Strategic Dynamics:

Conceptual Frameworks

ROBERT A. BURGELMAN
Stanford Graduate School of Business
 Strategic Dynamics:
Two Conceptual Frameworks

Overview

I. Dynamic Forces Driving Firm Evolution

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

Established Firms

III. Four Strategic Leadership Challenges in Established Firms

I. Dynamic Forces in Firm Evolution

Basis of
Competitive
Advantage
in the
Industry

Official Internal
Strategic
Corporate Selection
Action
Strategy Environment

Distinctive
Competence
of the Firm
I. Dynamic Forces in Firm Evolution
What it
Takes
to Win
Basis of
Competitive
Advantage
in the
Industry

What We What We DO
SAY
Official Internal
Strategic
Corporate Selection
Action
Strategy Environment

Distinctive
Competence
of the Firm

What Weve
Got
I. Dynamic Forces in Firm Evolution: The Rubber Band Model

Market Basis of
INDUSTRY FORCES Non-Market
Competitive
DRAM products become a commodity. Advantage
Winning requires low cost and high in the
quality which depends on manufacturing Industry
skills.

Official Internal
Strategic
Corporate Selection
Action
Strategy Environment

INERTIA NEW OPPORTUNITIES

Distinctive
Intel skills in circuit design Competence
and process technology, of the Firm
but not manufacturing
I. Dynamic Forces in Firm Evolution: The Rubber Band Model

ACTION is
ahead of
Basis of
Competitive STRATEGY
Advantage Fab
in the capacity
Industry
allocation
Official
Corporate diverges
Strategy from
strategy
Internal
Selection
Official Environment
STRATEGY Strategic
is ahead of Action
ACTION
Apple Distinctive
Newton: Competence
handheld of the Firm
product
strategy
I. Diagnosis #1: Sources of Strategic Dissonance

Dissonance is Strategic if:

1. There is a divergence between Basis of Competitive

Advantage and Distinctive Competence
Example: Silver Bullet Target Test:
Who is your most dangerous competition? Is it still clear?
I. Diagnosis #1: Sources of Strategic Dissonance

Dissonance is Strategic if:

1. There is a divergence between Basis of Competitive

Advantage and Distinctive Competence
Example: Silver Bullet Target Test:
Who is your most dangerous competition? Is it still clear?

2. There is a divergence between Stated Strategy and

Strategic Action
Example: We say that we provide customer solutions but we only sell
them our own technology

Note: Initially the signals are usually weak

I. Dynamic Forces in Firm Evolution
What it
Takes
to Win
Basis of
Competitive
Advantage
in the
Industry

What We Culture What We DO

SAY
Official Internal
Strategic
Corporate Selection
Action
Strategy Environment

Distinctive
Competence
of the Firm

What Weve
Got
II. Diagnosis #2: Organizational Capability to Adapt

Characteristics of a Culture Ready for Strategic Change*:

1. Resource allocation reflects competitive reality

2. Strategic planning has forums for debating new opportunities

3. Capacity of top and senior managers for strategic recognition

4. Capacity for strategic leadership

* Note: Created by ourselves and/or by others

I. Dynamic Forces in Firm Evolution
Basis of
Competitive
Advantage

Internal
Corporate Selection Strategic
Strategy Environment Action

Distinctive
Competence
I. Dynamic Forces in Firm Evolution
Basis of
Competitive
Advantage

Internal
Corporate Selection Strategic
Strategy Environment Action

Distinctive
Competence
 I. Dynamic Forces in Firm Evolution
Basis of
Competitive
Advantage

Internal
Corporate Selection Strategic
Strategy Environment Action

Distinctive
Competence

II. An Evolutionary Framework of the

Strategy-Making Process in Established Firms
 I. Dynamic Forces in Firm Evolution
Basis of
Competitive
Advantage

Internal
Corporate Selection Strategic
Strategy Environment Action

Distinctive
Competence

II. An Evolutionary Framework of the

Strategy-Making Process in Established Firms

Concept of
Corporate
Strategy
 I. Dynamic Forces in Firm Evolution
Basis of
Competitive
Advantage

Internal
Corporate Selection Strategic
Strategy Environment Action

Distinctive
Competence

II. An Evolutionary Framework of the

Strategy-Making Process in Established Firms

Concept of
Corporate
Induced Strategy
Strategic
Action
 I. Dynamic Forces in Firm Evolution
Basis of
Competitive
Advantage

Internal
Corporate Selection Strategic
Strategy Environment Action

Distinctive
Competence

II. An Evolutionary Framework of the

Strategy-Making Process in Established Firms

Concept of
Corporate
Induced Strategy
Structural
Strategic Context
Action
 I. Dynamic Forces in Firm Evolution
Basis of
Competitive
Advantage

Internal
Corporate Selection Strategic
Strategy Environment Action

Distinctive
Competence

II. An Evolutionary Framework of the

Strategy-Making Process in Established Firms

Autonomous
Strategic
Action Concept of
Corporate
Induced Strategy
Structural
Strategic Context
Action
 I. Dynamic Forces in Firm Evolution
Basis of
Competitive
Advantage

Internal
Corporate Selection Strategic
Strategy Environment Action

Distinctive
Competence

II. An Evolutionary Framework of the

Strategy-Making Process in Established Firms

Autonomous Strategic
Strategic Context
Action Concept of
Corporate
Induced Strategy
Structural
Strategic Context
Action
 I. Dynamic Forces in Firm Evolution
Basis of
Competitive
Advantage

Internal
Corporate Selection Strategic
Strategy Environment Action

Distinctive
Competence

II. An Evolutionary Framework of the

Strategy-Making Process in Established Firms

Autonomous Strategic
Strategic Context
Action Concept of
Corporate
Induced Strategy
Structural
Strategic Context
Action

Variation Selection Retention

II. An Evolutionary Framework of the
Strategy-Making Process in Established Firms
CREATE LINKAGE
Radical Innovation
(initially not necessarily large) Middle/Senior Mgt : Increase Scale
1. Conceptual Skills
But: Complement or Substitute? 2. Political Skills

e Autonomous
Strategic
Strategic
Context
amend

Concept of
Action
emerging
environments
4 5 Corporate
Strategy
E
the existing
Induced environment
Structural
Strategic Context
Action
2 3 1
Incremental Innovation Top Management Beliefs about:
1. Organizational Structure
(not necessarily small) 2. Planning & Control Systems 1. Distinctive
3. Resource Allocation Rules Competence
4. Measurement & Reward Systems 2. Product Market Organizational
. . . Principles of Behavior Domain Learning
3. Core Values
4. Objectives

ACHIEVE ALIGNMENT
III. Four Strategic Leadership Challenges
in Established Firms

1. Exploiting the opportunities associated with the current

strategy: DISCIPLINE #1

2. Exploiting new opportunities spontaneously generated

from within: DISCIPLINE #2

3. Creating the adaptive organization: balancing the

emphasis on existing and new opportunities

4. Stimulating strategic renewal (when new opportunities are

no longer spontaneously generated)