Search

This paper elaborates on how design rules emerge and evolve as firms’ micro-level choices of product and organization architectures coevolve with changes in product markets and an industry’s competitive and cooperative dynamics. We suggest that the design rules a firm adopts will vary according to firms’ strategic choices of product and organization architectures that they believe are or may become feasible in a given industry. Building on the mirroring hypothesis that product designs a firm adopts will influence the organization designs it uses, we develop a model that identifies key relationships that influence firms’ strategic choices of product and organization architectures and associated design rules. We then elaborate on key interactions between firm-level architectural choices and the architecture-enabled competitive and cooperative dynamics that obtain in an industry. Our model identifies strategically important aspects of open- and closed-system architectures and modular and nonmodular architectures that impact industry structures, interfirm interactions, and resulting industry dynamics. Drawing on these analyses, we suggest how firms’ strategic choices of architectures are influenced by their assessments of (i) the potential for capturing value through both gains from specialization and gains from trade that firms believe will be enabled by their architectural choices and (ii) both ex ante and ex post transaction costs implied by their architecture decisions. We conclude by suggesting how the perspective on firm’s strategic architectural decisions we develop here enables new approaches to understanding evolutions of both product markets and industry structures for serving product markets.

In this paper we examine some fundamental epistemological issues in building theory for applied management science, by which we mean theory that can be usefully applied in a scientific approach to management research and practice. We first define and distinguish “grand theory” from “mid-range theory” in the social and management sciences. We then elaborate and contrast epistemologies for (i) building “grand theory” intended to be applicable to all cases and contexts, and (ii) building “mid-range theory” intended to apply to specific kinds of contexts. We illustrate the epistemological challenges in building grand theory in management science by considering important differences in the abilities of two “grand theories” in strategic management – industry structure theory and firm resources theory – to support development of conceptually consistent models and propositions for empirical testing, theoretical refinement, and application in management practice. We then suggest how a mid-range theory building approach can help to achieve integration of the two grand strategic management theories and improve their ability to support empirical testing, theory refinement, and application of theory in practice. Finally, we suggest how the competence-based management (CBM) perspective provides the foundational concepts needed to build both mid-range theory and (potentially) grand theory in strategic management that can be usefully applied in management science.

Effective competence-based management (CBM) requires in the first instance an ability to identify an organization’s competences and the sources of those competences. Identifying competences can be especially challenging in the context of not-for-profit organizations, which have often been characterized as being “different” from for-profit organizations. In this paper we argue that not-for-profit organizations have fundamentally the same systemic requirements for survival and success as for-profit organizations – and therefore that not-for-profits ought to be amenable to competence identification and analysis through use of CBM concepts and theory in essentially the same way as for-profit organizations. We support this basic proposition through a case study of competence identification and analysis in a humanitarian relief organization (HRO), an increasingly important kind of not-for-profit organization.

Effective competence-based management (CBM) requires in the first instance an ability to identify an organization’s competences and the sources of those competences. Identifying competences can be especially challenging in the context of not-for-profit organizations, which have often been characterized as being “different” from for-profit organizations. In this paper we argue that not-for-profit organizations have fundamentally the same systemic requirements for survival and success as for-profit organizations – and therefore that not-for-profits ought to be amenable to competence identification and analysis through use of CBM concepts and theory in essentially the same way as for-profit organizations. We support this basic proposition through a case study of competence identification and analysis in a humanitarian relief organization (HRO), an increasingly important kind of not-for-profit organization., In this paper we appraise the ways in which use of closed-system proprietary product architectures versus open-system modular product architectures is likely to influence the dynamics and trajectory of new product market formation. We compare the evolutions of new markets in China for gas-powered two-wheeled vehicles (G2WVs) based (initially) on closed-system proprietary architectures and for electric-powered two-wheeled vehicles (E2WVs) based on open-system modular architectures. We draw on this comparison to suggest ways in which the use of the two different kinds of architectures as the basis for new kinds of products may result in very different patterns and speeds of new market formation. We then suggest some key implications of the different dynamics of market formation associated with open-system modular architectures for both the competence-based strategic management (CBSM) of firms and for technology and economic development policies of governments.Specifically, we suggest how the use of open-system modular product architectures as the basis for new products is likely to result in dynamics of new market formation that call for new approaches to the strategic management of innovation and product creation. We also suggest technology and economic development policies favoring use of open-system modular architectures may stimulate new market formation and related economic development by providing platforms for accelerating technology development and dissemination, facilitating the formation of an industrial base of assemblers and component suppliers, assisting new firms in building customer relationships, enabling more geographically diffused economic development within countries, and facilitating development of export markets. We also suggest directions for further research into the potential for open-system modular product architectures to enable bottom-of-the-pyramid innovation processes, frugal engineering in developing economies, and development of low-cost product variations more generally.

