Compensation cost + Benefit Cost]) ÷
Total Number of FTE
• Revenue Factor: Revenue ÷ Total Number of FTE

• Systems for appraisal at different levels

 126

Standard systems- participation

• Absence Rate:[(Number of days absent in month) ÷ (Average
number of employees during mo.) × (number of workdays)] × 100
• Turnover Costs: Cost to terminate + Cost per hire + Vacancy Cost +
Learning curve loss
• Turnover Rate: [Number of separations during month ÷ Average
number of employees during month] × 100
• Processes for engagement and performance management
 127

Standard systems- recognition

• Systems of reward
 128

Standard systems- communication

• Capturing voices of different stakeholders
• Processes for communication- special/routine
• Capability of managers to communicate
• Capability to use different media
 129

Organizational routines and processes

• Processes,
• routine activities,
• organization level processes- such as Strat plan syst
 130

Organizational climate
• Impacted by Culture, Control systems
 131

Role in strategy implementation

• Execution may require something more than alignment
(eg cross functional linkages, going beyond silo functional
thinking)
• Making agile adjustments- going beyond the plan
• Quality of internal communication- do all frontline staff
understand the new strategy
• Systems rewarding team performances and agility
• Decentralized leadership- hence focus on leadership
development
 132

Nature of leadership
• Thought leadership- executing growth, market insight,
strategic (long term) orientation
• People and organizational leadership- change,
organizational capability, team leadership, collaborating
and influencing
• Business leadership- Customer impact, results orientation
 133

HR requirements in international strategy

• Competencies and skills
• Role of coaching and mentoring
 134

Coaching and mentoring leaders for growth

• Mentoring
• Transformational role?
• Altering expectations of followers?
• Introducing to network?
• Coaching- individual, group and team level
 135

Location of HR capabilities
• Within the functional domain of HRM
• Within line managers
• As a separate shared function- with options
• be an extension of the HRM department
• as an infrastructure
• located within one of the business units,
• an internal joint venture
 136

HR capabilities- impact of technology

• Intranet-based employee portals through which employees
can self-service HR transactions.
• The availability of centralized call centers staffed with HR
specialists.
• Increased efficiency of HR operations.

• The development of data warehouses of HR-related

information.
• The ability to outsource HR activities to specialist service
providers.
Resources for platform
strategies
Session 8

137
What is a platform
• A platform is a business model that creates value by facilitating
exchanges between two or more interdependent groups, usually
consumers and producers.
• In order to make these exchanges happen, platforms harness and create
large, scalable networks of users and resources that can be accessed on
demand. Platforms create communities and markets with network
effects that allow users to interact and transact.

138
Players in a platform ecosystem

139
Network effects
• Demand side economies of scale
• Enhanced by technologies that enable efficiencies in social networking,
demand aggregation, app development,
• Suppliers and customers may be seen as resources

140
Roles within platforms
• Accretive vs depletive roles
• Platform competition from unrelated industries
• Competition from established platforms with superior network effects
• Target an overlapping customer base with a distinctive new offering that
leverages network effects
• Competition from platforms that collect the same set of data as your firm

141
Shift from being a pure ‘pipeline’ business to
a platform business
• Resource control to resource orchestration
• Internal optimization to external interaction
• Change from focus on customer value to ecosystem value

142
Resources in platforms
• Strong up front design that can attract the desired participants, and
enable the desired interactions
• Start with a single type of high value interaction, and spread the
scope later
• Categories of resources in platforms
• Resources that enable a firm to create a platform
• Resources that enable a firm to leverage a platform to create profits
• Resources that enable a firm to enter a market where competing platforms
are already dominant
• Resources that enable a firm to resist attacks from competing platforms

143
Access openness and resource openness
• Access openness refers to the granting of access to external
complementors to participate and conduct business on a platform by
providing them with dedicated resources to interact with the
platform. For example, a host can provide interfaces, such as APIs
(Application programming interface), to allow outside developers to
create new apps on top of the platform. Here, access refers to the
access to participate.
• By contrast, resource openness refers to opening the platform’s
valuable resources by forfeiting the IPR of the resource. For example,
a platform owner can opensource a platform’s codebase

144
Examples of platforms
• Google Search, Facebook, Amazon Web Services, Amazon
Marketplace, Android

145
Differences between various platforms
• Platforms are very different in how they create network effects,
interactions they enable, approaches to solving “chicken and egg”
problems (do you build the demand side first or the supply side?),
openness levels, growth dynamics, subsidies, competitive strategies
and monetisation methods
• Getting the critical mass is important in getting a platform started.
Getting the first 1000 or million customers may be the most difficult.
Hence resources that enable firms to achieve this may be critical.

