Day1TUMGMSeafax

Strategic Management and Implementation TMU: 

Strategic Management and Implementation TMU Johannes M. Pennings June 2004 www-management.wharton.upenn.edu/pennings

Strategy and Innovation: 

Strategy and Innovation Part I, Day 1 What is strategy? Frameworks External vs Internal Focus: Customer andamp; Knowledge Strategy and Design Part II, Day 1 Strategic Management of Innovation Market and Firm Interia Photography Industry

Slide3: 

Dual Strategies Competing for the Future Activity Systems Capabilities-Based Competition Resource-Based View Vision Multimarket Competition Time-Based Competition Value Chain Core-Competence Eco-Systems Co-opetition Virtual Integration Collective Strategy Profit Pools Strategic Groups 5-Forces model 7-S Framework Value Disciplines Time/Event Pacing The (Institutionalized) Strategic Management Shopping Mall Value Migration Strategic Innovation Strategy as Revolution

Slide4: 

Strategic Management … Confusion Reigns. '[W]aves of new approaches [have been] proposed. […] Each approach made its contribution in turn, yet how any of them built on or refuted the previously accepted wisdom was unclear. The result: Each compounded the confusion about strategy that now besets managers'. Source: Collis andamp; Montgomery (1995) ' Competing on Resources: Strategy in the 1990s', Harvard Business Review.

Slide5: 

'People seem to disagree about almost every aspect of strategy making […] they disagree about which issues to address in developing strategy, they disagree about the process of developing strategy, and they even disagree as to whether one can think about strategy at all'. C. Markides (2000) All the Right Moves: A Guide to Crafting Breakthrough Strategy

Slide6: 

Strategic Management: ... deals with the formulation and implementation of a set of decisions, the purpose of which is the realization of a sustainable competitive advantage (manifested in long-term above average profitability).

Many Frameworks of Strategy: 

Many Frameworks of Strategy Porter and Five Forces Competitive advantage due to cost leadership or market differentiation Mintzberg and Stream of Decisions Not rational but emergent BCG and low to high growth markets New 'School' and competencies that produces a platform fro strategizing

Porter:Strategy, the Link between the Firm And its Environment: 

Porter: Strategy, the Link between the Firm And its Environment THE FIRM Goals and Values Resources andCapabilities Structure and Systems THE INDUSTRY ENVIRONMENT Competitors Customers Suppliers STRATEGY STRATEGY

Sources of Competitive Advantage: 

Sources of Competitive Advantage Similar product at lower cost Price premium from unique product

Strategy and Innovation: 

Strategy and Innovation Part I, Day 1 What is strategy? Frameworks External vs Internal Focus: Customer andamp; Knowledge Strategy and Design Part II, Day 1 Strategic Management of Innovation Market and Firm Interia Photography Industry

Porter’s FrameworkForces Driving Industry Competition: 

Porter’s Framework Forces Driving Industry Competition Potential Entrants Substitutes Industry Competitors Suppliers Buyers Bargaining Power over Suppliers Threats of New Entrants Bargaining Power of Buyers Threat of Substitutes

Mintzberg on Strategy: 

Mintzberg on Strategy Plan (Intended) Also a Ploy (a Trick a Way to ? a Competitor) Pattern (Realized) Position Perspective ع ع

THE CONCEPT OF STRATEGY: 

THE CONCEPT OF STRATEGY

Slide14: 

Hi Growth Lo Growth Market Share BCG

Strategy and Innovation: 

Strategy and Innovation Part I, Day 1 What is strategy? Frameworks External vs Internal Focus: Customer andamp; Knowledge Strategy and Design Part II, Day 1 Strategic Management of Innovation Market and Firm Inertia Photography Industry

Shifting From an Industry Focus(Porter) to a Resource Focus: 

Shifting From an Industry Focus(Porter) to a Resource Focus STRATEGY STRATEGY THE FIRM Goals and Values Resources and Capabilities Structure and Systems The Firm-Strategy interface The Strategy-Environment Interface THE INDUSTRY ENVIRONMENT Competitors Customers Suppliers THE INDUSTRY ENVIRONMENT Competitors Customers Suppliers