In this paper we develop a model for researching the influence that a board of directors can have on improving an organization’s sustainability performance. Our model explores sources of cognitive flexibility of boards needed to recognize and respond to the need for improved sustainability performance. We first define concepts of sustainability, sustainability competence, and sustainability performance. We then analyze two forms of board capital (a board’s human capital and its social capital) and three aspects of a board’s information processing (its patterns of information search, discussion and debate, and information absorption) that we suggest affect a board’s cognitive flexibility and thereby influence whether a board decides to adopt sustainability performance goals. Our model also suggests that an organization’s strategic flexibility – as represented by its current endowments of resource flexibilities and coordination flexibilities – will moderate the relationship between a board’s decision to adopt sustainability performance goals and an organization’s subsequent achievement of those goals. We also suggest that our model is generally relevant to any research seeking to predict the influence of boards on strategic change in many forms, not just to research focused on sustainability issues.

This focused issue (Volume 6) of Research in Competence-Based Management provides a number of research papers – both theoretical and empirical – on what we have characterized in the volume title as “new industry dynamics.” It also contains papers that might just as accurately be described as providing “new competence perspectives” on industry dynamics. In effect, this volume both applies existing competence theory to the analysis of new industry dynamics, and provides new conceptualizations for representing and analyzing industry dynamics that are now emerging in many industries and product markets. While much competence theory has been developed through analysis of micro-level phenomena in individual organizations, we expect that the papers included in this volume will help point the way to further development of competence theory relevant to the macro-levels of industry and product-market phenomena.

L’objectif de cet article est d’etudier des questions epistemologiques fondamentales qui se posent dans le cadre de l’elaboration dans le domaine de la strategie d’une grande theorie (applicable a tous les cas et tous les contextes) et d’une theorie intermediaire (applicable dans des contextes definis). Les auteurs considerent les differences importantes dans le potentiel de deux grandes theories en strategie (theorie fondee sur la structure de l’industrie et theorie des ressources) a permettre le developpement de modeles et de propositions pouvant etre testes empiriquement et pouvant contribuer au perfectionnement de la theorie. Ils montrent ensuite que la perspective fondee sur le management strategique des competences (CBM) peut proposer les concepts fondamentaux necessaires pour integrer et redynamiser les developpements des theories en strategie en prenant en compte les structures de l’industrie et les ressources des firmes.

Part I of this issue begins with a paper by Colin Eden and Fran Ackermann on “Competences, distinctive competences, and core competences.” Eden and Ackermann draw on their extensive work with top management teams in workshops focused on identifying the competences of an organization. They describe an interactive process of engagement with managers through which an organization's competences are identified, some of which are further judged to be “distinctive competences” of the organization. Analysis of the interrelationships among a firm's identified competences then leads to the discovery of a pattern of competence interactions in which some competences appear to be at the “core” of the organizations distinctive competences. The paper presents an interesting perspective on how the capabilities and competences of a firm are often interrelated in ways that invite special attention and development by managers. Further, the paper explains the systems methodology that the authors have developed for use with managers to help identify and assess an organization's competences.