146
Platform forking
• A hostile firm, i.e., a forker, bypasses the host’s controlling boundary
resources and exploits the platform’s shared resources, core and
complements, to create a competing platform business.
• For example, Amazon has created its proprietary Fire OS platform,
which appropriated the open platform core of the Android
OpenSource Project (AOSP). Furthermore, Amazon has not only
copied Android’s core but has expanded the exploitation to its app
complements that are shared for distribution
• Response to forking- e.g. Google’s responses, which modified
Android’s boundary resources to curb exploitation and retain control

147
• Technically, a platform fork “forks” the platform’s core, but
strategically the technical fork is a means to create a new platform
that directly competes with the host platform while maintaining
compatibility with it. Compatibility offers a means to exploit the host
platform’s complementarities, especially its apps.
• creating a fork of the platform core saves at least between $1 and $2
billion in initial development cost and provides significant additional
savings in each subsequent version if the forker manages to maintain
compatibility

148
Platform envelopment
• “platform envelopment strategies,” whereby a dominant platform
(the enveloper) operating in a multi-sided market (the origin market)
enters a second multi-sided market (the target market) by leveraging
the data obtained from its shared user relationships.
• effects of “privacy policy tying,” a strategy whereby the enveloper
requests consumers to grant their consent to combining their data in
both origin and target markets. This may allow the enveloper to fund
the services offered to all sides of the target market by monetizing
data in the origin market, monopolize the target market, and
entrench its dominant position in the origin market
• Here the resource used is “another attractive platform”

149
Impact of platform envelopment strategies
• Leverage shared user relationships and/or common components. For
example, Google entered into mobile operating systems by bundling
Android with Google Search, two separate platforms, in order to,
among other possible goals, leverage the data generated by users of
both platforms. Such data were effectively monetized through
Google’s online advertising platforms. This strategy allowed Google to
fund its entry in a way that could not be replicated by other
competitors and contributed to its eventual dominance of the mobile
operating system market

150
• Platform envelopment strategies are viable not only when bundling
platforms that are complements but also when they are weak
substitutes or are functionally unrelated. Google entered online
display advertising by bundling DoubleClick’s online display platform
and its own online search platform, which were regarded as
complements by many advertisers and weak substitutes by others
• Facebook or Alibaba, penetrated retail banking by combining a
payment system platform with its online advertising businesses

151
Volumes as a resource
• A (positive) membership externality exists when the value received
by a member of one side increases with the number of members on
the same or another side. In the case of social networks, users benefit
from being able to reach out to a larger number of users. As another
example, consumers benefit more from a restaurant reservation
platform if they have more restaurants to choose from when making a
reservation. This is a traditional indirect network externality. A
(positive) usage externality exists when the members of a group
benefit when members of the same or the other group intensify their
use of the platform. For example, users of a social network may
benefit when other users post additional content.
152
“When a platform enters a pipeline firm’s
market, the platform almost always wins”

153
Impact of platforms-1
• Platform creates a new type of online marketplace and increase
the exchanges among various businesses in the global scope. For
instance, the Chinese e-commerce platform, Alibaba.com is a
business-to-business website, connecting manufacturers from a
variety of countries with buyers around the world.

154
Impact of platforms-2
• Platform features an infrastructure that brings external sellers
and buyers together, regardless of sources through data-driven
matchmaking, with little internal resources or inventory. In
business logistics and supply change management, it can go
beyond the just-in-time delivery and reach zero inventory
through platform.

155
Impact of platforms- 3
• The network effect has shifted from traditional business-to-
business network or managerial ties to the platform based
virtual business networks in the global business market.
Platform becomes a business hub attracting many sellers and
buyers all over the world through internet. Therefore, the
network effect is enhanced in the digital platform.