Shifting From an Industry Focus(Porter) to a Resource Focus: 

Shifting From an Industry Focus(Porter) to a Resource Focus THE INDUSTRY ENVIRONMENT Competitors Customers Suppliers STRATEGY STRATEGY THE FIRM Goals and Values Resources and Capabilities Structure and Systems The Firm-Strategy interface The Strategy-Environment Interface

New School: Resources & Capabilities: 

New School: Resources andamp; Capabilities The role of resources and capabilities in strategy formulation. The resources of the firm Organizational capabilities Appraising the profit potential of resources and capabilities (sustainability and appropiability). Developing the firm’s resources and capabilities.

Value Migration: 

Value Migration 'We have to be willing to cannibalize what we’re doing today in order to ensure our leadership in the future. It’s counter to human nature but you have to kill your business while it is still working'. Lewis Platt, Hewlett-Packard

Value Migration: 

Value Migration 'Financial accounting, balance sheets, profit-and-loss statements, allocating of costs, etc. are an x-ray of the enterprise’s skeleton. But much as the diseases we most die from - heart disease, cancer, Parkinson’s - do not show up in a skeletal x-ray, a loss of market standing or a failure to innovate do not register in the accountant’s figures until the damage is done'. P. Drucker (1993) Developing (strategic) leading indicators

Rationale for the Resource-based Approach to Strategy: 

Rationale for the Resource-based Approach to Strategy When the external environment is subject to rapid change, internal resources and capabilities offer a more secure basis for strategy than market focus. Resources and capabilities are the primary sources of profitability But note that platform of capabilities can become a TRAP

Evolution of Honda: A Strategy Based Upon Resources and Capabilities: 

Evolution of Honda: A Strategy Based Upon Resources and Capabilities 1948 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 Founding of Honda motor company 50cc 2-cycle engine 4 cycle engines 405cc motor cycle Related products: ground tillers, marine engines, generators, pumps, chainsaws First product: clip-on engine for bicycles The 50cc super -cub N360 mini car 1000cc Goldwing touring motor cycle Acura Car division

Resources as the Basis for Superior Profitability: 

Resources as the Basis for Superior Profitability Rate of Profit in Excess of the Competitive Level Industry Attractiveness Competitive Advantage Differentation Advantage Cost Advantage Vertical Power Monopoly Barriers to Entry Brands Product technology Marketing capabilities Process technology Plant size Low-cost inputs Firm size Financial resources Market share Patents Brands Retaliatory capability

The Relationships Between Resources, Capabilities and Competitive Advantage: 

The Relationships Between Resources, Capabilities and Competitive Advantage STRATEGY INDUSTRY KEY SUCCESS FACTORS COMPETITIVE ADVANTAGE ORGANIZATIONAL CAPABILITIES RESOURCES TANGIBLE INTANGIBLE HUMAN Financial Physical Technology Reputation Culture Structure Specialized skills and knowledge Communication andamp; interactive abilities Motivation

The Rent-Earning Potential of Resources and Capabilities: 

The Rent-Earning Potential of Resources and Capabilities Scarcity Relevance Durability Mobility Replicability Property rights Relative bargaining power Embeddedness of resources THE EXTENT OF THE COMPETITIVE ADVANTAGE ESTABLISHED SUSTAINABILITY OF THE COMPETITIVE ADVANTAGE APPROPRIABILITY THE PROFIT EARNING POTENTIAL OF A RESOURCE OR CAPABILITY

Growth of service sector partly explains increase in Strategy as Firm Knowledge: 

Growth of service sector partly explains increase in Strategy as Firm Knowledge Source: World Bank, 1998

Growth of service sector in Sweden, similar to other EU countries: 

Growth of service sector in Sweden, similar to other EU countries Source: IUI Agriculture Employment Percent Service Industry

The new forces: 