This paper develops a taxonomy of five modes of competences that an organization must develop and maintain in its various activities to achieve overall competence. Each competence mode is distinguished by the specific forms of flexibility it brings to an organization to respond to the changing opportunities and threats in its environment. Each form of flexibility is in turn distinguished by the kinds of strategic options it creates for an organization. Key interrelationships among the five competence modes are identified, and important aspects of managing each of the competence modes and their interrelationships are discussed.

This article advocates that more strategy researchers and managers become engaged in aninteractive, reciprocating research process, the objective of which is building pragmatic strategic management theory. To this purpose, the authors suggest how researchers and managers may engage in theory-building processes in which generalized theories of researchers and contextual theories of managers interactively evolve in a new model of double-loop learning. In particular, the authors suggest the following sequence of activities: (a) Researchers should propose integrative theories thought to be generally applicable; researchers and managers should then consider applicability of strategy theory to specific competitive contexts. (b) This strategic logic is then formulated by managers and applied to specific competitive contexts. (c) The market response leads to refining or to redefining the firm’s strategic logic. (d) The firm’s experience in formulating and in testing strategic logics inform researchers’ efforts to develop new strategy theory.

In developing products, long-term success depends on designing components that facilitate the creation of a family of current and future product options. Ron Sanchez emphasizes that this requires careful planning of shared technologies and production processes. The payoff is a modular approach that enhances the ability to integrate market-differentiating features and that supports rapid innovation, stringent cost controls, and the acceleration of supply timelines.

This paper develops an integration of transactions costs theory and real options theory that leads to a more complete representation of the problem of economic organizing. By recognizing the opportunity costs associated with internalization of specific-use assets when flexible assets are also available, the integrated theoretical framework provides better insights into optimal strategies for configuring value chains under supply-side and demand-side uncertainty. This expanded model of economic organizing suggests four optimal strategies for configuring value chains and predicts four prevailing forms of economic organization under varying combinations of contracting (supply-side) and market (demand-side) uncertainty. Copyright © 2003 John Wiley & Sons, Ltd.

Research implications and practical implications Our model building process provides a basic template for other research focused on developing normative management models through case-based research. The specific elements included in our Enhanced Integrated Models should provide managers with a useful model for managing exploratory innovation processes.

Practical implications The modeling framework reported in this paper can help management practitioners in structuring choice situations involving coopetition, both in terms of the incentives to engage in a coopetitive setting and the design of a value network that can accommodate the complexities inherent in such multifaceted relations.

This paper explains how the adoption of a modular approach to product and process architectures can greatly improve product development performance and provide a powerful framework for knowledge management and organisational learning. We first consider specific ways in which modular architectures enable both new processes for product development and new product strategies. We then explain how disciplined adherence to the modular way of creating new products helps an organisation to identify its current technological capabilities more clearly, and to define objectives and processes for strategically focused organisational learning. We discuss three seemingly counterintuitive principles in the new strategic logic of managing in the modular way, as well as new management practices involved in the modular way of working.

We introduce the concept of distribution equity torepresent the asset value of a distribution relationship. Distributionequity is characterized as the increase in options value ofmarketing opportunities that result when a firm effectively utilizesits knowledge relationships with an existing distribution channelpartner to create and market its products. By providing a frameworkcharacterizing various forms of knowledge in a channel partnerrelationship and the ways in which they can increase the optionsvalue of a firm's product development and marketing opportunities,we provide a framework for improving the management of distributionequity.