156
Impact of platforms-4
• The platform has displaced traditional intermedia in the
connected ecosystem. The role of sellers and buyers in the
platform ecosystem is flurrying in the digital age in which a
producer and a user can swap with each other. As such, a buyer
can become a seller and a seller can become a buyer in an
interactive way. Such a swap effect attracts more participants
and accelerates the market expansion.

157
Impact of platforms-5
• Platform in the shared economy has expanded the opportunity
for business-to-business crowding sourcing and crowd funding,
creating values by unlocking the spared resources. Given the
platform openness, companies can have a wide access to
external sources for new product development, idea generation
and innovation through the various types of business platform.

158
Example of a platform- Sports league
• E.g. Cricket T20 leagues- Components of the platform
• Franchisee teams- whose owners bid to have their own teams (Revenue for
the platform)
• Well known players who have their own following (who are contracted by the
teams)
• Cricket boards of different countries who get a share from their contracted
players revenues
• Sponsors of the tournaments for different years
• Viewers of the matches- both in the stadium and through television
• TV companies that bid for the right to telecast live matches
• Business firms that pay to telecast their ads in these matches
• How are the different platform components mobilised?
159
Competing for value- T20 cricket leagues
• Inter-nation cricket series, multinational tournaments
• Other formats of the game
• Different boards of the cricket playing countries who earn their
revenues from their domestic and international matches
• Owners of cricket stadiums in different parts of the world
• Other T20 leagues in other countries

160
E.g. how does competition of IPL have
cooperation and competition with this platform
• IPL vs ICL
• IPL Vs Other country leagues- e.g. BBL
• IPL Vs other formats
• Which resource ensures that IPL has a competitive advantage over
other competitors?

161
 162

MARKETING CAPABILITIES
Session 4
 163

Marketing capabilities
• Which are the complex bundles of knowledge and skills
for carrying out marketing activities that are deeply
embedded in organizational processes.
• These capabilities are likely in areas such as digital
marketing, Marketing Tech platforms, and marketing
analytics where companies are trying to get up to speed
fast
 164

Exemplary firms in marketing

• Coca cola- Brand
• Pidilite- products that define the category (e.g. Nestle- Maggi)
• Unilever-brands, Resources for broad based differentiation
• P&G-
• Apple- Brand, cult level loyalty, NPD capability
• Star network- marketing strategy, segment identification,
• Titan-
 165

Types of marketing capabilities

• Outside-in capabilities- competencies of firms that
help it understand the changes taking place in the
markets, CRM
• Inside out capabilities- firms’ internal resources such
as financial management and cost control
capabilities & processes
• Spanning capabilities- capabilities such as NPD and
information sharing capabiliites that help integrate
outside-in and inside-out
• Networking capabilities- creation of mutual trust
among partners, enabling and sharing of expertise
and other tangible assets
166
 167

Use of forming external linkages

• Embedded ties help in exchange of fine
grained information and problem solving-
firms organized in networks have better
choices of survival than firms in arms
length market relationships
• Use of boundary spanning social networks
increase both learning and flexibility in
ways that would not be possible within a
self contained hierarchical organization.
 168

Customer resources in RBV

• Penrose: use of customers to generate
idea to enter new product ideas; response
to customer needs resulting in assimilation
and formation of unexploited skills and
resources
• ‘privileged access to information about
emerging needs of established customers
provides an important basis for sustainable
competitive advantage’
 169

Building on customer relationships

• Inside access- built on frequent, onsite, and in
many cases, face to face interaction with
customers
• Assimilates and exchange knowledge that is
often tacit in nature, and to rapidly adjust the
characteristics of both existing and new
product
• Frequent and long term social interaction builds
trust and emotional bonds in customer
relationships
• ‘Relatedness’ in terms of common consumer
needs
 170

Consumer resources-sustainable competitive

advantage
• Differences in ability of firms to respond to
consumer needs, on the basis of differential
access to inside info on customers
• Development of common language and
knowledge structure that allows for efficient
exchange of knowledge. These cannot be
imitated unless competitors also go through
similar long term processes
 171