The new forces Traditional sources of competitive leverage Deregulation Globalization Digitization Source: Unleashing the Killer App

Revolutionary changes: 

Revolutionary changes Digitization - Computing power and communications bandwidth becoming cheap enough to treat as disposable (Moore’s law) Compare doubling grains of dirt on a chess board Globalization – China, World is a large network, global network of suppliers and buyers, 24 hour operations, shop on a global basis Deregulation - Free market better regulator than government, e.g., airlines, communications, banking

Business Week 1998: 

Business Week 1998

Business week and US Companies….Where is Haider, Bank of China, etc. ?: 

Business week and US Companies….Where is Haider, Bank of China, etc. ? Source: Business Week

Valuation Ratios: 

Valuation Ratios Coca-cola 19 Beverages Oracle 15 Computer software/services Cisco Systems 14 Computer software/services Computer Associated International 14 Computer software/services Schering Plough 12 Health care Amgen 10 Health care Gillette 10 Consumer Products Metronic 9 Health care Kellog 9 Food Microsoft 9 Computer software/services Pharmacia andamp; UpJohn 9 Health care First Date 9 Computer software/services Pfizer 8 Health care Abbot Laboratories 8 Health care Mereck 7 Health care Johnson andamp; Johnson 7 Health care Bristol-Myers-Squibb 7 Health care Pepsico 7 Beverages Phillip Morris 6 Tobacco Eds 6 Computer software/services

Competitive advantage is becoming increasingly dependent on firm’s ability to create and leverage knowledge : 

Competitive advantage is becoming increasingly dependent on firm’s ability to create and leverage knowledge Firm knowledge Internal codification Dissemination Transfer External leakage and imitation Competitive advantage (if resources andamp; capabilities are hard to replicate or imitate) Key idea: Firms are good at transferring tacit knowledge (Kogut andamp; Zander, 1992)

Identifying Organizational capabilities :Functional Approach: 

Identifying Organizational capabilities : Functional Approach FUNCTION CAPABILITY EXEMPLARS Corporate Financial management Exxon, Coca Cola Management General Electric, Strategic Control Emerson Electric, GE Coordinating decentralized ABB, Shell business units Managing Acquisitions ING, ConAgra MIS Speed and responsiveness through American Airlines rapid information transfer Benneton Randamp;D Research capability Mereck, ATandamp;T Development of innovative new products Sony, 3M Manufacturing Efficient volume manufacturing Electrolux Continuous Improvement Nucor, Motorola Flexibility Benetton Design Marketing Design Capability Apple, Swatch, Brand Management Proctor andamp; Gamble, PepsiCo Sales andamp; Distribution Promoting reputation American Express Responsiveness to market trends The Gap Sales Responsiveness Microsoft, Glaxo Efficiency and speed of distribution DHL Customer Service KLM

The Framework for Analyzing Knowledge, Capabilities and other Resources: 

The Framework for Analyzing Knowledge, Capabilities and other Resources 5. Identify resource gaps that need to be filled. 4. Select a strategy 3. Appraise the rent-earning potential of resources/ capabilities 2. Identify capabilities 1. Identify the firm’s resources. Appraise strengths and weaknesses STRATEGY CAPABILITIES RESOURCES POTENTIAL FOR SUSTAINABLE COMPETITIVE ADVANTAGE

Summary: 

Summary We are moving into a knowledge-based economy as new forces are changing the face of business A company’s market value is increasingly dependent upon the value of its intellectual capital or intangible assets A company’s competitive advantage is based on a firm’s ability to create and leverage its knowledge Thus, knowledge sharing across divisions, countries, functions is emerging as a major business priority

Strategy and Innovation: 

Strategy and Innovation Part I, Day 1 What is strategy? Frameworks External vs Internal Focus: Customer andamp; Knowledge Strategy and Design Part II, Day 1 Strategic Management of Innovation Market and Firm Inertia Photography Industry

Internal and External Design: Strategy and Innovation: 