The need to manage strategic change in organizations facing uncertain futures challenges both management theorists and practitioners to develop better models of organizations that can lead to greater insights into processes that motivate and accomplish organizational change. In this paper, we introduce a view of organizations as open systems that leads to identification and clarification of some key issues in the dynamics of organizations as they try to respond to an uncertain and changing environment. The systems properties of organizations attempting adaptive change have been studied by many researchers. Ashby's "law of requisite variety" (1956), for example, stipulated a basic requirement that a system must be capable of generating the "requisite variety" of responses to a changing environment in order to maintain its internal stability. Forrester's industrial dynamics approach (1961, 1968) laid important groundwork for the dynamic systems modeling of organizations, industries, and macroeconomics. Simon (1981) also proposed a number of basic properties of systems applicable to organizations. This paper is an updated and revised version of the authors' "A System View of the Firm in Competence-Based Competition," in R. Sanchez, A. Heene, and H. Thomas (eds.), Dynamics of Competence-Based Competition: Theory and Practice in the New Strategic Management (Oxford: Pergamon/Elsevier, 1996), pp.

(1997). Preparing for an Uncertain Future. International Studies of Management & Organization: Vol. 27, Preparing for the Future: Developing Strategic Flexibility from a Competence-Based Perspective, pp. 71-94.

This chapter offers some reflections on Max Boisot and his extraordinary intellect drawn from our 15 years of exchanging and crafting ideas together. I first comment on the process of working with Max, and then suggest some of the remarkable qualities of thought that I believe distinguished Max's keen intellect as I came to experience it through our collaborations. I note in particular the breadth of perspectives that Max inevitably brought to any discussion, his ability to draw multiple theoretical perspectives together in composing novel representations of economic and organizational phenomena, and his ability to rigorously categorize and usefully interrelate the many theories and concepts with which he was conversant. These qualities are illustrated through some further comments on the process of writing our 2010 paper on economic organizing. I conclude by suggesting how these qualities of thought are also reflected in Max's individual work and especially in his crowning achievement, the Information-Space Model.

This pczper investigcztes irzterrelationslzi~~s of product design, orgcznization design, processes for leartlirzg and managing knowledge, arzd competitive strategy. This paper uses the principles of nearly decotnposable systems to investigate the ability of strind(irdized interfcices between components in cz product design to embed coordination of product development processes. Embedded coordination creates 'hierczrchical coordination' without the need to continually exercise authority-erzcrblirlg effective coordination of processes without the tight coupling of orgcznizationczl structures. We develop concepts of modularity in product and organization designs based orz smndcirdized component and organization interjczces. Modular product architec- tures create information structures that provide the 'glue' that holds together the loosely coupled parts of a modular orgatzizatiorz design. By fczcilitriting loose coupling, modularity can czlso reduce the cost and dyficulty of adaptive coordination, thereby incrensing the strategic flexibility of firms to respond to erzvironmentnl change. Modularity in product and organizcztion designs therefore etznbles cz new strcitegic approach to the management of knowledge based on cztz irztentionczl, carefully mcznaged loose coupling of (I firm's learning processes czt architec- tural cznd comporzent levels of product crecztiorz processes.

Product competition in a growing number of markets is undergoing a profound transformation. Some firms are now beginning to use new kinds of ‘flexible designs’ for products and organizations to pursue innovative product strategies that generate unprecedented levels of product variety and change. This article explores the ongoing changes in strategies for designing products and for organizing development processes that are driving this transformation of product competition. Different kinds of competitive conditions require different kinds of strategies. Basic strategy concepts and derived product strategies are compared for stable, evolving, and dynamic product markets. Concepts of modularity in products and organizations are argued to be the core concepts driving the new kinds of product strategies now emerging in dynamic product markets. Modular product design is distinguished from traditional approaches to designing products, and the potential competitive advantages to be derived from modular product design strategies are elaborated. Modularity in product designs allows the decoupling of processes for developing new products, enabling those processes to become concurrent, autonomous, and distributed and making possible the adoption of modular organization designs for product development. The ‘quick-connect’ electronic interfaces of shared CAD/CIM systems may allow firms to create electronically mediated product development networks that further enhance the flexibility of modular product creation processes. Modularity in products and organizations requires new concepts for strategically managing knowledge. Creating modular product architectures requires an intentional and disciplined decoupling of technology development and product development. As a consequence, modular product design leads to better understanding of the state of a firm's current knowledge and makes possible more effective strategic management of new technology development. A hierarchy of organizational knowledge that distinguishes know-how, know-why, and know-what forms of knowledge is presented as a basis for developing new strategies for leveraging and controlling knowledge in product creation networks. This article concludes by arguing that success - and perhaps even survival - in product competition will increasingly depend on more effective strategic management of product, organization, and knowledge architectures.