Consumer resources- Sophisticated

• Interactions may become more
sophisticated- hence less understood by
outsiders- customer relationships cannot be
traded as individual items- as they rest on a
complex collection of multi point and multi
level contacts, and because relationships
and trust in problem solving capabilities are
often linked to the overall reputation of the
firm
 172

Market orientation as a firm level resource

• ‘Listening to customers and delivering solutions on the
basis of interests and wants of the customers- inclusive of
customer orientation, competitor orientation and inter-
functional coordination
• Market oriented firms- follow routines and processes such
as generating info about customers through monitoring
and assessing their changing needs and wants,
disseminating that info within the firm, and revising
strategies to enhance customer value
• Market orientation – more valuable in the context of its
synergies with innovation
• Basis of ‘dynamic capability’?
 173

FIRM ORIENTATION

High CUSTOMER MARKETING

ORIENTATION ORIENTATION
Propensity
to meet
current REACTIVE DISRUPTIVE
needs Low ORIENTATION ORIENTATION

Low High
Propensity to meet future needs
 174

Components of Marketing capabilities

• Market sensing capabilities
• CRM capabilities
• Brand management capabilities
 175

Market sensing capabilities- customer intelligence

aspects
• Firms ability to learn about customers, competitors,
channel, and general environment
• Identification of underserved customer segments
• Identifying opportunities within the existing customer base
 176

Market sensing capabilities- margin aspect

• Matching firm’s resource acquisitions and deployments
with customer opportunities
• Hence, also avoid overpaying for resources
• Identifying least price sensitive customers
• Identifying sources of non-price value
• Learn fast about customer and competitor responses to
its moves- hence providing insights about the rates of
these growth outcomes
 177

Learning from the market

Decisions driven by current customer requests and behaviour
•
and signals about their changing needs
• a willingness to be immersed in the lives of current, prospective, and
past customers and observe how they process data and respond to the
social networking and social media space, without a preconceived point
of view;
• an open-minded approach to latent needs; and
• an ability to sense and act on weak signals from the periphery
 178

External resources leveraged in open network

• Social media text miners
• Viral consultants
• Search engine optimizers
• Market research suppliers
• Database analytics
• Advertising agency
 179

CRM capabilities
• Firm’s ability to identify customers and prospects
• Initiate and maintain relationships with attractive customers
• Leverage these relationships into customer-level profits
• (This may weed out some of the less profitable customers
and hence reduce revenues but overall margins may
increase)
 180

Customer engagement in a virtual community

• Stage 1. Understand consumer needs and motivations
• Stage 2. Promote participation
• Encourage content creation, cultivate connections, create
enjoyable experiences
• Stage 3. Motivate cooperation
• mobilize members- leaders, inspire ideas
 181

Value derived by participants in virtual communities

• Information
• Relationship building
• Social identity/self expression
• Helping others- seeking value by helping others
• Enjoyment- joy of interacting with others
• Status/influence- seeking status among others
• Belonging- sense of attachment to the community as a
whole
 182

Skills of network oriented managers

• Relational skills
• Commercial skills
• Knowledge management skills
• Leadership skills
 183

Co-creation
• The mobilisation of forethought,
• Using the collective intelligence of customers
• Using customer competence, managing personalised
experiences, shaping expectations
• Converting ‘just in time’ knowledge of customers to ‘just in
time’ learning for the company
 184

Cocreation- principles
• Value for stakeholders to ensure participation
• Focus on rewarding experiences for all stakeholders
• Provide options for stakeholders to interact with one
another.
• Provide platforms that allow stakeholders to interact and
share their experiences.
• Crowd sourcing as a type of co-creation
 185

Ways of co-creation by different firms

Company Nature of co-creation
BMW ‘M’ Division for customization of cars, engineers and customers link
Ducati Tech café- virtual environment for product conceptualization
Eli Lily Internet based platform- collaborative innovation among pharma
customers
IBM Worldwide partner innovation centres
IKEA Partners designing their own kitchens with help of a sales rep
LEGO Lego factory for personalised LEGO models, sharing with other
customers
P&G P&G advisor program- customers give feedback after trying new items
Philips Collaborating with software hackers by giving access to program files
Samsung Virtual product launch centre- help in diffusion of new product info
Unilever Co-creation of concepts, packaging, advertising
Threadless Customers submit, inspect and approve T Shirt graphic designs
 186