Internal and External Design: Strategy and Innovation Brief Review of Organizational Design and and External Relationships Structure, Culture, Networking of Internal Organization Design Brief Review of External Design

Internal and External Design: Strategy and Innovation: 

Internal and External Design: Strategy and Innovation Brief Review of Organizational Design and and External Relationships Structure, Culture, Networking of Internal Organization Design Brief Review of External Design

Internal Design Aspects: 

Internal Design Aspects Specialization ( grouping by skills, process, customers, products, etc.) Coordination Hierarchy Functional and Divisional Structure

The Basic Tasks of Organization: 

The Basic Tasks of Organization ORGANIZATIONAL CHALLENGE: design structure andamp; systems that: Permit specialization of knowledge Facilitate coordination by grouping individuals andamp; link groups with systems of communication, decision making, andamp; control Deploy incentives to align individual andamp; firm goals and share knowledge among them Achieving high levels of productivity requires SPECIALIZATION Specialization by individuals necessitates COORDINATION For coordination to be effective requires COOPERATION But goals of employees = goals of owners THE AGENCY PROBLEM

General Motors Organization Structure, 1997: 

General Motors Organization Structure, 1997 Board of Directors President’s Council Corporate Functions North American Operations Delphi Automotive Systems International Operations GM Acceptance Corporation Hughes Electronics Midsize andamp; Luxury Car Group Small Car Group GM Power Train Group Vehicle Sales, andamp; Marketing Group Development andamp; Technical Cooperation Group GM Europe Asian andamp; Pacific Operations Latin American, African, andamp; Middle East Operation

General Electric’s Organization Structure, 1995 : 

General Electric’s Organization Structure, 1995 Board of Directors Corporate Executive Office Lighting NBC Motors Transportation Systems Aircraft Engines Industrial Power Systems Medical Systems Appliances Capital Services Information Services Electrical Distribution andamp; Control Plastics Corporate Staff Functions: Tax, Treasury, Audit. Mandamp;A, Legal, Business Public Relations, Government Development Relations, Leadership Development Service Divisions Aerospace Environmental GE Licensing/ Marketing Technology Programs Supply Trading andamp;Sales

Organization design: 

Organization design By FUNCTION(sales, production, customer service, etc.) By PURPOSE (market, product, segment, region, etc.) Sales Finance Service And Parts New Cars Used Cars Service And Parts

Functional Structure: 

Functional Structure

Multidivisional Structure (By Region, Product, or Customer): 

Randamp;D Manufacturing Marketing Finance Accounting HR Division 1 Randamp;D Manufacturing Marketing Finance Accounting HR Division 2 Randamp;D Manufacturing Marketing Finance Accounting HR Division 3 Randamp;D Manufacturing Marketing Finance Accounting HR Division 4 CEO Multidivisional Structure (By Region, Product, or Customer)

Slide47: 

Multidivisional Structure at Proctor andamp; Gamble

Pros & Cons of Basic Organizational Designs: 

Functional Structure Pros: fosters group identity, permits greater specialization and so increases skill levels, facilitates supervision. Cons: creates strong contrasts and thus conflict between functional units, makes it harder to trace responsibility for performance (no unit is a profit centre), fails to develop well-rounded general managers. Pros andamp; Cons of Basic Organizational Designs Multidivisional Structure Pros: simplifies co-ordination across functions within units, can be very large and still maintain control, facilitates idiosyncratic treatment of customers when they differ greatly. Cons: reduces collegiality, duplicates staff functions and foregoes opportunities to share them, reduces chances for skill specialization.

Dilbert on cross-functional conflict: 

Dilbert on cross-functional conflict

The Fundamental Law of Organizational Design: 

The Fundamental Law of Organizational Design To the extent that you differentiate, you must integrate.

