Drivers of chaos (12)
- Global connectivity
- Trade liberalization
- Technology (Industry 4.0)
- Pace (= development + diffusion)
- Convergence
- In every product and in every industry
- Buyer power
- Social inequality and unrest
- Environmental crisis
Pace
Development + Diffusion
- Long-term planning and tight control systems don’t work anymore
Convergence
Competitor can come from different industry, built product based on different industry
Hypercompetition
Intense and rapid competitive moves. Competitive advantages continuously generated, destroyed or neutralized. Constant disequilibrium and change. Sustainable competitive advantage doesn’t exist.
Causes of change
- Global warming > Environmental & Social Sustainability (CSR).
- Technology > Shift from industrial to knowledge-based economies + decreasing fixed costs in some industries.
- Competition > Global (but also increasing concentration & consolidation in some industries), smaller entrepreneurial firms, shift from economies of scale to economies of scope & market niches.
- Social trends > Increasing complexity and Corporate scandals and accountability.
Accommodate to pace of change
- Managing advantages: long periods of advantage disrupted infrequently by breakthroughs that erode that advantage.
- Managing disruptions: short periods of advantage punctuated by frequent disruptions.
Scaling Laws
- Sublinear scaling: double the number of cells in an organism, the number of capillaries increases by only 75%.
- Super-lineaar: when you doubt the size of a city the infrastructure needed increases by 85% BUT the number of socio-economic outputs increases by 115%.
The Success Syndrome/ Inertia
Leading market companies already have a good operation and knowledge about the consumers. They have established their position in the market. As a result, if the company has been aging and expanding their operations, they already have developed a well organized structure in the way of working.»_space; It is challenging to keep up with the dynamic innovation and rapid technological change.
Challenge of The Success Syndrome/ Inertia
- How to protect the traditional successful business and simultaneously to engage in radical innovation.
» Difficult because established companies tend to focus on what they are good at, and already have established management procedures, practices, performance measures based on targets and accountability.
Solution: innovation and doing something new requires different management and organizational approach.
Geoffrey’s statement
Warns big companies that they have to adapt to the world or else they will be bankrupt
Elephant theory
Corporate firms are big (= have lot of resources), but are slow (= adapt slow).
Principles of Disruptive Innovation
- Resource Dependency Theory: firms depend on customers and investors for resources. Customer’s don’t want new products/services; solution = new managers, because they don’t depend on old customers.
- Small markets don’t solve the growth needs of large firms.
- Agnostic marketing: markets that don’t exist cannot be analyzed.
- A firm’s capabilities define its disabilities.
- Technology supply may not equal market demand.
Agnostic marketing
Markets that don’t exist cannot be analyzed.
> More experienced companies can do (internal/external) market analysis’s
> Start-ups can’t
How can you sustain your company or Disruptive innovation?
- Working with start-ups
- Creating autonomy for some parts of the company > gives the opportunity to sense weak spots of your company or/and create awareness for it.
The Innovator’s Dilemma (Clayton Christensen)
- Failure to adapt to disruptive innovation is not the result of bad management but a result of good management
- Leading companies are focussed on their mainstream market/existing customer base; listen closely to create new products & services to meet their needs (and kill ideas for which there is little need)
Downside: this fixed focus can lead to ignorance of another group of customers that natch other needs. Other companies will start do develop innovation for that small group.
Cannibalizing competitive advantage
Destroy your competitive advantage before your competitors do it for you
Entrepreneurial companies (key words)
Creative, entrepreneurial mid-set, dynamic structures, etc.
Entrepreneurial architecture
A strategic alignment of corporate resources to encourage entrepreneurship and innovation on a sustainable basis
EO - Entrepreneurial Orientation
5 Entrepreneurial Characteristics
Sustained pattern of entrepreneurial behavior over time. Five dimensions/characteristics:
- Innovativeness
- Risk-taking
- Pro-activeness: it is not reactive, they wan’t to be the first.
- Competitive aggressiveness: focus always on market share.
- Internal autonomy: drives also exploration
4 Pillars of Organizational Architecture
- Leadership and Management
- Culture
- Structure
- Strategy
Economy of scale
Profit depend on the unit costs
Economies of scope
Can be generated from diversity products, diversification that somehow relate to each other.
- So it is more efficient to produce together