Uses of customer intimacy

• Redefine value for customers in the market (e.g, Dell,
Nike)
• Building cohesive business systems that delivers more of
that value than customers
• In doing so, raise customer expectations beyond that of
competitors
 187

Managing relationships
• Client relationship scorecard (eg. Infosys- training
employees to build transformational relationships)
• Use of social media to build relationships and maintain
appropriate communication links
• Using customer for financing
 188

Communicating in relationships- drivers

• Generating more value in a group
• Need for communication among providers
• Value to clients of shared information or information
• Appropriate product bundle
• Client’s use of predictable clusters of complementary services
• Difficulty of accessing or using shared complementary services
 189

Brand management capability

• Create and maintain high levels of brand equity
• Align brands to the market environment
• Establish and maintain awareness among prospective and
existing customers and to differentiate products and
services to lower customers' search costs and perceived
risk
• Though strong brands lowers price sensitivity, they may
increase unit costs of brand building
 190

Complementarity between the three capabilities

• Complementarity between Market Sensing and CRM
capabilities
• Complementarity between CRM and Brand management
capabilities
• Complementarity between Market Sensing and Brand
Management capabilities
 191

RESOURCE BASED STRATEGY

Strategy and resources: an introduction

 192

Course Objective
• To understand the types and characteristics of resources
associated with the organization
• To learn the methods for assessing the resource needs of
the organization; and
• To understand the process of resource acquisition,
retention and development
 193

AOL focus
• The course will focus on the learning goal of decision
making, along with the goal of functional learning in
strategy. The learning goal of decision making will be
covered in the case through use of cases which will
provide the context for analysis on all key topics. The level
of decision making skill will be evaluated through a written
examination (mid term) involving cases on which specific
questions will be asked that address each dimension of
decision making.
 194

Evaluation component
End-Term 40%
Mid term exam 25%

Assignments 20%

Quiz on case discussions 10%

Class Presentation 5%
The overall grades, based on the relative performance of the participants.
For assignment – On any of the topics discussed in the course- analysis of one or
more firms with regard to these topics- Format- Around 6-8 pages of text, analysis in
your own words, 12 font, 1.5 line spacing, 1 inch margins, no photographs, On cover
page- only title and names/roll numbers of all group members.
For presentation, answer questions, submit slides before the sessions, presentations
to happen during the session.
 195

Strategic management- current consensus

• What is the common understanding about
strategy content and process?
 196

Strategic management- current consensus

• Definition, framework, dominant ways of
thinking- SCP, business and corp strategy
• Key dilemmas- short term vs long term
focus, thinking like a firm
• Concepts – such as strategy, goals,
mission, vision, intent
 197

Questions for strategic theories

• Where should we compete?
• How can we gain and sustain advantage?
• What assets, capabilities, structures, systems and culture
do we need to deliver the strategy?
• What do we look like now?
• How can we change?
 198

Questions for strategic theories

• Which theories inform strategic management?
 199

Key issues in strategic management

 200

Key issues in strategic management

• How to sustain value creation
• How to handle (or employ) imitation
• What is the boundary of the firm
 201

Frameworks in Business strategy

202
203
204
 205

Strategy stated as (beyond vision, mission and values)

• Goals or objectives- ends
• Scope- domain
• Advantage- means
 206

Frameworks in Business strategy

• LCAG
• Porters industry five forces and positioning- generic
strategies
• Value disciplines- Operational excellence, customer
intimacy, and product leadership
• The stakeholder model
• Strategic planning and capital planning frameworks
• Balanced scorecard
 207

LCAG framework- implications for resources

 208

Porter’s industry five forces, positioning and generic

strategies
• Five forces
• Positioning-
• Generic strategies of differentiation, cost leadership, integrated
• -based on resource matching with CSF
 209

Generic strategy- cost leadership- resource

implications
 210

Generic strategy- cost leadership- resource

implications
• Efficient processes
• Supply chain integration
• Resources enabling economies of scale and scope
• Specialized resources
 211