Task Interdependence: 

Task Interdependence Pooled interdependence Units share a common resource. Sequential interdependence One unit’s output is another unit’s input. Reciprocal interdependence Units must work with each other to produce common output. high Cost of Managing low low Priority for Linking high

Forms of Task Interdependence: 

Forms of Task Interdependence Needs Assessment

An Information-Processing Model of Organizational Design (Wheel vs Circle): 

An Information-Processing Model of Organizational Design (Wheel vs Circle)

Linking Mechanisms: 

Linking Mechanisms Hierarchy (i.e., a boss) Rules and procedures (formal or informal) Liaison roles Task forces, cross-unit teams Integrator roles/departments Matrix structures Information Processing Capacity high low Costs of Managing the Linkage low high

Liaison Roles & Cross-Unit Groups: 

Liaison Roles andamp; Cross-Unit Groups Liaison

Integrators (Project, Brand, Program, & Account Managers): 

Integrators (Project, Brand, Program, andamp; Account Managers)

Matrix Structures: 

Matrix Structures

New Organizational Forms: 

New Organizational Forms Process-based organizations Organizing around business processes Recognizing corporate processes - entrepreneurial process - competence building process - renewal process Parallel structures separate structures of separate management processes e.g. 3M, TQM, change management process Project-based organization, engineering cos., consulting also Firm’s 'Formulas' cos., also manufacturing cos. e.g. Oticon Network and Virtual Organization the boundaryless corporation e.g. Sun Microsystems, Cisco Systems, Italian clothing manufacturers

Firm as a bunch of silos or interconnected departments: 

Firm as a bunch of silos or interconnected departments

Strategy and Innovation: 

Strategy and Innovation Part I, Day 1 What is strategy? Frameworks External vs Internal Focus: Customer andamp; Knowledge Strategy and Design Part II, Day 1 Strategic Management of Innovation Market and Firm Interia Photography Industry

External Design: 

External Design Contracting Licensing Consortia Partnerships Alliances Joint Ventures Acquisitions Relationship with Us?

Firms Sharing Assets: 

Firms Sharing Assets Governance or Control (Who is in Charge?) Ownership

Slide63: 

Internal or External Hybrid Firm A Firm B

Strategy and Structure: 

Strategy and Structure Internal and external Strategic Perspective Porter, BCG and Knowledge Based View Internal: Functional to Divisional and Network Design External: Licensing to Equity Joint Ventures and Acquisitions ……Strategic management of Innovation: Knowledge as Platform for Strategizing Design inside and outside the firm for Strategizing

Strategy and Innovation: 

Strategy and Innovation Part I, Day 1 What is strategy? Frameworks External vs Internal Focus: Customer andamp; Knowledge Strategy and Design Part II, Day 1 Strategic Management of Innovation Market and Firm Inertia Photography Industry

Strategy and Innovation: 

Strategy and Innovation Resources and capabilities provide a basis for firms to stay in the market, but also to exit early (too early) Stay: Nokia, IBM, Exit: Mannesmann, Polaroid, Swissair, Marconi Sink or swim depends on???

Innovation and Strategy: 

Innovation and Strategy 1. Death of 'Dominant Design' Firm versus its environment Some examples What watch do you wear? 2. Unlocking the Firm from 'Old' 3. Locking into the 'New'Design

Dominant Design: 

Dominant Design A product or service with a clear identity, a standard that we take for granted and has become widely diffused Car Windows Pizza Endoscopy Mobile Phone

Patterns of Technological/Market Evolution: 

Patterns of Technological/Market Evolution

Strategic Focus Evolves with the S-curve: 

Strategic Focus Evolves with the S-curve Compare 'product life cycle' Emergence of dominant design From product to process innovation From functionality to volume and standardization

Technological Substitution: 

Technological Substitution

Slide72: 

E.g., Cash Machine E.g. ICT

Innovation:a matter of life and death: 

Innovation: a matter of life and death Think of a product that got pushed out of existence? Why did substitution occur? What happened to the 'Owners' of that dominant design? Examples in your Industry, Sector

Slide74: 

Sail-ship built around 1910, capsized on maiden voyage, off Southampton

Wooden Tennis Rackets: 

Wooden Tennis Rackets

Slide76: 

A 1998 racket that is now the dominant design

Ergonomic Designs (which never made it!): 

Ergonomic Designs (which never made it!)