This paper investigates competition in dynamic product markets from combined resource base and strategic flexibility perspectives. A concept of strategic flexibility in product competition is developed in which flexibility depends jointly on (1) the resource flexibility of the product creation resources avaialble to a firm and (2) the coordination flexibility of the firm in using its available resources in product markets. Two recent technological innovations affecting product creation processes—CADD/CIM systems and modular product design—are argued to have greatly increased the potential flexibilities of key product creation resources. Managerial innovations in the use of these technologies have also led to important new coordination flexibilities. The combination of recently achievable resource and coordination flexibilities is argued to have transformed the competitive environments of many product markets, leading to new kinds of product strategies, new organizational forms, and a new dominant logic for competing in dynamic product markets.

In this paper we extend established concepts of product and process architectures to propose a concept of organization architecture that defines the essential features of the system design of an organization needed to achieve an effective strategic alignment of an organization with its competitive and/or cooperative environment. Adopting a work process view of organization, we draw on concepts of product and process architectures to elaborate fundamental elements in the design of an organization architecture. We suggest that organization architectures may be designed to support four basic types of change in organization resources, capabilities, and coordination, which we characterize as convergence, reconfiguration, absorptive integration, and architectural transformation. We also suggest the kinds of strategic flexibilities that an organization must have to create and implement each type of organization architecture. We identify four basic types of strategic environments and consider the kinds of changes in resources, capabilities, and coordination that need to be designed into an organization's architecture to maintain effective strategic alignment with its type of environment. We then propose a typology that identifies four basic ways in which organizational architectures may be effectively aligned with strategic environments. Extending the reasoning underlying the proposed alignments of organization architectures with strategic environments, we propose a strategic principle of architectural isomorphism, which holds that maintaining effective strategic alignment of an organization with its environment requires achieving isomorphism across a firm's product, process, and organization architectures. We conclude by considering some implications of the analyses undertaken here for competence theory, general and mid-range strategy theory, and organization theory.

This paper examines the intrinsic characteristics of sport and reaffirms the idea that celebrity endorsers bring more to the endorsement process than just their personal qualities. This idea was previously proposed by McCracken (1989) in his transfer of meaning theory. The importance of this research lies in the fact that given the risks associated with celebrity endorsement, marketers must be aware of all factors that influence consumers’ evaluations of the celebrity endorsement. The proposition therefore is that an athlete’s sport is a factor that influences consumers’ celebrity endorsement evaluations. In other words the athlete and his sport cannot be separated.

Use by some firms of a revolutionary new form of market research, here termed “real‐time market research”, has been observed in certain dynamic product markets where technologies and consumer preferences change rapidly. In real‐time product research, firms produce small lots of new product models and research consumer reaction by offering product model variations to consumers. This product research has been made economically feasible by the development of methods for shortening the time required for product development, by the adoption of flexible manufacturing systems, and by the rise of important new regimes for designing products. Documents the apparent use of real‐time market research by some firms and discusses the new product design regimes which make real‐time research feasible and economic.

This introductory chapter elaborates some of the key ideas which shaped the concept of this book. The overriding idea is that autopoiesis theory has the potential to provide a unifying framework for the study of organizational phenomena in the 21st century. Although organization studies have recently had no shortage of new paradigms and approaches — such as postmodernism, phenomenology, ethnomethodology, reflexivity, and critical theory — the field seems to be expanding in ways that make it increasingly difficult to comprehend, especially for the uninitiated.