Generic strategy- differentiation- resource

implications
 212

Generic strategy- differentiation- resource

implications
• R&D, NPD processes
• Brands, customer focus
• Quality systems
 213

Integrated cost leadership and differentiation

strategy: implications
 214

Being perceived as different (Collis and Rukstad, 2008)

(Blue ocean logic)
 215

Value disciplines
• Operational excellence,
• Customer intimacy,
• Product leadership
 216

Value disciplines- implications for resources

 217

Reason why the firm continues to operate

• Finding the sweet spot of overlap between the
• customers’ needs and the
• companies capabilities- that the
• competitors do not currently offer
 218

The stakeholder model

• Group 1: Employees
• Group 2: Customers
• Group 3: The Community
• Group 4: Shareholders
• Group 5: Society
 219

Implications of stakeholder model for resources

 220

Strategic and Capital planning process

• Strategic planning as the vehicle that guides decision
making for all spending
• Resources needed to fulfill both immediate requirements
and anticipated future needs based on the results-oriented
goals and objectives
• Capability of existing resources - performance gap
between current and needed capabilities
• Identifying and evaluating alternative approaches, including
nonphysical capital options such as human capital
• Review and approval framework with established criteria
for selecting capital investments
 221

The balanced scorecard

• Financial
• Customer
• Internal business process
• Knowledge, learning and capabilities
 222

Open Innovation / Open strategy

• The primary innovator performs some central
function in the general process and is rewarded
for that work with a patent, license, some kind of
service, or another means of monetizing the
value created. The remaining work is performed
by independent innovation firms that develop their
own products and services around that
technology.
 223

Open innovation- implication for resources

• Strategic resources?
 224

Miles & Snow framework

• Actions of prospectors, defenders, reactors, and
analysers
• Analysers more profitable? Prospectors- more revenue
growth?
 225

First mover vs second mover- resource implications

• What capabilities does successful first mover have?
• What capabilities does a successful second mover have?
 226

Frameworks in corporate strategy

• Ansoff Matrix
• McKinsey’s three horizons of growth: core, emerging and
blue sky business
• Real options
 227

Ansoff Matrix
• Market penetration
• Market development
• Product development
• Diversification
 228

Portfolio models
• BCG Matrix
• GE Grid
 229

McKinsey’s three horizons of growth: core, emerging

and blue sky business

Visualize movement
from 1 to 3, and 2
being the bridge
 230

Real options
• Firms establish options by making an initial
investment, for example by performing a market test,
creating a joint venture, developing a prototype, or
purchasing an operating license (e.g., in the mining
or telecommunications industries). If the economic
prospects of the project turn out to be favorable, a
firm may later decide to exercise the option—that is,
to launch the new product, to purchase the
remaining capital of the joint venture, to build a plant
for the new technology, or to operate the acquired
license. Conversely, if economic circumstances are
unfavorable, it will abandon the option
 231

Real options- resource implications

 232

Value paradox in strategy

How to balance the two broad approaches to creating value
• Create more value for each customer
• Customer specific resources
• Control over resources that can create features
• Resources that can enable a premium to be charged
• Decentralised resources that enables responsiveness
• Create value for more customers
• Resources that are common to many customers
• Centralized resources that enable efficiency and coordination
 233

Time Paradox in strategy

• What time horizon to focus on?
• How to simultaneously focus on all three time-horizons?
• What does a particular focus mean?
• Past
• Building on existing resources
• Present
• Creating or acquiring new resources to respond to the
changed requirements
• Future
• Investing in resources that may be relevant in the
future
• Creating resources that may shape the future
 234

How does the time paradox play out in a particular

context
• Automobile companies faced with new emission norms in
2019
• Option to continue with vehicles barely meeting the current norms
• Option to invest in vehicles that will be compliant for years to come
and make fuel choices such as petrol/diesel
• Option to design products such as EVs, hybrids, other clean
options
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Conceptual framework of strategy & resources

• Value paradox and time paradox play out both at the
business strategy level and the corporate strategy level
• The functional strategy and the resources depend on the
strategic approaches the firms have adopted for business
strategy and corporate strategy