Evolution of Tennis Racket as Dominant Designs: 

Evolution of Tennis Racket as Dominant Designs wooden Graphite (plastic)

Tennis Racket Manufacturers: 

Tennis Racket Manufacturers Outside Firms often Major Innovators Prince with Metal and Titanium Racket Star Players Play Big Role in Acceptance of New Paradigms Best Ideas Need not be Winners!

Substitution: 

Substitution Old products languish, but hang on, long after new technology emerges New products often launched by firms outside traditional industry New technology creates new markets Penetration of new technology typically begins with tiny sub-markets

Example of Mechanical Watches dying paradigm: 

Example of Mechanical Watches dying paradigm Mechanical engineering Swiss Guild-like handicraft Jewelry-like

Slide82: 

Slide83: 

Watch as a Closed Assembly System: 

Watch as a Closed Assembly System

Watch as a Closed Assembly System: 

Watch as a Closed Assembly System Note that a watch is more than time keeping device: Marketing - expensive to cheap; 'push' to 'pull' Distribution -jewelry stores to drugstores Production - craft, mass to automated State - cartel protection to global openness so changes in dominant design not only in product but also institutions, practices, competencies, distribution and regulation-protectionism

Watch’s Dominant Design: take-aways: 

Watch’s Dominant Design: take-aways S-curve for both product andamp; process innovation. Global watch industry went to three significant technology-market discontinuities: Dominant design switches with three outcomes: bankruptcy entrepreneurship weathering the storm

Other Examples: New paradigm often results in displacement of incumbents by new entrants: 

Other Examples: New paradigm often results in displacement of incumbents by new entrants Mechanical to electronic to auto-kinetic watches Wired to wireless telecom Bank branches to ATMs Vacuum tubes to transistors Propulsion to jet engines Typewriters to word processors 35MM Camera to Digital Photos Disk drives for desktop to laptop PCs Brickandamp;mortar bookstores to e-book retail

Strategy and Innovation: 

Strategy and Innovation Part I, Day 1 What is strategy? Frameworks External vs Internal Focus: Customer andamp; Knowledge Strategy and Design Part II, Day 1 Strategic Management of Innovation Market and Firm Inertia Photography Industry

Technological Substitution: 

Technological Substitution 35MM Digital

From 35MM to Digital Cameras: 

From 35MM to Digital Cameras 35MM with FILM Digital with FLASH CARD

Paradigm: 

Paradigm 35MM Digital

Key Players, Value Chain: 

Key Players, Value Chain Players: Kodak, Canon, Minolta, Fuji, Agfa-Gevaert, Sony, Zeiss Ikon, Polaroid (bankrupt in 2002), Casio Value Chain: (1) Housing, (2)Shutter mechanism, (3) Optics, (4) Flash and Power source, (5) Development, (6) Printing, (7) Wholesale and (8) Retail

Evolution in this “ecology”: 

Evolution in this 'ecology' !: 80-85….2: 86-90….3: 91-95….. 4: 96-03 Photography Group Adjacent Groups (Computer HW and SW) Development Infrastructure

Evolution of Photography: 

Evolution of Photography 35MM Cameras And Early DI (Sony MAVICA No Substitution Paradigm and its Trajectory Very 'Obvious' PC Revolution Internet and Email limited to Universities Photo CD with CD Player 1. Complementary technologies And 2. Firms with NE Strategies, hugging Aging Paradigms 80-85 86-90 91-95 96-2003 Polaroid Bankrupt Price-adjusted Quality full Match Digital sales Exceeds Conventional Sales ‘Counter’ Innovations APS Convergence In Full Swing

Paradigm: 

Paradigm 35MM : Complements are development, paper 50Mn plus pixels Limited duplication, transmission Analog Hard, Real Key Players Kodak, Agfa, Fuji, also Canon Companion Paradigms: Film and film reels, Movie Production, Projection Digital: Complements are PC, WWW, Email Number of pixels growing Duplication Digital Soft, Virtual Key Players Canon, Sony, Minolta, and perhaps Kodak Companion Paradigms: Editing, Visual arts, Movie Production