This volume explores ways in which an organization's existing competences can be enhanced as sources of competitive advantage - either enduring or intendedly transitional. Competence enhancing activities considered include political lobbying to extend the lifetime and value of a firm's competences, expanding services to enhance the value of manufacturing capabilities, initiating knowledge management projects, strategically adapting a firm's governance structures to take advantage of government policy initiatives, staging development of competences in internationalization processes, improving capabilities in managing alliances, understanding the factors conducive to entrepreneurial action-taking, and using individual competency development in self-managing processes for organizational competence building.

This paper seeks to explain the evolution of human systems of exchange through the emergence of both fundamental forms of organization (such as firms and markets) and specific instances of organization (such as individual firms and other economic or social entities) for engaging in exchange. We develop a combined systems, evolutionary, cognitive, and game-theoretic perspective on organizing that broadly represents organizations as systems of exchange founded on rules and routines for ordering exchange (broadly construed) between agents. We characterize the evolution of systems of exchange as an evolutionary cognitive process in which agents learn from their exchange experiences to adapt and improve rules and routines that improve the systems of exchange in which they participate. An evolutionarily stable form or instance of organization is achieved when a nexus of rules and routines emerges that offers a Pareto preferable system of exchange that attracts agents to its way of organizing exchange. We identify key aspects of rules that determine their relative attractiveness and thus their potential to be perceived as Pareto preferable by agents. We describe how trialand- error learning by agents as they apply and seek to improve rules and routines in processes of exchange leads to the emergence of innovative forms of organizing (distinguished by their distinctive new nexus of rules) and to their dissemination, further evolution, and perhaps eventual extinction within a population of agents. We also distinguish the nexus-of-rules perspective on organization developed here from the nexus of contracts perspective common in the economic view of organization.

This paper draws on the conceptual and theoretical premises of the Competence-Based Management (CBM) approach to strategic management in elaborating the role of Management Processes in implementing a firm's Strategic Logic. We suggest how the CBM conception of Management Processes enables the integration of essential functional and support activities. We address these activities by characterizing Management Process as broadly concerned with marketing, strategy, and organization issues, and elaborating ways in which Management Processes can and should address these issues. In this regard, the paper essentially proposes a normative model of what “Management Processes” must do to enable an organization to function as a sustainable open system for value creation and distribution.

Using the framework of the philosophy of science, this chapter explores some basic theoretical issues that must be recognized and addressed in developing theory within the competence perspective. We first develop an overview of resource-based and competence-based research to highlight some fundamental theoretical issues. We then identify a set of basic assumptions for conducting a research program focused on development of a “competence-based theory of the firm.” Working from these basic assumptions, we argue for a shift in the epistemological aim of competence theory development from explaining market success to explaining firm competitiveness. We explain how such a shift theoretical focus and approach can remedy the problem of circular reasoning often observed in resource-based thinking that tries to contribute to the competence literature.

Drawing on concepts from the resource-based view, the dynamic capabilities school, and competence-base theory, this chapter develops a value chain framework for evaluating and managing resources and capabilities. In common with activity-based value chains, our framework is a method for representing and analyzing the firm, and identifying what may be its optimal configuration. However, as opposed to an activity-based value chain, our approach is specifically designed to help clarify interrelationships between a firm's various assets and capabilities. Thus, it may help researchers and managers alike to analyze to what extent a firm's successes may be attributed to a certain set of resources and capabilities and whether there is scope to further develop them to advance the firm's strategies. Our value chain framework can be used singly or in conjunction with an activity value chain framework, depending on the strategic problem being addressed. However, we suggest that our resource and capabilities value chain will be most useful when determining how a firm's business processes should be funded, what resources and capabilities should make them up, or how these decisions could affect the firm's present organizational structure.