Key photography elements of product/service/delivery: 

Key photography elements of product/service/delivery Relative Value Price Resolution Features Immediate Viewing Image Sharing Digital

Slide97: 

Camera Film Image Taken Slides Developing Negatives Prints Slide Album Photo Album Consumer Re - purchase Cycle Traditional Film Image Lifecycle Frequent re - purchases Photographic Process – Digital vs. Film Paradigm

Slide98: 

Imaging Equipment Imaging Media Imaging Transfer Imaging Storage Imaging Display Canon Nikon Kodak Olympus Minolta Polaroid Traditional Industry Players Digital Industry New Players Sony H-P Kodak film Fuji film Agfa film Kodak Chemicals Kodak Paper Fuji Paper Various Album Manufacturers SanDisk Sony Intel Toshiba Microsoft Software Adobe Software Kodak Software Dell Software H-P Printers / Ink Epson Printers / Ink Lexmark Printers / Ink Ofoto online H-P paper CVS.com AH.com CD-ROMs PC Manufacturers Mobile Phones Palm Pilots / PDAs Imaging Equipment Imaging Media Imaging Transfer Imaging Storage Imaging Display Imaging / Photography Value Chain

…..smile….: 

…..smile….

Slide100: 

Photography Industry - Milestones

Cameras: 

Cameras Old versus New Paradigm 'Razor Blade' Polaroid Dead and Kodak out of the Dow (DJIA) Movie Theaters and Hollywood next? Film, Paper and Album replaced by Digital …..and WWW and Email What is Next ?

Kodak Options: 

Kodak Options Majority of Kodak’s revenues come from sales of films not cameras, and digital cameras do not use any film. How difficult for Kodak to give up its cash cow product. The economics of traditional photography are much more attractive for producers than those of digital. A constraint on Kodak? Finally, given that Kodak supports a vast organization on the basis of film sales, and that digital won’t yield profits for some time to come, how will this organization be supported in lieu of film sales.

Slide103: 

Patents, Strategic Alliances, Joint Ventures…..

Kodak’s Response to Digital Disruption: 

Approached digital photography as a threat to its core business Saw cannibalization of existing film-based business Focused on current consumer behavior vs. emergent technologies (Paradigm Hugging) Focused on traditional film competitors (e.g. Fuji) Kodak’s Response to Digital Disruption

Kodak’s Response to Digital Disruption: 

Kodak’s Response to Digital Disruption Before December 2001: Kodak’s organization was organized by end-user market The work of digital champions had to be divided among the various segments rather than as a unified strategy Besides having the difficulty of charging one group with the responsibility to develop Kodak’s digital strategy, simple funding for Randamp;D efforts would be divided among the existing segments Given this structure, digital imaging was a threat to the established paradigm and its 'owners'

Kodak Refocuses: 

Kodak Refocuses Kodak restructured in 2002 to better integrate digital technology into its product line Photography Health Imaging Commercial Imaging Refocused on the business of 'Photography' Recognized the need to meet multiple market segments: Consumers with differing needs, shopping habits, Internet usage, technical sophistication Partnering with other firms

Kodak’s Prospects: 

Kodak’s Prospects Kodak is not the leader it once was; its core competencies in paper and film have become core rigidities The photography market is likely to be much more fragmented As we will see on June 13, we need a dedicated integrated business unit for new paradigm to overcome core rigidities

So far… lessons:: 

So far… lessons: 1. Death of 'Dominant Design' Firm versus its environment Innovations Inertia and Paradigm Huggers 2. Unlocking the Firm or Industry from 'Old' Paradigm Photography Industry

First Day: 

First Day Concept of Strategy External (Customer, market) and Internal (Knowledge) View Tools for Strategizing (Internal Structure and External Structures) The Strategic Challenge for Players in their Industry in overcoming Inertia